@John
Small business are really hard to value. Illiquid, earnings highly linked to the active participation of the shareholders, and to boot, you wear all the risk in providing certainty in income for your employees.
When I bought in, we used a valuation of book value (no debt in the company and a reasonable amount of cash, plus about 2.5 time post tax annual profit. That's the same basis I've used to value it on an ongoing basis.
There isn't actually a "note" on the business - I made a cash purchase. My parents were nice enough to let me use some of their equity in a rental house to guarantee the loan. I'm pretty appreciative for the assistance that gave me in getting the deal through. I feel bad about this risk being on them though, so even though it isn't my lowest interest rate debt, I'm trying to get it cleared soonest.
As above, cashing out is hard - these types of businesses are really not liquid at all. In terms of sale, it is really unlikely - really only if the whole company is bought out / or if we decide to list in a public offer (unlikely). Aside from that, its down to directing dividends from the company into other areas.
@aussierogue
Thankfully the business is not mining related. However, it is linked to two industries, both of which are cyclical. Thankfully, to date, one of these has been in an up-cycle, so we have been able to navigate the downswings in the other. I also have a high level of concern about how leveraged we are to the Australian economy (which has also been somewhat exuberant over my financial life). We keep a few irons in the fire in our export market for this as a bit of insurance. With relative exchange rates and high wage costs here, that hasn't been overly profitable for us to date.
I think you have picked up on my nervousness about the level of concentration, and the consequent desire to put away some hay while the sun is shining.
Bigchrisb's Journal
@ Chris
As another fellow with a large part of their net worth in a privately held company, I understand your concentration of wealth fear. Australia, it seems to me, is enjoying a few good economic years now, and I am sure this has helped you business, as you've stated. However, you really need to think about actual bad scenarios for the business should the Australian economy take a turn for the worse and how this would affect your business and personal cash flows - in my experience, owners typically make the mistake of paying themselves last or not at all when times are rough in the business - can you survive such a scenario for 12 months? 3 years?
In terms of net worth, I believe your share in the company has value but unlike publicly traded securities, it has no price at the moment so to be conservative (and realistic in my opinion), you should value it at zero. Also, is there a credible chance for you to cash out of this opportunity? If so, what is the timeline for this? If there is / was a third party willing to buy you out, then it would be credible to peg a dollar value on your shares in the company....
Just my .02$ (Australian
.....)
As another fellow with a large part of their net worth in a privately held company, I understand your concentration of wealth fear. Australia, it seems to me, is enjoying a few good economic years now, and I am sure this has helped you business, as you've stated. However, you really need to think about actual bad scenarios for the business should the Australian economy take a turn for the worse and how this would affect your business and personal cash flows - in my experience, owners typically make the mistake of paying themselves last or not at all when times are rough in the business - can you survive such a scenario for 12 months? 3 years?
In terms of net worth, I believe your share in the company has value but unlike publicly traded securities, it has no price at the moment so to be conservative (and realistic in my opinion), you should value it at zero. Also, is there a credible chance for you to cash out of this opportunity? If so, what is the timeline for this? If there is / was a third party willing to buy you out, then it would be credible to peg a dollar value on your shares in the company....
Just my .02$ (Australian
.....)@GPMagnus
Agree very much with the company/industry/country exposure issues. I've tried to balance this a bit in my investment allocations I have a fairly heavy exposure to international (both US and rest of world) in the hope that this provides a bit of a core should the company go belly up.
In terms of exit, we get approached to sell the company about once a year. Usually by larger organisations wanting to absorb us. So yes, there is a potential to realise this asset. To date, the vale of the loss of autonomy and independence has been too great to consider it. However, I believe that there is a genuine market if we chose to sell the business. Alas, this is unlikely to be without golden handcuffs, so not exactly a passive asset.
@John
Good question! Legally, yes. In practice, in small companies, if key people depart, the income drops. They are much more active than passive shares on a stock market. Because of this, I don't really count any dividends form the company as passive income. I guess its a bit like a blog - I don't understand why people spout those as passive income - they are a great means of creating self employment (just like any other small business you have a passion for), but in the majority of cases require active work to keep the cash flowing.
Agree very much with the company/industry/country exposure issues. I've tried to balance this a bit in my investment allocations I have a fairly heavy exposure to international (both US and rest of world) in the hope that this provides a bit of a core should the company go belly up.
In terms of exit, we get approached to sell the company about once a year. Usually by larger organisations wanting to absorb us. So yes, there is a potential to realise this asset. To date, the vale of the loss of autonomy and independence has been too great to consider it. However, I believe that there is a genuine market if we chose to sell the business. Alas, this is unlikely to be without golden handcuffs, so not exactly a passive asset.
@John
Good question! Legally, yes. In practice, in small companies, if key people depart, the income drops. They are much more active than passive shares on a stock market. Because of this, I don't really count any dividends form the company as passive income. I guess its a bit like a blog - I don't understand why people spout those as passive income - they are a great means of creating self employment (just like any other small business you have a passion for), but in the majority of cases require active work to keep the cash flowing.
@bigchrisb As you stated 45% of your net worth is in the company, but if that disappears for any reason, then your net worth minus your debt is only about AUD 165K. If you sell, you'll have that money for sure and likely more since you will ostensibly sell for more than liquidation value, so you might even end up with AUD 1.5 million or more; given you spend AUD 30K/year you'd be at 2% SWR there and then = true FI/RE, even if you have golden handcuffs for another year as you work for the new owners 
I've run the scenario of whether to sell or not in my head more times than you know without having any concrete offers (although one may be coming my way later this year) but at the end of the day if you've done as well as you have there is a very good chance many other entrepreneurial opportunities will present themselves to you and if you have the time and inclination you could do whatever you want ...
Just my thoughts
I've run the scenario of whether to sell or not in my head more times than you know without having any concrete offers (although one may be coming my way later this year) but at the end of the day if you've done as well as you have there is a very good chance many other entrepreneurial opportunities will present themselves to you and if you have the time and inclination you could do whatever you want ...
Just my thoughts
Point taken about the diversification of income! I think that the high uncertainty in this valuation plays on my mind a little - as you point out, the assumptions around that have an order of magnitude impact on my metrics! I also concur that diversification away from this one asset is a core tenant of my current financial strategy.
In light of this, probably time for a look at my asset allocation:
Assets:
Private company: $590,000
Superannuation: $98,500 (industry fund, 45% international shares, 45% Australian shares). Have been considering a SMSF, but that's another story)
Car: $13,000
First Home Saver: $5,550
Australian direct shares: $232,000
Australian REITs: $70,000
Australian LICs: $84,000
Australian ETFs: $56,000
US ETFs (VTI/VTS/IVV): $63,000
Rest of world ETF (VEU): $119,000
Breaking this down into percentages:
Aust shares 21.1%
Aust REIT 5.2%
Aust LIC 6.3%
Aust ETF 4.2%
US ETF 6.6%
Int ETF 10.8%
Car 1.0%
Company 44.3%
Cash 0.4%
Liabilities:
Company loan: $104,000
Margin loans: $467,000
Comments:
- While I'm carrying margin loans, I don't see much merit to holding cash. Better off paying down the debts.
- I feel that I'm over-exposed to the individual company (44% of assets).
- I feel that I'm under-exposed to international shares (17% of assets). I think I'd like this to be closer to 30%.
- I feel that I'm over leveraged (debt = 77% of non-company assets). Ideally, while I would like this to be zero, I'll settle for an intermediate goal of 50%.
- Cash flow from non-company investment = $35,200-$47,350 = -$12,150/year
Goals:
- Reduce gearing by directing savings into debt repayment
- Get non-company investment to be cash flow neutral.
- Consider increasing international exposure
Any comments/suggestions/critique from forum land?
In light of this, probably time for a look at my asset allocation:
Assets:
Private company: $590,000
Superannuation: $98,500 (industry fund, 45% international shares, 45% Australian shares). Have been considering a SMSF, but that's another story)
Car: $13,000
First Home Saver: $5,550
Australian direct shares: $232,000
Australian REITs: $70,000
Australian LICs: $84,000
Australian ETFs: $56,000
US ETFs (VTI/VTS/IVV): $63,000
Rest of world ETF (VEU): $119,000
Breaking this down into percentages:
Aust shares 21.1%
Aust REIT 5.2%
Aust LIC 6.3%
Aust ETF 4.2%
US ETF 6.6%
Int ETF 10.8%
Car 1.0%
Company 44.3%
Cash 0.4%
Liabilities:
Company loan: $104,000
Margin loans: $467,000
Comments:
- While I'm carrying margin loans, I don't see much merit to holding cash. Better off paying down the debts.
- I feel that I'm over-exposed to the individual company (44% of assets).
- I feel that I'm under-exposed to international shares (17% of assets). I think I'd like this to be closer to 30%.
- I feel that I'm over leveraged (debt = 77% of non-company assets). Ideally, while I would like this to be zero, I'll settle for an intermediate goal of 50%.
- Cash flow from non-company investment = $35,200-$47,350 = -$12,150/year
Goals:
- Reduce gearing by directing savings into debt repayment
- Get non-company investment to be cash flow neutral.
- Consider increasing international exposure
Any comments/suggestions/critique from forum land?
Updated my dividend forecasts for the next few months. All numbers are gross (including franking credits):
July: $4,760 (ANZ, MQG, WBC, NAB, IVV, MTS, VAS, VTS)
August: $2,718 (SGP, DXS, WDC, AFI, BKI)
September: $3,128 (ARG, GPT, RIO, MLT, CPU, TLS, BHP, CIN)
October: $6,016 (CBA, CSL, WOW, IVV, VTS, VAS, VEU)
November: $240 (GPT)
Comments:
October is abnormally high, as VEU is changing from annual to quarterly distributions. This makes this dividend about $2700 rather than $900.
November is a rather quiet dividend month!
There is a mix of DRPs and cash dividends. All of this is either going into debt reduction, or reinvestment.
Long term, this seems to be sufficient cash flow for me - I guess that emphasizes the need to crack down on that debt level!!
July: $4,760 (ANZ, MQG, WBC, NAB, IVV, MTS, VAS, VTS)
August: $2,718 (SGP, DXS, WDC, AFI, BKI)
September: $3,128 (ARG, GPT, RIO, MLT, CPU, TLS, BHP, CIN)
October: $6,016 (CBA, CSL, WOW, IVV, VTS, VAS, VEU)
November: $240 (GPT)
Comments:
October is abnormally high, as VEU is changing from annual to quarterly distributions. This makes this dividend about $2700 rather than $900.
November is a rather quiet dividend month!
There is a mix of DRPs and cash dividends. All of this is either going into debt reduction, or reinvestment.
Long term, this seems to be sufficient cash flow for me - I guess that emphasizes the need to crack down on that debt level!!
I'm not familiar with many of these investments, but it looks like you have 722.5k in long stock/equity vehicles, with a margin loan of 465k. Effective margin rate of 155%... If 2008 happens again, which is certainly a possibility, you could be wiped out.
I don't know what your business is, but with such a crash I'm sure it would likely be impacted... Like you said, if you can sleep at night. I know I could not under such risk.
Also, I'm sure you could reduce spending and instantly increase (perhaps double) your years in saving. Currently you're spending ~38% annual expenses on a car. Get rid of that and you have 45 years saved. Retire, maybe go part time?
I don't know what your business is, but with such a crash I'm sure it would likely be impacted... Like you said, if you can sleep at night. I know I could not under such risk.
Also, I'm sure you could reduce spending and instantly increase (perhaps double) your years in saving. Currently you're spending ~38% annual expenses on a car. Get rid of that and you have 45 years saved. Retire, maybe go part time?
Good point about the car - its pretty much my biggest expense!
However, the mental benefit of getting away for weekends is very important to me - last time I tried being car free for 18 months, I ended up pretty miserable. As a starting point, I've started riding my pushbike to work again - its about 13km each way, so a reasonable length commute. I've made 5 days in a row, which looks like a good start in re-establishing this habit. Should help my waistline a bit too.
I'm targeting car expenditure of $6,500 next year, down by $2,900 a year. This is a combination of:
- Reduce annual km by 3000 by cycling to work 4/week.
- Lower depreciation (based on 25% of carrying value/year)
- Lower maintenance costs (there were some lumpy items last year)
- Increased cost for 4 new tyres
- 4% inflation on recurring costs (insurance, registration etc)
Although, my own arguments sound a bit like self-justifying claptrap... Might have to keep thinking about the car cost item.
The gearing and debt level is probably at the core of my financial mess though. But I just can't bring myself to sell down to reduce debt. I figure that on my current payment trajectory, I'll have it clear in 4 years (before my 35th birthday). If a transaction occurs with the business, it may happen sooner.
I guess this journal is me trying to keep myself honest to that time frame. Keep the feedback and comments coming!
However, the mental benefit of getting away for weekends is very important to me - last time I tried being car free for 18 months, I ended up pretty miserable. As a starting point, I've started riding my pushbike to work again - its about 13km each way, so a reasonable length commute. I've made 5 days in a row, which looks like a good start in re-establishing this habit. Should help my waistline a bit too.
I'm targeting car expenditure of $6,500 next year, down by $2,900 a year. This is a combination of:
- Reduce annual km by 3000 by cycling to work 4/week.
- Lower depreciation (based on 25% of carrying value/year)
- Lower maintenance costs (there were some lumpy items last year)
- Increased cost for 4 new tyres
- 4% inflation on recurring costs (insurance, registration etc)
Although, my own arguments sound a bit like self-justifying claptrap... Might have to keep thinking about the car cost item.
The gearing and debt level is probably at the core of my financial mess though. But I just can't bring myself to sell down to reduce debt. I figure that on my current payment trajectory, I'll have it clear in 4 years (before my 35th birthday). If a transaction occurs with the business, it may happen sooner.
I guess this journal is me trying to keep myself honest to that time frame. Keep the feedback and comments coming!
@ chris
Happy to see you are taking diversification seriously! I have thought about the value of your shares a bit more. You value them at AUD 590K. I wrote that they are worth something but that you cannot put a number on it directly.
Indirectly, I would say that your share in the company is probably worth the difference between your remuneration from the company (263K/annum) and the salary a third party would get to do your job (say AUD 150K/annum) and I would multiply this by between 0.5 and 3 years, depending on the macro environment - the better it is, the longer period you can use (but not really beyond three years as there is no visibility and you could be going from 2005-6 to 2008-9).
This would mean that your share in the company is worth between AUD 50K and AUD 300K - nothing to sneeze at, but still small compared to the debt you are faced with. If you could turn this into non-recourse debt then I would advise you to keep paying yourself first and possibly never pay off the loan but just refinance when possible because then the loan giver is carrying the risk - not you.
As for your asset classes - if you intend to live in Australia when you are FI/RE, I think the split is OK, although perhaps tilted to much in favor of US stocks compared to world stocks. If you wish to FI/RE somewhere else, you need to make sure your portfolio reflects this by more direct investments into said locale's equities.
All in all, I'd still sell now when the economy is good, then wait 2-3-5 years until it tanks and then buy things cheaply. As some very wise and very rich people taught me long ago "Sell at x7 EBIT, buy at x3 EBIT and in-between play golf" - and all of them told me its the last part of the sentence that is the hardest to act upon!
Magnus
Happy to see you are taking diversification seriously! I have thought about the value of your shares a bit more. You value them at AUD 590K. I wrote that they are worth something but that you cannot put a number on it directly.
Indirectly, I would say that your share in the company is probably worth the difference between your remuneration from the company (263K/annum) and the salary a third party would get to do your job (say AUD 150K/annum) and I would multiply this by between 0.5 and 3 years, depending on the macro environment - the better it is, the longer period you can use (but not really beyond three years as there is no visibility and you could be going from 2005-6 to 2008-9).
This would mean that your share in the company is worth between AUD 50K and AUD 300K - nothing to sneeze at, but still small compared to the debt you are faced with. If you could turn this into non-recourse debt then I would advise you to keep paying yourself first and possibly never pay off the loan but just refinance when possible because then the loan giver is carrying the risk - not you.
As for your asset classes - if you intend to live in Australia when you are FI/RE, I think the split is OK, although perhaps tilted to much in favor of US stocks compared to world stocks. If you wish to FI/RE somewhere else, you need to make sure your portfolio reflects this by more direct investments into said locale's equities.
All in all, I'd still sell now when the economy is good, then wait 2-3-5 years until it tanks and then buy things cheaply. As some very wise and very rich people taught me long ago "Sell at x7 EBIT, buy at x3 EBIT and in-between play golf" - and all of them told me its the last part of the sentence that is the hardest to act upon!
Magnus
Thanks Magnus!
Yes, companies are hard to value. I've wondered about different valuation metrics, and tried to come up with a compromise. The things I see as having value to a company are its current net assets (a stock) and the net present value of its future earnings (a flow). There is a reasonable level of certainty about he former, and a high degree of uncertainty about the latter.
My debates about value have ranged from:
- The present net liquid assets of the company (cash and net debtors) only. My share of this is about $250k. I figure that is a no risk floor to value, as that is what is left if we wound the place up today with no valuation on profits.
- Some multiple of the dividends (as you have suggested). It has a cash flow, which can be valued. However, it doesn't account for profit re-invested into the company. One of the reasons we have been growing so consistently is that we have kept dividend payouts to about 30% of post tax profits, and re-invested the rest for growth, both organically, and acquisitions. Taking this metric would encourage keeping the company as cash poor as possible, which probably isn't in its best long term interests (although it may boost out short term returns)!
- Value the post tax profits from the company. My share of this is about $130k/year this year, and a bit lower last year. The hard part is what multiple to use for this. The best guide is the last (internal) share transaction, which was close to cash value + 3 time post tax profit averaged over the last two years.
- Value purely of an earnings multiple, which seems to be the approach taken by some of the buyout merchants.
That gives a value anywhere between $245k and $1.3M.
At the end of the day, unless I see this value as realized cash, I want to be able to support my permanent lifestyle from other passive income. Rather tempted to just ignore the company value, and just focus on the rest of my balance sheet.
Regarding asset classes, I want to build up my international holdings a bit further - partially as I don't want to be totally exposed to the Australian economy (banks, miners and housing), and I still feel that the Australian dollar is stronger than it will be in the long term. However, I really struggle with the relative yield of international shares vs Australian shares. The broad Australian market had a gross dividend yield of a bit over 7%, while the yield on non US shares is closer to 3.3%, and US shares closer to 2%.
Then again, the high yield on Australian stocks is probably one reason that our market is still (measured by the all ords) 35% below its peak, while the US markets are getting close again. If you look at the accumulation indices, its more like 22%.
Given that accumulation indices are a much better metric of total return, I don't understand why they don't get more coverage?
Yes, companies are hard to value. I've wondered about different valuation metrics, and tried to come up with a compromise. The things I see as having value to a company are its current net assets (a stock) and the net present value of its future earnings (a flow). There is a reasonable level of certainty about he former, and a high degree of uncertainty about the latter.
My debates about value have ranged from:
- The present net liquid assets of the company (cash and net debtors) only. My share of this is about $250k. I figure that is a no risk floor to value, as that is what is left if we wound the place up today with no valuation on profits.
- Some multiple of the dividends (as you have suggested). It has a cash flow, which can be valued. However, it doesn't account for profit re-invested into the company. One of the reasons we have been growing so consistently is that we have kept dividend payouts to about 30% of post tax profits, and re-invested the rest for growth, both organically, and acquisitions. Taking this metric would encourage keeping the company as cash poor as possible, which probably isn't in its best long term interests (although it may boost out short term returns)!
- Value the post tax profits from the company. My share of this is about $130k/year this year, and a bit lower last year. The hard part is what multiple to use for this. The best guide is the last (internal) share transaction, which was close to cash value + 3 time post tax profit averaged over the last two years.
- Value purely of an earnings multiple, which seems to be the approach taken by some of the buyout merchants.
That gives a value anywhere between $245k and $1.3M.
At the end of the day, unless I see this value as realized cash, I want to be able to support my permanent lifestyle from other passive income. Rather tempted to just ignore the company value, and just focus on the rest of my balance sheet.
Regarding asset classes, I want to build up my international holdings a bit further - partially as I don't want to be totally exposed to the Australian economy (banks, miners and housing), and I still feel that the Australian dollar is stronger than it will be in the long term. However, I really struggle with the relative yield of international shares vs Australian shares. The broad Australian market had a gross dividend yield of a bit over 7%, while the yield on non US shares is closer to 3.3%, and US shares closer to 2%.
Then again, the high yield on Australian stocks is probably one reason that our market is still (measured by the all ords) 35% below its peak, while the US markets are getting close again. If you look at the accumulation indices, its more like 22%.
Given that accumulation indices are a much better metric of total return, I don't understand why they don't get more coverage?
-
George the original one
- Posts: 5406
- Joined: Wed Jul 28, 2010 3:28 am
- Location: Wettest corner of Orygun
> I still feel that the Australian dollar is
> stronger than it will be in the long term.
Do not underestimate the natural resources being shipped out of Australia (primarily to China and India, if the US trade press is to be believed). There will be boom/bust cycles, but the wealth of resources will continue to support the Aussie. I think it would take a massive cock-up by the government to undermine the value.
> stronger than it will be in the long term.
Do not underestimate the natural resources being shipped out of Australia (primarily to China and India, if the US trade press is to be believed). There will be boom/bust cycles, but the wealth of resources will continue to support the Aussie. I think it would take a massive cock-up by the government to undermine the value.
@ chris There is actually a third way to get a valuation - the "comparables" method or comps as investment bankers call them - are there similar companies out there that have been sold / have raised equity in the public market? if there are you can get a reasonable figure.
Again - if you want ERE and need 30k a year and you could cash out at 1.3m pay back your loans and get a 7% dividend yield, why not pull the trigger, so to speak - even without any other asset you have, the dividends from the sale of your share would alone be over double your spending, i.e. you'd be able to reinvest 60-70% of your dividend income and still live - that equals negative SWR - you'll still be saving)))
@ George I think Australia should follow OPEC during the 70s - if all of SE Asia needs Australia's natural resources, they should pay through the nose - reduce exports Australia has a strong enough economy and sell dearly in the future, which will also balance the responsibility towards future generations (cf. Norway's public political discussions about oil and timber). Also, this must be balanced with the risks of getting paper/electronic money in return for actual goods, more so if the currency is one that may be devalued, e.g. USD, local currencies
Again - if you want ERE and need 30k a year and you could cash out at 1.3m pay back your loans and get a 7% dividend yield, why not pull the trigger, so to speak - even without any other asset you have, the dividends from the sale of your share would alone be over double your spending, i.e. you'd be able to reinvest 60-70% of your dividend income and still live - that equals negative SWR - you'll still be saving
)))@ George I think Australia should follow OPEC during the 70s - if all of SE Asia needs Australia's natural resources, they should pay through the nose - reduce exports Australia has a strong enough economy and sell dearly in the future, which will also balance the responsibility towards future generations (cf. Norway's public political discussions about oil and timber). Also, this must be balanced with the risks of getting paper/electronic money in return for actual goods, more so if the currency is one that may be devalued, e.g. USD, local currencies
Today I had a bit of a chicken out moment. US stocks are sitting at a 4 year high. My gearing ratio is through the roof, with a return to May stock prices being enough to give me a margin call. I lost some sleep over this last night. Loosing sleep over investments fails the page 1 test for me, so I decided to reduce my gearing a bit today.
I ended up selling down $57,000 of VAS (an Australian broad market ETF). This reduced margin loan debt to $422,000, and dropped my monthly interest bill by $420/month.
I've had a habit of trading a little on this ETF - I'm not sure this is a good thing, even though its been somewhat effective. My recent history with this was a sale of 900 units at 56.46 towards the end of April (due to cash flow for interest pre-payments), then re-purchased 1000 units in Jun for an average cost of 52.55. 8 units from a DRP. Sold off in August at 56.55. Including brokerage, interest and dividend impacts, a net gain from trading of approx $7,500.
Once I get my debt levels a bit more under control, or if fear starts to spread again (say Greece does actually exit the euro) I might buy the same dollar value back again.
I ended up selling down $57,000 of VAS (an Australian broad market ETF). This reduced margin loan debt to $422,000, and dropped my monthly interest bill by $420/month.
I've had a habit of trading a little on this ETF - I'm not sure this is a good thing, even though its been somewhat effective. My recent history with this was a sale of 900 units at 56.46 towards the end of April (due to cash flow for interest pre-payments), then re-purchased 1000 units in Jun for an average cost of 52.55. 8 units from a DRP. Sold off in August at 56.55. Including brokerage, interest and dividend impacts, a net gain from trading of approx $7,500.
Once I get my debt levels a bit more under control, or if fear starts to spread again (say Greece does actually exit the euro) I might buy the same dollar value back again.
Time for a monthly update.
Income (net):
Employment: $6,950+$3,320
Dividends: $2,324 (1,220 in DRP)
Super: $1,700
Interest: $26
TOTAL net income: $14,310
Expenditure:
Business loan interest: $644
Business loan principal: $3,865
Margin loan interest: $3,200
Super: $1,700
Rent: $815 (still looking for replacement housemate)
Travel deposit (Aug-13): $500
Xmas-new year holiday bookings: $1980
Dive equipment $250
Car repair $20
Food/leisure/misc $1,336
Savings: $5,565 39%
Interest: $3,844 27%
One-off travel: $2,480 17%
Core expenditure: $2,421 17%
Portfolio changes:
Stock sales: $57,000 of VAS.
Stock purchases: $11,000 of RIO
$9,000 of FFJ (punt on Gina)
Margin loan down to $427,700. Market movements equivalent to a gain of $17,100
Commentary:
Expenditure was high this month, both between purchases of stuff and pre-paymets for two holiday trips in the net 12 months.
The car repair wouldn't usually rate, except that the first two quotes were in the thousands. Third guy found some loose injector clamps and charged me $20 - rather pleased with that!
FFJ is a bit of a short term gamble. It had a big set of write downs which saw a 10% decline, then rumblings from their major shareholder (a bit of a character), which saw another 12% fall. Maybe I'm trying to catch a falling knife, and recognize that this is more of a gamble than an investment!
Income (net):
Employment: $6,950+$3,320
Dividends: $2,324 (1,220 in DRP)
Super: $1,700
Interest: $26
TOTAL net income: $14,310
Expenditure:
Business loan interest: $644
Business loan principal: $3,865
Margin loan interest: $3,200
Super: $1,700
Rent: $815 (still looking for replacement housemate)
Travel deposit (Aug-13): $500
Xmas-new year holiday bookings: $1980
Dive equipment $250
Car repair $20
Food/leisure/misc $1,336
Savings: $5,565 39%
Interest: $3,844 27%
One-off travel: $2,480 17%
Core expenditure: $2,421 17%
Portfolio changes:
Stock sales: $57,000 of VAS.
Stock purchases: $11,000 of RIO
$9,000 of FFJ (punt on Gina)
Margin loan down to $427,700. Market movements equivalent to a gain of $17,100
Commentary:
Expenditure was high this month, both between purchases of stuff and pre-paymets for two holiday trips in the net 12 months.
The car repair wouldn't usually rate, except that the first two quotes were in the thousands. Third guy found some loose injector clamps and charged me $20 - rather pleased with that!
FFJ is a bit of a short term gamble. It had a big set of write downs which saw a 10% decline, then rumblings from their major shareholder (a bit of a character), which saw another 12% fall. Maybe I'm trying to catch a falling knife, and recognize that this is more of a gamble than an investment!
Had to post an update - this month off to a great start! Between a tax return, company dividend and listed dividends, non-employment after tax income this month is over $36,000, all straight into investments and debt reduction. In other words, non-work savings this month exceed a year of expenses.
Felt great, so I had to share!
Felt great, so I had to share!
Monthly pay is being processed, so time for an update for September.
Income (net):
Employment: $6,950+$3,320
Dividends: $3,864 (1,221 in DRP)
Super: $1,700
Interest: $26
Tax return: $14,000
Private company dividend: $15,300
TOTAL net income: $45,160
This month was a classic example of the lumpiness of my income through the year!
Expenditure:
Business loan interest: $600
Business loan principal: $3,900
Margin loan interest: $3,372
Super: $1,700
Rent: $815 (still looking for replacement housemate)
12 weeks personal training etc $1020
Holiday accommodation (Oct-12): $338.50
Dive equipment $350
Food/leisure/misc $2261
Savings: $36,404 80%
Interest: $3,972 8.8%%
Travel/diving: $1,708 3.8%
Core expenditure: $3,076 6.8%
Portfolio changes:
Short term trades on FKP (gain $1,082) and BLY (gain $1,095).
Stock sales: nil
Stock purchases: $34,600 of CIN, $10,700 of JBH
Moved $9,000 of MQG from personal name to company name.
Margin loan at $445,000. Market movement equivalent to $18, 400.
Commentary:
This was a very high income month, with a couple of lumpy income items. The tax return is an annual occurance, while the company dividends are usually 1-2 times a year, but at an unpredictable time.
Expenditure was also very high this month, between purchases of stuff, a miscellaneous expenditure that I can't get to the bottom of (the money hasn't arrived in my investments, so I've frittered an extra thousand away on crap somewhere). I also spent a bit over a thousand bucks on some personal training and nutrition advice - my attempts at DIY on this have not been working very well to date. I figure there is little point to being retired by 35, if I'm dead by 50. Hopefully it helps to establish some good habits - if so, will be money well spent. If not, will be dollars down the drain.
A couple of short term speculative plays - two have closed with >$1000 profits (FKP and BLY, although had I kept holding BLY, I'd now be up about $3k), and two still live (FXJ and JBH, both currently breaking even).
While this month technically had an 80% savigns rate, I'm scared. Mainly because without the income lumps, I consumed my entire income. I have to reign this in in the coming months.
Income (net):
Employment: $6,950+$3,320
Dividends: $3,864 (1,221 in DRP)
Super: $1,700
Interest: $26
Tax return: $14,000
Private company dividend: $15,300
TOTAL net income: $45,160
This month was a classic example of the lumpiness of my income through the year!
Expenditure:
Business loan interest: $600
Business loan principal: $3,900
Margin loan interest: $3,372
Super: $1,700
Rent: $815 (still looking for replacement housemate)
12 weeks personal training etc $1020
Holiday accommodation (Oct-12): $338.50
Dive equipment $350
Food/leisure/misc $2261
Savings: $36,404 80%
Interest: $3,972 8.8%%
Travel/diving: $1,708 3.8%
Core expenditure: $3,076 6.8%
Portfolio changes:
Short term trades on FKP (gain $1,082) and BLY (gain $1,095).
Stock sales: nil
Stock purchases: $34,600 of CIN, $10,700 of JBH
Moved $9,000 of MQG from personal name to company name.
Margin loan at $445,000. Market movement equivalent to $18, 400.
Commentary:
This was a very high income month, with a couple of lumpy income items. The tax return is an annual occurance, while the company dividends are usually 1-2 times a year, but at an unpredictable time.
Expenditure was also very high this month, between purchases of stuff, a miscellaneous expenditure that I can't get to the bottom of (the money hasn't arrived in my investments, so I've frittered an extra thousand away on crap somewhere). I also spent a bit over a thousand bucks on some personal training and nutrition advice - my attempts at DIY on this have not been working very well to date. I figure there is little point to being retired by 35, if I'm dead by 50. Hopefully it helps to establish some good habits - if so, will be money well spent. If not, will be dollars down the drain.
A couple of short term speculative plays - two have closed with >$1000 profits (FKP and BLY, although had I kept holding BLY, I'd now be up about $3k), and two still live (FXJ and JBH, both currently breaking even).
While this month technically had an 80% savigns rate, I'm scared. Mainly because without the income lumps, I consumed my entire income. I have to reign this in in the coming months.