The following are our Q4 2019 net worth and income and expense posts from our blog, wrapping up the quarter and the year. TL;DR: Net worth went up $534,000 for the year. Our Q4 savings rate was 80%, and 88.5% for the year. Fell short of our 90% savings rate goal. https://preview.redd.it/nxx4b7t7x0a41.jpg?width=1200&format=pjpg&auto=webp&s=fadc7b35bad84e6dd2d1b3b18e3a8aad0d240ff4
Quarter 4 2019 – Net worth update: Up $534,000 for 2019
Wow, I cannot believe the year went by that fast. I hope you’ve all had a safe and happy Christmas and New Year period.
As we said in our New Year birthday post, we had a busy quarter on the work front. It’s been getting really bad. Work stress is a very real concern for both my wife Ellie and I, and it seems only fitting that we want to FIRE.
It’s still very far away, but we started 2018 with a goal of retiring in 10 years, and a year has passed. Given the rapid passage of time, 10% time progress is nothing to be sneezed at.
However, in October I wrote a post on how our progress seems to be accelerating, following the rapid progress we made to a $1 million share portfolio. But the numbers in that post were quickly superseded with some big news.
Financially speaking, the quarter started out with a bang when Ellie received a $100,000 inheritance and the mixed emotions that came with it. It was a huge win for our finances, but it came at the expense of a familial loss.
While that was the headline event this quarter, let’s take a look at the full picture and see how we ended the year.
Our financial goals
Here are our early retirement goals. Essentially we want to retire early before the age of 45, with the following in assets:
- $2,000,000 in shares
- $600,000 in two investment properties
- $700,000 in superannuation
- $1 million house as our primarily place of residence
- Total asset goal = $4,300,000.
Between those shares giving us dividends and rent from the investment properties, we want to have a gross passive income of about AU$150,000 per annum (pre-tax
), to fund a nice early retirement where money isn’t a concern. You can also track our net worth growth in our previous posts.
So how did we go in October-December to finish up the year? As always, let’s start with shares. https://preview.redd.it/y07lxgmtv0a41.jpg?width=1200&format=pjpg&auto=webp&s=13392f5dd13fc484828da42ab64b33a995657cff
After finding out that we were going to receive the inheritance, our thoughts turned to where we could invest it.
That ended up being in a pair of long-term, hopefully safe and stable Listed Investment Companies (LICs). They’ll provide us with around a 6% gross dividend return. With $50,000 thrown into each, they should see our gross passive dividend income increase by around $6,000 annually.
That’s around 4% of our entire FIRE income right there, and we’re incredibly lucky and grateful to have received this.
Otherwise, after that explosive start to the quarter, the remainder was actually very quite on the buying front.
We had a big tax bill to pay, as well as another big expense for 2020 – holidays – that we put a down payment on. But you’ll have to wait for our Q4 income and expense report (coming up next) to hear more about that. However, that did mean that we lost the best part of a month of our salaries to those expenses.
While we bought big, our portfolios were also hit by the (seemingly endless) banking scandals that have hit the sector. Given that we’re heavy in financials, that side underperformed – all the more reason to add extra diversity to our portfolio!
So how did it all go with the value of our shares?
Our share portfolio was started the year on $725,000, was $819,000 at the end of Q1 2019, $931,000 in Q2 2019, and broke the $1 million mark at the end of Q3 at $1,023,000.
The ASX started October on 6688.30 points and ended the year on 6,684.10 – down 0.1% for the quarter.
We ended 2019 with a value of $1,120,000
. Given how much many of our stocks were beaten down, we were actually very happy to end up with that – it could have been a lot worse. We’ve noticed that LICs generally show a lot of resilience during downturns, so they could have cushioned the blow for our balances.
Regardless, we ended the quarter up $97,000 (9.5%). In total on 31 December 2019 our share portfolio was up $395,000 compared to 31 December 2018 – an increase of 54.5%, which is just mind-blowing
to us. Even without the inheritance, our portfolio would have gone up by around 40%.
What a crazy year on the share front, in so many ways. https://preview.redd.it/0j3y8cbuv0a41.jpg?width=1200&format=pjpg&auto=webp&s=ee77b2e1c64c7cb09090dd5979aec73b3b815839
Next up is our superannuation accounts – or compulsory retirement savings.
During the quarter there were all sorts of ruminations about the Australian retirement system.
Someday a future government is going to have to bite hard on the retirement age bullet and raise it, because it’s just not going to end up well for the economy otherwise if they keep it as it is. But that unpopular can of worms will still get kicked down further the road for a few years longer.
Thankfully we plan to avoid a lot of the hoopla around government pensions (or lack thereof
) in our old age by being self-funded early retirees.
That said, for as long as we continue working, we receive employer-funded contributions into our retirement funds. We don’t make extra superannuation contributions because we can’t access these under current laws until we’re at least 60 years old (wait for that number to eventually rise as well). We’ll do a post about that in the next few weeks.
So how did things go for our superannuation balances?
As a reminder, we started 2019 with $335,000 in super, $368,000 by 31 March, $393,000 by 30 June, and $409,000 at 30 September.
Three months later we’re now on $428,000
– an increase of $19,000 or 4.6%. It’s also an annual rise of $93,000 or 27.7%, which is a staggering amount. https://preview.redd.it/5jlko3xuv0a41.jpg?width=800&format=pjpg&auto=webp&s=7d6b00ee9b3f2e44dec609f6d355b49bc7930edf
October-December: Primary place of residence
Last quarter the dial on the value of our house price moved for first time, and there seems to be some corroborating evidence for that.
House prices stagnated here in Brisbane over the last year, while southern Australian house prices took a dive of 10-15%, However, now news comes of a change in sentiment, and house prices are forecast to rebound by as much as 17% in 2020
… Unfortunately it’s only meant to be between 3-7% in Brisbane. But we can live with that.
However, despite the change in the national property market’s sentiment, has anything changed with the value of our home in the last three months?
Last quarter in Q3 onthehouse.com.au said it was $710,000 (up from $705,000 in Q2), and ANZ bank said it was worth $720,000 (up from $655,000).
We didn’t trust the actual numbers, but we went with the number ANZ gave back in Q2 – $655,000, a $5,000 increase.
We haven’t seen as much real estate action in our neighbourhood this quarter, so this will be interesting.
At the end of December onthehouse.com.au gave us a valuation of $735,000 – up $25,000. Once again, onthehouse.com.au seems to be a bit too optimistic (but we’d certainly take it!), while ANZ is a bit closer to the mark. That said, compared to Q3 when ANZ it was $720,000, in Q4 it now said it’s worth $668,000.
Huh? ANZ certainly likes to bounce around.
So once again, I’m a bit conflicted with how to value things. While one valuation goes up $25,000, the other plummets by $52,000, and they give different figures.
The ANZ report is certainly closer to the mark in any case in my opinion – and it’s still higher than the valuation we settled on last quarter ($655,000), so hopefully we’re just conservative.
But I’m going to play it slightly safe and hold the valuation at $655,000
. If both valuations move in the same direction (either up or down) as they did last quarter, we’ll move things.
Our future retirement home will cost around $1 million to buy, so we’ll have a shortfall that we’ll need to make up once our passive income goals are finalised. However, we’ve paid off the property, so all the capital is ours and counts towards our net wealth.
But our primary place of residence isn’t the only skin we’ve got in the real estate game. https://preview.redd.it/mcr008ivv0a41.jpg?width=1200&format=pjpg&auto=webp&s=ae97ad34cdeb0a4cc5f646d85abcf690cdff4d38
October-December: Investment properties
Righty-o – Last quarter things moved up by $5,000 to a combined value of $605,000, with an extra $3,000 paid off our two investment properties.
This quarter, things only paid themselves off by a barely noticeable $1,000 with a total debt of $374,000.
On the valuation side, this was the state of play in Q4 via onthehouse.com.au and ANZ property reports:
- Onthehouse.com.au – combined value $680,000 ($695,000 in Q3).
- ANZ – combined value $619,000 ($605,000 in Q3).
So just like with our primary place of residence, it’s conflicting data. However, this time it’s reversed, with onthehouse.com.au dropping a little bit (by $15,000), and ANZ increasing (by $14,000).
Between the two, things have apparently dropped by $500 per property – which is just splitting hairs.
Given they were both pulling in practically opposite directions, we’ll call this flat again at $605,000
, and claim the $1,000 mortgage repayment.
ANZ seems to once again be the more accurate measure, and we’ll once again play it conservative and retain their $605,000 total value.
Deducting our debt of $374,000
gives us total equity of $231,000. That’s a tiny increase of 0.4%.
So in total, a very unremarkable quarter on the property front! https://preview.redd.it/qnl4a8swv0a41.jpg?width=1200&format=pjpg&auto=webp&s=b32e426f3d26d2a09518504ebc59867398e9a562
Financial state of the union
Looking back to the start of the year, we began with a net worth of $1,900,000, increasing to $2,057,000 in Q1, sitting on $2,196,000 in Q2, and reaching $2,317,000 in Q3.
So here’s how things look at the end of 2019:
|Asset ||Value |
|Shares ||$1,120,000 |
|Superannuation ||$428,000 |
|Investment properties value ||$605,000 |
|Investment properties debt ||-$374,000 |
|Primary place of residence ||$655,000 |
|Total ||$2,434,000 |
That’s another nice increase of $117,000 for the quarter – a 5% lift.
For the whole year, it’s a quite extraordinary increase of $534,000, or 28.1%. Taking out the inheritance Ellie received, it’s still a momentous lift of $434,000 – which would have been 10% of our entire net worth goal
: a ridiculous number, really.
Given the ~18% market rally in 2019, ridiculous
really should be the word of the year.
It would be crazy to expect the same in 2020. But given that much of 2019 was mired by Brexit and the US-China trade war (which is now partially agreed), 2020 might be another year with rocket under it now that Brexit is also almost sorted (did I just jinx it?). That said, Iran, North Korea, and any number of other surprises will await us as well.
Domestically in Australia, talk of further interest rate cuts might drive even more money into shares, and the housing market is apparently rebounding. If it wasn’t for the underlying shaky fundamentals, you’d bet that 2020 will be another solid year… But we’ll see.
In the end all I know is that our net worth has increased – and it’s now 56.6% of our total target – progress towards FIRE of 12.4%. What a year!
Next up is our income and expenses report for Q4 2019, so stay tuned for that and our quest to save 90% for the year. Will we reach it? Blog link: https://hishermoneyguide.com/quarter-4-2019-net-worth-update/
2019 income and expenses: We saved $189,718 – 88.5% savings rate
The big question we’ve been asking ourselves is whether we reached our goal of saving 90% of our income over the course of the entire year.
Our running total for the first nine months of 2019 was an income of $151,400, with expenses of just $12,710. That’s a huge running savings rate of 91.6%.
But the first nine months don’t tell the full story by any means.
We still had our eye watering tax bill to include this quarter. Plus a surprise expense: we’re going on holidays in Q1 2020, and in November we pre-paid a decent chunk of it!
So can we keep our heads above the 90% threshold across the whole year as we aim for financial independence and early retirement before age 45? Let’s find out!
October-December: Income and side hustles
Let’s start with our salaried work and effort-related ‘active’ income (aka: side hustles).
For starters, this quarter had a profitable seven pay cycles within it for salaries, giving us $43,314.18 after tax. That’s $6,187.74 more than last quarter which only had six pay days. Wouldn’t it be nice if every quarter had seven pay cycles…
We haven’t had any big
wins on the side-hustle front to finish the year. But here are other small income streams.
Our bottle collection numbers were $147.70, compared to $235 last quarter. That brings us up to $1015.20 for the year. Not bad for some tax-free cash. However, this side of things has certainly slowed down for us recently. We just haven’t had the time to go on walks after work like we did earlier in the year, so these numbers are decreasing. And the streets actually seem cleaner as well, which is awesome.
This blog made $119.04, compared to $119.26 last quarter. In total the blog earned us $369.76 for the year. In late 2018 the site cost about $521 to set-up with 6 years of hosting, two years domain registration, and a paid theme. So the way things are going, next quarter things will have more or less paid for themselves, which was the core goal of monetising the site. Thanks everyone for your support here!
Next up, doing online surveys were another tidy earner. This quarter we earned $190. In Q1 we earned $170 from surveys, $100 in Q2, and $285 in Q3. That brings us to $645 for the year. When you get these in the form of e-gift vouchers, they’re tax free. Cha-ching!
We also had $110 in rewards program redemptions for October-December. It’s really not even a blip on the radar, but we’ll take it nevertheless. In total we had $240 of rewards redemptions for the year.
Lastly, it’s not really an ‘active’ income source, but Christmas rolled around, and our parents gave us cash in lieu of physical presents. Good thing they gave us money, too, because we have everything else we need – aside from early retirement! This year we received $1,000 in cash, which is greatly appreciated – thanks mums and dads!
That brings our side hustles to a total of $566.74, plus $1,000 in presents. Added together with our salaries, that gives us a grand total of $44,880.92, compared to $37,765.44 last quarter. https://preview.redd.it/uqy6w4p1w0a41.jpg?width=1200&format=pjpg&auto=webp&s=c325286aa6e915618bf737bbacb419bb86b1b13f
Let’s turn our sights to our ‘passive’ income: share dividends.
We had a nice year of buying and reinvesting shares, so as always – we really want to see our numbers increase. It would be rather disheartening to see a year of progress reveal no progress at all.
So how do our numbers compare to last year:
| ||Q4 2018 ||Q4 2019 |
|DRP/DSSP reinvested/Direct debit (excluding franking credits) ||$12,694.50 ||$15,256.82 |
The numbers above are ‘somewhat net
‘ – for the purposes of calculating our savings rate. It excludes franking credits, which are pre-paid tax.
Looking at the numbers above, our dividend income has increased year-on-year by $2,562.32 or 20.2%, which is quite nice.
For reference, this is the full picture for 2019, versus 2018:
|DRP/DSSP reinvested/Direct debit (excluding franking credits) ||2018 ||2019 |
|Q4 ||$12,694.50 ||$15,256.82 |
|Q3 ||$15,465.78 ||$16,439.23 |
|Q2 ||$4,488.78 ||$9,728.34 |
|Q1 ||$5,611.49 ||$6,739.82 |
|Total ||$38,260.55 ||$48,164.21 |
In total, that’s an increase of $9,903.66 or 25.9% – which is just terrific
Short of a market crash, things are looking great to improve once again in 2020, with over a quarter of a million dollars in shares purchased and dividend reinvested across 2019 – plus anything extra we purchase throughout 2020. https://preview.redd.it/acan7eq2w0a41.jpg?width=1200&format=pjpg&auto=webp&s=1e07049eea455419be91352c59872fc04b9e123e
Alright, drum-roll time. Let’s look at our expenses for the final quarter of the year: Important to note: the “TOTAL” columns are for the entire year – this table now includes expenses for the last four years: 2016-2019.
For October-December we had total expenses of $11,983.96
. That dwarfs our 2018 expenses for the same period (which were $7,760.86) – so an increase of $4,223.1 or 54.4%. Gimme a O, U, C, H!
That figure is also almost as much as our expenses for quarters 1, 2 and 3 combined. What on earth happened?!?
Well, that blowout is entirely down to two items: our tax bill – which doubled on last year
– as well as down-payments on a holiday we’re taking to New Zealand in Q1 2020. Our total holiday cost will come in at around $5,000 so we still have around $3,000 coming our way in Q1 next year, so that’ll be an expensive time. However, we hope our tax bill to drop a little bit in 2020 by maybe $1,500 – so that’ll help.
It was another largely our bills were mostly
around the same – but not all.
Firstly, there were some notable savings. The biggest step we took was downgrading one of Ellie’s professional memberships, resulting in a saving of almost $400. Across the whole year this downgrade will save us about $750 each year, which is nothing to be sneezed at. In November 2018 we also had a big expense with setting up the blog, which wasn’t replicated this year.
Compared to last year our grocery bill has gone up a little bit, but not as much as we expected given the severe drought.
If we take out tax from our “living expenses”, across all of 2019 we only spent $18,256 compared to $17,891 in 2018. That’s an increase of 2%, which is pretty much in line with inflation.
All up our goal was to cut spending for the year, which we failed at. But given what some of those increases were, ultimately we’re pretty happy with our expenses. Yeah, some things have gone up, but others have dropped.
We could have saved more if the goal was to save money at any
cost, but we’re pretty comfortable with life at the moment and what we spend money on.
We have a holiday to look forward to, while 2021 will be a staycation most likely ahead of another international trip in 2022. And sure, our tax bill went up, but that’s because we had a higher income – so we don’t have any right to complain there.
2019 was another year of managing to dodge big expenses for items like broken appliances or home maintenance, which will
eventually bite us. Until that happens though, we’ll keep saving and investing. But speaking of saving, how did we go for the quarter, as well as the whole year?
How are we tracking? Q4 savings rate
Now let’s throw together some numbers and see what comes out. First up we’ll look at the savings rate for the quarter:
|Q4 ||Value |
|Income ||$44,880.92 |
|Share dividends ||$15,256.82 |
|Expenses ||-$11,983.96 |
|Total savings ||$48,153.78 |
|Savings rate ||80.0% |
80% is easily
our lowest savings rate of any quarter of the year (Q1 was 89.7%, Q2 was 93.2%, and Q3 was 92.1%), but we always knew and said that Q4 with that big fat tax bill was what would hurt us.
So that’s not really a surprise, and in the grand scheme 80% is still pretty good. But forget Q4. What did all of 2019 look like? It’s a number I’ve been waiting all year to see… https://preview.redd.it/2dcay1d5w0a41.jpg?width=1200&format=pjpg&auto=webp&s=40773ade74465500540cc0521ee432ba936b2cbf
2019 annual savings rate
So, did we reach our goal of a 90% savings rate for all of 2019?
|2019 ||Value |
|Income ||$166,249 |
|Share dividends ||$48,164 |
|Expenses ||-$24,695 |
|Total savings ||$189,718 |
|Savings rate ||88.5% |
Darn. 88.5%. So close, and yet so, so far
Feeling an instant level of guilt, I ran a calculation to see what would have happened if we we didn’t pre-pay part of our upcoming holiday, and it was 89.3% – still short. That makes me feel a bit better.
The next big savings rate killer was the tax. With the way we do our calculations, having some $4,800 of taxable side-hustle income for 2018-19 meant almost $1,800 in extra tax. The impact of that extra tax and holidays combined would have just about got us over the line to 90%.
We tried and ultimately failed! Sorry, folks!
In any case, saving almost $190,000 between income and reinvested dividends is something we’re really thrilled
about. It’s all going into shares now, and will continue to do so until we hit our share income goals. Combined with the increases to our net worth in 2019, our goal of early retirement has never been closer and feels like it’s accelerating.
We’ll be posting our 2020 goals next week, so stay tuned for that.
Thanks for reading and good luck with your income and expense goals for the year ahead!
Cheers, Alex Blog link: https://hishermoneyguide.com/quarter-4-2019-income-and-expenses/