This month I became a millionaire and achieved a massive milestone I set out for myself at the start of the year, which if I am honest I never thought I would actually reach. In this respect August was a pretty exciting time for the Net Worth update. I included two massive investment gains into the portfolio. These are 1. Manufactured equity in the rental build, and 2. The value of my online businesses. The snowball is rapidly growing now, and whilst I don’t want to throttle back just yet, I have been forced to engage the autopilot and pay less attention to finances as it has been negatively affecting my mental health.
The theme of this month was really looking after myself a bit more. As I mentioned, I fully admitted to myself just how obsessive I have been about finances and realised the negative effect it has been having on my mental health. It turns out this is fairly common for FI/RE bloggers. I’ve been chatting to a counsellor and its pretty interesting how many areas of my life have similar themes, working hard to try and achieve a future outcome, but sacrificing the here and now. Accordingly, I am trying to work on being more ‘present’. This means limiting screen time (particular around bedtime and sleep hygiene), cutting back on obsessively tracking metrics (share portfolio, Instagram followers, minutes left until FIRE… that kind of thing). I’m doubling down on diet and exercise, and applying for an extended break (sabbatical) from work. Unfortunately my Fathers health has continued to deteriorate so I am looking to use this time to travel interstate again to care for him, but with COVID travel restrictions this is being a bit difficult.
End of financial year tax return is still outstanding…
When the tax statements for the ETFs and LICs in my portfolio are all finalised (unfortunately around October-ish), I will print Sharesight tax summary for my index funds and then take it down to my accountant, pay $300 and walk away with an estimated $5,000 tax return. I am not banking on getting this return, but when I do get it I will be putting it half into the mortgage offset account and half into my brokerage account for buying more index funds.
My saving rate was 74% this month, but this is something I have decided to pay less attention to because it was just stressing me out. Now that I have reached a $1M net worth and generating around $25K of ‘relatively’ passive cash-flow income per year, I almost feel like I don’t need to stress out about the saving rate. The reason I put so much emphasis onto the saving rate was I wanted to track how efficiently I was reaching FI/RE because I had this idea that when I hit FI/RE, that my life would suddenly improve and I would be happy.
Secondly, I guess there was an element of Ego, and I liked to be able to brag about it on Instagram and somehow felt my savings rate gave me more credibility or ‘rank’ in the FIRE community. So I will be working to mellow this out and try to ‘be more grey’ instead of black and white – if this means the savings rate takes a bit of a hit – so be it. I am prioritising my mental health.
Income from this month was getting closer to back to normal, but doing sim flying and management style work meant I wasn’t earning a standard flying wage with all the allowances – just the base rate. My sales agent conveniently sold a heap of stuff on commission which was good seeing some cash flow into the account through them; everything I made went into either the mortgage account or my brokerage account.
I also made about $500 in income from the CaptainFI blog between my experiment with Google AdSense and various affiliates for businesses and products that I use. Its been great because I have felt a bit more able to spend more money on the site to increase the user experience; investing in some subscription based services and upgrading to a better hosting plan which should hopefully make the site load faster (yes, I know I need to post less images!). One of these services was paying to get the Podcasts transcribed, so you can read them now if you get sick of my voice (and CTRL+F to find the bits you want quickly!)
When I first wrote this article, the ‘reliable’ ongoing affiliate income from the other portfolio sites was about $130 per month, so this is the number I have used in the retirement calculations below. At the moment I don’t want to include income from CaptainFI.com as a part of this – the reason being that I didn’t really start CaptainFI with the idea to turn it into a business. My plan is to use this blog as a learning process for myself, and to help others on their journey. Realistically though, I don’t see any issue with sharing affiliate links for products and tools which I use on the path to FIRE, and affiliate commissions allow me devote more time to improving and growing the site.
Spending continued to be pretty low, but I did lash out on some Galaxy hops for brewing beer, and a new footy. I loaded up on fresh fruits and veggies guilt free as I have loosened the reigns on tracking spending
This month I invested $23,553 between Shares, Property, and I also roughly spent about $1000 on the website portfolio.
$20,132 went into the share market this month; $6126 into A200 and $14,004 into VEU. I think I want to see $200K in the A200 holding and then I will potentially start to diversify and maybe even go back to buying Vanguards VAS to ‘hedge my bets’ a bit, or focus more heavily on Aussie LICs – what do you think? Is it too much to have in one ETF?
I bought such a big chunk of VEU because it had been going down due to COVID fears, and well I didn’t really have a big holding of it before at all, so wanted to boost that up. At the moment, I am targeting something like 80% Aussie and 10% US and 10% global (ex US) with the concentration bias in Australia due to franking credits and high dividend yield. After FIRE, I will try to boost the amount of US and Global stocks to something closer to 25% each for risk management / diversification reasons.
I transferred an extra $3421 into the property build fund to continue to build up a buffer, as well as load the mortgage account which the interest only repayments come out of. This gives me a bit of breathing room, reduces the interest payable and also gets me ‘ahead’ on my repayments if that makes sense.
I didn’t invest anything more into P2P lending through Plenti, but I did get me $2 of interest which was then re-invested into the fund.
The FIRE portfolio continues to grow, as I slowly continue to feed money into it. The portfolio has recovered a little from the COVID drop, and provided a small amount of dividends which I have reinvested in the portfolio. I have transitioned away from the Excel Spreadsheet and into using Sharesight for my portfolio metrics here which a lot of you had been asking for, so here it is no bull! You can use this link to sign up and get 4 months for free on a premium subscription for Sharesight, but be sure to check out my review of them first here – Captain FI reviews Sharesight.
I recently set up my trade confirmation emails with SelfWealth and Sharesight which makes this process completely hands free! All I need to do is log in once a year and confirm dividends, but of course I log in every month so I can get the following screenshot to upload for you guys!
From the Sharesight reporting, the start of the month saw a growth of about $7K, but with some corrections in the market since the 20th the overall total return was just over $4600 in capital growth and dividends or just under 2% of the portfolio’s value – not too shabby as the markets continue their upward trend. Who knows for how long – rumours of increased inflation due to governments quantitative easing, forecast recessions, many small businesses closing and government stimulus coming to a close soon, I am expecting a potentially volatile last quarter for 2020 – but I will continue to buy!
Financial year to date
This financial year has seen a generally upward trend, with a total return of 3.6% or just over $8600 between capital gains and dividends getting paid out from the portfolio.
Because sometimes you just need a pie chart to visualise what is going on – and maybe understand where your concentration risks are. Can you guess where my concentration risk is? LOL
We have progress! The duplex build is finally starting to go ahead, with the bank now approving construction to start (…again?!). The final documents were signed with the mortgage broker a few nights ago, and I am the proud owner of $370,000 in mortgage debt, which thankfully is an interest only loan at a ripper rate of 3% so the fortnightly repayments are only just over $440 with fees. It is still over $10K a year just in interest alone so its scary stuff when its not making any money back yet!
The bank property valuation estimate should come back soon, which will be a good place to start to figure out how much equity I have etc, but it was designed around being a completion value of $570K before COVID-19 affected property prices which really spooked the bank and stalled our progress. This means on paper at the moment I have about a 35% equity stake in my unit, which I have put about 20% of my cash into, and the other 15% is ‘manufactured equity’ – or about $85K worth.
To date, I have invested about $108,000 of cash into the property project and I am estimating something like 6 months until the slab is poured, and then hopefully 12 months from pour to tenancy. It is going to hurt not getting rent and having to pay the mortgage for this whole period, but I have to remember about the ‘manufactured equity’ we are making from the build which more than offsets this period of no rent, since the numbers all added up when we started the project. The interest repayments account for about $20K during the build, so it still came out about $65K ahead to go ahead and do the build, provided our current valuation remains the same. Unfortunately, the prices will likely drop by around 10% or more, meaning the manufactured equity might come down and be closer to only $10K!
In terms of cash-on-cash return expectations, its still ok, since I would have invested around $110K for 18 months and made $10K; a 9% return over 1.5 years so about 5.97% annualised rate of return, with some sweet tax depreciation starting to be able to be claimed. But all these numbers really mean nothing until the property is built and properly revalued, and even then the valuation doesn’t really mean that much until IP1 gets sold (unless I am allowed to do a cash out refinance to take equity out of the property as a downpayment for IP2).
I will feel much more comfortable once the slab is poured and we can see the frame going up, but for now its just a matter of continuing to throw money into the hole. At least during the build the construction loan is interest only, but I am paying P+I on the land portion. Once the build is finalised, we will do the deed of partition (split the jointly owned title into one title for each dwelling) and I will refinance the loan against my dwelling to consolidate it, suck out the maximum equity I can, and set it up properly for with an offset to hold at least $5000 of cash to act as a buffer / emergency fund.
The Rental cash flow on the property is fairly ‘low’ – its basically slightly cash flow positive so it pays for itself with some tax depreciation benefits. Why I did it is for the cash-on-cash rental yield, Some capital growth (conservative estimates), the depreciation schedule whilst I am a ‘high’ earner, and finally manufactured equity of the deal. Its also a hedge against inflation, since inflation erodes the value of the loan over time – I take the loan out in 2020 dollars, and pay it back in 2030 dollars, which are much larger or have less value. This is in line with my financial independence strategy to basically max out my serviceability on cash flow positive properties and then invest the surplus into index funds.
After the unit is built I will see a financial adviser to go through the numbers and work out if its better to keep it, or sell it and use the equity as a down-payment on a couple of regional rental properties. I’m thinking I will probably keep it for 10 years or more though, and suck all of the juicy depreciation schedule out of it since it wont cost me a thing (except opportunity cost, but when I refinance I will take as much out as possible)
I am still actively looking for a second site (potentially in Adelaide or Brisbane markets) to conduct a second duplex build or subdivide so if any one has any ideas or is interested in a collaboration, then get in touch and I can organise my property development manager to have a chat.
Click here to see what my Transition to retirement financial planning process looks like
Captain FI Net worth August 2020
The Net Worth pie chart looks a little different now as I have pushed all of the cash into the property development with an estimated $193K of equity in the deal now, factoring in the manufactured equity gains.
I have included the *very small* Peer to Peer lending slice, which kind of acts like a bond (technically you would probably call it a CCC rated Junk Bond I guess). At the moment RateSetter are giving me 3.2% which is better than the emergency fund I have in a savings account (2% or so) but really I just wanted to learn more about P2P lending and whether the longer term loans could provide an attractive source of interest / yield. It’s not a lot of money, but was enough to qualify for the bonus $100 for signing up thanks to a friends link (so that will boost the return for the first month!)
The possessions do not include a few thousand bucks worth of things I am trying to sell. This cash will help me on my path to the long term plan. Some of the things I might buy back in the future when I need them again, but for now they just either don’t get used, take up space or are going to be too expensive or hard to store. I have revised the value of my things again, and they reflect essentially what is a reasonable market rate that I could sell them for.
What really matters here is the chunk that is outside of super, or more specifically the chunks labelled ‘Shares’ and ‘Business’, because that is what is going to be giving me the majority of my income to live off. The property equity is nice on paper, but you can’t live off it – for example you can only use any rental income left over after covering property expenses to buy groceries. Similarly, the Super is nice to have because that takes care of ‘older me’, but it doesn’t let me FIRE before preservation age.
In terms of my progression to FIRE, I am about 85% of the way to ‘Single FIRE’, and about 28% of the way to ‘Family FIRE’ – still a long way to go!
Captain FI Net Worth Progression
Tracking your Net Worth over time is one of the best things you can do to keep yourself motivated on the journey, and compare your current performance to your previous growth.
At the end of the day though, this NW tracking thing is all a bit of an ego stroke. What really matters is the dividend yield or the income all of your assets are able to generate, because really that is a measure of your passive income or lifestyle in FIRE.
Because of the unique way I have my finances structured to be optimised for an Australian investor with a significant amount invested in Superannuation, my NW number isn’t really all that reflective of my ability to FIRE, but I still think it is an important metric to track since its growth is representative of performance – the rate of change of net worth is more important than NW, in my opinion.
CaptainFI Net Worth Progression – Graph
The Net worth progression graph is rather crudely constructed in Excel, but still demonstrates a solid upward trend from when I started documenting my journey.
I currently have plans to take the graph way back to the start, but this means going through literally days worth of excel spreadsheets to figure out the numbers so standby on this.
CaptainFI Net worth progression – table
I decided to include a Net worth graph and table which provides a bit more information on my journey for anyone wanting to go back and see how individual months went at a quick glance.
|Date||Net worth||Difference||Saving Rate||Notes|||
|Jul 19||$578,900.00||||84%||Finally began tracking this like a proper adult.|||
|Aug 19||$560,100.00||-$18,800.00 (-3.2%)||78%||Share market slight correction, Ok savings.|||
|Sep 19||$584,744.88||$24,644.88||72%||Share market rebound, savings rate not so good.||LINK|
|Oct 19||$600,386.00||$15,641.12||84%||Good saving this month. Normal salary, plus allowances, dividends from index funds, tax refund, eBay selling and was working abroad in asia where things are cheap.||LINK|
|Nov 19||$612,917.21||$12,531.21||76%||Falling short of my savings goal of 80%. Mostly domestic legs this month with higher costs. Also invested in hydroponics.||LINK|
|Dec 19||$625,350.00||$12,432.79||76%||Good savings of cash (for development) and investment, however higher spending due to Christmas period (Travel and Gifting).||LINK|
|Jan 20||$865,212.00||$239,862.00||55%||Super settlement was a HUGE boost to NW. $9K growth from stock market. Expensive month lots with lots of unexpected bills – weddings, travel, Booking flights, fines etc.||LINK|
|Feb 20||$851,802.0||-$16,592 (-1.9%)||52%||Large increase in spending on myself this month, still managed to tuck away $5K to put into shares and property. Corona Virus market scare resulted in a correction and gave NW a small negative trend. Time in the market not Timing the market! Became Single again.||LINK|
|Mar 20||$819, 354.6||-$31,806.95 (-3.7%)||80%||Another small step backwards in the NW due to the ‘corona crash’ in full swing. FIRE Portfolio of ETF/LICs down about 15% this month, however due to high savings rate and structure of my superannuation annuity the NW is only down 3.7%. Savings rate good at 80%, higher than usual income (with some slightly higher spending, too). Picking up shares on discount – this is the best outcome for someone in the accumulation phase with good income!||LINK|
|Apr 20||$847,023||+$27,668||85%||$11,000 in rebound of stock market capital prices alone (up 6%), plus first quarter dividends paid (heavily reduced due to banks withholding dividends). Great savings rate due to COVID-19 lock-down = no spend. Increased entrepreneurial efforts and selling down of physical possessions provided side hustle income. Two standard paychecks from flying activity; domestic day trips only so no allowances. All cash unfortunately had to go into the property development due to contract timing, I am chomping at the bit to buy some more index funds before they go back up in price too much – hence why I am selling most of my toys!||LINK|
|May 20||$857,859||+$10,836||92%||Some Great sales as I let go of my Super Sport Motorcycle, Some gym gear, expensive flying equipment and a few other various bits and bobs and invested this money. Flying still reduced, but increasing from April. The share market grew as I continued to make my fortnightly investments. I also wrote down the ‘value’ of some of my possessions (liabilities) such as my car, tools and furniture by around $10K to align them to market price (“tell him hes dreaming…!”).||LINK|
|June 20||$858,650||+$791||90%||Small Net Worth gain as I continue to declutter and simplify my life, despite being off work due to a family emergency. Share market not doing much.||LINK|
|July 20||$888,218||+$29,568||68%||Majority gain due to share market going back up, low spending due to being on the family farm and at home because of lock down.||LINK|
|Aug 20||$1,029,293||+$141,075||74%||Became a millionaire. Achieved this massive milestone I set out for myself in Dec 2019. Included unrealised gains in my property development as well as website business. Good savings rate due to not much spending, invested in Aus and total world shares. Investing in my web business. Starting to shift focus away from $$$ and more into looking after my mental health.|
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What did you think of the update? Let me know in the comments below!
Monthly question from the Captain
Have you ever tried Matched Betting? I have been experimenting with it lately (and even published this article) and would love to hear if anyone has had any success stories!