Financial independence – July 2019

Man looking at sunset

I am sharing my road to Financial Independence (FI) to help me get my shit together, or at least get you to think about where you are. The reality is that we all want to be financially independent. FI does not imply quitting your job and is not a synonym for retirement. It is the freedom to ignore finances when you make life decisions. It means choosing what makes you happy.

Savings rate

You can read more about saving rate in my article how savings rate influences your retirement. Our savings rate this month was 35.2%. The biggest cost this month was all the little things that we had to buy in preparation for Alex. Who knew that having a baby would be expensive? Oh yeah, everyone.

I don’t see it slowing down next month, so I suspect our saving rate will take a serious knock over the next two months. Such is life. However, the excitement far outstrips the cost concerns. Our savings rate can be seen below (3-month trailing average in orange).

This month’s savings rate increased our average savings rate to 33.7% (38.7% trailing average). We hope to keep hitting this 40% savings rate sweet spot. I suspect this will get harder once little Alex joins the family.

Spending for the month

Your savings rate is completely dependent on your spending habits. Let’s look at what we spent our money on.

The first cost that increased this month is the transport and fuel category. We did the service on my wife’s car and had to fix a few minor things. The costs for health and medical was reduced this month. Looks like the worst of the winter colds are behind us. Lastly, the baby preparation expenses are really starting to pick up nicely, at just over 10% this month.

Financial independence

I also track our progress towards financial independence. For this, I set a target using the 4% rule, which I tested in the article back-testing the 4% rule. The methodology can be seen in the March financial update. Our progress towards financial freedom can be seen below.

We ended the month on a net worth of R1.627 million. This is a net-worth growth of R31 000 for the month. The markets climbed slightly this month, which increased our net worth. At this stage, we are at 13% of our savings target. This is 0.7% behind where we should be, but going strong.

Investment allocation

Our portfolio is weighted towards property. I am in the process of reducing our exposure to this asset class. You can read more about this in my articles why I’m selling my real estate and 9 reasons why I don’t want to retire with property. At this stage, we still have two properties left. Our allocation can be seen below.

Any new savings goes predominantly towards share investments, as Exchange Traded Funds (ETFs). This month I invested all our savings in ETFs. We’ve stopped contributing to property altogether. This will see the weighting systematically shift towards equities.

I also started doing a breakdown of our equity investments. As you can see, the majority of our money is in global shares. I wanted to increase this to 60%, but changed my mind and decided on 55%. The three ETFs that I invest in are the Ashburton Global 1200, Satrix Top 40 and the Coreshares Proptrax Ten.

My blog reads in July increased from 6 637 to 15 344 (up 131%). I really appreciate the massive amount of support I’m receiving. Thanks for reading and if you have any specific topic requests please feel free to let me know. I also started a forum this month, which I hope will create a community of likeminded people that can discuss financial topics openly.

Be safe out there,


July articles

Underrated financial concept: Time value of money

The cheapest bank accounts in South Africa

Tips for buying property in South Africa

Quote of the week

“I put a dollar in one of those change machines. Nothing changed” – George Carlin Click To Tweet


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  1. steveark

    I’m curious, since your target is 14 years in the future on the graph have you escalated current expenses by 51% to get what inflation will do to your expenses over the next 14 years. No matter what you are spending now inflation is going to increase that amount at about 3% per year, maybe more in some countries. The whole 4% rule is based on the time value of money and so you cannot mix present and future values as if they are the same. Inflation eats away at the value of future dollars much quicker than most people think.

    1. Post
      Hendrik Brand

      Hey Steveark,

      You are exactly right (and I like the reference to my previous article). Based on the current expenses, I require R12 mil. As inflation inflates the monthly expenses, the required amount also increases. So, I account for inflation by increasing the required amount by inflation, which then accounts for the increase in expenses. This leaves me with a required amount of just over R24 mil in 14 year’s time (an increase of 103%). This means I accounted for inflation of just over 5%.

    1. Post
      Hendrik Brand

      Hey W.

      It is a bit higher than I would like it to be. I am systematically rebalancing by investing all our monthly savings in shares. It is a slow process though. For now, it lets me sleep soundly, but once I feel the economy is turning I might move larger amounts from cash to shares.

      How many month’s salaries do you keep in cash?

      1. Pieter Venter

        Saw an article by early retirement now that if you have a credit card you that you should actually go 0 in emergency funds

        I don’t have a credit card so my cash portion is stored in my access bond and that’s about 2months.

        But any case I think its a good idea so move slowly a bit. See we had a yield curve inversion in the us which may indicate a up cumming recession(SALE) normally about 18 – 24 months from a yield inversion.

        Then lastly on the 4% with so much of your portfolio global. Should it not be a bit lower. The trinity study was done with a definition of a success is no a net worth above 0 @ 30 years.

        1. Post
          Hendrik Brand

          Hey Pieter,

          You bring up really good points. First off, I agree with the credit card comment. Using it as an emergency fund is a good idea. It does depend on whether you are someone who can manage debt responsibly. In theory, you would be better off in the market vs having it in your home loan (I have it there as well). The last 5 years, however, I haven’t regretted it. If the sale comes along, I would happily move more into shares.
          As for global exposure, I try to look at it slightly different. I see the 55 global/35 local/10 property as 35% SA, 23% US, 16% Europe, 10% property etc. since I look at the underlying distribution as well. Backtesting the 4% rule, I am comfortable that it will be sufficient. What do you consider a good drawdown rate?

      2. W.

        I guess if I regard the money stashed in the bond as cash (instead of home equity) then my chart looks more like yours. It’s about 6 months of household after tax income.

        My spending looks a bit different because I split savings and investing. Combined they also amount to mid 30%, but budgeting monthly amounts now already for the car replacement in 2022 and the other car replacement in 2029, and the University fees in 2037, and the bathroom remodels and kitchen remodel needed 8 – 15 years from now affects the percentage quite a bit.

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