Financial independence – August 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 45.8%. Way more than we thought we would save this moth. September will be significantly lower with the expenses for Alex’s birth. Spoiler alert, I’m already a father, but more about that next month. Our savings rate can be seen below (3-month trailing average in orange).

This month’s savings rate increased our average savings rate to 34.7% (40.8% for the three-month 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.

Our spending on fuel and transport was down significantly as my wife’s car was serviced in July. Our spending on food decreased significantly this month. We stayed in and made homemade meals more often. As expected, baby expenses picked up significantly this month. These expenses will be even higher in September but should reduce in October.

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 R1.668 million. This is a net-worth growth of R41 000 for the month. The markets climbed slightly this month, which increased our net worth. At this stage, we are at 13.3% of our savings target. This is 0.6% 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 do 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 decreased slightly from 15 344 to 13 497 (down 12%). 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, which I hope will create a community of likeminded people that can discuss financial topics openly.

Be safe out there,

Hendrik

August articles

10X retirement reality report unpacked

Economic bubbles

Stop staring at your investments

Quote of the week

“There is a gigantic difference between earning a great deal of money and being rich" – Marlene Dietrich Click To Tweet

Endnote

Thank you for reading to the end. Apparently, the average person spends 8 seconds on a page, so you are special. If you have any suggestions, feel free to drop me a mail on the contact page. If I missed anything or you have questions, don’t hesitate to comment below. I might even notice it and respond. If you enjoyed this article and really want to throw me a bone, please share it.

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