Sunday, 13 April 2014

New Worth: March 2014

The net value of my geared stock portfolio and retirement account (SMSF) were both down slightly over the past month, having suffered a significant dip due to the global stock market being affected by the Crimean Peninsula tensions which were only partially recovered towards the end of the month.

The Stocks figure was also reduced by about $13,000 this month due to costs associated with the transfer of my parent's hobby farm into my name during the past month (my 'inheritance'). I was initially not going to include the market valuation for this property in my net worth calculations, but as the transfer and ongoing costs will be incorporated I may as well include the value of this 'asset' (although, as I intend to pass this property on to my sons in my will, it should be considered a non-liquid asset).

The remaining amount shown for 'properties' and 'home mortgage(s)' is my half of these figures. As usual, I don't include assets or liabilities belonging to DW, DS1 or DS2 in my net worth figures (which is why I was initially not going to include the value of the hobby farm mentioned above).

Assets$ Amount$ Diff% Diff
Stocks *$236,454-$8,559n/a
Retirement$580,913-$7,112-1.21%
Home$483,501$1,0360.21%
Farm$325,000$325,000n/a
Debts ^$ Amount $ Diff% Diff
Home Mortgage(s)$102,356-$39-0.04%
Net Worth$1,523,512$310,40425.59%
* the Stocks figure is portfolio value - margin loans. The LVR is around 80% overall.
^ doesn't include the ~$675,000 of investment loans, as these are already deducted when calculating the value of my geared stock portfolio.

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Wednesday, 5 March 2014

Net Worth: February 2014

February saw a rebound in the stock market that provided a nice boost to my geared stock portfolio and also to my SMSF account. In fact this month saw a new high reached in my net worth, however this wasn't too exciting given the previous high was way back in 2007. After adjusting for inflation there is probably no net rise in net worth over the past seven years, which is fairly mediocre considering I am 'saving' about $40,000 each year (via superannuation savings and also indirectly by servicing the interest payments on my geared investment loans). However, considering the size of the hit my net worth took in 2008 it could be much worse!

Assets$ Amount$ Diff% Diff
Stocks *$245,013$25,717n/a
Retirement$588,025$21,1773.74%
Properties$482,465$3,1090.65%
Debts ^$ Amount $ Diff% Diff
Home Mortgage(s)$102,395$100.01%
Net Worth$1,213,108$49,9934.30%
* the Stocks figure is portfolio value - margin loans. The LVR is around 80% overall.
^ doesn't include the ~$675,000 of investment loans, as these are already deducted when calculating the value of my geared stock portfolio.

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Net Worth: January 2014

There was almost no change in my net worth during January as the drop in value of my SMSF account balance was almost exactly offset by the increase in estimated house equity. Despite the slight down-turn in the stock market, my geared stock portfolio ended the month almost unchanged.

Assets$ Amount$ Diff% Diff
Stocks *$219,296$645n/a
Retirement$566,848-$4,787-0.84%
Properties$479,356$4,1460.87%
Debts ^$ Amount $ Diff% Diff
Home Mortgage(s)$102,385$90.01%
Net Worth$1,163,115$50.00%
* the Stocks figure is portfolio value - margin loans. The LVR is around 80% overall.
^ doesn't include the ~$675,000 of investment loans, as these are already deducted when calculating the value of my geared stock portfolio.

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Thursday, 2 January 2014

Net Worth: December 2013

Another rather poor month for the Australian stock market that reduced the value of my leveraged share portfolios, but the value of my SMSF account increased due to the unhedged exposure to international share markets boosting the value of our High Growth Index Fund investment in A$ terms. The continued rise in the Sydney real estate market boosted the estimated market value of our house, which also added to my net worth total this month. It is now approaching the pre-GFC high reached in mid and late 2007, but of course, is still well below this level in real terms (ie. if adjust for inflation). My parents have decided to transfer the title of their hobby farm property (that I was to inherit) to me immediately, as that will mean that five years after it has been 'gifted' to me its value will no longer included in the 'asset test' used to determine the rate of aged pension they receive. Although they are both about eighty years of age, my maternal grandparents lived until their mid 90s, so transferring the property title now may still give them a higher pension for a decade or more, rather than leaving it to me in their will. It will also mean that I take over paying the council rates and other costs of maintaining the property, which will also boost improve their budget. There will be some costs (that I will pay) involved in transferring the title (the largest cost being the State government 'stamp duty' charge) to my name, and I should get a couple of valuations done by registered appraisers so I have a sound basis for the 'cost base' that will apply for any capital gains tax due when/if the property is eventually sold by me or my sons (I need to see if the title can be registered in both my name and that of my sons, or will have to be left to them in my will as they are both minors). I probably won't include the value of this 'hobby farm' in my NW figure, as it is a 'one off' windfall gain, and would mean my NW graph does not reflect the performance of my savings and investment strategy over time. So, like the fact that my 'net worth' figure doesn't reflect our households 'net worth' (as it doesn't include the value of DWs investments, retirement savings or her half of the value of our home), this should be born in mind when comparing my graph to those of some other PF bloggers.

Assets$ Amount$ Diff% Diff
Stocks *$218,651-$762n/a
Retirement$571,635$9,6191.71%
Properties$475,210$8,8101.89%
Debts ^$ Amount $ Diff% Diff
Home Mortgage(s)$102,376-$7-0.01%
Net Worth$1,163,120$17,6741.54%
* the Stocks figure is portfolio value - margin loans. The LVR is around 80% overall.
^ doesn't include the ~$675,000 of investment loans, as these are already deducted when calculating the value of my geared stock portfolio.

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Monday, 30 December 2013

Should there be a medicare co-payment required for gp visits?

It appears that the Liberal government in Australia is leaking details of a plan to introduce a 'co-payment' for visits to a doctor that are bulk-billed, in order to find out exactly how much this would upset the electorate, and possibly to also soften voters up before anything concrete is announced in the May budget. The suggested amount is fairly small (about $5) compared to the minimum 'short consultation' fee bulk-billed for a GP visit, but would hopefully curb 'over-servicing' - whereby some elderly or unemployed patients sometimes visit their GP with great frequency in order to have a chat, rather than for any specific medical need.

While the AMA (the doctors 'union') always meets any suggestion of a co-payment with predictions of adverse patient outcomes ('the poorer patients won't see their GP when they need to') such dire predictions have to be taken with a grain of salt, given the conflict of interest between seeing patients as often as needed with the need to see patients as much as possible in order to boost bulk-billing income (one doctor was recently investigated for claiming to have seen hundreds of patients an hour, thereby billing medicare for thousands of dollars. When questioned about how he could treat a patient in less than a minute, he claimed he 'eyeballed' all these patients in his waiting room!). While the vast majority of doctors are presumably highly ethical and wouldn't think of trying to 'rip off' the public health system, it would be easy to tolerate over-servicing as actually providing a medical service - after all, the little old lady on high blood pressure medication that comes in for a chat every week might indeed benefit from such close medical supervision, and, like chicken soup for the 'flu, while it might not be doing any significant good, it can't hurt (except the federal budget).

The Labor party, having been trounced in the recent election, but bouncing back in the opinion polls (now that the new Liberal government has to actually work out which services to cut or taxes to raise in order to have any chance of reducing the multi-billion dollar deficits entrenched while Labor was in government) is obviously keen to portray this a terrible new tax, a hence a 'broken promise' (although if you promise not to raise taxes, not to cut services, AND to reduce the deficit, as both parties seemed to do during the campaign, how can ANY promises be considered 'core'?). The also like to portray a co-payment as the first step in dismantling medicare, claiming that that is part of the Liberals 'hidden agenda'... although since a similar co-payment was suggested by Bob Hawke it seems that both parties occasionally realise that the current rate of rise in health expenditure is unsustainable in the long term.

However, a co-payment probably would discourage some poor people from seeing a GP when they need to. But then again, some pensioners already choose to spend part of their government unemployment or aged pension on booze, cigarettes, and sometimes illicit drugs, rather than on medical care, or even the educational needs of their children (hence the well-intentioned but controversial 'intervention' and 'managed payments' schemes).

Overall, it seems a small co-payment for GP visits would be a good thing, so that the finite health budget can be spent where it is off greatest actual benefit to public health, but would probably also have to be matched by a similar amount of 'out-patient fee' at the public hospitals funded mostly by the states, otherwise there would be a large movement of bulk-billing patients from GPs to public hospitals in order to avoid the fee.

It will be interesting to see how much 'outrage' over this measure actually attracts - in some ways it seems very similar to the mock outrage that was whipped up when a small 'user pays' fee was introduced for all ambulance services - prior to which there were cases reported of elderly patients calling an ambulance to take them to public hospital for free, in order to fill the medical prescriptions, simply to save travelling to the nearest pharmacy by bus or taxi to fill their prescription! Any public service that appears to be entirely 'free' to the consumer will end up suffering from considerable over-servicing, often at huge expense to taxpayers for very little benefit.

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Tuesday, 3 December 2013

Net Worth: November 2013

A rather weak month for the Australian stock market reduced the value of my leveraged share portfolios, but the value of my SMSF account still managed a slight increase due to the unhedged exposure to international share markets. The fall of the Aussie dollar boosted the value of the Vanguard HighGrowth Fund units, which form a large part of our SMSF investment portfolio. The recent rise in the Sydney real estate market boosted the estimated market value of our house, which also added to my net worth total this month.

Assets$ Amount$ Diff% Diff
Stocks *$219,413-$5,109n/a
Retirement$562,016$3,0480.55%
Properties$466,400$7,7731.69%
Debts ^$ Amount $ Diff% Diff
Home Mortgage(s)$102,383$100.01%
Net Worth$1,145,446$5,7020.50%
* the Stocks figure is portfolio value - margin loans. The LVR is around 80% overall.
^ doesn't include the ~$675,000 of investment loans

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Friday, 1 November 2013

Net Worth: October 2013

An even better month for the stock market boosted both my leveraged share portfolios and the value of our SMSF investments. This month also saw two months of employer contributions deposited, which also helped.

Assets$ Amount$ Diff% Diff
Stocks *$224,522$55,331n/a
Retirement$558,968$22,6854.23%
Properties$458,627$00.00%
Debts ^$ Amount $ Diff% Diff
Home Mortgage(s)$102,373$70.01%
Net Worth$1,139,744$78,0237.35%
* the Stocks figure is portfolio value - margin loans. The LVR is around 80% overall.
^ doesn't include the ~$675,000 of investment loans

With a large exposure to the stock markets, a return of investor confidence and bullish stock market would provide a major boost to my NW progress. Hopefully 2014 sees a return to stronger global growth and reduced uncertainty and volatility. The trick will be to know when to start reducing my leverage in preparation for the next inevitable correction or bear market. Having seen out the GFC and EFC, I hope I don't have to go through a third 'once in a lifetime' market crisis. But there are still major storm clouds in the horizon in terms of the massive government debt levels present in many developed economies, an aging population increasing welfare costs and reducing productivity growth, and the costs of 'peak oil' and many other finite commodities and tackling global warming (or mitigating the effects thereof).

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Saving Pennies - closing an inactive credit card account

One of those annoying little avoidable expenses that has been bugging me for ages is the annual fee on an ANZ credit card account I never even use. I can't remember how I ended up having this account in the first place (I think there must have originally been a $100 bonus for opening a new account and using it a few times), but for the past couple of years the only activity on the account has been the annual fee of $30. I would totally forget about the account (as they only send out a monthly statement if there have been any transactions or if there is a balance carried on the card), and then remember it again when the statement arrived showing the annual fee that had been charged. Every year I've been promising myself to close the account down just before the next annual fee falls due, and then forgetting all about it again. The problem was that, having just paid the annual fee, I thought I may as well keep the account open 'just in case' for the remainder of the year, and that having a extra $15,000 credit line available in case of emergency might come in handy at some time...

This year was even worse, as I didn't even notice when the annual fee statement arrived, as we now have a savings account with ANZ for our self-managed superannuation fund. The envelop for the ANZ savings account statements looks identical to that used for the credit card statement, so I didn't even open up the credit card statement when it arrived, and only noticed the following month when another statement arrived showing a late payment fee of $20 and interest charged on the unpaid $30 balance! That was enough to convince me to finally phone up ANZ and close the account. Fortunately when I explained my reason for closing the account I ended up getting the annual fee, late payment fee and interest charged all waived (having $30,000 or so sitting in our SMSF savings account probably makes me a 'valued customer'). Well worth making the phone call!

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Saturday, 26 October 2013

Estimated cost for a second storey house extension

The consultant dropped by last night to have a look at our existing single-story, brick veneer home and discuss our ideas for adding a second floor on top. Our thoughts about adding a master bedroom with en suite bathroom, study, and WIR, plus a large lounge room and library appear 'do-able' at about the cost I had in mind - around $230,000 to $250,000. The price includes an interior staircase, bathroom fittings and so forth, and some minor changes to the downstairs, and a large tiled balcony along the front of the house. But it doesn't include floor coverings (we'd probably have hardwood flooring put down), so I'm sure the total cost would end up near $300,000. The extension would be done in single brick 'skin' and a timber frame, with the bricks chosen to match the old red bricks as closely as possible. A slight mismatch shouldn't matter, as the new balcony with separate the old and new brick sections visually. The alternate would have been to use rendered cement sheeting on the extension, and render the existing house - but doing that probably would have cost around $30,000.

We'll get a sketch plan of the concept in the mail, and think about it for the next year or so before making a decision. Meanwhile, I'll consider the alternative of spending the money on a block of land up at Port Stephens, and building a new 4-bedroom holiday/retirement home there. The cost would be about the same as adding an extension on top of our Sydney home. I can't afford to do both. And I'm not entirely sure if I'll decide to do either.

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Monday, 21 October 2013

Credit burns a hole in my pocket

Only a few months have passed since we finalised the sale of our Sydney investment property and we used the proceeds to pay off most of our home loan. Yet DW and I have each already 'invested' about $100,000 in the stock market using some of the 'portfolio loan' credit that became available once the investment property and home loan accounts had been paid out. And we are now talking about using some of the remaining credit to maybe add a second-storey extension on top of our existing 3-bedroom home. Seems that having hundreds of thousands of dollars available to borrow (at home loan interest rates) is too tempting to resist for long.

While our 40+ year old home isn't very large (3 small bedrooms and one bathroom), we don't really need the extra space - especially as DS1 might be moving out of home when he starts university about four years from now. The cost of adding a simple upstairs extension is also fairly expensive in Sydney - one master bedroom with en suite bathroom and a small study/office, a lounge room and a library room will cost somewhere in the vicinity of $200,000-$300,000 (I'll have a better idea once a 'consultant' from one building firm visits on Friday to give an 'obligation free' inspection and price guidance). And living in our house while construction work is going on above us also wouldn't be particularly pleasant.

As an alternative, I'm thinking about buying a vacant house block in a sea-side village in the Port Stephen's area (about two hours drive north of Sydney). A vacant block there costs around $100,000 and a quick internet search has turned up at least one project home company that will build a basic, single-storey four-bedroom/one bathroom house for around $160,000. So it should be possible to end up with a nice new holiday home on the central coast for under $300,000.  New four-bedroom houses in the area are selling for around $400,000 so it should be possible to get our money back if we decide to sell the finished house (provided the real estate market in general doesn't decline). And if we choose to rent it out, similar houses in the area rent for $300-$400+ per week, which we provide an ROI of between 5% and 8% (depending on the final cost of the finished house and land). If we like the area we might even move their when we retire (it's close enough to visit Sydney for a day trip), which would let us sell or rent out our Sydney home to help fund our retirement (if we needed the cash/cash flow). We may drive up there next weekend and check out the area and local facilities.

Then again, I may decide to do nothing, and just keep waiting for my parents to renovate the holiday house they have sitting on a lake-side 25-acre hobby farm (about three hours drive north of Sydney). However, that house is in unliveable condition at the moment, and my parent's have been 'planning' to renovate it for most of the last ten years since I last visited there (without making any noticeable progress). So I think both of our kids may have moved out of home before we can realistically expect to stay there on vacation!

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