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Wednesday, 31 January 2007

Is it Time to try Timing the market?

Although my preferred strategy is a "high-growth/high-risk, buy-and-hold, stick to your asset allocation" one, there comes a time when the market starts to look a bit too high to any dispationate observer. The pundits are still saying that the Australian stock market isn't cheap but isn't too expensive either, based on historic p/e ratios and company profitability outlook. Then again, they're saying that after three consecutive years of total returns of 20%+ the best they expect this year is around 10%, so the upside seems limited, while the downside risk has obviously increased from what it was four years ago. Looking at the chart for the All Ordinaries Accumulation Index since 1980 the current market rise looks a lot like 1987 - and we all know how that ended up!



Anyhow, the Superannuation (retirement) account for my son was invested with the following asset allocation:

80% Geared Australian Share Fund
20% International Shares Fund

This allocation has performed very well since I opened his account four years ago, with returns of:

FY 04/05 25.3%
FY 05/06 42.0%

I figure that having gotten off to such a good start DS1 can now afford to move to a more conservative, high-growth asset mix (even though at age 6 he has another half century before he reaches retirement age), so today I sent in the paperwork to change his investment mix to:

30% Australian Share Fund
10% Australian Small Co Share Fund
20% International Shares Fund
20% Property Securities Fund
20% Australian Bonds Fund

This is still a high-growth, high-risk allocation (with 60% in stocks) so it should provide a good rate of return over the next 50 years, but at lower volatility than the previous asset mix. If there's ever a significant (30%-50%) correction in the Australian Stock Market I'll think about moving some funds back into the geared Australian Share Fund again. I think this weak form of market timing is called "dynamic allocation" - but it's still just a guess no matter what you call it.
 *    *    *    *

The current market also has me a bit nervous about my Australian Share Portfolio. I have two margin lending accounts holding $540K of Australian Shares, with a loan balance of $263K, so a severe market correction would have a big impact on my Net Worth! I'm toying with the idea of buying some PUT options on the ASX200 Index as insurance against a major market correction occurring between now and the options expiry date (21 June 2007). For $12K I could buy enough Options to offset any losses where the market drops below 5500 (it's currently at about 5750). The simpler option (excuse the pun) would be to just sell off enough of my portfolio to pay off the margin loan balances - but the interest has been pre-paid until 30 June 2007, so I'd be throwing five months of interest payments down the drain if I paid off the loans now. I also have reasons for not wanting the realise a capital gain prior to 30 June.

Tuesday, 30 January 2007

Commonwealth Diversified Share Fund

I received a couple of dividend statements today for my investments in the Commonwealth Diversified Share Fund [ASX code: CDF] - a sort of ETF that aims to replicate the S&P/ASX200 Accumulation Index. I was interested to see how the Annualised Net Return (change in net asset value per unit after fees, taxes and expenses, assuming all distributions are reinvested) compared to the ASX200 Accumulation Index:

1 Year 3 Year 5 Year
Net Return 23.27% 24.31% 14.78%
S&P/ASX200 24.22% 25.00% 15.35%
Difference 0.95% 0.69% 0.57%


This shows that the effective "fee" for using this "Index" fund is around 0.57% - 0.95% (it varies as in some years they outperform or underperform the index by a slight amount - aka. "tracking error").

This compares favourably to investing in, say, Vanguard Australia's "High Yield Australian Shares" Index Fund, which invests in the S&P/ASX200 stocks (excluding LPTs) which has a management fee of 0.90% for the first $50,000 invested (0.60% for the next $50,000 and then 0.45% for the balance of your investment in this fund over $100,000).

The buy-sell spread of 0.30% for the Vanguard Fund is slightly higher than you'd pay in brokerage costs for buying a parcel of over $10,000 of CDF stock.

The only substantial difference between these two methods of investing in the ASX200 index that I can spot is that the CDF shares occasionally trade at a small discount to the ASX200 index (XJO), so you could save yourself the buy-sell spread and a couple of year's worth of management fees by timing your purchase carefully:

Sunday, 28 January 2007

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Now, back to our normal programming...

What to do when you save too much

The times has an article covering the contrarian view of some academics that Americans are saving too much for their retirement, and risk squandering their youth rather than their money. The theory being that a middle-income couple could trade off $400,000 less in retirement money for an extra $3,000 a year disposble income during prime working years to spend on education or home improvement.

On the other hand, I've seen advice that if you are "on track" to meet your retirement or investment target you should adjust your asset allocation to attain the amount of return required for the least possible risk.

I don't find either of these options terribly attractive - just because my retirement fund is on track to meet my retirement income needs doesn't mean that I want to start spending more or wish to adjust my asset allocations to a mix with lower "risk" and a lower expected rate of return. I'm happy with my current budget, so I intend to add any future pay rises (that exceed increases in my cost of living) to my savings plan. Similarly I'm quite content with the current risk level of my investment portfolio, so it is likely to achieve a higher rate of return than I really require to achieve a comfortable retirement. Even if I adjusted the risk level of my retirement account investments down in order to "guarantee" that I'd have enough money in retirement, I'd still aim for the same overall level of risk in my entire investment portfolio that I'm comfortable with, so I'd likely accept an increased level of risk with my non-retirement investments as my retirement account got load up with "safe" assets.

So, my preferred option for when you find yourself ahead of target for your investment goals is just to keep on accumulating "excess" wealth. You can always leave it to charity in your will if you're so inclined, or else leave a larger estate to your heirs.

Plus there's always the risk that advances in medical technology might mean that you live a lot longer than you currently expect. Or else the world could go to "hell in a handbasket" due to global warming, WMD terrorism, etc. etc. and you could find yourself "retired" earlier than you expect, or else needing a lot more income in your retirement than seems likely assuming "status quo".

Friday, 26 January 2007

Medical Expenses

I took a day of work last week to have a medical test done - a couple of hours of "day surgery" was involved. The bill for the procedure was around $500 for the specialist, with the medicare "scheduled fee" being $295.40 for this procedure. This would mean that without insurance I would have had to pay around 15% of the scheduled fee plus the difference between the scheduled fee and the actual amount invoiced. ie. around $250 plus an extra amount for the anaesthetist.

As it turned out my basic hospital insurance policy covered the entire amount, so it ended up costing nothing for this procedure (the test result also came back "normal" which was also a *good thing* ;). And how much does the insurance cost me? Well, the monthly fee charged to my CC is $148.40 (the amount is reduced by a federal government subsidy for private medical insurance) or $1780.80 pa for my family policy. However, the actual "out of pocket" cost is less than this as there is a medicare levy surcharge of an extra 1% of taxable income if an individual's taxable income is over $50K ($100K for a family). This tax year we wouldn't be liable for the surcharge as DW is on maternity leave an will have little taxable income, so our family income will be below the threshold. However, in most years our family income is high enough to be liable for the surcharge if we didn't have basic hospital cover, meaning that we'd be paying an extra $1250 in tax. So, the "real" cost of having the policy is only around $530 pa ($10 a week). Well worthwhile, especially if any of us ever need elective surgery in a private hospital, such as a hip replacement. (The waiting lists for elective surgery in public hospitals are very high to constrain costs, to private hospital insurance can be essential).

Domain Name and Template changes

I've bitten the bullet and setup blogger to use my custom domain name "enoughwealth.com" - hopefully my blog will be accessible via this URL as well as still working using the old http://enoughwealth.blogspot.com ! I'll keep copying my posts to http://enoughwealth.savingadvice.com as a backup site - it seems to have attracted higher readership than the .blogspot.com version for some reason, although it has some limitations with what you can do to the blog template over there.

I've also taken the opportunity to change to a new, cleaner template for enoughwealth.com. Let me know what you think. Over the next couple of days I'll be adding in bits and pieces of html code from the old template, to reinsert the NetWorthIQ graph, link list, adsense etc. Hopefully I'll be able to put this all into the side bar without stuffing up the rest of the template (like last time).

Aside from the usual annual domain name rego fee for "enoughwealth.com" (US$14.95 with Dotster) I now have to pay an extra US$10 pa to get Dotster to provide "DNS management" so I could set the CNAME to the required value for automatic redirection to my blogger-hosted blog.

Hopefully using the custom domain will get better exposure than using a subdomain of blogspot.com - and help build readership over time.

Tuesday, 23 January 2007

Confusing Wealth with Lifestyle

An article on cnn.com reports that in UCLA's annual survey of college freshman 75% of those surveyed in 2006 thought it was essential or very important to be "very well-off financially.", compared with 62.5 percent who said the same in 1980 and only 42 percent in 1966. What I found most disturbing was that "wealth" was apparently seen as synonymous with the "trappings" of wealth. No wonder these people will leave college with student debt and immediately pile on more debt trying to acquire the "lifestyle of the rich and famous" before they actually have any net worth, let alone become wealthy.

Monday, 22 January 2007

Silly Spend Day

Yesterday DW wanted to drive to the Aldi Supermarket to buy a couple of pakcets of their "cheap but good" nappies for DS2. A good idea in theory, although the petrol and wear on the car makes it doubtful how much we actually "save" by going out of our way to buy these. In practice, a total disaster (from the fiscal point of view).

While there I saw an "Digital Notepad" on sale - basically a clipboard with a 1000 lpi electronic pen/sensor built in so you can write up to 88 pages of notes and then download the images to my PC via USB. Basically I could already do that by simply scanning pages of notes using my flat-bed scanner! Anyhow, it looked cool, and I fancy the idea of wandering around the office taking notes on this high tech toy - so I forked out $140 for one (reduced from $160). Silly, silly, silly me.

Saturday, 20 January 2007

Kicking around some investment scenarios

I've been doing some research on Self-Managed Superannuation (Retirement) Funds with a view to setting one up for myself, DW, DS1 and DS2 (luckily the maximum number of members in a SMSF is a perfect fit to my "nuclear" family).

The potential benefits of a SMSF compared to my company-selected superannuation fund are:
* can invest in any "suitable" investment (eg. direct shares, index funds) rather than picking from the list of 20 or so managed funds available via my current Super Account.
* saving money on fees - although our employer has arranged for a "rebate" of part of the standard admin fee charged by the Super Fund (so it ends up being around 0.4% instead of 0.95%, plus the managed fund management fees of around 1-1.5%), this is still higher than the $500 pa "flat fee" available from eSuperFund.com.au for a SMSF (eg. on my current Super Account balance of $315K this equates to an admin fee of 0.16% pa)

There are some possible drawbacks though:
* I currently have life insurance via my Super Fund. If I changed funds I'd have to apply for cover again, and, for the amount of cover I currently have ($400K) I'd probably have to pass a medical exam
* As a member of a SMSF I'd have to be a trustee and be responsible for setting an investment policy and abiding by the rules regarding running a SMSF, otherwise the SMSF can lose it's tax-advantaged status. This shouldn't be too onerous though, as I previously acted as an employee-appointed Superannuation Fund trustee at my previous job.

The other thing I have to consider is shifting some of my assets that are currently held outside of Superannuation (ie. my geared investments in Australian shares) into a Superannuation account to save tax. Basically an undeducted contribution of up to $1M can be made before Sep 2007 (due to recent changes in the Superannuation rules) and there won't be any contribution tax. Once held by a Superannuation Fund, the assets income is only taxed at 15% (rather than my personal marginal tax rate of around 30%+) and capital gains are taxed at 10% (rather than half my personal marginal tax rate). Also, once I reach retirement age (65) all withdrawals from the Superannuation account are not taxable under the new rules.

The disadvantages of putting these assets into a SMSF are:
* Can't "borrow" for a Superannuation investment, so gearing is out. However, this isn't a big issue as I'm thinking of eliminating my gearing this year anyhow as the stock market has had a good run for 3 years and will eventually have a "correction" of 10%-30%, not a good time to be geared up. Also, Superannuation Funds can invest in "warrants" which give you similar effects as margin loans, but without the risk of margin calls (but the effective "interest rate" built into warrants is higher).
* You can't "roll" existing stock investments into a Superannuation account without triggering a CGT "event" - so I'd have to pay Capital Gains Tax on the currently unrealised gains in my stock portfolio. If I was just selling off enough of my stocks to pay off my margin loans I could probably offset a large part of the realised gains by selling off all the "losers" in my portfolio.
* I'll have to get all my CGT records up to date in Quicken so I can work out how much capital gains tax I'd be liable for (I have old records up to 1998 in my old Quicken backups, but need to trawl though the past 8 years of transactions to get my CGT records up to date! It's amazing how little time I've had "spare" to do my financial records in Quicken since I got married and started a family!). I wouldn't want to do the transfer till after the end of the Australian tax year (30 June) as DW is on maternity leave this FY and may get some family assistance money if our combined income is not too high this FY. So the "window of opportunity" to make a large (up to $1M) undeducted contribution into Super for me is between 1 Jul and Sep this year. After Sep the max undeducted contribution each FY is going to be $50K, so it would then take 6 years to shift my current Australia Share investment into Super.
* Once assets are in a Super Fund they can't be "released" until retirement (except in exceptional circumstances). Thus, I'll be keeping some other assets outside of Super to act as my "Emergency Fund".

I'm also looking into DirectPortfolio.com.au which offers a managed direct share service, which can be done within a SMSF. I like the fact that they run individual stock holdings for each account, so you avoid some of the unintended tax effects that can arise when investing in managed funds. But their admin/management fee is quite high (around 2%) and you have to pay a $1000 setup fee when open an account with them. The setup fee covers recording all your CGT history if you transfer existing stock holdings to them, so it would be reasonable if I transferred my existing stocks without triggering a CGT event. But if I transfer my shares into a SMSF CGT will have been paid on the date of transfer, so there's no CGT history data required - so the $1000 setup fee seems a bit high in that case. Looking at DirectPortfolios results for their various "mandates" they have achieved around 2.3% above the ASX200 accumulation index for this period, which means they "outperform" by slightly (0.35%) more than the fees are costing. But, they don't provide data on the "beta" of their "mandates" so it's hard to tell if their risk-adjusted return actually outperforms enough to offset the management fee. So, if I decide to move my stock assets into a SMSF I'll probably just sell them off and deposit cash into the SMSF, then use it to buy a Vanguard Index Fund (perhaps their "High Growth" Fund).

Lots to research and think about in the next 5-6 months!

My use of home equity for investing

As previously discussed, we bought an investment property in 1999, just when the "boom" in Sydney real estate took off. The property cost just over $400K, and we took out a standard 25-year variable rate mortgage. The property appreciated significantly until 2003, and is now valued over $700K, so we have significant equity in that property. As loan interest on your own home loan isn't tax deductible in Australia (but you don't pay any CGT when you sell it either), but loan interest on investment loans is, we recently converted the loan to a fixed rate 5-year mortgage, so we could maximise payments off our home loan instead. At the same time I also arranged to make use of the available equity via a Home Equity Loan and I'm investing the funds over a period of 18 months a portfolio of US stocks, selected from candidate companies listed on the magic formula investing website. This strategy allows you to put your home equity to work as an investment, but, of course, is fairly high risk so is not suitable for all investors. It will pay off handsomely though if my US stock portfolio performs as well as the long-term average for the S&P-500 and interest rates on my home equity loan average out less than this rate of return. As a bonus, the dividends from the US stocks are fairly low compared to the interest on the home equity loan, and the difference can be claimed as a deduction on my personal tax return. As long-term capital gains in Australia are taxed at half your normal marginal tax rate, this means that I am basically able to reduce the tax paid at marginal rates (up to 48%) on my wage income, and will instead pay CGT at half the marginal rates (ie. up to 24%), assuming I eventually sell the stocks at a profit.

Friday, 19 January 2007

Wealth Today

Some recent figures on wealth and income in Australia and Worldwide:

Australia:
In 2003-4 14% of taxpayers earned $62,501 or more
Average Household wealth is $468,000 (median net worth is $295,000)
Wealthiest 20% of households had 59% of total household net worth (average NW of $1.4m)

Worldwide:
In 2000 the wealthiest 10% of the world's population held 85% of global household wealth.
The top 1% owned 40% of global assets, while the bottom 50% owned around 1% of global assets.
US had average wealth holding of US$210,319 per adult in 2000, Japan US$227,600 per adult, Australia US$94,712 per adult. Or, in percentage terms, US had 5.5% of the world's adult population owning around 33% of the world's wealth, Japan 2.7% of the world's adults owning 18.3%, and Australia 0.4% of the world's Adult's owning 1% of the world's wealth.

In the US the richest 10% of the population owns 70% of the wealth, for Japan the figure is the top 10% owing 40% of the wealth, and for Australia the top 10% own 45% of the wealth.

The latest figures show that Australia's wealth is now a record $354,000 per capita, up 93.4% in the past five years in real terms (inflation adjusted). By comparison my personal NW is up 107.4% in real terms over the past five years - so I'm doing slightly better than average. Like they say, a rising tide raises all boats, so it's important to realise that when property and stock markets have been booming improvements in your net worth are almost unavoidable. Don't get carried away and think that you're a great real estate tycoon or stock picker just becuase you've made a profit!

I find that these "wealth comparisons" generally seem to view wealth inequality as an obviously "bad thing", which I don't totally agree with. While it's good to assist the "deserving poor" - be they individuals or countries, I don't think universal wealth equality is a goal to strive for.

Consider ten people who start out with the same background, ability and opportunities. Assume they have similar jobs and earn the same amounts, so that by age 40 each of them has earned a total of $500,000. 1 of these ten people is by nature frugal and enjoys the "simple things" so manages to save 10% of their income each year, invested at 5% ROI. Another 4 out of the ten spend a bit more, so they only manage to save 2% of their income each year. The last five people in the group spend every cent that they earn, thus accumulating no wealth. Where would these ten people be at age 40?

Person Net Worth
1 $52,665
2 $16,533
3 $16,533
4 $16,533
5 $16,533
6 $0
7 $0
8 $0
9 $0
10 $0

So, how does this translate to "wealth distribution"?

Total wealth of this group is $148,797. Average NW is $14,879 (but median NW is $8,266)/
The wealthiest 10% of this group owns 56% of the wealth, while the bottom 50% only 0% of the wealth. Shock, horror - not! All this means is that if you defer consumption and accumulate capital, you'll end up with MUCH more wealth than if you spend everything you earn. This applies to individuals, families and countries. The only inequality that we should try to mitigate is that of opportunity, NOT of outcome.

What I find interesting is that this simplistic model of spending/saving behaviour is a pretty good match of most wealth distributions observed around the world. That is, in any group of people, around 1 in 10 will be very frugal and "save for a rainy day" (ie.PAWs), another 4 out of 10 will try to save and invest, with limited success, and around half the population spends as much as they can.

Buying the old sweatshop

While I was feeling bored at lunchtime the other day I searched the 'net for info about how my old employer, Hi-com International, was going. It might seem odd that I care, since they retrenched me after more than ten years service, but I quite enjoyed working on the engineering research projects there and would like to see how they've progressed since I left them in 1998. Well, blow me down, if the company hadn't gone broke (put into "administration") and been bought out by a listed company (Ludowici) last September! I checked out this company and they seem to be doing quite well out of the commodity boom, and plan to expand cautiously overseas, so their prospects seem OK. I decided to buy a parcel of shares in Lucowici so I can watch what they do with Hi-com International now that they own it.

Budgeting for Small Business

Just as it is important for your personal finances, when your running a small business it's vital to establish and monitor your business budget. As the old saying goes, "people don't plan to fail - they just fail to plan". IncParadise.com lists the four most important actions when monitoring your budget:
1. Set targets
2. Keep accurate books
3. Check how your tracking each month
4. Monitor your cash flow

The IncParadise.com Small business blog has lots of other interesting articles and news relevant to small business. Recent post topics include:

* Growing Popularity of Internet Fax
* Extended Deployments Hurting Small Businesses
* Common Branding Mistakes
* Testimonial for Robert Arnal from Citibank
* New Small Business Information Website
* Failure is NOT an Option
* Small Business Tax Help
* The Best Bank For Small Businesses
* Monitoring Your Budget
* Small business managers and owners working 24/7
* Small Business Hiring Up
* Keeping it Legal
* Using Your Workforce Effectively
* Tax Law Changes for Business in 2007
* It’s the little things tucked away



Wednesday, 17 January 2007

Billionaire500 Magazine

I found this interesting site by accident: Billionaire500 Magazine and must admit the website is very smoothly done and features some amazing "toys" that I imagine would be part of every billionaire's lifestyle.

Yet I somehow can't quite believe any billionaires actually sit down and browse this website - perhaps they get their personal secretary or butler to do it for them?

Tuesday, 16 January 2007

How Did I Get from There to Here?

Easy Change wrote to me with a good question in response to my Asset Allocation post:
"I was wondering if you would be so kind as to talk more about when you started investing and/or what age range you are in at this point in your life. I am coming up on thirty soon myself and I find the whole concept of getting to 100k before then (which is what several pfbloggers are shooting for) to be a huge undertaking."

I think I've covered most of this before, in bits and pieces, but to summarise:

I'm 45, live and work in Sydney, Australia. I have a wife, two young sons, a mortgage and no pets. My personal net worth has just hit one million Aussie dollars. I come from a middle class background, have degrees in IT, industrial math and applied chemisty, and have only ever worked as a "wage slave" - first ten years as a scientist for a private R&D company, and then for ten years as for a market research company - working my way up from an entry level quality assurance role to a junior management position. My salary package is currently $8x,000, but until 2 years ago I'd never been on more than $60,000.

I started out investing by saving my pocket money and earnings (paper round, market gardening, and supermarket shelf packer) during high school into a bank account. When I worked during the Uni vacations (as a process worker in a pencil factory) I saved via my bank account and occasionally invested a lump sump ($1000) into government bonds or unsecured notes from a bank-owned customer credit company (AGC).

I first learned a bit about the stock market doing a Business Economics subject at Uni, which included doing "paper trades". As this course ran in the second half of 1987 it was quite interesting! Once I completed Uni and started working full-time I began investing in Individual stocks (using broker research to choose them), and eventually bought my first investment property.

Over time I learned more about stock selection, minimising brokerage fees and choosing Mutual Funds (for overseas stock exposure) that didn't have exhorbitant fees. Later on I began to use gearing (via margin loans) to offset dividend income with tax-deductible margin loan interest - effectively "converting" current, taxable income into tax-deferred capital gains (which, in recent years, are taxed at half the tax rates of current income).

I sold my original investment property (at a slight loss), as it was in a very poor suburb and tenants proved very unreliable. I swore off direct property investment, but then bought another property after I got married, as my wife wanted to reinvest the funds she had from selling her unit back into real estate.

Recently I've diversified my investmenting to include hedge funds, agribusiness investments (pine, sandlewood and teak plantations) and some wine, coins and bullion. I started direct investment into US stocks last year - trying out the "Magic Formula Investing" method outlined in the "Little Book that Beats the Market".

I'll probably reduce my level of gearing this year, as the stock market has had a very good run for several years and I'm ahead of my projections - no point risking reversion to the mean, especially when using margin loans. I'll also add any future wage rises straight into my superannuation (retirement) account, as by doing a "salary sacrifice" it gets taxed at 15% rather than my marginal personal tax rate. They've also recently changed the tax treatment of retirement income from superannuation accounts in Australia, so that they will be tax exempt. This makes superannuation more attractive than gearing shares or property investments for accumulating assets, although there are some limits to what you can invest in via superannuation, especially if I stick with the company-selected retirement fund, rather than opening a "self-managed" super fund.

I reached $100K net worth by age 30. That was worth more than $100K in today's money, as it was way back in 1991. But it was also easier for me than for most people, as I was living at home still (not paying rent or board), and I had no student debt outstanding when I graduated (I paid the HECS (Uni) fees as I went along. And HECS fees in Australia are only around 25% of the full cost).

My accumulation of net worth over time was covered in a previous post.

Worst investment decisions:

* Spending the money I saved up working during uni vacations on a 10" meade SC Telescope. You can buy one today for about the same price I paid back in 1982, and I've probably only used it for a total of ten hours in the last 20 years. Then again, I always wanted to be an astronaut when I was a kid, so it was worth every cent. I just wish I'd got around to building that observatory up at my parent's farm...

* Spending around $1000 on a Sinclair ZX80 computer and accessories in 1980 - I should have bought some Microsoft shares when they listed instead...

* Buying $2000 worth of an unlisted internet stock (GEN) in 1995, which went broke before it could list on the NASDAQ. If only I'd waited and bought Google or Amazon.com instead...

Sunday, 14 January 2007

US Shares - "Little Book" Portfolio Update: Jan 07

I continued to build up my "Little Book" portfolio of US stocks with my regular US$5,000 stock purchase of one of the stocks listed by the magic formula investing website. This month I chose Crytologic (CRYP) . Some of my previous picks have dropped considerably, especially OVTI, so my overall portfolio now has around 0% return after deducting buy/sell costs. Taking into account the interest on the money I've borrowed to make the stock purchases, I'm under water at this point. Not that it really means anything - I plan to stick to my investing plan for at least ten years before looking at the average return and volatility to decide if the risk-adjusted return is as expected.

New glasses (spectacles)

I picked up my new pair of glasses today - $630. It had been four years since my last eye-test and also the nose-piece on the current trendy, frame-less, titanium pair had broken off (titanium is expensive, light-weight, but tends to fatigue and can't be easily repaired). So it was overdue to have a new frame and lenses. The new pair isn't quite as "cool" looking as the old pair, but appears to be more robust, so it may last 5-10 years if I'm lucky. The old pair actually got repaired at no extra cost by the optometrist, so I had a good "spare" pair now.

Saturday, 13 January 2007

Wine Collection Storage

A minor part of my assets (which I don't even bother including in my Net Worth estimates) is a small wine collection. I don't drink much wine, but I enjoy reading up on the Australian wines that are "collectible" and have bought and stored a few bottles of Grange hermitage, De Bortoli "noble one" and some others. My biggest problem has been not having somewhere to store these wines. I initially did the usual "under the staircase" wine rack thing - but, especially in Summer, this is NOT a suitable location. Even with some insulation and air conditioning the humidity would not be optimum. I've now shipped the wines up to my parents farm, where they have a suitable underground wine cellar area, but I still not to set it up properly and monitor the conditions.

For information about the correct conditions for cellaring your wine collection, and information about available equipment, visit Wine Cellar Equipment.


Fee rebate cheque for $1200

Back in June I applied online for a $50,000 investment in Macquarie Equinox Select Opportunities Fund - a "fund of hedge funds". I used a Macquarie Structured Product Investment Loan for 100% of the investment amount so I'd be able to take a tax deduction for prepayment of the 06/07 interest. As it was near the end of the Australian tax year I had to do the application online, and I nominated my usual "no advice" Finacial Advisor Service as the financial advisor, so that I'd get a rebate for most of the Funds "entry fee".

Because I hadn't received a rebate cheque by October I contacted the Financial Advisor service to check that they'd received the fee from Macquarie - it turned out that Macquarie allegedly had no record of my advisor details (although I had a print out of my application so I knew I'd provided the correct info), but kindly would update the records and pay the advisor fee if I emailed them confirmation.

Well, today a rebate cheque for $1,200 finally arrived from the advisor, so it was well worth nominated an "advisor" on my application that rebates Fund entry fees! One funny thing about this whole business is that despite the entry fee being deducted from applications, the unit price listed for this Fund has never dropped much below the $1.00 per unit application price. Go figure.

Friday, 12 January 2007

Current Asset Allocation

I checked on all my accounts to determine my current overall asset allocation (if it was way off what I want I would think about rebalancing). The Net Worth figure is slightly higher than my usual monthly calculation as this one includes some items I don't normally bother with - bank accounts, coin collection/bullion, and agribusiness investments. The total still doesn't count miscellaneous household items or cars, boats, hovercraft, steam engines etc. (see previous post on "toys"):

Overall Asset Allocation
% $
Assets 100.0% $1,814,373.92
Debts $711,224.31

Asset Allocation:

Au Shares 38.3% $694,875.45
Int Shares 11.6% $210,337.08
Property 41.2% $747,988.85
Fixed Int 1.5% $28,071.17
Hedge Funds 5.0% $90,448.50
Agribusiness 1.2% $22,650.00
Coins/bullion 1.1% $20,000.00

Net Worth $1,103,149.61
LVR (D:A) 39.2%
Gearing (D:NW) 64.5%

Accounts:

Retirement $312,446.13
Direct Property $713,750.76
Margin/Broker $670,449.34
Agribusiness $22,650.00
Coins/bullion $20,000.00
Hedge Funds $50,000.00
Bank Accounts $25,077.69

This year I'll continue building up my "Little Book" portfolio of US stocks, which will increase my allocation to International shares to around 15%. I don't plan to invest any more in real estate, so my allocation to property should drop below 40% soon. In the longer term I'd expect my allocation to drift towards 35% Au stocks, 20% Int stocks, 35% property, and 10% "other". I aim to keep my use of gearing to around 40% LVR (67% gearing).

Thursday, 11 January 2007

Feel the Burn

Browsing for info on the net I found out that stair climbing burns 0.15 kcal per step up, and 0.05 kcal per step down. So today's 532 steps (each way) should have burned an extra 106 kcals - assuming I'd otherwise have been sitting around doing nothing. By the end of next week I hope to be a bit more in condition so I can do 13 "laps" of the "stairway from hell" - a total of 988 steps daily. This should take around 30 mins each lunchtime at work, and burn off 198 extra kcals. As 3,500 kcals/wk equates to 0.5 kg/wk of body fat, this should help me lose an extra .15 kg/wk compared to just dieting.

One thing to note is that even vigorous exercising for the recommended 30 mins/day won't burn off enough calories to lose much weight by itself (although it will help you lose fat and gain muscle, so you look better than just dieting, and will help you get fit). By comparison, eating 500 kcals/day less than your "maintenance" intake should lead to a weight loss of around 0.5 kg/week.

Overall my diet plan is for around 1,800-2,000 kcals/day (with only 5-10% cals from fat). Based on an estimated 2,800 kcals/day for "maintenance" I should lose around 1 kg/week from CRAN (calorie restriction with adequate nutrition) and another .15 kg/week from increased daily activity (exercise). At a rate of -1.15 kg/week in total I should reach my "ideal" weight (based on getting to a BMI of around 22) in 26 weeks - a nice round 6 months. My goal is to get below 70kg before the end of the Australian Financial Year (30th June).

As you lose weight your maintenance calorie requirement drops (also with CRAN your metabolism tends to slow a bit, though this is offset by boosting metabolic rate via exercise). So I'll probably have to add some additional exercise towards the end. Stair climbing is good to start with, as it seems fairly "low impact" if done in a controlled manner (ie. not like Rocky Balboa!), but once I get down to less than 80 kg I'll start to do some rope skipping. Skipping is a good exercise as it can be done indoors, so it's good for home at night, even if it's bad weather outside. Skipping has a METs rating of 12 (METs = metabolic equivalents. One MET is defined as the energy it takes to sit quietly) compared to stair climbing (8.6 METs) and stair descending (2.6 METs). So skipping will burn around twice as many kcals per minute as climbing up and down flights of stairs. So doing 15 minutes skipping each evening in addition to my lunchtime stair exercise would double the amount of calories burnt off by exercising each day.

Once I reach my "ideal" weight I'll ease back on the exercise a bit (to the recommended 30 mins brisk walk a day) so that my weight stabilises while still sticking to the same CRAN diet. Supposedly CRAN has good prospects of helping you reach your optimal lifespan - although starting it seriously at age 45 is not ideal. It would obviously have been better to maintain my ideal weight and stick to it using CRAN throughout my adult life.

Wednesday, 10 January 2007

Day 10 down, 355 to go

Spent $97.76 on groceries and vitamins, did my planned exercise (532 stair steps) and stuck to my diet plan. A land valuation notice for our home arrived today - apparently the land value has gone up 7% from $400,000 to $428,000 over the past three years, even though house prices have been static. A new valuation is issued every 3-4 years and is the basis for our local rates assessment. This will mean our local taxes will be considerably higher this year.

Tuesday, 9 January 2007

Day 9 down, 356 to go

A no spend day, I ate healthily (is that a real word?) and did 5.5 "laps" (418 steps) of the "tower of terror" (aka. "stairway to hell" - see pic below). On the financial front the Australian stock market went back up by 80 points (around 1.5%) today, after falling by a similar amount yesterday. As each point change translates to around $90 change in my NW this would be hair-raising if I wasn't planning to hold on to my stock portfolio for the next 20+ years. As it is I just get a laugh listening to the business news "explaining" the changes - apparently yesterday there was either negative "market" sentiment, "more sellers than buyers", or the stock market was overpriced. Today either the "bargain hunters" were out in force (at 2.5% below a recent all time high?), or everyone had decided inflation was suddenly under control because the oil price had dropped a little bit. Ah well, nice to see "Mr Market" is alive and well.

A credit card offer from HSBC addressed to "The Householder" arrived in post today. Nice to see that "Householder" was "conditionally approved" for a card! I may apply for a card as they are offering 0% interest on balance transfers until 1 October 2007, and no fees for the first year. Presumably I could cancel the card after paying off the balance transfer in September and avoid paying any fees. If I get $10,000 transferred to my normal CC account I can then withdraw the money as a cash advance (for a $10 fee) and invest the money at 6% in an online savings account for 8 months, netting $400, or around $240 after taxes. Every little bit helps.

Monday, 8 January 2007

Net Worth - PF Bloggers progress for DEC '06

Here's the regular round up on how the various PF bloggers who post Net Worth each month are progressing. I've added a couple of new ones this month. Leave a comment if I've missed yours out!

Monthly Net Worth of PF Bloggers for DEC 2006:

Blogger Age Net Worth $ Change % Change
Accumulating Money 2x $45,705.16 $2,563.37 5.9%
Binary Dollar 2x -$5,724.36 $4,521.17 N/A
Blogging Away Debt 2x -$38,691.00 $1,757.00 4.3%
Consumerism Commentary 30 $70,108.19 $2,820.68 4.2%
Crazy Money 27 $241,889.00 $8,238.00 3.5%
Enough Wealth 45 $1,032,783.00 $41,091.00 4.1%
Financial Freedom 30 $250,775.82 $16,972.50 7.3%
Financial ladder xx $134,846.55 $3,119.72 2.3%
Ima Saver 6x no Dec data no Dec data N/A
It's Just Money 32 no Dec data no Dec data N/A
Lazy Man and Money 2x no Dec data no Dec data N/A
Make love, not debt 2x -$70,787.04 $4,207.07 5.6%
Making Our Way 37 $605,201.77 -$8,224.51 -1.3%
Mapgirl 32 no Dec data no Dec data N/A
My Money Blog 28 $114,508.00 -$4,603.00 -3.9%
My Money Path 29 $105,092.00 $2,612.00 2.5%
My Open Wallet 37 $312,771.00 N/A v N/A
New Age Personal Finance 31 $151,917.64 $9,810.87 6.9%
Savvy Saver 27 $220,286.00 $2,837.00 1.3%
Tired But Happy xx $110,270.00 N/A N/A

nb. Some ages have been adjusted as follows:
exact age provided = listed as given
"20's" = listed as 2x
"early 20's" = listed as 22
"mid-late 20's" = listed as 27
and so on.

Day 8 down, 357 to go

Fortunately yesterday's flat tyre was able to be patched, so it ended up only costing $30 (better than a new tyre, especially as this one was only a couple of months old). First day back at work was business as usual. At lunch time I went to the shops and withdrew $400 from my credit union account so that I could pay $397 into our Joint Account (to cover the interest for my "little book" US share portfolio for last month). Also spent $44.71 on groceries and $15.18 on petrol (the tank was still half full, but I had a 10c/L discount voucher which expires today, and the petrol price was near its weekly low).

I did manage to stick to my eating plan today, and did four "laps" of the four storey staircase near my workplace after lunch. By the end of the fourth ascent (304 steps in total, but who's counting?) my legs were getting a bit wobbly, and I realised just how little exercise I'd been getting since I stopped the daily paper round with DS1 last July. Hopefully I'll have recovered enough to manage at least two "laps" tomorrow, preferably four. Apparently climbing stairs has a "METS" rating of 8.0, compared to 3.5 for a brisk walk, so ten minutes of stair climbing a day should be equivalent to a 20 min walk. By the end of the week I should be able do ten "laps" a day in 15 minute sessions - maybe ;)

Sunday, 7 January 2007

Day 7 down, 358 to go

Spent $114.51 on groceries yesterday and another $88.27 today on groceries and some school supplies for DS1. I didn't do any exercise this weekend, but at least I stuck (more or less) to my diet plan. I'll have to make an effort to get some exercise at work tomorrow - there's a four storey metal staircase built into a cliff near my workplace (with a nice few of the Sydney skyline and Harbour Bridge from the top), so if it's not too hot at lunch time I'll climb up and down the staircase a few times for my exercise.

While driving home from the shops this afternoon the car's handling felt a bit odd - I thought the roads may have been a bit slippery from the rain, but it happened a bit too regularly so I checked all the tyres when we arrived home. Sure enough, one tyre was a bit soft and I found a nail stuck in it. As soon as I removed the nail the tyre completely deflated, so I had to put on the spare. I'll drop the car in for a new tyre tomorrow morning on the way to work, and have arranged to get a lift in to work from my co-worker (who lives close to our home). I doubt the puncture can be repaired, so I'll probably have to pay for a new tyre (I only got this one put one a few hundred km ago). Such is life.

Wealth Scoreboard

For Australians the HILDA survey provides statistically valid data about household net worth and lets you see where you stand in relation to others of similar age or income. For US readers Scott Burns has some interesting posts about his "Wealth Scoreboard" based on similar data for the US. To save you hunting around his website for the latest figures, here they are:

Here’s how the Scoreboard works. Households in the U.S. are divided by age groups and then by the net worth required to be in the top 1 percent, top 5 percent, top 10 percent, and top 25 percent of all households in that age group. A median figure is also provided so you can tell whether you are in the top, or bottom, half of your age group.

If you are 50 to 59 years old, for instance, you’ll need a net worth of at least $188,000 to be in the top half of households that age. You’ll need 3 times that, $570,000, to be in the top 25 percent. And you’ll need a whopping $9,554,000 to be in the top 1 percent. (See table below.)

















































































The Wealth Scoreboard



The table shows median net worth for households, arranged by age of the chief earner. To find your rank, go to the right age category and find the net worth closest to yours. (Data are from 2004; all U.S. dollars are in nominal terms, in thousands.)



Age Group




Top 1%



Top 5%



Top 10%



Top 25%



Median



80 or Older



$3,349



$1,770




$1,149



$536



$188



70 - 79




$9,198



$1,945



$1,106



$489



$183



60 - 69



$10,188



$3,075




$1,522



$699



$232



50 - 59




$9,554



$2,223



$1,180



$570



$188



40 - 49



$4,710



$1,297




$746



$353



$113



30 - 39




$1,971



$451



$272



$121



$39



20 - 29



$607



$206




$103



$30



$6


Source: VIP Forum, based on data in the 2004 Survey of Consumer Finances


The Scoreboard is put together by VIP Forum, a Washington DC based group that does research on wealth and wealth management practices. The basic data comes from a Federal Reserve survey that is done every three years, the Survey of Consumer Finances. The last survey was done in 2004.

Frugal living: Online discount coupons

You can get a coupon for 10% off online Target purchases by accessing Target deals via the couponchief website. Once you've navigated to the Target site via one of the links provided, you can browse the Target online shopping site and you should automatically see the 10% discount when you get to the checkout page.

Couponchief has a wide range of other coupons and deals available online - for example, Dell, Sony, Overstock and more. You can either browse for deals from a particular merchant, or browse the website by category, or search.

Saturday, 6 January 2007

NCN rocks

Aside from moving to dedicated hosting fairly recently, No Credit Needed (NCN) has now started to create an individual page for each member. I haven't updated my debt figures for last month yet, but as soon as I do (and NCN sets up my 'homepage' I'll put a permlink to my graph next to my NetWorthIQ chart (If I can display the chart as a link to NCN, rather than just a text link I'll do so).

Most of the NCN members are paying down CC or student loan debt, and hope to pay it off in a couple of years. If you're in a similar situation you can visit NCN for inspiration. Some other members are tracking more hefty debts such as home or investment property mortgages. I think I'm the only one tracking a whole portfolio of debt (mortgages, margin loans etc.) with a "pay off" timeframe of 20+ years!

Day 5 down, 360 to go

Grrrr - both a "spend day" AND an "overeat day" - luckily not *too* bad on either front. I took DW and the kids to our local shopping precinct to get a batch of digital photos printed (DW tends to get "cabin fever" if she stays at home for more than a two days in a row, and DS1 loves visiting the shops, even though he never buys anything!) Although the photo printing was free (using a coupon from my dad), DW visited the Target store and bought her and DS2 some clothing. Although the clothing was a real bargain (DW got a blouse for $3.87 that was originally priced over $27) it still ended up being $11.85 spent on clothing. The bad part of this family outing was that while there I succumbed to a "two pizzas for $5 deal" at the Pizza Hut outlet in the foodcourt (they're normally $4.95 each) and totally blew my diet plan for the day by eating them both (they were the small "personal pan" ones meant for 1 person, and it was way too much fat and calories for healthy eating, let along someone supposedly on a "diet"). Ah well, tomorrow is another day to get back on the wagon, and next week I'll be back at work and can "brown bag" my standard lunch each day.

I also nearly went beserk and bought a Grundig LCD TV that was on sale (for $1499 compared to "original" RRP of $3200), but DW convinced me to leave it and come back "tomorrow" to check it out in detail. Luckily when I got home I realised that I should make an in-depth analysis of all it's features and price it compared to other models and makes, and that we don't really *need* another TV right now (although a "big screen" digital TV has been on my "wants" list for a couple of years). Anyhow, I can't be bothered doing the necessary homework right now, and prices will keep dropping on such electronic toys, so I'll try to forget about it for another year or two.

Thursday, 4 January 2007

Day 4 down, 361 to go

Ended up having to spend something today - $4.35 on petrol for the lawn mower (it ran out of gas half-way through mowing the lawn). Aside from that everything went according to plan - mowed lawn, cleaned gutters, shoveled four wheel barrow loads of earth from one side of the pool to the other (in preparation for putting down some gravel), and have a quick swim. DW has organised some of her digital photos taken this holiday season, so I'll burn them onto a CD tonight so she can take them to get printed tomorrow. She got a coupon for free digital photo printing from my dad (it came with the camera he bought).

It's the last day of my "at home" vacation tomorrow (back to work on Monday), so I'll have to try get the last of my stock portfolio data entered into Quicken and file away the big pile of paid bills and financial statements that's been building up for the past few months.

I'm wondering if I'll receive tax information for my US stock holdings and have to lodge a US tax return. So far I haven't sold any of my "little book" portfolio shares, but I did receive some dividends that had US foreign tax withheld. Not sure if I need to do a US tax return, or can just declare the dividends and claim the foreign tax credit on my Australian Tax return.

Day 3 down, 362 to go

A very pleasant day out, with an evening walk around Taronga Zoo for three hours at dusk with my family and my parents. My parents have a "zoo friends" pass ($190 pa) so they are able to take DS1 to the zoo as often as he likes. Tonight (after closing) there was a special "picnic night" offer available to Zoo Friends and their guests, so DW and I got in for just $15 each (normal entry cost is $32 per adult). My parents paid for the entry and brought some sandwiches for our "picnic" dinner, so this was a "no spend" outing from my point of view.

My parents had also brought in some takeaway noodles for DW and themselves, and also brought some extra for me. Unfortunately I "fell off the wagon" and had some fried noodles and a couple of spring rolls for dinner - definitely NOT on my healthy eating plan. To make matters worse I then also ate the ham and turkey sandwiches I was supposed to have had for dinner as a late night supper ;(

Hopefully the three hours of walking around the zoo provided some extra exercise to offset some of this bout of over-eating. Although from memory a serve of fried noodles would take about 100 hours of walking to burn off the extra calories!

My only spending for the day was $18.38 worth of groceries I bought on the way home (so that I won't need to go to the shops for anything tomorrow). I'm planning to mow the lawn, clean out the gutters and do some more "earthworks" around the pool tomorrow, so it *should* be a no spend, high exercise and healthy diet day.... we'll see how it turns out.

The Australian stock market was up around 20+ points (to another "all-time high") before lunch, but then plummeted during the afternoon to end around 26 pts down for the day. This translates to a paper "loss" of around $2500 to my net worth, but as I'm a "long term" investor I try to just ignore the daily ups and downs of the market. Better to just concentrate on the things I can (and should) control - like my diet and exercise.

Tuesday, 2 January 2007

Day 2 down, 363 to go

Another OK day - I managed to just eat mostly the "right stuff" again (hey, maybe I should write an eBook called the "The Right Stuff Diet"! - if so I'd better take the "before" shots for the cover before I get too trim, taut and terrific) and I got a bit of exercise cleaning the pool and shoveling some dirt from one side of the garden to the other. [We had bought a tonne of small river pebbles last year, and the plan is to put them between the path surrounding our pool and the back fence in place of the grass that is currently there. Hopefully the gravel will look a bit neater than the overgrown grass.] My weight is down to 98.6 kg - at the moment weight is dropping off me as if I'm on "The Biggest Loser". I know my weight won't keep dropping at this rate, but if I stick strictly to my diet plan it should average more than 1kg a week.

For the record, today was a fairly typical "diet" day, which comprised:
* 4 "weetbix" for breakfast, with 150ml skim milk and 150 lite soy milk, 4 tspn sugar and 4 tspn "aktavite" (a type of chocolate flavoured, vitamin enriched "sprinkles")
* a low-salt, lite ham and alfalfa sprout sandwich (on 2 slices of white, hyfibre bread)
* 1 navel orange
* 1 tin of chicken/veg soup and 4 slices of white, hyfibre bread (this isn't particularly healthy)
* 100g grapes
* 100g grilled, lean beef
* 50g grilled pumkin
* 100g boiled rice
* 3 "frosty fruit" ice-blocks (frozen fruit juice) (I should only have 1 of these as dessert each day, but it's still better than junk food or icecream)

Today wasn't a "no spend" day as I had to buy some groceries ($43.42) and top up the petrol ($14.97) to last until I go back to work next week. The petrol purchase wasn't too bad as the tank was still half full (not doing as much driving while on vacation at home), Tuesday is the day of the week where petrol price is cheapest around here, I had a 4c/L discount coupon from my shopping docket (which reduced the price to $1.109 per Litre), and I paid for it with the VISA "giftcard" that I'd got from my company as a "bonus".

I made some progress entering the current stock holdings for one of my margin accounts into Quicken (two more margin accounts to go), then my "Little Book" portfolio transactions for the past 7 months). That's the easy part. Going through the past 10-15 years worth of my broker and margin lender statements and my tax returns to fill in all the historical transaction data is not going to be fun. Luckily I still have an old copy of my Quicken files from '98 which had all my stock transactions up to that time entered correctly, so I'll just have to copy and enter them into the new version of Quicken, then work my way forward from '98 and check if the final stock holdings then reconcile. It's times like this that I hate DRPs, stock splits, takeover (especially cash/stock combos) etc. Another reason to only invest in 10-12 individual stocks, or, better yet, index funds).

DS1 visited my parents and they took him out to the cinema to see "Happy Feet". As Tuesday is the "half price" day at the cinemas here, the cost for two "seniors" and a child would have been reasonable. DW took DS1 and DS2 for a walk in the afternoon and collected some free wood chips for our garden beds from up the road (the local council had cut down a dead/dying tree last week and left a pile of wood chips on the side of the road. They usually come back after a week or so and clean up anything that's left).

One good thing with blogging is that I can write stuff that probably only I'm interested in ;)

Day 1 down, 364 to go

My New Year's Resolution for healthy living has survived the first day - although I stuck to my healthy eating plan (no snacking on left-over Christmas "goodies"), my exercise for Day 1 was limited to cleaning out the swimming pool. At the moment it's cool and raining in Sydney - most unusual for Jan 1 as it's often 40 deg C and clear blue skies at this time of year. Especially unusual considering that we're been in a drought for the past two or three years and the main dam supplying Sydney's water is down to around 30%. Luckily some of the rain today fell in the dam's catchment area.

As soon as the weather fines up I'll start doing half an hour of laps in our backyard pool each day while I'm still on vacation. Until then I'm making do reading the health and fitness blog written by a fitness women which has some interesting posts. The most immediately useful one is the ten tips for starting a training program. Although some of the tips (such as "Live in an area that provides opportunities for physical activity") seem a bit extreme - I'm about to move house just to be closer to a gym!

This blog also has some useful tips on how to handle the constant challenge of eating out without ruining your diet. Although I tend to "brown bag" my lunch (a tin of no added salt baked beans (for fibre), a tin of salmon in springwater, and some "high fibre" bread) for both health and budget reasons, there is sometimes no alternative to eating out - especially if it's a business lunch with the boss.

Another interesting post was the tip to stay hydrated by drinking a couple of glasses of water after drinking a cup of coffee (as it is a diuretic). I don't drink coffee, but I drink LOTS of diet coke - I'm trying to cut back from a couple of 2L bottles a DAY, to just one 2L bottle lasting all day at work and at home with dinner. I'll make an extra effort to take a bottle of filtered water along to work, so I can alternate between the caffeinated drink and plain water throughout the day. Hopefully the reduction in caffeine plus the weight loss will get my blood pressure back down below the "borderline" readings I got last time I visited my doctor. Avoiding having to start taking blood pressure medication by losing weight and execising would also save a lot of money in the long run.

Anyhow, my weight is currently 99.1 kg (goal <78 kg) - I'll see how well I've done by the time I go back to work next Monday. I actually find it easier to stick to my diet at work, as I can eat the same things for breakfast and lunch each day - the main challenge is to resist having an afternoon "sugar fix" of junk food. Although the first week of a diet tends to be largely loss of fluids, I should be able to lose around 0.5 - 1.0 kg per week just by eating "healthy" foods without any junk or snack foods, and doing half an hour of aerobic exercise each day.