Saturday, 18 October 2008

When the going gets tough, the tough get saving

So far this month my net worth is down by another $100,000 or so, dropping below $800,000. Considering my net worth has now dropped by around 1/3 from it's peak at just under $1.2 million during 2007, any thoughts of early retirement have disappeared. I can't see my net worth regaining 50% to it's previous peak for many, many years. And rather than being well ahead of target with my retirement savings, I now expect I'll have to keep pouring 50% of my gross salary into my retirement account (via salary sacrifice) until I'm 65 if I'm to be reasonably sure of a comfortable retirement funded purely from my retirement account.

I can't do much about my investment performance, so for the moment I'll just focus on trimming any unnecessary expenses from our budget. Hopefully if interest rates continue to be slashed by the RBA the interest-only payments on our property loans will eventually be reduced enough for us to start making repayments of principal, rather than using the redraw facility while DW is working part-time.

If the market drops much further I'll have to seriously consider selling off my share portfolio and using the proceeds to clear my margin loan debts and establish some cash reserves. With the economy expected to contract, I don't want to be in the position of having large debts to service at a time when my employment could be downsized. For the moment I'm just hanging in there and hoping this is just another blip in the long-term performance of Australia equities...



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5 comments:

kate said...

hang in there, i truely believe if we can all hang onto our shares things will bounce back. the more that can hang in there the quicker tis thing will be over.

Anonymous said...

"considering my net worth" how can you say that when you use "margin" on your "net worth" your in "debt" ?

enoughwealth@yahoo.com said...

I don't understand the above comment by anon. My net worth = gross assets - debts. Having debt doesn't stop you having a positive net worth...

My debts include a home loan, investment property loan, HELOC (used to finance some investments), and three margin loans.

My home and investment property values are greater than the total of my home, investment and HELOC loans. Similary my stock portfolio current value is greater than the total of my margin loan debts. I therefore have a postive net worth - it's just dropped a lot in the past year due to the value of my stock portfolio dropping 45% while the amount of debt has remained constant...

Anonymous said...

It takes a special kind of asshvle to think things will " Bounce Back" . Iran just sold its fabulous South Azadegan Oil Field, the biggest find in thirty years in the Middle East; today, to China! Goddammit! Frightened by the U.S. example in Iraq, they chose to involve China, for protection and a fair deal, now that we print money out of convenience and at will with our "fiat " system and the Feds! Expect this to mean Chinese plutonium in Iran, and Chinese delivery systems, soon! and the end of the "Fat Bastard Era" in America!

enoughwealth@yahoo.com said...

I'm not sure what the above comment has to do with this post, and it seems strange for someone to insert such general diatribe against a recent event in a post that a year out of date.