Monday, 11 November 2019

Diet 2019 Wk 45 - week ending 10.11

Had quite a good week last week. Stuck to my meal plans (except on Sunday, where I ate a little bit more than planned) and had a (sort-of) fast day on Tues and a proper fast on Thurs, with a low-carb 'ketogenic' day on Wed. Also went to the gym on Mon, Wed and Fri as planned and increased my warm-up treadmill time slightly (12 min rather than 10 min, although I'm taking it easy with only a 5% incline and 5kmh speed) and the total sets done in each gym session. I also managed to achieve my target of a minimum of 10K steps walked on the weekdays (but not on the weekend).

This week I'll try to do a proper fast on Tue and Thu, increase the reps a bit during my gym sessions (maybe a add another exercise), and make sure I do my 5BX session every day. I'll also do a bit more walking next weekend.


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Monday, 4 November 2019

Net Worth: October 2019

My NW increased by $15.6K during October (0.66%) due to the continued improvement in global and local stock markets adding value to my geared share portfolio and also our SMSF investment. Our house valuation also improved slightly (0.75%) as the recent improvement in the Sydney real estate market flowed through into our suburb. I think that is technically an 'all time high' for my NW, but it has been fairly flat during the past couple of years due to the correction in Australia real estate and a subdued local stock market.

I've decided to report the amount borrowed to fund the 10% deposit for my 'off-the-plan' investment apartment in the 'other mortgages' total. I will continue to report the cost base for the 'other real estate' holdings until the apartment development is completed (in 2023) and I get the unit valued to obtain a mortgage to fund the balance due at settlement. There will be some stamp duty (about $42K) payable in a couple of months - I'll add the amount to the 'other mortgage' figure, and also increase the cost base by the same amount, so it won't have any impact on my NW figure until settlement.


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Diet 2019 Wk 44 - week ending 03.11

Last week went OK except for Wednesday when I at more than planned, and the fact that I only managed to go to the gym once (due to working late on two of my 'gym days' and having to get home in time to cook meals for the kids). I probably could have squeezed in the gym sessions, but I just didn't feel like it. At least I still did my daily 5BX on the days I didn't get to the gym. I also didn't do much walking on Sunday as it was raining, so my average daily step count for the week was down slightly again. I'll try to meet my 10K target each day this week, and also go to my planned gym sessions on Mon, Wed and Fri. I also need to try to get to bed a bit earlier and get a full 7 hrs sleep each night.

I watched a few youtube videos on the weekend about the benefits of fasting by Dr Fung - apparently fasting is better for retaining muscle mass while losing visceral fat than simple CR (caloric restriction) dieting. And intermittent fasting (with normal caloric intake on the non-fasting days) tends to result in more sustainable weight loss as it doesn't lower ones metabolic rate as much as continuous CR dieting -- so you tend to not suffer from the 'yo-yo' dieting effect (where you tend to put weight back on due to having lowered your metabolic rate). Fasting also helps lower insulin levels, which can produce a number of health benefits.

While I like the idea of the health benefits of fasting and using IF to get down to a healthy BMI asap, I also suspect that CRAN might be beneficial for longevity by lowering metabolic rate (so ongoing CRAN then doesn't result in a lower than ideal BMI). So on the days that I don't fast I will still restrict my caloric intake slightly (at least until I reach my 'ideal' BMI). But I might add a bit more lean protein (chicken breast or smoked salmon) on the non-fasting days, as it will make my weight training on those days more productive in terms of retaining/adding muscle mass.


Making my evening meal before each fasting day a no-carb meal (eg. chicken breast and green beans) may also help my one-day (36 hour) fasting more effective. I might also change my Wednesday meal plan to a ketogenic/low-carb one, so I end up with a three day ketogenic period each week.

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Monday, 28 October 2019

Diet 2019 Wk 43 - week ending 27.10

I had a good diet and exercise week up until Sunday. I had gone to the gym as planned on Mon, Wed and Fri for some light weight training, and did one session on 5BX on a non-gym day. I also managed to reach my target of at least 10,000 steps/day, including on Saturday. But I didn't do my 5BX on Saturday evening, and on Sunday we went to the movie theatre and I ate some junk food and confectionery while we were out. Then on Sunday evening I also had some extra snacks after dinner, so my daily calories were way too high on Sunday. I also didn't walk very far on Sunday either.


For Mon-Sat I averaged 1,270 kcals/day which was close to the previous weeks daily average. But on Sunday I had 3,586 kcals, which blew out my daily average for the week to 1,601 cals/day. Still OK as a long term daily average, but my weight had ticked up quite a bit this morning (to 102.8kg) simply due to the extra bulk of food and corresponding water retention.

Today I'll stick to my 'standard' diet plan and go to the gym on the way home. I did a 30 min circuit of weight machines with 3 sets of 8-15 reps at each station last Friday, and I'll try to do the same in each gym session from now on and slowly increase the weights. Initially I'll use weights that I can manage 15 reps with, as I want to build up a bit of strength and avoid injury rather than build muscle mass (it would also be difficult to training for increased muscle mass when simultaneously dieting).

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Thursday, 24 October 2019

Overview of my 'healthy eating and exercise' plan

I thought I'd post an overview of my diet and exercise plan for the next 6-12 months. The week-to-week reality may differ somewhat from 'the plan', but this is what I am aiming for. Having a written plan is a good first step towards achieving any goal. And I find that recording what I've eaten each day helps me stick to my plan (most of the time).

My current eating plan is to stick to a 'standard diet' meal plan five days each week, and to fast two days each week.

My 'standard diet' consists of a healthy breakfast of honey-flavoured porridge with lite milk (and a scoop of added whey protein - "Vital Strength hydroxy ripped  thermogenic protein" is what the marketing department called the product I happened to buy on sale (50% off) in my local supermarket, but any whey protein will do once I've use this batch up) and a glass of grapefruit juice (I also take a daily multivitamin, 1000mg of Vit C, some Vit D and prescription BP medication). Then my weekday lunch consists of a 125g tin of smoked salmon slices and a 300g tin of baked beans. And dinner consists of some grilled animal protein (e.g. 120g of fillet steak, chicken breast, or pork fillet) and a serve or two of vegetables (usually frozen or tinned peas, carrots and green beans), or a gluten-free soup and pita bread. And then some fruit (eg. an apple and mandarin) and a jelly for dessert. On the weekend I'll have the same breakfast, but might have scrambled eggs on toasted gluten-free Pita bread for lunch (with a small amount of 'proactive' cholesterol reducing margarine), and I often make a pot roast and some roast potatoes for the family to have for evening meals during the weekend.

I eat my breakfast around 8am, and have usually finished my dinner by about 7pm (and avoid having any snacks after dinner - snacking after dinner was a major reason why I put on weight over the years). This is basically a 13:11 diet regime coupled with CRAN (the total cals are around 1,600 compared to my basic metabolic requirement of around 2,150-2,350 cals (depending on how active I am), so this meal plan represents 25%-30% CR and I've checked the overall fat:carb:protein ratios and vitamin and mineral content using a spreadsheet). Sticking to basically the same meal plan (with minor variations) each day makes it easy to do the weekly shop, and it also avoids have to recheck the nutritional values are adequate with a CR diet that changed day-to-day.

So far I'm finding it quite easy to have a fast on two days each week (TUE and THU, which are the weekdays that I'm not going to the gym). Actually, from when I stop eating around 8pm on Monday night to breakfast on Wednesday morning is approx. 36 hrs, so it is really 1.5 days of fasting (or 36:12 as I've seen it called in some articles about IF).

Overall, that means my total weekly calorie intake (if I stick to my plan) totals around 5x1650 cals each week = 8,250 cals (or an average of  about 1,200 cals/day). Which compared to 7x2,350 = 16,450 cals/wk if I was eating 'maintenance' calories (~2,250 cals) each day is a quite substantial CR of 50%. This should result in quite a rapid rate of weight loss, which is probably a good idea given my BMI started off in the 'obese' range, and I've been meaning to get down to my 'ideal weight' since the 1980s!

Once I get down towards my 'ideal' BMI I'll cut back to only one day of fasting each week (some amount of ongoing Intermittent Fasting is supposed to be good for your health) and increase my standard daily calories slightly to my new maintenance level (which will be lower once I achieve a lower BMI). The exact level of maintenance calories required will depend on how active I am.

In terms of exercise, my plan is to do 5BX in the evenings and to walk 10K steps each day, and to go to the gym and do some weight training on my non-fasting weekdays each week (i.e. Mon, Wed and Fri). I might skip the 5BX on days when I've already had a gym session (although it is probably good to do the stretching involved in 5BX after a session of weight training).

I'm hoping that I won't end up with too much 'loose skin' by the time I get to my ideal BMI. Apparently the amount of excess skin one has after weight loss tends to be genetic to some extent. Generally anyone that looses 100lbs or more (45 kg) seems almost certain to end up with excess loose skin, and some people who have only lost half that amount end up with excess skin after losing weight. My planned weight loss is to go from my 111 kg starting weight to get down to about 74 kg (and stay there) - which will be a reduction of 37kg (or 81 lbs). So its quite likely that I'll have some loose skin after the weight loss. Replacing some of that fat loss with muscle gain should help reduce the amount of loose skin to some extent. And having jelly (full of collagen) *might* also help improve skin elasticity and maximize the chance that my skin will shrink to suit my reduced body size as I loose weight. In any event, having a bit of excess skin is a lot better than killing myself slowly by having excess weight.

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Monday, 21 October 2019

Diet 2019 Wk 42 - week ending 20.10

Had a solid week of sticking to my diet plan and also did a day of fasting on Tuesday, and went to the Gym on Monday. I also did 5BX sessions on five of the six days I didn't go to the gym, and increased my daily step count a bit closer towards my 10,000 steps/day target.

This week I plan on going to the Gym on Mon/Wed/Fri and do 5BX on the other days (and a bit of dumbell weight training at home on those days), as well as stick to my diet plan and fast on Tue/Thu. Hopefully this will become my normal routine after a couple of weeks. I also need to try to get to bed a little bit earlier, as ideally I should be averaging around 7 hrs sleep each night if I want to maintain muscle mass and lose mostly fat as I diet and exercise.

Daily averages for the last two weeks:

As my protein intake is probably a little bit too low for muscle gain/preservation while dieting, I've added a scoop of whey protein to my morning breakfast of porridge. I might also get some creatine powder to have with my morning grapefruit juice if I'm going regularly to the gym three times a week for weight training.

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Tuesday, 15 October 2019

Diet 2019 Wks 40 & 41 - weeks ending 06.10 and 13.10

I had two weeks of eating 'ad libitum' due to a combination of having a lingering cough (so I didn't want to fast or diet while still recovering from the 'flu) and weekend visits to my parents up at our hobby farm/lake house weekender (which involves several large home-cooked meals a day, plus snacking). I therefore put back on most of the weight I'd lost during the previous three weeks of dieting.

Anyhow, last week my cough had finally cleared up, so I got back onto my standard eating plan and eliminated snacks/junk food. I didn't have any fast days, but did eat a bit less than my standard diet plan on Tue-Fri. I also went to the Gym for the first time in ages and did a bit of weight training.

This week I've resumed fasting on Tuesdays and Thursdays, and will go to the gym for half an hour of easy weight training on Mondays and Wednesdays on the way home from work. On the days I don't go to the gym I've started doing 11 mins of 5BX in the evenings. I'm also trying to do some extra walking around the office and in the evenings to get my daily step count up to my target of at least 10,000 steps/day.


My chart of daily calorie intake and weight shows the effect of two weeks of eating too much. Next time I get sick I need to take it easy and get plenty of sleep, but avoid overeating, and especially avoid 'snacking' when I'm not being very active.


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Sunday, 13 October 2019

How much tax does superannuation really cost the government?

An article in today's SMH reports that $800b is now in the superannuation accounts of those of retirement age (over 65), which has meant a reduction in reliance of the age pension. Instead of the cost of the age pension rising from 2.9% of GDP in 2001 to a projected 4.6% by 2040, it is now projected to actually fall to only 2.5% by 2038. However, it is also reported that the cost of the concessional tax rates applied to superannuation means that it is costing 1.9% of GDP, which according to the Grattan Institute will rise to 3% of GDP by 2060.

However, while the age pension is a real cost to government, the cost of the concessional tax rate applied to superannuation is not as high as generally reported. Why? Because calculations of the 'cost' of superannuation assumes 'all other things being equal' ie. If someone with taxable income in the top (45%) marginal tax rate has SGL and salary sacrifice contributions into super taxed at 'only' 15%, this is costing the government 30% in tax concessions. However, the reality is that if superannuation wasn't available, those in the higher tax brackets would simply use other means to reduce their tax liability. The projected 'cost' also does not take into account planned changes to the higher tax brackets in 2024-25.

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Thursday, 3 October 2019

Diet week ending 29.09.19

Last week my cough persisted (it is only clearing up now) so I didn't do any fasting days, and indeed I didn't even follow my standard meal plan and I snacked quite a lot on confectionery and chocolates when I wasn't feeling well. So my average daily calorie intake for last week was quite high and I put back on most of the weight I had managed to shed.

This current week (so far) has also not been very good, diet-wise, and I've only got back onto my standard meal plan today (so no fasting days again this week). I'm also going back up to the lake house this weekend to visit my parents and collect DS2 (who was staying with them for the first week of the school holidays), so the coming weekend will involve several large home-cooked meals. But I'll do my best to avoid any more junk food/snacking during the weekend.

Next week I'll get back to following my standard diet plan, and also have a couple of fasting days  provided my cough has cleared up completely and I'm feeling 100%.


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Wednesday, 2 October 2019

Where to with regard home loan interest rates?

Recent interest rate cuts to 'historic lows' in Australia, combined with high property prices (especially in Sydney and Melbourne) have lead to a lot of speculation about how low interest rates will drop (after yesterday's 0.25% cut I've seen some pundits predict a further two cuts by the middle of next year), and when/if rates will increase again -- and by how much.

This is an especially hot topic amongst comments regarding property prices and loan affordability. Many comments are along the lines of 'prices are too high, and will drop 40% or more' -- which reminds me a lot of Dr Keen's prediction about a '40% fall in property prices) back in 2008. Many of the comments also assume that the current low interest rates are an aberration, and that home loan mortgages *must* rise substantially -- which will lead to mortgage stress and potentially a significant rise in mortgage defaults.

While home loan interest rates are certainly very low and can't fall much further (given that RBA cuts below 0% would be ineffective, so the focus would shift to QE instead. and that banks set home loan rates which also reflect non-zero deposit rates and their admin/overhead costs), this doesn't mean that home loan interest rates must rebound. After all,taking a really long view, current home loan interest rates are back down to what was considered 'normal' prior to WWII.

I've cobbled together a couple of historic charts of Australian average 30-year home loan interest rates below, and extended it to include recent rate changes. This chart shows that the current home loan interest rates might actually be 'normal' for an economy with low growth rates and inflation, and little prospect of major rises in productivity (unless AI turns out to have as big an impact as computerisation and robotics had in the 1970s-2000s).



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Tuesday, 1 October 2019

Net Worth: September 2019

My NW increased by $33.6K during September (1.45%) mostly due to the gains in the local and global stock markets flowing through to my geared share portfolio and also our SMSF investment. Our house valuation was slightly lower, based on sales data for our suburb, whereas the overall Sydney market has shown a rebound in property values (likely due to the two interest rate cuts by the RBA in recent months).

My NW data for this month includes a $1m increase in 'other real estate' as an asset, and a corresponding increased liability of approx. $1m in 'other mortgages' - this is due to my purchase 'off-the-plan' of a one bedroom apartment in a high rise apartment development (88byJQZ) in St Leonards. I paid the initial $5K 'holding deposit' using my 'portfolio loan', so that debt has actually been reflected in the net value of my 'Stocks' position, leaving $995K liability. When the balance of the 10% deposit gets paid when I exchange contracts this month, the 'other mortgages' figure will reduce to $900K (that balance will fall due when the apartment construction is completed and 'settlement' occurs - currently scheduled for Q1 2023), and the full $100K deposit amount will be reflected in my 'portfolio loan' balance as I am using that to pay the deposit. This will reduce the net value of my 'Stocks'  portfolio by $100K, which is a bit misleading, so I may do an ongoing adjustment to the portfolio loan figure and include the $100K 'deposit' amount as part of the 'other mortgages' figure.

I'll probably also add the stamp duty (payable 3 months after exchange of contracts) as part of the 'valuation' of my apartment, as this will probably be similar to the price differential for a completed unit compared to 'off-the-plan' pricing. In the unlikely event that the apartment development does not complete, I should get my deposit refunded and also be able to claim back the stamp duty payment.

Hopefully the property market 'correction' in Sydney is indeed over, and between now and settlement in 2023 the valuation of my apartment will have risen (so it shouldn't be a problem getting a mortgage for the balance due on settlement - I will have paid a 10% deposit, and banks usually prefer to only lend 80% of valuation).
As with all geared investments there are several risks in making this investment, including:
* property prices may not appreciate, or may decline (as was the case during the recent property slump) - but historically St Leonards has enjoyed an average gain around 6% pa. I've calculated that I would make some gain as long as prices appreciate by at least 2%pa during my holding period (10-15+ years).
* I may not be able to arrange finance (a mortgage) when the development is completed in 2023 and I need to 'settle' the balance. This seems unlikely as I have another unencumbered property that could be used as collateral for the loan. But if I am no longer employed it may be more difficult to obtain a mortgage.
* Interest rates may increase substantially - currently investor mortgage rates are around 3.5%-4.0%, and interest rates are currently being reduced. On the other hand, interest rates are at historic lows, so a substantial rise in interest rates is a distinct possibility in the medium-long term.
* I may not be able to achieve typical rental returns ($560/wk for a one bedroom apartment), or may experience high vacancy rates. However, as a new, 'luxury' apartment on the 39th floor with views towards the city, harbour, and harbour bridge it should be relatively easy to rent out and obtain above average rent.

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Friday, 27 September 2019

Is China still a 'developing' country or is it a 'newly developed' country?

Recent speeches by Trump and Morrison claimed that China is no longer really a 'developing' country, but a 'newly developed' country. The implication being that much of the 'special treatment' it obtained in relation to international trade and climate change should now be wound back.

But is China now a 'developed country' or is it still 'developing'?

A couple charts suggest that it is indeed now a 'developed country':

1. Urbanization.

While still less urbanized that the US, Europe or Australia, China is now at a similar level of urbanization that Europe attained by the 1950s - which suggests that on this measure it is already 'developed'. And it looks to be on track to be just as urbanized as Europe and the US within a decade or so in any case.


2. Per capita GDP and electricity use

While China already uses as much electricity per capita as the UK (which accounts in large part for its massive increase in carbon emissions since the Paris agreement was drawn up), it still lags far behind the US, UK and Japan in terms of current GDP per capita. On the other hand, China's GDP is already around that was enjoyed by citizens of the 'developed world' back in the 1950s. So although it can be argued that China is still a 'developing nation' relative to the affluence of Western nations, in absolute terms it is already a developed country (unless we choose to believe that the US, UK and Europe were NOT really developed countries back in the mid 20th century?).


Of course aside from not being a 'developed' nation, another argument put forward for why China should not need to curb carbon emissions as much as 'developed countries' is the notion that it isn't just a country's current emissions that should be taken into account, but also the cumulative emissions of a nation. While this seems reasonable on an equity basis, the reality is that global warming is being driven to catastrophic levels by the rate of current emissions - the impact of emissions prior to 1970 on the global climate just wasn't all that significant.

It's a bit like a group of shipwreck survivors adrift in a lifeboat that was slowly filling up with water due to a couple of passengers that had been pouring cups of water into the boat for the past day. It is only after the other passengers also start pouring water into the boat and the water level starts rising noticeably faster does everyone realize that if they don't stop pouring water into the boat it will sink. Does that mean that only the passengers that had been putting water into the boat all day should stop? Or does everyone need to stop in order to save the sinking lifeboat?

Of course China has a vested interest in continuing to be considered a 'developing' country, and the developed nations has a vested interest in China no longer being afforded any 'special treatment'.

A final chart of GDP growth rate also seems to indicate that China may be leaving the era of  'developing' and is now joining the club of mature, developed economies (that have lower, sustainable growth rates):



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Wednesday, 25 September 2019

What caused, and what will fix, global warming?

With global warming the current 'hot' topic, I though I'd (again) post my observations about the cause of global warming, and how it can (or can't) be fixed.

1. Cause.

Well, as they say, 'the science is in' and the answer is increased atmospheric concentrations of 'greenhouse' gases (CO2, methane, CFCs etc.) causes a larger 'greenhouse effect' and increases global temperatures. In fact this was already an established fact when I studied environmental chemistry back in the early 1980s. There was a bit of debate about the cause(s) of the increased levels of CO2 in the atmosphere, and how big an impact it has on climate, but it turns out that the obvious cause (us) is also now pretty much beyond doubt. Unless of course you're a climate change 'skeptic' that chooses not to allow evidence to affect their chosen/indoctrinated beliefs (similar to flat-earthers, moon landing skeptics, and, funnily enough, religious 'believers') - so you pretty much have to accept that global warming is artificial, and not a natural variation in climate. So it isn't magically 'go away' unless we do something about it.

But the key driver is actually the sheer number of 'us' on the planet. It was fine for a small percentage (a few hundred million people) to want/have cars, energy-intensive (industrial) jobs, and all manner of labor-saving and entertainment electrical devices, but when you combine a natural desire for nearly everyone to achieve similar living standards with an massive increase in the total population, the problem becomes much more intractable.

It is interesting to simply compare global greenhouse gas emission levels with global population - it can be seen that from 1850-1980 the correlation was obvious and unbroken. It is only from 1980 onwards that there has been some slight reduction in the trajectory of carbon emissions compared to population. Unfortunately any reduction in per capita emissions has not been enough to solve the problem of increasing population. I've added the black line showing (roughly) where carbon emission levels would have gone (simply driven by increasing population and development) if not for the mitigation achieved so far (more energy efficient technologies, non-fossil-fueled energy sources etc.).

2. Solution?

Well, as can be seen from the population chart, population growth rates peaked in the 1950s, and are slowly trending down towards a projected 0.1% by 2100 (still almost twice the rate of about 0.04% that applied prior to 1700 - before infant mortality rates plummeted). So, in the very long term, stabilizing global population would stabilize carbon emission levels even in the absence of any per capita reduction in carbon emissions. And, if/when the entire world is developed, with high living standards, literacy levels, and gender equality, fertility rates might even drop below replacement level globally, allowing the global population to slowly decline to a more sustainable level (2 billion? 5 billion? 10 billion?). Unfortunately, the global population at the time of the Paris Climate agreements was around half what it will be by 2100 -- so the global average per capita emission level will have to be halved simply in order to 'tread water'.

But as global population will continue to rise for many, many decades, the only way to address global warming is to reduce per capita carbon emissions by a massive amount. Enough to more than offset the increasing population. Comparing per capita levels for different countries reveals a number of things:

1. Developing countries (China and India especially) are rapidly increasing per capita emissions towards that of developed countries. Combined with substantial (and growing) populations, these countries need to be able to achieve development without hitting the same levels of per capita carbon emissions of the USA. So, building a whole lot of fossil-fueled power stations and providing the population with petrol-powered cars isn't really sustainable. China already has higher per capita emission levels than Europe. So, while developed countries have been cutting their per capita emissions, the global average per capita emission level hasn't changed very much:


2. Developed countries that are a) large and b) high per capita emitters, need to initially reduce their per capita carbon emissions towards 'best practice' amongst developed countries.

3. After that, the 'developed' countries (including, by then, China) will need to get their per capita emissions to a much lower level than what is currently 'best practice'. While there are some constraints (not all countries can rely on geothermal power like NZ or Iceland, and not all developed countries want to incorporate nuclear power in their energy mix like France) improved renewables technology should make it possible for developed countries to decrease their per capita emissions significantly in the next few decades.

Unfortunately improved per capita emissions in the already developed countries can't solve the problem. Getting to 'zero emissions' in the UK or EU will be helpful, but this will be overwhelmed by the population growth and development effects of China and India. It is even more important for the developing countries to be aiming for per capita emission levels significantly lower than those achieved by current 'developed' countries. The following chart doesn't make this seem too likely - China, while still only 56% urbanized already has higher per capita emission levels than the EU (which is 74% urbanized). As India increases urbanization (from its current level around 34%), it is also likely to overtake Europe and the USA as a source of carbon emissions.

Although it is now, apparently, a climate 'emergency' the most obvious (and effective) means to slow the rate of global increase greenhouse gas emissions (actively working towards ZPG and slowing the rate of development in underdeveloped countries) are 'off the table'.

Incidentally, although Australia's CO2 emissions per capita are very high and need to be reduced, our total emissions are relatively small - so even heroic reductions in Australia's per capita emission levels would have negligible impact on global warming.

The current debate regarding 'what to do' about climate change seems to be a nonsensical reversal of the 'pareto principle'. Rather than focus on actions that could/should be taken to impact on 80% of future increases in carbon emissions, the focus seems to on actions that can only have a trivial impact on the total level of global carbon emissions...

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Diet week ending 22.09.19

Was going well until last Thursday when the slight cough I had developed on Tuesday progressed into another bout of the 'flu. So I decided to give up on the fast day in the afternoon and had some dinner and snacks. Then from Friday to Sunday I was fairly sick, so I did less walking than usual and also ate 'ad libitum' - which for me means have three healthy meals but then also snacking on some confectionery and/or chocolate. So the weekly daily average for week 38 ended up close to maintenance caloric intake, despite the week including a day and a half-day of fasting.

Daily averages:

This week I've been feeling a lot better, with the cough slowly clearing up. And although I ate three meals on Monday and Tuesday, I've at least slowly cut back on the snacking. Today I'm planning on sticking to my usual 'non fasting' daily food plan (no snacks/junk food) and might do a light workout in the gym on the way home.

Tomorrow is normally scheduled as being a day of fasting (every Tue/Thu is my plan until I get down to my ideal/healthy BMI), but as I've still got a slight cough I'll instead have a normal lunch and a light dinner tomorrow rather than fasting.

I'm taking the boys up to our hobby farm this coming weekend, and DS2 will be staying at the farm with my parents next week (the first week on his school holiday). My mum usually cooks large dinners while we're visiting, so I'll have to resist the urge to overeat (and also avoid having any snacks while I'm there, or during the four hour drives there and back).

Next week (assuming my cough has cleared up completely by then) I'll get back to fasting every Tue/Thu and going to the gym on the way home from work on Mon/Wed. I also need to try to increase my daily step count to the recommended minimum (10,000/day) and start doing a 5BX exercise session every the evenings before showering. The 5BX routine starts out incredibly easy, so its simply a matter of building this into my nightly routine until it becomes a habit again.

My long term weight chart shows how my weight has been slowly going higher over the past twenty years, despite many periods of a year or two where I've managed to reduce my weight by 5-10 kg before putting it all on again. My weight when I finished high school was 78kg (a BMI at the top end of the 'healthy' range) and was already in the 80s (overweight) by the time I graduated uni, so I definitely have a tendency to overeat and/or snack on junk food whenever I'm not consciously keeping track of what I eat. You'll notice that I've generally been recording my weight while its been going down, but then it has (generally) gone up while I wasn't monitoring it. There are a couple of periods where my weight has been increasing despite recording it regularly - which is a case of where I had 'good intentions' but didn't actually get around to changing my behaviour. (For me, keeping a food diary is a necessary but not sufficient condition to actually reduce my weight!).



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Monday, 23 September 2019

Buying an investment apartment 'off the plan'

They have been excavating the foundations for a new high-rise (150m/47 stoery) apartment block nearby where I work since before my employer moved offices to St Leonards in June last year. I decided to look up what was being built there ('88byJQZ') and found out that while the initial release of apartments 'off the plan' was done when the project was announced in Feb 2018, a third 'phase' (or tranche) of units had only been released for sale a few weeks ago.

As the Sydney property market appears to have (maybe) finished its 'correction' during Q2 2019, and there has been a massive drop-off in new developments now planned/getting approved, I've decided it might be a reasonable (good?) time to invest. The new apartment block is close the the St Leonards train station (which is five stops from the Sydney CBD) and will also be close (~250m) to the new Crows Nest Metro train station that is due to open in 2024 and will be only a few minutes from Barrangaroo Metro station and the CBD.

I enquired about available one-bedroom apartments, and this release offers a selection ranging from $780,000 for one on the second floor (with 'views' of the other 26 storey apartment block that is also under construction), up to $1m for a one-bedroom apartment on the 39th floor that has views from the balcony towards the Sydney Harbour Bridge and parts of the harbour and CBD skyline (and probably also some distant views of the Pacific Ocean). While it is a one-bedroom apartment, the apartment I was interested in also has an extra 'study' room located where the elevator shaft for floors 1-26 is located on the lower levels. This increases the apartment's floor area and provides a 'spare room' that could be used as a home office, nursery, or overnight guest accommodation. I decided on buying that unit and paid the $5,000 'holding deposit' while my solicitor reviews the contract.

The required deposit will be $100,000 (10%) which I'll fund out of my existing, undrawn 'portfolio loan' account (secured against our home equity). The apartment block is due for completion in Q1 of 2023, and which time I'll need to arrange an interest-only investment loan for the balance ($900,000) due at settlement.

At current interest rates, average rents for one-bedroom apartments in this suburb, and the estimated costs (management, rates and strata levy) this investment unit would produce a negative cash flow of around $15,000 pa. As this would be negatively geared, the impact on my 'after tax' cash flow should be considerably less ($10,000 pa or so). The average rate of price increases for units in Sydney over the past 25 years has been 5.9%pa, which would equate to around $59,000 of unrealised capital gains pa. Any eventually capital gains would (under current rules) be taxed at half my marginal tax rate (and if I sold the unit when I am retired, my marginal tax rate may be considerable lower than my current marginal tax rate).

Of course, the actual outcome will depend entirely on future (unknown) changes in the main risk factors:
- will Sydney property prices continue to rise over my investment time-frame of 9-16 years?
- will prices drop again/more? By the time of settlement (2023) when I need to arrange a mortgage?
- will prices drop over the 9-16+ year period that I intend to hold onto the investment?
- if so, will the rise be the 'typical' gain of 5.9%pa of the past 25 years? Or more? Or less?
- can the average rental be achieved? Will this new, 'luxury' apartment rent for more than the average? - will there be a high vacancy rate and/or pressure to reduce rents (there are a couple of other high-rise apartment blocks currently being completed in the area, or due to start construction)
- will the current (historically low) interest rates persist? or will my mortgage costs rise significantly?
- will I be able to fund the negative cash flow out of my employment income? (ie. will I be retrenched before my planned retirement age?)

Many of these factors are unknown but have significant downside risk - for example the global economy appears to be slowing, as does the Australian economy. Whether or not that results in recession, higher unemployment, and lower real estate prices is impossible to predict. As is the likelihood of significantly higher interest rates (at the moment we still seem to be in period of declining interest rates). Or lower rental returns and/or high vacancy rates.

I've done some rough calculations of possible outcomes assuming typical rates of rent increase (3%pa), current interest rates (4-5.5%) for my portfolio loan and the required mortgage, and price rises ranging from 2%pa-8%pa. At a 'typical' rate of price growth (6%pa) over 9 years I would end up with a capital gain of around $500,000 (assuming current interest rates, low vacancy rates and achieving 'average' rental rates that increase by 3%pa). If price rises averaged 'only' 2%pa over the next 9 years (eg. a double dip slump in property prices in the next couple of years if Australia has a recession, followed by economic recovery and return to 'typical' rates of property price rises) I would still make a small profit over 9+ years. Indeed, even assuming 2% average price rises over the next 9 years, and interest rates rising 1% I would still end up slightly ahead.

I haven't taken into account the modest price differential for completed apartments compared to their 'off the plan' price (often around 10%) - due to people preferring to purchase a home that is ready to move into. Hopefully that builds in a small 'buffer' in my projections.

Of course the 'worst case' scenario is fairly dire - for example a severe recession with property prices dropping, lower rental returns and high vacancy rates, and/or higher mortgage costs. We'll see how things turn out - this feels a lot more like a speculative gamble than an 'investment', but I suppose that is always the case when you head off towards the pointy end of the return-risk relationship...

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Friday, 20 September 2019

Climate change 'strikes'

Apparently, having just voted in the LNP (conservative) government in Australia, and with both major parties supporting coal mining, the most effective thing people can do to attack the climate change 'emergency' is to have a day off work/school and wave some placards around.

https://www.smh.com.au/national/global-climate-strike-live-australian-school-students-march-in-protest-of-climate-change-20190920-p52t70.html

The funniest thing about these hordes of people gathering to protest human greenhouse gas emissions is that the rise in greenhouse gas emissions since the 1880s has been driven mostly by the inexorable growth in the human population.

Just do a back-on-the-envelope calculation of what global emissions and the temperature rise would have been if population was still at 1880s levels...

I also wonder how many of these people are actually paying the few dollars extra that would be required to get all their domestic electricity consumption provided by renewables? As with most things, many people will cry out for action, but generally only if someone else pays for it - either via taxpayer funded schemes or by costing someone else their job.

It will also be interesting to see how many people protest in the countries that have increased global emissions the most in the past few decades - since 2005 US emissions have declined by 758 million metric tonnes, the EU by 770 million metric tonnes, while China has increased their emissions by 3 billion metric tonnes, and India by 1 billion metric tonnes.

It's not a coincidence that the underdeveloped countries with huge populations that are trying to 'westernise' their economies and living standards are the ones currently driving the world towards temperature rises above the 2 degree 'crisis' target. And it also shows the futility of making heroic cuts in carbon emissions in the developed countries when this is being overwhelmed by rising emissions in the developing countries.

Yes, the rich nations with already high living standards can best afford transitioning to non-polluting energy sources, and should lead by example (and pay the 'sunk costs' of developing the required technologies). But if this truly is a 'climate emergency' the most significant change that could avert a climate disaster would be to ensure that developing countries only develop via non-polluting energy sources, rather than simply pushing ahead with economic growth at any cost (on the back of fossil fueled energy supplies).

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Tuesday, 17 September 2019

Progressing with my uni (and other) studies

A new uni semester (Q4) has just started. This semester I'm doing the 'Superannuation' subject. Browsing through the modules it all looks quite familiar, so I *should* be able to get another HD in this subject. So far I've completed four out of the twelve subjects required for the Master of Financial Planning degree, and have gotten two HD's (in Communication and Ethics for Financial Planners, and Investment Planning,) one D (in Financial Planning), and a Credit (in Commercial Law).

My GPA for 2019 (so far) is 6.0 which is just at the cut-off for getting onto the annual "Dean's List". Either a D or HD this semester will be enough to get on the Dean's List for 2019, but I'd prefer to get an HD this semester, as it will improve my chances of getting a university medal when I graduation.

My GPA overall (so far) is 6.25. To graduate 'with distinction' I'll need my GPA to be above 6.00, and for the Dean's Medal award at graduation I'll need a GPA above 6.00 AND be in the top 2% of my 'cohort' (which I think will be all the postgrad students graduating from the school of business that year). Hopefully I can get mostly HDs and Ds for the remaining subjects and get my final GPA to  6.50 or above. It's hard to know exactly what GPA will be sufficient to make it into the 'top 2%'.

This semester I also want to finish off the specialist courses in Margin Lending and SMSF that I'm doing with IIT, and also finish off the ADFP I'm also enrolled in with IIT. So I'll be quite busy studying for the rest of this year. Next year I'll only be doing my WSU studies, so it should be a little bit easier to ensure I get as many HDs as possible. Once I've finished the Masters degree I then plan on doing my CFP (the Masters degree will give me credits for three of the four required CFP courses) and to enrol in a PhD in Financial Planning. We'll see if things go according to plan...

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Thursday, 12 September 2019

Trying "12:36" (intermittent fasting) for a change

My 'diet' hadn't been working too well this year - I'd stopped tracking my daily intake and gotten into a bad habit of buying snack foods when doing grocery shopping and then browsing on them while watching TV in the evenings. Instead of losing weight, I'd been slowly gaining weight this year!

So, after reading about 12:36 ('alternate day'(ADF), or 'intermittent') fasting producing some good results for weight loss and improving a range of health markers, I decided to give that a go. I'd previously found it quite easy to stick to a five-day regime of my version of FMD ('fasting mimicking diet') that involved a balanced but low-calorie (~600/day) regime for five days, but after initially intending to do that once a month (and stick to my 'standard' healthy diet plan the rest of the time), I'd found it too much of a chore to buy and prepare the fairly specific food items for FMD. After doing it a couple of times I'd never gotten around to it again...

Therefore, the '12:36' fast seemed like a good idea, as it will be a lot easier to implement. The original version of 12:36 is to eat 'ad libitum' (whatever you feel like) for 12 hours (eg. from 8am to 8pm) and then eat nothing for 36 hours (i.e. have a fasting day). That has been applied to 'normal' weight humans, but as I am obese (BMI ~34) I really don't think having any 'ad libitum' days is a good idea (I can easily eat a family pizza and a couple of packets of confectionery or a family-sized block of chocolate in an evening if I'm in the mood). Therefore, my version of the '12:36' diet plan is to stick to my standard, healthy food plan most days of the week, and simply have a fasting day every Tuesday and Thursday. If I'm really keen I might also stick to my low-cal 'FMD' diet regime some weekends.

I experimented with doing a couple of days of fasting last week, but not stictly as I did eat a few food items on those days. I ended up having 936 cals last Tuesday and 685 cals last Thursday. I didn't feel particularly hungry on those days, so I stuck to a proper fast on Tuesday this week (no food at all) and today. I've actually found it very easy to 'fast' - not feeling very hungry at all (no more peckish that I often feel at 4pm after having a normal breakfast and lunch!).

Studies have shown that ADF has similar benefits (at least in animal studies) as CRAN, so I think this might be my ideal diet regime. The biggest plus from my point of view is that it is incredible easy to implement - no special foods to buy or prepare, and nothing to keep track of on the fast days.

So far the only 'glitch' caused by fasting is that one day I completely forgot to take my multivitamins and prescription medications in the morning as I didn't have any breakfast.

So far I haven't been on ADF long enough to determine what the long-term rate of weight loss might be, but I'm hoping to lose weight at a steady rate of 0.5-1 kg/wk once the initial 'water loss' period is over, and then slowly move towards my ideal BMI (70-75kg) over the next 12-18 months. Hopefully my rate of weight loss will slow down as I approach my ideal BMI (it takes a lot more calories to maintain and move 110kg compared with 70 kg!) - but if not I'll just replace the 'fast' days with the more modest FMD food plan on those days once I get close to the lower bound of the healthy weight range.

So far the initial results look quite promising:

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Monday, 9 September 2019

Sydney Planning for Population Growth - a house built on sand.

A read a feature article in the SMH about how Sydney's population is expected to grow by 1.3 million over the next decade. The article is full of pretty computer generated 3-D views of 'projections' of where this increased population will be housed (mostly west of Paramatta), but, having looked at the data for my suburb, I have to question whether this whole planning exercise is built on pretty dodgy data foundations.

When I selected my suburb the 'model' responded that the 2016 population was 2,656 and that by 2031 it would increase to 2,677. Really? An increase of only 21 people?

Given that the brand new Northern Beaches hospital was recently opened in this suburb, resulting in rezoning from single dwelling to medium for quite a few blocks (one house nearby was already replaced with a block of six or so units just this year), and that the nearby High School is slated to be moved to another location and replaced with a new 'town centre' featuring three apartment blocks of around 10-15 floors each, I have to wonder at the accuracy of all the 'data' being used for these projections and modelling.

God help us if they are actually planning infrastructure developments based on these models.

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Thursday, 5 September 2019

AMP casting Financial Planners adrift

An article in today's SMH describes how AMP has started cancelling the licences of some of its 1500+ aligned financial advisers. The article parrots the AMP line that this action is to take a 'tough stance' as "some advisers were not going to meet new regulations imposed by the government to abolish commissions and increase compliance".

This implies that these advisers are being dumped due to some compliance issue, whereas the reality is that those adviser's "business economics simply aren't strong enough" -- which is AMP's way of saying that these advisers don't generate enough revenue to make it worth AMP keeping them as authorised representatives.

Those advisers will now in the difficult position of having to find a new AFSL to get registered with, or, if they decide the quit the industry they find that the value of financial planner's "books" of clients being worth a fraction of what it has traditionally been - due to reductions in ongoing commissions and increased costs (compliance) for servicing clients. This is reflected in the fact that AMP has also slashed the amount it will pay their advisers as 'buyer of last resort'.

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Monday, 2 September 2019

Government meets demands of AFA and FPA lobbying - FASEA exam and education deadlines extended

Due to the large number of AFA and FPA members that were unhappy with the 'short' timeframes allowed to a) pass the FASEA Financial Planner examination (which basically just tests the ethics and best interest concepts that all financial advisers should already have embedded into the day-to-day practice), and b) upgrade their educational qualifications to meet the new minimum requirement of the equivalent of a tertiary degree in financial planning, the AFA and FPA have been actively lobbying the Federal government to extend the current deadlines.

The rational for extending the FASEA exam deadline was that it had originally been announced as being "two years" to pass the exam, but due to the time required for FASEA to actually develop the exam with ACER and implement the first round of exams in June, the original deadline of 1 Jan 2021 would have 'only' allowed 18 months for existing financial planners to pass the exam (or be deregistered and have to go through the 'new adviser' process). The associations also complained that due to the time taken to mark exams and issue results, the last possible session for sitting the exam and receiving notification of a 'pass' before the deadline would have been Sep 2020, not the end of the year. In the end the government agreed to change the exam deadline to 1 Jan 2022 (a full 12 months extension), which allows more than two years to sit and pass the exam (I sat my exam in June and passed, and around 90% of the first cohort passed, so it isn't a particular difficult exam).

The deadline for the educational requirements was originally 1 Jan 2024, which seemed perfectly generous to me - even doing a full Masters or Bachelors degree in financial planning would only take 4-6 years part-time for those with no advanced standing for 'prior learning' such as the advanced DFP or a CFP qualification. But apparently due to business and family commitments (which are the normal status for nearly all part-time students) many financial planners had indicated it would be 'too hard' to meet this deadline. So, the deadline for the educational requirements has been extended by two years - to 1 Jan 2026.

The AFA and FPA have expressed the hope that this extended deadline will allow more planners to remain in the profession. Personally I think this would be due more to older, existing planners being able to keep working until the end of 2025 without needing to upgrade their educational qualifications, than many more planners attaining the higher educational requirements simply due to having another couple of years to complete the studies. Those who complained the most (planners with many years of experience and no tertiary qualifications) will still find it a shock to go 'back to school' at a university level, regardless of how much time they are given to complete the courses.

On the downside, the changes mean that the public may still be getting 'professional advice' from financial advisers that don't have a tertiary education for another five years...

Both changes will require legislation to be passed before coming into effect.

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Net Worth: August 2019

Although the equities markets recovered slightly towards the end of August, this did not completely offset the sharp declines experienced when the US-China 'trade war' became more intractable earlier in the month. Therefore, my geared stock portfolio and superannuation (which is mostly invested in Australian and International share markets via the Vanguard High Growth fund) investments declined by $11,061 and $10,163 respectively.

The net value of my geared stock portfolio continues to reflect the ~$2,600/mo of startup costs for my financial planning business that are being funded using my 'portfolio loan'. I haven't got any clients yet, but my goal is still to get a few clients by the end of 2019, and (hopefully) enough clients by the end of 2020 to at least cover the running costs of my home business. The major costs are the monthly fee to the AFSL ($1,150/mo), the monthly fee for Midwinter (admin) basic subscription (~$200/mo), and the costs of my uni studies (about $1,200/mo on average) and FPA and AFA memberships (~$100/mo).

The estimated value of my half of our home remained unchanged, as the local sales data was not updated last month, but the CoreData index of Sydney house prices showed a 1.5% gain during August, so it definitely appears that the decline in property prices has bottomed out after the two consecutive cuts in the cash rate by the RBA, and the introduction of personal income tax cuts by the Federal government.

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Monday, 12 August 2019

Is Labor doomed to mostly stay in opposition for the rest of this century?

Putting aside the fact that Labor managed to loose the last election (contrary to most peoples expectations), I was reminded today about the rapidly growing over 65 demographic in Australia (15% of the population in 2017, up from 9% in 1977. And projected to comprise 22% of the population by 2057 and to reach 25% of the population by 2097). Combine this with the fact that the two-party preferred breakdown shifts from Labor to NLP with age, and it looks as if it might become increasing difficult for Labor to form government in Australia during the remainder of the 21st century.

Age     two-party vote (%)
         ALP      NLP
18-24    59.5     40.5
25-34    58.5     41.5
35-49    51.5     48.5
50-64    46.0     54.0
65+      39.0     61.0

While the young tend to favor progressive policies and redistribution of wealth, older voters tend to be more conservative and prefer lower taxes. This attitudinal shift tends to occur with age - the same cohort of twenty-something voters that voted "It's Time" for a Labor government in 1972 and the aging baby boomers that mostly voted NLP in the last election. Therefore, it can be expected that as the percentage of over 65s increases, this should boost the overall two-party preferred vote of NLP at Labor's expense.

Another factor that might work in NLP's favour is that as the population ages and once radical social agendas become 'mainstream' they tend to be adopted by the conservative side of politics. Whereas the Labor/Green policies constantly have to be ever more progressive to appeal to their 'base' of young voters.

This also explains why Labor occasionally spruiks the idea of lowering the voting age further -- as these voters would be predominately Labor/Green supporters.

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Thursday, 8 August 2019

Passed the FASEA exam

The results from the June FASEA exam sessions were released today - I'm glad I passed as that is one less thing one my 'to do' list as a financial planner (and resitting the exam would cost around $500 each time!). All registered financial planners in Australia are required to pass this exam (on ethics and compliance/legislation) by 1 Jan 2021 or lose their registration.

Apparently 579 (out of approximately 25,000 registered advisers in Australia) sat the exam in June, and about 90% passed the exam.

When the current semester at Western Sydney Uni finishes in a few weeks I'll also be 1/3 of the way through my Master of Financial Planning degree, so the extra educational requirements that come into force on 1 Jan 2024 for existing advisers are also progressing nicely (although it costs a small fortune).

Now I just need to get my first client!

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Wednesday, 7 August 2019

Saving money by 'switching' Electricity Supplier/Plan

Late last year I finally got around to using the State Government's "Energy Watch" website to compare my electricity supplier/plan with others that were available. After entering some facts about my current bills (costs and usage pattern) it turned out that the best alternative for us was 'switching' to a different plan offered by our current supplier. (Because I didn't actually change supplier I've since received reminder emails from Energy Watch saying that I didn't complete the switching process).

As I have setup automatic payment of our electricity bills by direct debit (I just have to make sure I remember that the charge is due, so I have enough money in that bank account!) the best plan available for us was one where there is a hefty (around 25%) discount on the energy usage component of the bill (ie. everything except the daily 'supply'/connection charge) if the bill is paid "on time". It also involved locking us in to that supplier for a period of time, but as I hadn't bothered switching suppliers for the past decade that isn't an issue.

Looking at the four quarterly bills we paid for 2017/18 vs 2018/19 our figures were:

FY 2017/18 kWh = 8,941 cost = $2,367
FY 2018/19 kWh = 9,065 cost = $2,092

Therefore our usage had increase 1% (no significant change) while our bill had dropped 12%, despite only making the switch to the discounted plan at the end of 2018.

We also saved a little bit by paying more attention to our usage during 'peak' times - managing to reduce our 'peak' time electricity usage from 10% of our total to only 6% (basically by DW not doing any washing during the 'peak' hours, and us not starting to cook dinner most days until after the 'peak' period ended (peak period is 2pm-8pm on weekdays). Peak electricity cost around 60c per kWh, compared to 27c for 'shoulder' periods (7am-2pm and 8pm-10pm) and 13-16c for 'off peak' (10pm-7am) and 'dedicated circuit' supply (which I think is our hot water tank).

Switching plans half way through the year saved us around $250 last financial year, and we should reduce our annual electricity bill by about another $250 this financial year.

The comparisons don't take into account the price changes for electricity over the past two years - as prices have increased 9% during that period, our bills would have been even higher if we hadn't switched plans or reduced our 'peak' usage.

The next item on my 'to do' list relating to electricity costs is to get our solar panels/inverter checked and possibly repaired. We had solar panels installed on our garage roof about ten years ago, and because the cost was subsidised by a government rebate and there were initially very generous 'feed in' tarriffs applied, the system had paid for itself after only 2-3 years, and the solar power had been subsidizing our electricity bills (until the inverter stopped working a couple of years ago).

While our solar power system is out of warranty (and the supplier went out of business long ago), it might be worth getting a new inverter installed (if the panels are still OK). I made a few inquiries about getting a repair quote, but most solar panel suppliers only seem interested in selling new system.

Getting the solar panels working again would only reduce our total mains usage by about 10%, but it would mostly cut our 'peak' and  daytime 'shoulder' use, so it would have slightly more impact on our bills than on our mains electricity consumption. It would also help cut our contribution to carbon emissions a little bit (but probably not as much as the fact that I now get the bus and train to work each day, rather than driving).

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Thursday, 1 August 2019

Net Worth: July 2019

My net worth total was marginally higher at the end of July (+$1,873 or 0.08% compared to last month) at $2,382,540. This was due to a significant increase in the balance of my retirement savings (SMSF and ColonialFirstState superannuation accounts) that was largely offset by a drop in the estimated value of our home. In reality, Sydney house prices stabilized during June/July, but this was masked by the fact that last month I didn't have updated local sale price data, so I had used the previous month's estimate. So I basically included the June decline in house price in the July figures.

My direct stock and managed fund investments (via margin loan accounts) also showed a slight decline during July, but the reality was the stock markets rose during July, but my net stock portfolio total also included some draw downs on my 'portfolio loan' for payment of uni fees, a monthly transfer of $1,500 to cover my financial planning business fixed costs, and payment for an unlisted investment of $4,215 in the company Adviser Ratings (via a crowdfunding campaign). Theoretically I should include the value of the Adviser Ratings shares in my portfolio, but I can't be bothered (it is probably also prudent to 'write down' the value of this investment to $0, as they are illiquid and of dubious value unless the company does well and eventually floats on the ASX (or gets sold to an investment company).

Overall, the stock market gains of 2019 have been largely consumed by my expenses relating to my financial planning business running costs (~$2,000/month) and my university fees (~$1,000/month) for the Master of Financial Planning degree. Hopefully within two years my business will have reached 'break even' and I will have completed the Masters degree (if I decide to continue on to do a PhD in financial planning the fees should be covered by RTS government funding).


The $7,900 valuation of the S type Jaguar I bought last year might also be optimistic - it has an electrical issue (the new battery keeps going flat within 1-2 weeks of being charged up - probably due to the fact the the brake lights stay on even when the engine is off and the key removed from the ignition!). This car is due for registration renewal this month, so I'll have to arrange for it to be towed to the local mechanic to get repaired and obtain an inspection report ('pink slip') so I can renew the registration before it expires... getting the car towed will be a little bit tricky as the anti-theft system locked up the steering when the battery was disconnected for charging, and the NRMA road service mechanics were unable to unlock the steering. So it will be hard for a tow truck to get it out of the garage and onto the street...

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Friday, 5 July 2019

Paying less tax under the Liberals

Well, the tax package the NLP government took to the last election has now been passed by both houses, so will become legislation. My local MP sent me a link to this handy tax relief estimator. My actual taxable income is hard to know in advance, as it will depend on how large my tax deductions (interest paid on my margin loans, costs associated with my Ubereats casual work, and my self-education and business expenses relating to starting up my financial planning business) turn out to be, and how much extra income I get from dividends, and how much (if any) income I earn from my business and casual work. And any capital gains (or losses) made on any shares I sell during a particular financial year...

Based on my raw (before any deductions or other income) annual salary, plus bonus, of around $125,000, my tax bill would drop by only $165 (to $36,217 ie. a reduction of only 0.45% in tax) during 2018-19 to 2021-22 FY. The tax cuts for 2022-23 and 2023-24 would increase to $2,565 (a 7.05% reduction in tax), and (assuming Labor doesn't rescind the latter tax cuts) the final stage from 2024-25 onwards would see the tax on $125,000 of taxable income drop by $4,790 (13.16%).

However, my taxable income is usually a lot less than this raw figure, so the initial tax savings will be proportionately larger in the next couple of years. If my taxable income was $90,000 the initial tax rate changes would save me $1,215 in tax (a reduction in tax paid of 5.3%), which is equivalent to a fairly hefty pay rise.

And then, if my business becomes profitable in a few years time, the latter tax cuts that benefit higher income levels more will be just getting phased in. So, if my taxable income reached $200,000 by 2024-25 the tax saving would be worth $11,640 (a reduction of 17.3% in the amount of tax due).

The prospect of significant reductions in income tax for higher income earners from 2022 (and even more from 2024) means that it will be a good tax strategy to realize any capital losses in the next couple of years, and postpone selling any assets that will realize significant capital gains until the final stage of tax cuts has been implemented. Assuming it all goes ahead as planned...

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Thursday, 4 July 2019

Invested in 'start up' company Adviser Ratings via crowd funding

Last time I invested in a company pre-listing was a US ISP start-up 'Global Entrepreneurs Network' (GEN) last century. Despite being a dot-com company prior to the dot-com boom-bust in the late 1990s, that company managed to run out of money and go bust (actually it appears it was acquired by SAGE, but the original public investors didn't end up with any equity) before it reached IPO/listing stage.

It was a bit disappointing (especially as I could have invested in listed companies such as Microsoft or Apple instead - and could have made a lot of money) but not unexpected with those sort of high risk 'blue sky' investments. On the other hand, if a pre-IPO investment works out, you can potentially make a considerable profit.

After twenty years I've finally decided to risk another small investment in a 'start up' company - this time I've invested $4,215 via crowdfunding to 'invest' (aka speculate) in buying150 shares in the new financial adviser rating company called 'Adviser Ratings' (not as imaginative a company name as Alphabet, but at least its truth-in-labelling). There is a considerable demand for reliable financial advice in Australia (and the UK and US), and considerable difficulty for consumers in knowing which advisers are good and which aren't (for example, some of the shonkiest advisers exposed during the Hayne RC had high profiles, and appeared to be highly regarded 'experts'). So a 'trip adviser' style consumer rating system for financial advisers would seem to have considerable potential.

Also, being a software based company with (apparently) some revenue streams already (one of the big risks is whether or not these revenues do turn out to be 'sticky' and ongoing as expected), and the  potential to replicate its business model in the UK and possibly the US (although I've no idea what existing/potential competitors might be doing a similar thing in those markets) it could scale up at minimal cost, and grow revenue. Whether this actually happens or the shares end up worthless is the risk you take when making such 'blue sky' investments.

Anyhow, its an interesting investment opportunity, and fits in with knowledge of the financial advice industry (one of the old cliches of share investing is to pick companies that produce products you know about and consume yourself - whether it is a winning strategy is dubious - just think of all the people that used VHS tapes in the 80s!). And if the company never 'lists' and the shares end up worthless I can afford to loose the $4,215 (I lost a lot more when I invested in Agribusinesses Timbercorp and Rewards!). If anyone is interested in investing, you can use this link (which will utilize my referral code, and I'd end up getting 30% of the 6% fee that birchal charges for the crowdfunding). The crowdingfund share 'float' for Adviser Ratings has already passed its minimum funding target (raising $350K) so it looks like this tranche of shares will be issued.

NOTE: This is NOT a recommendation to invest in this company - do you own research and make up your own mind!

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Wednesday, 3 July 2019

MFinPlan progress

I was relieved that I managed to end up getting a Credit grade for last semester's subject 'Commercial Law' with a mark of 66%. As I had only gotten marks just over 65% for the assessment tasks during term, I had gone into the exam expecting to either just Pass the course or maybe get a Credit. Law was certainly not one of my favourite subjects! I've now completed 1/4 of the Masters degree in Financial Planning, and will be nearly half-way through by the end of the year.

My previous two subject results had been a Distinction and a High Distinction, so I'm just on track for the annual "Dean's Letter" this year (which requires a Distinction average and taking at least four subjects) and to remain on track to make the cut-off for consideration for a 'with Distinction' degree (must have a Distinction average overall i.e. GPA >=6.0) and to a have any shot at getting an academic medal (to get that I'd have to end up in the 'top 2%' of the graduating cohort, which would probably require getting mostly HDs from here on).

This semester I'm doing the subject 'Investment Planning', which should be a lot more enjoyable, although it seems to cover a lot of stuff that I'm already familiar with:
Module 1 - Investment environment
Module 2 - Risk and return
Module 3 - Investing in shares
Module 4 - Alternative investment
Module 5 - Investing in fixed income securities
Module 6 - Investment administration
Module 7 - The investment planning model and client profile
Module 8 - Investment objectives and returns
Module 9 - Management of risk
Module 10  - Investment strategy
Module 11 - Investment selection
Module 12 - Portfolio construction and management

This semester I need to make sure I also finish off the two 'specialist' courses (Margin Lending and SMSFs) that I'm enrolled in at the International Institute of Technology (I'm nearly finished, aside from the 'role play' video submissions and the final assessment quizes), and I also need to try to get a couple of the modules completed towards the Advanced Diploma in Financial Planning that I'm also enrolled in.

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Monday, 1 July 2019

Net Worth: June 2019

The positive performance of the Australian and global share markets during June resulted in my geared share portfolio gaining $22,317 (10.34%) and my superannuation savings rising by $40,058 (3.88%). I don't have new sales data for calculating our house price estimate this month, but the overall Sydney property market data showed practically no change in average prices during June, suggesting that the market has 'bottomed out' in response to the RBA lowering interest rates (which flowed on to home mortgage interest rates) and the election result ruling out the proposed changes to negative gearing that had been Labor policy. While most pundits don't expect a strong rebound in house prices during the remainder of 2019, I don't expect out home price estimate to be a major drag on my NW during the financial year (and may even have modest gains during 2020).

My NW estimate $2,336,288 rose $62,606 (2.75%) during June and has recovered to be within $2,500 of my previous all-time-high (in August 2018). While dropping interest rates suggest that the economy is weak (a negative for the prospects of the stock market), on the other hand they make dividends more attractive relative to bond yields, which may support stock prices. Hopefully the tax cut legislation will be passed this week, which should provide some economic stimulus during the latter part of 2019, and should help bolster consumer sentiment despite the ongoing lack of any significant real wage growth.

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Monday, 24 June 2019

FASEA exam done and dusted - hopefully I passed

I did the FASEA Financial Adviser exam on Sunday (I didn't want to take a day off work). I can't say anything detailed about the contents of the exam as that would be 'misconduct' (we were basically sworn to secrecy). The exam was 3-1/4 hours long, but it was possible to get the 70Qs done within the time limit (I actually finished about 12 mins early and decided to leave before the final 10 min 'lock in' period), so there wasn't really much time pressure. Most of the questions were related to 1 page 'case study' descriptions, very similar to the practice exam Qs provided by FASEA. A few other Qs were just a multiple choice of table of T/F values to fill in relating to one key definition or series of statements. The short answer questions were OK, but it was sometimes hard to work out exactly which two key points they were expecting to be included in the response. The exam format was all described in the instructions provided to candidates when you registered for the exam, so nothing 'secret' about that.

Overall I *think* I passed (requires a minimum of 65%) the exam, but if I didn't then I will need to do a LOT more reading before sitting the exam again - the bits I was uncertain about were either things I haven't done yet for my initial registration (eg. taxation advice) or were related to how the AFSL compliance team would handle breaches by one of their authorised reps (as a rep I'm more concerned with knowing what I need to do to be compliant with the rules, not what the actions/penalties would apply when the rules are breached). This seemed more appropriate to AFLS management or compliance staff, not particularly relevant to 'front line' financial planners.

The fact that the exam was 'open book' in terms of having access to pdfs of the relevant Acts was really quite unhelpful - if you didn't know the answer to a particular question, there was no way you'd have enough time to review the relevant Act to find the answer. The few times I tried looking up a relevant key phrase to simply double check on an answer I had no luck finding the relevant passage out of the thousands of pages of legislation! If you knew exactly which section of an Act to look up, you'd probably already know the answer!

Anyhow, fingers crossed that I passed the exam, as its not something that I want to have to do again (or pay another $500+ for the privilege!). Time to get on studying for my next Masters degree subject (investment analysis), and finishing off the couple of 'specialist' modules (SMSFs and Margin Lending) that I've almost completed. Then I need to get stuck into doing the Advanced DFP course I enrolled in last December (and haven't started yet)...

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Friday, 21 June 2019

SMH had a silly article about to earn $1m and pay no income tax

Apparently the SMH sub-editors have no qualms about using click-bait headlines such as "How a millionaire pays no income tax".

The article has some interesting facts about typical amounts deducted, drawn from ATO data on 2016/17 tax returns. But the main lead of the article is about the mythical 'Tony' who has a $1m income but pays no income tax. It turns out this hypothetical example is based on a) him making a $50K deductible contribution into super (of course these days the amount has reduced to $25K), and also making a whopping $850K charitable donation.

I suspect that most readers lured by the heading weren't expecting an article about how to pay no tax by giving all your earnings away as a charitable donation! ;)

Of more interest (but unexplained in the article) was the factino that the average amount claimed by those earning more than $1m income on 'managing tax affairs' was $607,201. It would be interesting to see if that much money was actually being spent on an arms-length basis.

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Wednesday, 19 June 2019

How much do Australian Financial Planners make?

From ATO data for 2016/17 available via a SMH article the following breakdown of 'Financial Planner' taxable income by tax bracket:

2.69% earned up to $18,200 (537 people) - average income: $13,785
7.27% earned in range $18,201 - $37,000 (1,453 people) - average income: $32,320
38.91% earned in range $37,001 - $87,000 (7,775 people) - average income: $68,848
35.55% earned in range $87,001 - $180,000 (7,102) people) - average income: $130,107
15.58% earned over $180,000 (3,113 people) - average income: $409,680

Overall, about half the 'financial planner' taxpayers had a taxable income under $87,000, and roughly 15% had a taxable income above $180,000.

Average full-time taxable income for this job category is $132,694

And the total number of taxpayers with title 'Financial Planner' was 19,980 - this probably is lower than than the actual number of financial planners, as some registered planners (like me) may have multiple jobs and the job title reported is for their main source of income.

Taxable Income      # people    % of FP    % /w PHC    % w/ NGP    % w/ HD    avg HD
$0 - $18,200          537        2.69%      74%         21%         22%       $25,184
$18,201 - $37,000   1,453        7.27%      72%         13%         27%       $24,449
$37,001 - $87,000   7,775       38.91%      79%         17%         29%       $25,568
$87,001 - $180,000  7,102       35.55%      94%         18%         11%       $15,525
over $180,000       3,113       15.58%      99%         20%          3%       $13,735

PHC = private health cover
NGP = negatively geared property
HD = HECS debt

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Tuesday, 4 June 2019

The impact of the FASEA changes on accountant's 'SMSF advice'

One of the quirks of the Australian financial advice sector was that accountants had been able to offer financial advice limited to SMSFs in isolation. This made a sort of sense, as accounting clients would often seek guidance from their existing accountants when thinking about setting up an SMSF. And, after all, accountants had much higher educational and professional standards than the typical 'financial adviser', so they felt they were perfectly capable of giving advice with regards to SMSFs.

However, with the move towards 'Best Interests Duty' meaning that financial advice has to take into account the entire situation of a client, it no longer makes sense (or is appropriate) to give advice on how to setup a SMSF without taking into account the client's overall financial situation, goals, and other financial needs such as insurance, investing outside of superannuation, and the actual  investment allocations once the SMSF is setup.

Before 30 June 2016, accountants were permitted to provide advice on setting up and winding up an SMSF (and other product-related advice) under the so-called ‘accountants’ exemption’, which has now been repealed. Therefore, if accountants want to continue to offer 'advice' regarding SMSF they need to get registered as a financial adviser, and meet the educational requirements - including the new FASEA exam.


You would think that if the accountants that had previously been offering 'financial advice' with regards to SMSFs had been acting in the client's "best interests" by taking into account their holistic financial situation and needs when advising about establishing an SMSF, then passing the FASEA exam would not be particularly challenging. But apparently not so - a recent poll by SMSFAdviser indicated that only 25% of respondents planned to 'meet the new requirements and continue to give advice' (some of the respondents would have been registered financial planners, so this probably overstates the percentage of accountants that will 'upgrade' in order to be able to continue offer SMSF advice). While 23.3% of respondents said they would be unaffected by the new requirements (i.e. they don't provide any financial advice in conjunction with their accounting services), a whopping 29.7% intend to stop giving advice, and a further 22% were planning to retire by 2024 or leave the industry.

Overall, it looks like the changes will result in a much smaller cohort of accountants offering financial advice to their clients, which suggests there may be an increase in referrals of accounting clients to financial planners when they are in need of personal financial advice. Those accountants that do choose to 'upgrade' in order to be able to offer financial advice will be able to offer a more holistic service to their clients. Whether or not it makes economic sense is another matter... there is a lot of admin required when providing financial advice (eg. product comparisons and a written SOA) that isn't involved when 'only' providing accounting services.

On the other had, there has recently been a significant flow of clients away from SMSFs and into low-cost industry superannuation funds - which might indicate that some clients of accountants had been placed into SMSFs when it wasn't really appropriate for them. So perhaps the repeal of the 'accountants' exemption' was long overdue.

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