Goals for 2009?

I'm a bit wary of setting goals for 2009, after failing to meet my 2008 goals. Some of the goals (around investment portfolio returns and increased net worth) turned out to be wildly optimistic given my asset allocation, use of gearing, and the GFCs impact on my equity investment returns. It's disconcerting to consider that I could have come close to meeting my goals if simply closed out my stock portfolio a year ago, paid off my margin loans, and put the balance into an online savings account for 2008!

This year I'll not even try to guess where the market might be in 12 months time and set any ROI goals - I'll just aim to meet my home, real estate investment and margin loan interest payments out of current income (salary, dividends and rental income), and to keep socking away 50% of my pre-tax salary into retirement savings via salary sacrifice and SGL contributions into our SMSF. A sub-goal will be to ensure that my employer makes the salary sacrifice contributions at the right times so I avoid any "excess contributions" tax liability.

It would be nice if there are further interest rate cuts by the RBA in 2009, as this would reduce the amount of cash DW and I have to contribute each month towards the interest-only payments on our home loan. Any surplus cash flow could be directed towards paying off some of my margin loan debt (or possibly some of our home loan debt - although the interest rate on the home loan is lower than the margin loans, the home loan interest isn't tax deductible).

I'll have to roll over my 2008 goal of losing weight and going to the gym - I only managed to lose around 7kg this year, and my BMI is still around 30. Given that my diastolic blood pressure is way too high (although my systolic is OK), I need to get down to an ideal BMI of around 22 to see if I can avoid taking blood pressure medicines.

One new goal for 2009 is to keep my current job (although that is somewhat out of my hands given the current economic climate). This time last year my net worth was high enough to toy with the idea of "early semi-retirement" - perhaps taking a pay cut in order to change careers into teaching or financial planning. But the drop in my net worth during 2008 means that I probably need to keep earning at my current income level until 65 in order to afford a "comfortable" retirement. My direct boss "left the company" suddenly a couple of weeks ago (he wasn't inclined, or allowed, to give specifics of his departure, but I'm pretty sure it was a "voluntary redundancy" along the lines of what I got from my previous employer ten years ago). If I'm lucky that cost saving will be the extent of the belt tightening required by our department, but it could just be the start of a round of company-wide "right sizing" if Australia goes into recession during 2009.

My other perennial goal is to start tracking all my income and expenses using Quicken. If I get can get my "new" Dell laptop repaired under warranty (it was doing strange things when I took it on holiday last October, and the DVD drive isn't working) I'll load Quicken 2008 onto it and be able to update my accounts during my lunch break, rather than trying to do so at night when the kids have been put to bed.

Subscribe to Enough Wealth. Copyright 2006-2008

Tax Office website has closed down for the holidays

Although the 2007/8 tax return deadline was officially the 31st October, since I'll be due a small refund I only really need to finish my return by 31 December so I can lodge it electronically using the ATO's free filing software "eTax". So I spent the last couple of days of the holiday break finalising the capital gains calculations for my 2007/8 tax return - trawling though ten years of previous tax files to get my DRP records up to date for the shares that were sold that year. However, while looking up some details online regarding the Mayne Nickless demutualisation and the Alinta "scheme of arrangement", I tried to follow a link to relevant information on the ATO website, only to see the following message:



It seems that the ATO shut down it's website on Christmas Eve, and it won't be available again until 5th January! I'll try using eTax to lodge my (and DW's) tax returns before eTax stops working on 31 December, but I suspect it won't be possible to lodge an eTax return while the ATO website is offline. If it doesn't work I'll call the ATO on the 5th January to enquire about lodging electronically, but I suspect I'll end up having to fill in and lodge the paper "tax pack" forms this year. It's not much of a hassle, but it will mean I won't get my tax refund as soon, and I may not be able to import the 2007/8 data into eTax next year.

Subscribe to Enough Wealth. Copyright 2006-2008

How Efficient is your favourite Charity?

An interesting article that points out the relatively high salaries paid to executives at some not-for-profit charitable organisations, the under-reporting of how much of the money raised by charities is consumed by fund-raising and administration costs, and how some charities have large pools of donated funds sitting in investments (that have done poorly this year). It appears that some charities are mostly concerned with justifying their continued existence, gaining "market share", and "empire building". While investing a small percentage of the funds raised makes sense in order to be able to maintain a consistent level of expenditure when income fluctuates from year to year, accumulating a large investment portfolio should not be the main aim of any charitable organisation.

Subscribe to Enough Wealth. Copyright 2006-2008

Season's Greetings

Merry Christmas to all readers of EnoughWealth!

After a slow start, Christmas trading in Australia appears to have picked up considerably in the last few days - apparently the Government's economic stimulus package is being spent. It will be interesting to see if we avoid a recession in Australia during this global slow-down. The hefty interest rate cuts this year may restrict the drop in Australian residential real estate prices to the 10-15% already experienced (although QLD and WA will probably continue to decline given the effect of the plunge in commodity prices on the mining sector in those states and their relatively high price ratios compared to historic ratios to NSW and VIC). On the other hand, home affordability is still very low at the current prices, and although there is currently undersupply of new housing compared to demand, the increased unemployment rate over the next year may cause the government to reduce immigration levels, which will lessen demand for housing in the medium term. Falling real estate prices have accounted for around $100K of the $500K drop in my net worth this year, so my financial progress in 2009 will be significantly affected by how Sydney real estate performs. My asset allocation is now even more overweight in real estate compared to this time last year, due to the plunge in equity markets.

It is impossible to know where the stock market will end up in twelve month's time - after all, this time last year many "experts" were still expecting the US sub-prime financial crises to not impact the global economy, or even have much impact on the US "real" economy. And I was silly enough to let my Index put options expire without taking the time and effort to replace them. However, with markets down around 45%, it feels close to the bottom (although it seemed similar back in March, when the market plunge paused after a fall of 25-30%, the "normal" bear market decline), and the Australian stock market could stage a rapid recovery (although not to 2006-7 boom levels) if our economy does manage to dodge a recession. After all, GDP is a lot higher than it was 5-6 years ago, so stock prices are relatively cheap if GDP holds up and company profit margins can recover - especially with interest rates continuing to drop to the lowest levels for a long while.

Hoping for a Happy New Year in 2009!

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