I've only myself to blame. After doing internet purchases for many years without any real problem (and using a secondary credit card with a low credit limit for internet purchases 'just in case') I became too careless about Internet security, and recently made several online payments recently using my main credit card. While I've used that card before for domestic telephone payments and some internet payments where I'm confident about the processor (eg. university fee payments), I'd usually been cautious about payments overseas (such as AliExpress, Banggood etc.).
However, in the past couple of months I must have used it somewhere that has had their payment database hacked, or else I've managed to get some spyware or something onto my home laptop (despite Mcaffee scans showing nothing untoward) as my main credit card suddenly showed eight foreign internet transactions totalling over $1,000 that I hadn't made. Fortunately I happened to be checking my online credit card transaction listing the day that the fraudulent transactions were processed, so I immediately called my bank to report the issue and they 'blocked' my old credit card and issued a new number (I'll have to wait for it to arrive in 5-10 days before I can activate it and advise several direct debit billers of the change in payment details). I then had to lodge on online form 'disputing' these transactions, and they will sit on my account (although I've arranged to not have to pay them in the next billing cycle) until the dispute is resolved - which can take anywhere from one to six months! Hopefully I won't end up being 'out of pocket' for these fraudulent transactions...
As the transaction descriptions made it easy to track down the online company at which five payments for the same amount had been processed, I decided to also lodge a report with the Australian Cyber Crime website ('ACORN') with the details of the transaction, date, amount, merchant etc. I'm not sure if they will actually pass on the information to the Australian or International Police (the amount involved is 'only' $1,000, but it could lead to a 'gang' systematically using stolen credit card details to make online payments), but at least I've done my bit to fight Cyber Crime. Unfortunately I still don't know for sure exactly which prior (legitimate) online purchase was the one the resulted in my credit card details being stolen/hacked.
Theoretically it should be fairly easy for ACORN/Police/Interpol to request details of the IP address used to make the five purchases (as they were for identical amounts and made on the same date using my credit card details) from the online merchant that processed the fraudulent transactions. Whether or not this leads to a suspect (if they were careless), or just leads to an anonymous redirect is unknown. As the five purchases were from an online MOOG company the authorities may also be able to track the IP/identity of who is now using the purchased game service (I suspect the person/gang that made the five online purchases probably bought new game logins and resold them at a steep discount for cash down at the local pub...). If they can find the end-user they might be able to find out who was selling the 'stolen' goods. Hopefully if the online merchant can cancel the services bought with these fraudulent transactions there will be less difficulty getting the disputed transactions cancelled, compared to if the transactions had been for physical goods that had already been shipped out...
Ah well, I've learned my (potentially expensive) lesson and won't be using my new credit card number for any more online purchases in future. I'll stick to using PayPal (wherever possible) or else using my designated 'low credit limit' credit card if a card is required for making an online payments.
Subscribe to Enough Wealth. Copyright 2006-2015
Friday, 10 July 2015
Thursday, 2 July 2015
Net Worth: June 2015
My estimated net worth at the end of June had decreased considerably
(-$39,299) compared to the previous month, despite three months' worth of superannuation contributions being deposited into my retirement account during June. The decrease was due to global and Australian stock markets showing weakness during the first half of June, and then having a couple of really bad days at the end of the month due to the 'Grexit' uncertainty.The only positive contribution during June was the continued rise in the estimated valuation of our home, which increased by another $9,328 (+1.54%).
Our three year fixed-rate home loan matured at the end of June, so I transferred $50,000 from my available 'portfolio loan' credit limit to pay that amount off our remaining home loan balance. This was to match the $50,000 payment DW made using funds from the sale of our investment property last year that she had invested in a term deposit until our home loan fixed rate period ended.
During the month I bought a few additional shares in NAB and IFL to add to my existing holdings - the NAB shares were via the rights issue, and the IFL shares were bought after recent bad publicity caused the stock to drop more than 10%. Hopefully in the longer term these will both be sound investments.
Overall, any major future rise in my net worth will depend on whether or not our home gains substantially in value if the area gets 'rezoned' by the local council later this year (for medium density housing around the new hospital site), and when (if) the Australian stock market eventually recovers to pre-GFC levels (unlike the US stock market, the ASX-200 is still considerably below the peak of about 6800 reached during 2007). While I continue to save a large fraction of my salary via superannuation 'salary sacrifice' the amount often seems insignificant compared with the monthly changes in net worth caused by market fluctuations. The 'plan' is that enduring these fluctuations ('risk') will eventually pay off via better returns in the long term compared with less volatile asset allocations.
Subscribe to Enough Wealth. Copyright 2006-2015
Our three year fixed-rate home loan matured at the end of June, so I transferred $50,000 from my available 'portfolio loan' credit limit to pay that amount off our remaining home loan balance. This was to match the $50,000 payment DW made using funds from the sale of our investment property last year that she had invested in a term deposit until our home loan fixed rate period ended.
During the month I bought a few additional shares in NAB and IFL to add to my existing holdings - the NAB shares were via the rights issue, and the IFL shares were bought after recent bad publicity caused the stock to drop more than 10%. Hopefully in the longer term these will both be sound investments.
Overall, any major future rise in my net worth will depend on whether or not our home gains substantially in value if the area gets 'rezoned' by the local council later this year (for medium density housing around the new hospital site), and when (if) the Australian stock market eventually recovers to pre-GFC levels (unlike the US stock market, the ASX-200 is still considerably below the peak of about 6800 reached during 2007). While I continue to save a large fraction of my salary via superannuation 'salary sacrifice' the amount often seems insignificant compared with the monthly changes in net worth caused by market fluctuations. The 'plan' is that enduring these fluctuations ('risk') will eventually pay off via better returns in the long term compared with less volatile asset allocations.
Subscribe to Enough Wealth. Copyright 2006-2015
Tuesday, 2 June 2015
Net Worth: May 2015
Overall my estimated net worth at the end of May had increased slightly (+$5,284) from the previous month to reach a record high of $1,790,460 AUD. Positive contributions came from the increased valuation of our home (but that estimate is based on 12-months average sales figures for our suburb, with the latest figures being for the period ending March 2015. The more current RP Data index for all-Sydney suggests there was a slight drop in average house price during May, which might indicate the current boom/bubble in Sydney real estate is coming to an end), and from a rise in the value of my superannuation account balance (due to a drop in the Australian dollar increasing the unit value of our Vanguard LifeStategy HighGrowth Index Fund investment). These gains were largely offset by a drop in the net value of my geared stock portfolio, which was affected by both a decrease in the stock market during May, and also by a slight draw down on my portfolio loan to repay a $20,000 'balance transfer' I'd taken advantage of (to access some funds at 0% interest rate for six months).
Our 3-year fixed rate home loan reverts to standard variable rate next week, at which time I will pay off $55,000 of the home loan balance (which is not tax deductible in Australia) using some realized gains on one of my hedge fund (OMIP220) investments that is maturing in June and being paid out. That will reduce the market value of my stock investment portfolio by the same amount, so there will be no net effect on my overall net worth (but theoretically reduces my gearing slightly).
During the remainder of 2015 I should be able to start working on the development application for building an extension to the lake house (on my hobby farm), but I will be capitalising those costs (as the cost of the extension should add an equivalent amount to the value of the hobby farm) they will also have no net effect on my overall net worth. But it will mean that a larger percentage of my net worth is tied up in illiquid investments (especially so in the case of my hobby farm, as I expect to pass it on to my sons as part of my 'estate' -- fortunately Australia does not have gift, death or inheritance taxes, so they will only pay capital gains tax if they eventually sell the property for more than the 'cost base' value. Due to the fact that the 'cost base' is no longer adjusted for inflation, long term capital gains are taxed at half the marginal tax rate, which approximates to only paying tax on 'real' gains -- at least up to the point where an asset has more than doubled in value during the holding period).
Once we have paid off a large chunk of our remaining home loan I should have some spare cash flow each month, which I'll use to pay off some of my margin loan balances. With the margin loan interest rate currently around 6.29% and my marginal tax rate for 2015/16 being 32.5c or 33c (depending on whether or not the “Clean Energy” (carbon tax) package of compensation measures gets rescinded as planned), this will give me an effective return of around 4.2% for paying down that tax-deductible debt rather than saving the extra cashflow. Conventional wisdom would indicate the optimum use of the extra cashflow would be to pay off any non-deductible debt (eg. credit card balances or my home loan), but I don't have any credit card balance (I pay off the amount due in full each month) and paying off our home loan would require DW to pay the same amount (as our home and loan are in joint names and we make equal loan repayments), and she has just bought an investment home unit 'off-the-plan' and wishes to save up some funds to be ready to pay settlement costs and stamp duty when the construction is completed towards the end of 2016.
It will be interesting to see when (if) my net worth eventually hits the "two million dollars" mark. Although I am saving about $30,000 of my salary into superannuation each year, the biggest factors affecting my net worth will continue to be changes in the value of our home (especially if our property is rezoned to 'medium density' in August), and how the Australian economy and the stock market perform (affecting my superannuation savings).
Subscribe to Enough Wealth. Copyright 2006-2015
Our 3-year fixed rate home loan reverts to standard variable rate next week, at which time I will pay off $55,000 of the home loan balance (which is not tax deductible in Australia) using some realized gains on one of my hedge fund (OMIP220) investments that is maturing in June and being paid out. That will reduce the market value of my stock investment portfolio by the same amount, so there will be no net effect on my overall net worth (but theoretically reduces my gearing slightly).
During the remainder of 2015 I should be able to start working on the development application for building an extension to the lake house (on my hobby farm), but I will be capitalising those costs (as the cost of the extension should add an equivalent amount to the value of the hobby farm) they will also have no net effect on my overall net worth. But it will mean that a larger percentage of my net worth is tied up in illiquid investments (especially so in the case of my hobby farm, as I expect to pass it on to my sons as part of my 'estate' -- fortunately Australia does not have gift, death or inheritance taxes, so they will only pay capital gains tax if they eventually sell the property for more than the 'cost base' value. Due to the fact that the 'cost base' is no longer adjusted for inflation, long term capital gains are taxed at half the marginal tax rate, which approximates to only paying tax on 'real' gains -- at least up to the point where an asset has more than doubled in value during the holding period).
Once we have paid off a large chunk of our remaining home loan I should have some spare cash flow each month, which I'll use to pay off some of my margin loan balances. With the margin loan interest rate currently around 6.29% and my marginal tax rate for 2015/16 being 32.5c or 33c (depending on whether or not the “Clean Energy” (carbon tax) package of compensation measures gets rescinded as planned), this will give me an effective return of around 4.2% for paying down that tax-deductible debt rather than saving the extra cashflow. Conventional wisdom would indicate the optimum use of the extra cashflow would be to pay off any non-deductible debt (eg. credit card balances or my home loan), but I don't have any credit card balance (I pay off the amount due in full each month) and paying off our home loan would require DW to pay the same amount (as our home and loan are in joint names and we make equal loan repayments), and she has just bought an investment home unit 'off-the-plan' and wishes to save up some funds to be ready to pay settlement costs and stamp duty when the construction is completed towards the end of 2016.
It will be interesting to see when (if) my net worth eventually hits the "two million dollars" mark. Although I am saving about $30,000 of my salary into superannuation each year, the biggest factors affecting my net worth will continue to be changes in the value of our home (especially if our property is rezoned to 'medium density' in August), and how the Australian economy and the stock market perform (affecting my superannuation savings).
Subscribe to Enough Wealth. Copyright 2006-2015
Thursday, 28 May 2015
Me vs. BRW "Rich List" 2015
Years ago I picked the cut-off net worth for getting onto BRW magazine's "Rich-200" list (the wealthiest 200 individuals in Australia) as a suitable "benchmark" for evaluating how well my net worth was tracking. As the cut-off more than 100 times my net worth, I divide the annual report's threshold by 100 and compare it to my current net worth as shown below (the graph is on a log-linear scale, as compounding tends to make wealth grow exponentially).
The chart clearly shows how I have been generally tracking quite well against this benchmark, with the exception of 2008 when the GFC caused me to have to liquidate a large part of my geared share portfolio at the bottom of the market. Over the past four years I have been slowly making up ground against the benchmark, probably due to my portfolio being overweight in Sydney real estate and the stock market, whereas many of those on the "rich-200" list have a large part of their wealth tied up in resource companies.
This benchmark is quite challenging due to a couple of reasons:
1. Being limited to the wealthiest 200 Australians, the population growth means that this is slowly becoming a more exclusive cohort
2. As under-performers get dropped from the list, the cut-off is biased towards those with the best investment performance
On the other hand, starting from a relatively low level of net worth means that initially my income was a large percentage of my net worth, and that savings were making a large contribution to my increasing net worth. This effect is slowly diminishing as my net worth grows to a larger multiple of my salary package (currently around 13.7x) and hence the ROI of my existing investments starts to outweigh the increase due to my savings. Of course, once I retire and start to draw down on my savings, rather than adding to them, it will be almost impossible for my net worth to keep pace with this bench mark...
Subscribe to Enough Wealth. Copyright 2006-2015
The chart clearly shows how I have been generally tracking quite well against this benchmark, with the exception of 2008 when the GFC caused me to have to liquidate a large part of my geared share portfolio at the bottom of the market. Over the past four years I have been slowly making up ground against the benchmark, probably due to my portfolio being overweight in Sydney real estate and the stock market, whereas many of those on the "rich-200" list have a large part of their wealth tied up in resource companies.
This benchmark is quite challenging due to a couple of reasons:
1. Being limited to the wealthiest 200 Australians, the population growth means that this is slowly becoming a more exclusive cohort
2. As under-performers get dropped from the list, the cut-off is biased towards those with the best investment performance
On the other hand, starting from a relatively low level of net worth means that initially my income was a large percentage of my net worth, and that savings were making a large contribution to my increasing net worth. This effect is slowly diminishing as my net worth grows to a larger multiple of my salary package (currently around 13.7x) and hence the ROI of my existing investments starts to outweigh the increase due to my savings. Of course, once I retire and start to draw down on my savings, rather than adding to them, it will be almost impossible for my net worth to keep pace with this bench mark...
Subscribe to:
Posts (Atom)