It’s almost six months since I launched my website* and time for an update on my journey to financial freedom. (*Article originally published 22 November 2019.)
It’s been a mostly smooth drive since June with some spectacular vistas along the way, particularly the two-month sabbatical, giving me a taste of what’s waiting at the goal post. My overall feeling is one of being hopeful. If this update was a song, it would be:
Tune playing on the radio
Brian and Jenn Johnson’s “You’re gonna be Ok”. You can watch the music video here.
What distance did I cover?
In June I was 52% on my way to never having to work for money again.
I’m actually quite excited to report that my financial freedom percentage now stands at 57%.
If I could still do a summersault, I would have used that after finding out I’ve moved up a whole 5% in six months.
How would I know when I’ve reached financial freedom?
The moment I have enough in my investment portfolio to cover 300 times my monthly expenses, it’s ‘mission accomplished’. If you want to read more about this ‘magic number’, the Rule of 300 and the 4% rule have been covered in a previous blog post.
What do I use as my map to financial freedom?
I have a roadmap to financial freedom with 12 milestones, so there’s some sense of accomplishment every year/every few years. I’m currently at milestone 10.
What’s in my portfolio?
When I take stock of my total portfolio and want to get a sense of what’s really under the engine or, in other words, find out what’s driving performance, I like to throw all my products – employer’s fund, preservation fund, private RA, unit trusts, tax-free savings account (TFSA) and ETFs together and drill down to the deepest level of the underlying asset classes and geography, as well as one level up, that of the funds in which those products are invested.
When categorised in terms of asset class:
- equities (shares): 75%
- bonds: 11%
- cash: 8%
- listed property: 6%
In terms of geography:
- local: 46%
- offshore: 54%
Top 5 fund allocations:
- Nedgroup Investments Core Diversified (local balanced passive)
- Orbis Global Equity (dollar based offshore active)
- Foord Balanced (local balanced active)
- Fidelity European Growth (euro based offshore active)
- SIM Moderate Absolute (local balanced active)
What contributed most to the progress?
The largest contributor were the dollar and euro-based offshore unit trusts in which I’m invested on the Allan Gray offshore platform, managed by Fidelity, Orbis and Foord respectively. This is the part of the driving that my fund managers (helped by the market) did on my behalf.
The second largest contributor was the portion of my salary that I put into my employer’s retirement fund every month. That’s my part of the driving.
Greatest pothole over the past few months?
My listed property unit trust actively managed by Bridge Fund Managers on behalf of Nedgroup Investments. It’s LOST 33% of its value over the past year. Fortunately only 2% of my total portfolio sits in that fund.
Has the load become lighter?
In the past 6 months I’ve gained some expenses (like gardening fees) but I’ve also managed to cut some expenses (like storage fees). The net effect is that my expenses have stayed relatively flat.
Top 20 expenses?
- Parents’ medical aid and insurance: R4100
- Food and groceries: R4000
- Airbnb accommodation: R3000
- Own medical aid: R1770
- Swellendam municipal account: R1200
- Body corporate levy – Durbanville: R1100
- Donations: R1000
- Petrol: R800
- Swellendam gardener: R800
- Eating out: R800
- Critical illness insurance: R789
- Short-term insurance: R777
- Yoga and dance: R600
- Cleaner once a month: R430
- Laundry and dry cleaning: R400
- Gifts: R400
- Clothes and shoes: R400
- Hair: R400
- Durbanville municipal taxes: R350
- Income protection cover: R320
There have been quite a few and I think my post about past beliefs that have hurt my portfolio covered most of them.
Plans for the next 6 months?
Keep on investing 27% of my salary into my employer’s retirement fund – all future contributions are going into a low-cost Satrix managed balanced index tracker now. The money from my first 5 years of being with my current employer stays in the active balanced and absolute return funds originally chosen.
Come March – if we get bonuses – that’s going into a tax-free savings account (TFSA), like every year. Except that I’ll be opening a TFSA with Easy Equities, as their fees on an ETF within a TFSA work out cheaper than the Allan Gray TFSA if you’re a long-term investor.
Overall plan: just keep on driving, maybe cut down a bit on Airbnb bookings, try to not get too obsessive about this FIRE drive, and remember to also take a deep breath every now and then and enjoy the road to freedom.
*Article originally published 22 November 2019
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