Financial update 3 (Jan 2018 – Jun 2018)

Date published: October 3, 2018

Welcome to our next financial update, which covers the period from January 2018 to June 2018. It was an interesting, and at times tumultuous, 6 months! Read on…

Prelude to the financial update

Due to our full-time work commitments and attempts to fit all of our weekend plans into two days, and an amazing European summer to make the most of, we haven’t kept up with our original goal to provide financial updates 3-monthly. You can see why our goal is to extend our weekends so that we can fit in all of our activities!

With this in mind, we have adjusted our goals to provide 6-monthly financial updates instead of the original 3-monthly updates. The results of some ‘quick maths’ show that this means that we will spend only 0.1% of our total time writing financial updates. This is drastically lower than the initially unrealistic and time-consuming 3-monthly updates, which would have hungrily consumed 0.2% of our total time to write.

Ok, maybe we’re a tad lazy, too…

Aside from these super-convincing time-related reasons, another benefit is that trends and patterns in our changing financials will be clearer, and we will be less likely to over interpret the natural volatility in the value of our investments (in particular, the shares that we own).

We hope that this means that the content of our updates will also be, well, more interesting. We aren’t overly keen on providing frequent, but mostly meaningless and repetitive, updates announcing: “We are still saving guys! But check back in next month to see if we are still saving!”, followed by “Yep, we’re still saving, nothing’s changed! But will this continue?!”.

If you are interested in seeing month-by-month tracking, many Australian bloggers do this, for example Aussie Firebug and the FI ExplorerCheck ’em out.

In our last financial update we discussed two major life changes, which substantially affected our finances (in short, inheritance and moving to Germany). Living in Europe, seeing new countries, meeting new and interesting people, and exploring interesting cultural differences has reaffirmed our desire to extend our weekend (i.e. work part time!) within a 10-year period.

So, did the last 6 months see our net worth move closer to the goal line? Let’s take a look at how our finances fared once we had settled into our new German lives.

The progress chart

Overall, our personal net worth has flatlined a bit during this period, which is due to a range of factors. Primarily, the Countess took a decent pay cut from her Australian wage, and was working on a more casual basis in Germany while she looks for a more permanent job that doesn’t require more than a very basic level of German (spoiler: she finds one!). This meant that our savings rate decreased substantially, and subsequently reduced our ability to contribute significantly to our asset base.

The good news, however, is that our personal net worth increased by a whopping 0.9% across this 6-month period. BOOM! Sounds bad, right? Well, not so much when you consider the expenses that we incurred during this period. Here is a short list of some of our favourites:

We went to the U.K. for a week to see family, we went to Italy for a week during Easter, we paid a $4,000 plumbing bill for investment property 2, we went away for a weekend to a local German national park, we paid $1,500 for months of German language classes (jetzt wir konnen noch schlecht Deutsch sprechen), we paid $5,500 for flights to Australia and accommodation in preparation for a future family wedding, and we went to the U.K. again for a different family wedding.

And we’re still 0.9% up? We can thank the fact that the Count still wears that old green hoodie with white paint splattered on it, and that the Countess still uses her old Dell laptop that has a 50% chance of making a horrendous grinding noise each time it is turned on, and a 30% chance of becoming unresponsive when you attempt to click the mouse.

Our total net worth bounced around from month to month, consistent with a) the increased volatility in the share market that was predicted for early 2018 and b) we bought some cryptocurrency! But more on this below. Despite our best efforts, our total net worth still managed to increase by 0.3%…

The individual assets and liabilities

Assets: Although our total net worth looks like it has flatlined over the time period, a considerable amount happened when you consider it by asset class.

An influential factor is a relatively small proportion of our portfolio invested in high-risk investment category – cryptocurrencies, the value of which peaked dramatically in January 2018, a couple of weeks after we initially bought. Subsequently, a crash in value by February led to a visible drop in our total net worth.

We aim to hold all of our assets for the long term, even cryptocurrencies, so it will be interesting to see how this all plays out. Being moderately shrewed investors, however, we did limit the amount that we invested in this highly speculative asset, and having a larger chunk of the portfolio in diversified index funds meant that this downward trend was buffered against in the portfolio as a whole.

During February, there was additionally a global 5% dip in shares (winning!). However, at the end of this 6-month period, our total assets end up just 0.3% lower than they were at the end of the last financial update (December).

Liabilities: If our assets technically decreased from December to June (albeit a minute amount), it is a small wonder that our total net worth creeped higher, overall. Our credit card balance rose and fell as we paid for the various trips listed above, but it ended a few thousand lower at the end of this period. In addition, our continuous repayments to our tax debt saw the balance decrease by a little under $2,000. ‘Noice!’

The equity pie chart

In previous financial updates, we included every single month of data in the rapidly changing pie chart. We have now updated this because gosh darn that last format was too hectic, and we were losing too many of our readers to seizures.

In general, there isn’t a great deal to say here. As discussed above, the reduced income from our jobs meant that it was difficult to add any sizeable contribution to any one asset class, and the total value of our assets was practically unchanged from December to June.

Therefore, apart from the obvious (cryptocurrency is a new asset class), our equity allocation only varied over this time period due to fluctuations in the price of those assets. Index funds (VTS, VEU, VAS, VSO) did perform a little better than the other asset classes, with VEU underperforming the others by a small margin. Therefore, we may consider adding more VEU at some stage in the near future.

Our shares now make up a good proportion of our portfolio, and our investment in property is more balanced than it has previously been.

The bottom line

Over the 6-month period to June 2018, our net worth plateaued. Our income is down from previously higher levels, and living in Europe has meant that we have spent more of our time travelling (which is one of the bigger reasons as to why we moved here in the first place!).

Share markets have been more volatile, and our initial investment in cryptocurrency has gone down. We are not concerned by this as we are investing for the long term, and we will continue to add to our portfolio through thick and thin. We expect some fluctuations, and on occasion downward trends, particularly given our previous high growth rates reported in earlier updates.

Yours in patience,

The Count and Countess