Investment Growth

2018 Net Worth Report: Year in Review

Posted by on 5 February 2019 in Net Worth Reports

I think it’s good to take some time every six to twelve months to evaluate the progress of our journey to financial independence. Not only is it motivating to recognise our progress, but we can also identify areas where we are falling short and develop ways to improve.

With that in mind, here is my year in review for 2018. I review my Profit and Loss statement and Balance Sheet for my entire financial independence journey, describe how my money flows between accounts, and share my successes and  failures.

Plus there are a few little announcements at the end!

Profile & Loss Statement

The chart below shows my Profit and Loss Statement for the six months that I have been working towards financial independence.

As you can see, I have three main sources of income. In addition to my salary, I rent out a spare bedroom in my apartment to generate some additional income. Beyond that, there are some ‘once-offs’ that help generate income, such as selling unused bits and pieces on eBay.

My main expenses over the past six months have been my mortgage (I do live in Sydney, after all!) and discretionary items. Discretionary includes things like eating out, drinking and entertainment, and probably covers my cost and half of my partner’s cost. One goal for 2019 will be to reduce my discretionary spending without affecting quality of life.

The other big ticket item is groceries and pharmacy. I’ve always struggled to reduce my spending on groceries, as I regularly work out and take my nutrition quite seriously.

Finally, in July you’ll see a big chunk of spending on a holiday. And that’s not even half of what I spent! There’s a lot that I need to do to improve my spending on holidays. For the next trip I will be more proactive in accumulating and spending frequent flyer points, as well as looking for cheaper flights and better deals on accommodation.

Over the last 6 months I have been able to save approximately $12,500 or a little over $500 a week. That’s a savings rate of only 23%. Pretty dismal if you ask me. My goal for the next six months is a savings rate of 35% and we’ll see how much higher we can go after that!

Balance Sheet

The table below shows my balance sheet for the last six months.

I keep about $30,000 in my offset account as an emergency fund and as I accumulate more cash, I periodically transfer it to my investment account. Once there, I invest in a 50/50 mix of an Australian shares index ETF (Vanguard VAS) and a hedged international shares index ETF (Vanguard VGAD). This asset allocation was informed by my analysis on safe withdrawal rates.

Over the last 6 months both my investment account and superannuation have effectively returned at or below 0%. Any growth in those accounts is due to contributions that I’ve made. It’s a shame that performance has been bad — but this is a long game and as long as I’m playing the game, I’ll be pumping money into VAS and VGAD.

At the same time, I have been able to pay down my mortgage balance by abut $5,000. For those of you who have a new-ish mortgage, you’ll feel my pain. Mortgage balances barely move for the first decade of the mortgage, all the repayments are eaten up by interest.

So in the first six months of working towards financial independence I have been able to increase my total net worth by about $21,000 or 6.4%. That’s not too bad! But I’m sure that improving my savings rate and achieving some better investment returns will help me significantly improve this number going forward.

What’s planned for 2019?

I try not to plan too far in advance. But in the early part of 2019 I have two big goals.

First, I’d like to redesign the site to make it more user friendly and make the content easier to find. Right now we have a running list of blog posts on the front page and readers have to scroll through to separate the wheat from the chaff. Instead, I’d like to organise the content to correspond to different stages of financial independence so that readers can easily find what’s most applicable to them.

Second, I’m building an improved retirement calculator that takes into account Australia’s unique two phase retirement system. Our current calculator doesn’t take account for the allocation of funds to a brokerage account versus a superannuation account, and thus misses out on some important tax benefits.

I’m not too far away from finishing both of those little projects. So stay tuned!

Happy 2019!

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There are 7 comments on this article

  1. Avatar for Dan Montgomery


    Hi Dan,

    First time at your blog, great job you’re doing.

    One thing that stood out is the 100% hedged international equities being VGAD which is less common. I did search your site trying to find your reason for hedged vs unhedged but without success unless I missed it.

    Would be interested in hearing your reasons for this decision?


    • Avatar for Dan Montgomery

      Dan Montgomery

      Hey mate, glad you’re liking the blog!

      To be honest, I’m still not sure where the jury lands on hedging. I’ve seen analysis that showed hedged portfolios winning and other analysis that showed unhedged portfolios winning. Do you have a view? This might be a good topic for some more research and a blog post.

  2. Avatar for Dan Montgomery


    Currency is generally a wash over the long term. Although Hedged global equities provide diversification benefits in local currency, unlike unhedged global equities they don’t provide protection against the nasty Home country risks such as a recession in Australia alone or worse something like a Japan scenario after their market crash. A hedged portfolio would not help much in these scenarios whereas “unhedged” global equities would be a life saver.

    But it’s not an easy decision especially as one gets closer to drawing on their asset base as in FIRE. Currency moves in an unhedged equity portfolio can cause havoc with cashflow at times and can potentially go against the investor for long periods of time. So it’s a balancing act between having assets in local currency vs protection against Home country risk.

    This paper from Vanguard might provide some insight into how they find a balance between this:|120224

    In summary though hedged global for greater sector / company diversification (in local currency), unhedged for diversification but also insurance against major Home country risk.

    It’s a big topic but hope that makes some sense given it’s brevity.


    • Avatar for Dan Montgomery

      Dan Montgomery

      That makes sense to me. It raises a good question: if hedged international and unhedged international offer different ‘types’ of diversification, would there be a net benefit of holding them both (along with domestic)? This is also something that J.D. raised in the comment below.

  3. Avatar for Dan Montgomery


    Just noticed your comments about investing i50/50 VAS/VGAD and was going to ask, but looks like you have answered it already.

    I consider them to be 3 separate asset classes
    • Aus
    • Int-U (unhedged)
    • Int-H (hedged)

    For mitigating risks:
    • Upside currency risk – helped by Aus/Int-H – at risk by Int-H
    • Downside currency risk – helped by Int-H – at risk by Aus/Int-H
    • Concentration risk – helped by Int-U/Int-H – at risk by Aus
    • Costs – helped most by Aus (franking credits), neutral by Int-U, and at risk by Int-H due to cost of hedging beyond increased MER

    By using all 3 classes, you are mitigating a wider range of risks
    • Having a lower concentration risk than half in Aus
    • Adding in mitigation of currency downside risk with Int-U
    • Hedging costs would remain similar as the Aus -> Int-U costs are offset by the Int-H -> Int-U improvement in costs.

    I also suspect you would get a better Sharpe ratio by splitting into 3 as they all move separately, but I have no idea how to back-test.

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