Last month I talked about how things were falling into place and I was finding it easy to grow my wealth. I spoke to soon. This month was tough.
It was my first experience of the share market correcting; it lost something like 10% of its value during the month. It really hit my investment account and funds in my super. At the same time, I had a number of unique circumstances in October that resulted in quite a bit of additional spending.
Together, this all really took a hit on my net worth. Let’s see how much….
Why do I post Net Worth Reports?
It’s very scary opening up my wallet and showing the world how much money I have. It forces me to consider some very confronting questions like “have I made the right decisions in life?” and “am I strong enough to show the world my failures?”.
But overall I think that there is value in documenting my journey to early retirement. Not only can people try to emulate my successes but — perhaps more importantly — they can avoid my failures
So here’s a full view of my income and expenses, and net worth, for October 2018. If you want to check out my other Net Worth Reports, you can check them out here.
What happened this month?
This month was a pretty special month for my partner and I: it was our first anniversary.
Although the weather wasn’t perfect, it did hold out enough for us to have a lovely picnic in North Sydney and then a really fun (surprise) group dinner.
I know my partner really values her friends and she’d really enjoy having them involved in part of our special occasion. So I decided that I’d pay for everybody’s dinner as my gift to her.
And as we were sitting there at dinner, I looked around at everybody smiling, laughing and spending quality time together, and I realised that this is what it’s all about.
Sure, it’s not exactly cheap buying dinner and drinks for 5 people. But the look on my girlfriend’s face was absolutely priceless. It’s such a small price to pay to make her that happy.
Last month I noticed that my spending on groceries was notably high. After that, I decided to think of ways to reduce my bill.
I made a conscious effort to replace meat with vegetarian alternatives (things like tofu and beans) and choosing cheaper options.
I’m happy to report that I reduced my spending on groceries by $50 per week. Nice!
However, I had a bunch of major expenses this month. Firstly, like I mentioned earlier, there was quite a bit of spending on gifts and dinners for our one year anniversary. This isn’t something that happens too often.
Secondly, we took a trip to Melbourne for three days. This involved lots of eating and drinking with friends. Although the P&L statement below says that holiday spending was $1,250, that includes spending for both my girlfriend and myself.
And thirdly, my car service was due — and it was painfully high.
Overall, in the month of October, I was able to save 25% of my income. Not quite what I am aiming for — but October had a number of one-off expense items that shouldn’t happen again. I’ll have to be vigilant next month).
This month, for the first time since I started reporting my finances, my assets almost reduced.
There were some tough times in the share market. The ASX200 struggled throughout the month, falling by over 10%. And this is reflected primarily in my Superannuation balance (my investment account has a different mix of assets that saved me for major losses.
After all is said in done, I was able to grow my net worth by just over $1,000 in the month of October. That’s an increase of 0.3%. Need to do better next time.
This month’s key insight
This month was the first time I’ve had to deal with investments performing poorly.
It’s quite scary to see your index funds losing more and more money. There’s a strong temptation to pull the money out. But as many smart people have said ‘you cannot time the market’. By pulling the money out, you’re locking in the losses you’ve made.
So my insight for this month is:
When the share market is dropping, keep your money in the market and continue with your investment plan.
Keep strong and investing in your index funds. The way I think about it is this: when pricing are going down, I’m buying my index funds at a discount.
Anyway, until next month, stay strong!
All the best,