Late June (just before the new financial year starts) is when my company does it's annual salary budget. Unless you're getting a promotion, have done an exceptional job, or were recently employed and just coming off your probationary period the salary review tends to be a somewhat disappointing experience. The default rise is a "cost of living" adjustment, which is allegedly based on the previous 12 months CPI increase. Given that inflation for the past year has been around 3%, and the fact the the

NSW minimum wage was just increased by 5.3% (from $504 to $531 a week), this year's standard rise should be around 3%-4%. Last year I got the default rise (3.5%), and I expect about the same this year, as I'm in the same role and already had a large rise two years ago. Anyhow, although a big rise would be a nice surprise it wouldn't have a material impact on my net worth. After all, a 5% salary increase this year is equivalent to my net worth increasing by just 0.35% - even less after tax! However, it would increase the value of my accrued annual and long service leave (around 16 weeks altogether) and compounds with any future rises - ten years of 3% increases leaves you in a much poorer position than ten years of 4% rises. Ah well, I'll find out the good (or bad) news in a couple weeks time... It's a bit like waiting to open a Christmas present.

Enough Wealth

As the end Australian financial year draws to a close on 30th June, it's time to make arrangements to pre-pay up to 12 months interest on my margin loans. I owed $116K to Comsec, so I prepaid the next 12 months interest on $100K of the balance. I also took up the option to capitalise the prepaid interest. I had some other funds sitting in online savings accounts, so I used that money to repay the remaining $16K of variable rate margin loan. This will mean that I don't have to make monthly interest repayments on the Comsec account for the next 12 months.

I expect I'll soon receive the paperwork to prepay interest on my other margin loan account with Leveraged Equities. I currently have $150K prepaid with them, which I'll reduce to $140K as I have around $6K sitting within the cash management account in my LE due to recently selling my Qantas shares. I'll put that money towards the interest prepayment, so I'll only have to come up with another $6K for the interest prepayment. This will leave only a few thousand dollars of margin loan debt requiring monthly interest payments.

One benefit of making the interest prepayment is that you get a slightly lower interest rate than the monthly variable rate (but this is offset by the opportunity cost of the prepaid interest amount for an average of 6 months). But the main benefit is that you bring forward the tax deductible interest expense by 12 months, so you gain an extra tax deduction the first year you do this. However, each subsequent year you are simply using the prepayment of the next year's interest to substitute for the current year's interest (that was prepaid the previous tax year). At some time in the future you have to unwind the prepayment arrangements by having a year with no tax-deductible interest payment, or possibly a series of years with slowly decreasing interest deductions. I plan to schedule this to occur when I'm retired and over 60. At that time (under the new Simpler Super rules) I'll be living off tax exempt Superannuation pension income, so the tax I pay on any dividend income from my margin loan portfolio will be very low, so getting the tax deduction for interest payments will no longer matter.

Anyhow, interest prepayment on margin loans is just the "icing on the cake" - the main benefit of using margin loans is to get a bigger stock portfolio, but have tax deductible interest payments slightly larger than the dividend income from the portfolio. This basically means that you have no net taxable income from the stock portfolio, and instead only make capital gains on the portfolio. If the gains are on assets held more than 12 months before sale, the applicable tax rate is half your marginal tax rate.

Enough Wealth

Now that our Self-Managed Superannuation Fund (SMSF) has been setup and the initial $200 contribution was processed OK via the ANZ V2 bank account, I'm starting to plan what asset mix the SMSF should contain, and what specific investments to make when our retirement savings are transferred into the SMSF next financial year. One complication of using a SMSF is that it will pool the retirement savings of DW and me, although the balances are reported indivdually based on each members contributions.

We currently have separate accounts with BT Employer Superannuation, and have slightly difference asset allocations in our accounts. Luckily our personal asset allocations are close enough to be able to get by with one asset mix that will suit us both in the SMSF:
Au Shrs Int Shrs Fixed Int Property
Overall 48.82% 39.33% 2.19% 9.67%
Me 48.11% 40.46% 0.59% 10.83%
DW 52.64% 33.18% 10.81% 3.37%
SMSF Plan 50.00% 40.00% 0.00% 10.00%
Another consideration with the SMSF will be ensuring that the investments are easy to monitor and can automatically provide the required transactional details to the SMSF administrator. eSuperFund (the administrator of our SMSF) can access transactional data for any investments done via the e*Trade brokerage account that was setup for out fund. Therefore I plan on buying any individual stocks using e*Trade and to also make mutual fund investments via e*Trade. Fortunately e*Trade rebates 100% of fund application fees (typically around 4%), so there's no issue with investing in mutual funds via e*Trade.

As the whole point of shifting our superannuation from BT to a SMSF was to save on fees we'll probably invest mostly via the CDF Australian Index Fund (which has a MER below 1%) and Vanguard Index Funds - Australian Shares Index , Global Shares Index, Property Securities Index. However, Vanguard charges around 0.90% MER on the first $50K invested in a fund, 0.60% on the next $50K, and 0.35% on any amount over $100K in that fund. Putting all our SMSF investment in just the Vanguard LifeStrategy HighGrowth fund would reduce the overall MER from around 1% to around 0.50% initially, and it would trend towards 0.35% as our SMSF value increased over time.
Fortunately the Vanguard LifeStrategy HighGrowth fund has an asset allocation close enough to our desired mix:
Au Shrs Int Shrs Fixed Int Property
HighGrowth 48.00% 32.00% 10.00% 10.00%
A Projection of our SMSF Starting Balance, Contributions and ROI shows roughly how much the fees will be over time:
Assumes
10% pa
'000 '000 '000 '000 Fees as Fees as
FinYear Start Add Earn End % of SMSF % of ROI
2007/2008 $360 $54 $36 $450 0.57% 7.15%
2008/2009 $450 $54 $45 $549 0.53% 6.49%
2009/2010 $549 $54 $54 $658 0.50% 6.02%
2010/2011 $658 $54 $65 $777 0.48% 5.66%
2011/2012 $777 $54 $77 $909 0.46% 5.38%
2012/2013 $909 $54 $91 $1,054 0.44% 5.16%
2013/2014 $1,054 $54 $105 $1,214 0.43% 4.98%
2014/2015 $1,213 $54 $121 $1,389 0.42% 4.83%
2015/2016 $1,389 $54 $139 $1,582 0.41% 4.71%
2016/2017 $1,582 $54 $158 $1,794 0.41% 4.60%
2017/2018 $1,794 $54 $179 $2,027 0.40% 4.51%
2018/2019 $2,027 $54 $203 $2,284 0.39% 4.44%
2019/2020 $2,284 $54 $228 $2,567 0.39% 4.37%
2020/2021 $2,567 $54 $256 $2,877 0.38% 4.31%
2021/2022 $2,878 $54 $288 $3,219 0.38% 4.26%
2022/2023 $3,219 $54 $322 $3,595 0.38% 4.22%
2023/2024 $3,595 $54 $359 $4,009 0.37% 4.18%
2024/2025 $4,009 $54 $401 $4,463 0.37% 4.15%
2025/2026 $4,463 $54 $446 $4,964 0.37% 4.12%
It's interesting to see how large a chunk of the annual investment earnings are being consumed by fees, even in this low fee arrangement.

Enough Wealth

This month I selected AVICI Systems (

AVCI) from the current MagicFormula listing to add to my "Little Book That Beats The Market" Portfolio of US Shares (100% geared). I bought 520 AVCI @ market (around $9.52). My US Stock Portfolio current situation is listed in the sidebar.

My portfolio had recently reached an annualised ROI of over 24%, but in the last few days it has dropped back slightly to currently have an XIRR=22.84%. My success criteria is to achieve a return greater than the cost of funds invested (borrowed as part of a "Portfolio loan" from St George bank, so the interest rate is the standard variable home loan rate, around 7.25%), and my long-term target is to achieve a ROI of 10-20% pa.

After I'm fully invested with a portfolio of 18 stocks this December (approx. US$90K) I'll start to sell off the oldest holding each month and replace it with a new pick from the current MagicFormula list. Rather than rolling over the exact amount realised from each sale into a new stock, I'll invest 1/18th of the current portfolio value, adding in some extra cash when needed. That way I'll be investing roughly equal dollar amounts each month.

Enough Wealth

I had a look through the available index CFDs from CMC Markets and couldn't find one for the Shanghai Market. The closest appears to be the HK33 Index. I was planning to trade that Index but the chart hasn't updated since mid-morning Monday, so I'm not sure if this index is trading or CMC Markets has suspended it due to the big falls in the Chinese Market this week?

Anyhow, I instead went back to trading the AUDUSD spot rate. The AUD had risen sharply in the past couple of days on speculation that good economic figures, low unemployment, increasing job vacancy ads, and a slight recovery in the housing construction industry might push the Reserve Bank towards increasing our interest rates another 0.25% tomorrow morning. I personally doubt that there is enough inflationary pressure yet to warrant another rise - after all inflation has dropped back within the target range, and so far there hasn't been any evidence of wage pressures resulting in a general wage breakout. I discovered that I can manually edit the $ amount being traded - rather than just $50K or $100K I can enter a $25K trade. So I sold $25K of the AUD at 0.8330 yesterday evening. As usual when I go short the AUD kept increasing today, so I've lost a bit on this trade so far, but at least it was only costing me $2.50 a point with this size position. The AUD has reached close to the 22-year high this evening, so I sold another $25K at $0.8370. I now have a total short position of $50KAUD at an average price of $0.8350. I'll leave this position open and see how the price reacts when the Reserve Banks decision is announced tomorrow morning. Hopefully if there is no rate rise the AUD will drop back slightly...

Enough Wealth

Although we have a clothes dryer, DW still prefers to dry clothes on the line when the weather is fine. When we bought our house it came with an extending clothes line attached to the remaining upright post of an old broken "Hills Hoist". The extending line has not been very easy to use as the bar attached to the old clothes hoist wobbles and makes the clothes lines sag. So DW finally took a trip to the local hardware superstore to check on new clothes hoists. The traditional Hills Hoist costs around $250 and is made in China, so she's decided to go with a cheaper brand that costs $150 (and probably also comes from China). It comes with a ten year warranty, so it should last ten years and pay for itself via the electricity saved by not using the clothes dryer very often. It also helps reduce greenhouse gas emissions, as our electricity mostly comes from coal-fired power stations.

[url=http://enoughwealth.com]Enough Wealth[url]

Readership continued to increase during May, with the bonus of enoughwealth.com site getting a big one-off boost from a specific mention and link to my site by one of the more popular personal finance blogs in the middle of May, which provided an extra 350 or so visitors on the day of the post. This spike trailed off rapidly and readership stats were back to normal after a couple of days. Hopefully some of the visitors liked what they read and have become part of the loyal band of regular readers who return day after day.

Cumulative visits (for sites enoughwealth.com and enoughwealth.savingadvice.com combined) passed through 25,000 during May. With monthly visits now above 6,000 EnoughWealth might reach a total of visitors by September, and has a chance of hitting the magic 100,000 mark by the end of this year!



After a period of initial rapid growth in visitor numbers from launch until Dec 2006, I stopped submitting posts to the various "carnivals" that are available each week. Coupled with a lull in producing daily posts in early January this produced a noticeable loss of momentum in gaining readers. Posting at least once a day in the last few months seems to have helped build up readership more quickly again.

I initially created the mirror site (hosted on savingadvice.com) late last year due to problems with "old" blogger at that time. Since then I've migrated to the "new" blogger, which is much more reliable, and setup the enoughwealth.com domain to redirect to the posts hosted by blogger. There are consistently about double the readers attracted to the enoughwealth.savingadvice.com site each month (eg. 2,910 in May compared to 2,018 visiting my "custom" domain. Hopefully if I resume promoting the enoughwealth.com domain via "carnival" submissions this month I may be able to increase readership of that site. The only reason I prefer readers to visit the enoughwealth.com site is because that site is monetized (savingadvice.com allows limited editing of the sidebar content). The only significant amounts of blog revenut have come from the odd sponsored post (PayPerPost and ReviewMe). With low readership numbers the amounts accumulating each day from AdSense and AdBrite are only 1c - 3c. The exception to this was few days after the mention by xxx which boosted my AdBrite revenue to over $1 per day, at which level ad revenue becomes worthwhile.

My Technorati rating is stuck around 30, as I haven't been requesting links from other sites for the past few months. My Alexa rank is slowly improving - hopefully it will be below 900,000 soon! A hearty thankyou to those of my regular readers who visit using the Alexa toolbar, marked this blog as a "favourite" in Technorati or added a link to enoughwealth.com on your website

Enough Wealth

We had a set of photos taken at our local Pixie Photo studio when DS1 was a baby. Although we have plenty of photos taken by family members. the ones taken in a studio have a certain something that comes from good lighting and professional posing. At the time a "package deal" cost around $100 for a set of various photos and sizes.

Now that DS2 is around the same age we again went to Pixie Photo for the same sort of photos for our enlarged family. The special offer this time was just for one basic photo for $10.95. While we were there we had a series of other pictures taken of the two boys. In the end we selected several of these extra photos in various formats, for a total cost of $490 !!! This really is a lot of money for half a dozen photos, but you can't compare the quality of these photos to your regular snapshots. I figure that you have to spend your money on something, and as a "once off" expense it's worth it for something that will become a family keepsake.

Enough Wealth

It was a perfect day in Sydney for the start of Winter - clear, blue skies, a light breeze and a temperature around 25C. I enjoyed a 20 minute brisk walk around the nearby landscaped gardens of a luxury apartment complex, in the process avoiding gym fees such as the $25 a week fee charged by the "boutique" gym conveniently located opposite where I work.

For lunch I had one turkey fillet and one lean ham bread roll. The turkey and ham cost around $12/kg on special, and the bread rolls were a steal at 12 for 99c! Plus an apple from a 1.5kg bag that cost $4.98. All up, lunch cost around $1.70 and was moderately healthy.

I still haven't entirely eliminated drinking diet coke uring the day at work - but at least the 2L bottle was on special for $1.90 instead of the regular price of $3.10. I've managed to cut down from 2 bottles/day to 1, substituting one bottle of coke with a 1.5L bottle of filtered tap water, which costs almost nothing.

I tend to get the urge to snack around 4 o'clock in the afternoon, so next week I'll start bringing a banana to work each day to have as an afternoon snack. At $4.98 per kg they're not cheap at the moment, but it's still cheaper (and lots healthier) than a mars bar or other junk food.

Enough Wealth

I currently have around A$40K of "0% balance transfer" funds borrowed on BankWest and HSBC credit cards. The money is invested at 6.1% and isn't due for repayment until the end of the year, which provides a nice little passive income stream after the initial paperwork and making arrangements for automatic payment of the monthly minimum via B-Pay. I'd previously done similar CC arbitrage using my Virgin Money and Coles credit cards. But it looks as if the era of "free money" may be coming to an end in Australia. There have been fewer of these 0% balance transfer offers appearing in recent months, and yesterday a new CC offer "to the householder" arrived in the mail from HSBC. Interestingly, although it advertised 0% APR on balance transfers for 6 months, there was a 2.5% "settlement fee" imposed, which hadn't applied to previous offers. The fine print also mentioned that this fee would be added to the account at the start of the 6 month period and would accrue interest at the normal rate (around 12% pa). This means that during the 6 month 0% period you would effectively have paid around 2.8% pa on this money, making the after-tax profit for investing the funds in an online high interest account negligible. Once you take into account the risk of additional fees if you miss a monthly payment for any reason, or don't pay off the remaining balance before the 0% period ends, it seems that CC arbitrage is no longer worth the effort - at least with this HSBC card offer. I'll keep an eye out for new CC offers to see if this is the start of a general trend by all the lenders, or just a foible of HSBC.

Enough Wealth

I didn't trade recently (I don't have enough money in the account!) but today I transferred another A$1,000 into the account so I can trade next week if an opportunity arises. I'm a bit wary of AUDvsUSD forex, although I may short the AUD if it still relatively high on Monday - apparently the latest rise is based on speculation that the Reserve Bank may raise interest rates at next week's meeting. I think this is unlikely, which should result in a still pull-back after the announcement on Wednesday morning. Then again, I could be wrong as usual

The real reason I've topped up my trading account is to try to short the HongKong33 if (when?) the current bull run ends. Given the huge gains in the past 2 years, and the sudden 6% drop this week in reaction to the Chinese government raising brokerage fees in an attempt to cool the market, I expect that there will be a substantial correction in the HK index in the near future. The market recovered this weeks drop within a couple of days, so the speculators are currently still very bullish, but there's a limit to how long such a bubble can inflate. The trick will be to not set a short position too early and lose all my trading capital while the bull run continues.

Enough Wealth

My Networth as at 31 May totalled $1,162,544 (AUD), an impressive overall increase of $46,415 (4.16%) for the month. My leveraged stock portfolios increased by a net 4.06% last month, and the estimated valuations for my share of our home and investment property increased 3.91% compared to the previous month, showing an acceleration of the mild uptrend that began earlier this year. The property gains were slightly offset by our mortgage loan balances increasing by a net $1,082 (0.32%) due to our monthly redraw of $3,500. Although we'll continue redrawing some of our advance mortgage payments each month to help meet our mortgage repayments after DW returns to work part-time, the amount required will reduce to only $1,000 per month. The valuation of my retirement account went up only slightly during May (0.72%).

So far this year my Net Worth has gone up by $129,761, which is 92.68% of my goal for the entire year! It's a pity that this rate of increase is unsustainable. At the current exchange rate of 0.828 USD to the AUD, my Net Worth is US$962,587 - so my milestone is to pass the one million mark in US dollars. If both the AUD and Sydney property prices keep rising, I may reach this in the next month or two.

Enough Wealth