Welcome to Passive Income NZ, my Journey to Financial Independence. Every month I share how I am tracking towards financial freedom by providing you with an update of where my portfolio is at and how far I am from financial freedom, and how my spending is tracking. My definition of financial freedom is not really the same as everyone definition. It’s not to just stop working, it is much more than that. It’s about living a more intentional life.
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In June, I wrote a post about Investing in Vanguard Fund and the New Zealand Tax Implications. The question about what your tax obligations are when investing in a foreign investment fund always come up. And since I had to do my own taxes I thought I would share what I know on the topic. It’s actually quite easy.
I also reflected on some Lessons Learned After One Year of Investing. In reality, I have been investing for much longer than a year, but I’ve only been actively passively investing over the last year. If you are new to investing, there are some good lessons in that post
I mentioned actively passively investing because I think that the term passive investing is being thrown around a lot. Some new investors might think that it is totally passive, but it’s not. You actually have to Actively Investing with Passively Managed Funds
Another important topic for new investors is that they have to realise that Investing Won’t Make You Rich. Sure investing helps grow your money, but you need the money in the first place. So the most important metric to focus on is actually savings rate.
Specking of personal finance metrics. I read a post from the Poor Swiss about the 11 best personal finance metrics you need to track that I realy enjoyed. The personal finance metrics covered in this post are;
- Personal Inflation Rate
- Savings Rate
- Net Worth
- FI number
- FI ratio
- Passive Income
- Investment Fees
- Asset Allocation
- Emergency Fund
The article was a good summary of what you should track if you are interested in personal finance. The one metric that I hadn’t thought about before, or tracked for that matter, was the Personal Inflation Rate. Since I have spending data back to 2013 I thought I would calculate my own Personal Inflation Rate- and to be honest I freaked out! An average of 10% year on year personal expense inflation.
- 2013 +19%
- 2014 +10%
- 2015 -18%
- 2016 +1%
- 2017 +27%
- 2018 +20%
This personal expense inflation is obviously not sustainable at 10% per year- Although I didn’t really notice it because I was too focused on my Savings Rate metric- below is my savings rate over the same period of time.
- 2012 28%
- 2013 48%
- 2014 40%
- 2015 45%
- 2016 45%
- 2017 38%
Obviously since your good at numbers this scenario only makes sense if my income has also had positive inflation over those years- and indeed it has. This shows you why it’s important to look at more than one metric. The majority of the increase in spending had been related to owning a home.
Investment in June
Since I decided that including my spending was not of any value to share I have decided to instead share our savings rate for the month. That is the amount of money invested or principal paid on the mortgage as a percentage of income.
For the month of June;
- Index portfolio: 48% (+18%)
- Mortgage: 16% (-4%)
The decrease in the mortgage percentage looks bad, but in real terms the decrease is only because I received a bonus, which makes it relatively smaller.
Portfolio June 2019
The proportion of my portfolio invested in peer to peer is still decreasing. I don’t have any automatic investments into peer to peer, instead, all my investments are going into InvestNow and allocated into different funds there.
Also, when I see that there are not more loans to fund on the peer to peer networks, and there is a significant amount of money sitting there idle, I withdraw it and transfer it over to InvestNow. So the decrease is going to continue.
I have been procrastinating about what to do with my kiwisaver- I’m now leaning towards simplicity over Juno. Either way, my kiwiSaver value is becoming significant and I am loosing out with my 1.11% fee charged by one of the big banks.
- Australasian Shares – 27%
- International Shares – 26%
- Europe Shares – 0% (-2%)
- US shares – 4% (-1%)
- Total Shares – 57% (-1%)
- Kiwisaver – 10%
- Peer to Peer Lending 19% (-1%)
- Property ETF 11% (+3%)
- Bonds – 0%
- Cash 3% (-1%)
Total Portfolio >100K by December 2019
My goal of reaching $100k invested still stands. I’m now 83% of the way there. I now have only 5 months left to achieve my goal. That means I need to invest at least $3,400 per month.
Another goal I have is to transfer my Kiwisaver to a lower cost growth fund. The current one I have is charging too much in fees. I’m going to look at my options and write a post about what I find.
I hope you enjoyed my financial update. I’m considering including my net worth in a future one. Let me know if you would be interested in that. I still suffer from the stigma of sharing financials with total strangers, it kind of feels like bragging- but in reality, I want to help you out by showing how I’m doing, what I’m doing right, and what’s not working.