Net Worth report – May 2019

This is our monthly net worth report for May 2019. Winter finally struck, with snow fell in the mountains and the heaters are on.

This month I have restructured the report a little bit in order to match it to our Stress Free Money pyramid.

Stress Free money pyramid by SmithMoney.
Stress Free Money Pyramid

By following the building blocks of the Stress Free Money pyramid, we take the angst out of our personal finances. We know what comes in, where it goes and rarely get surprised. We were even ready for Mr Smith’s redundancy. Money is there to help you – it shouldn’t cause stress in your life.

Know your cashflow

May 2019 cash flows

Our monthly cashflows are still negative, as we continue to look for a new role. Cash outflow was a little higher this month, as we made three mortgage payments.

Cash flow sankey chart
May 2019 cashflows

Income

Our income this month was still small relative to when Mr Smith had a job, but there were a few great income wins.

 $
Total cash2,542
Interest Income261
Medicare refund113
Expense reimbursement1,855
Cashrewards51
Sale of items262

On the positive side, we did receive some interest and dividend income in from our investment portfolio. Our other income includes $215 from selling old baby equipment and some cash coming from our Cashrewards account.

Cash inflows are not expected to change until one of us gets some paid employment. Technically, I am still on “leave” having been paid a lump sum for my redundancy, so therefore I am still employed, sort of, I suppose.

Expense reimbursements are where we have spent the cash (say on Cost Center #1’s braces) and some of this is reimbursed to us by his mother.

Passive Income to Expenses ratio

Our passive income to expenses ratio was 1.7%. Down a bit because of the lack of dividends in May, but trending in the right direction. The aim is to have passive income covering all our expenses as some point. One day…..

Passive income as % of total expenses
Passive income as % of total expenses

Expenses

Our expenses were down a little this month, mostly due to out household and travel expenses being lower.

Top 10 expenses$
Total157,26
Mortgage2,894
Motor1,800
Groceries1,283
Dining1,202
Health1,137
School Fees1,000
Clothing779
Household740
Insurance703
Utilities495
Remainder3,693

We had a few, higher than normal, cash outflows. Our car’s front tyres needed replacing, so that cost us $473 and our annual registration and insurance was due – another ~$800 out the door. Good news is that they were one offs until next year!

The other big movement was expenditure on household goods. We had more electrical repairs done to the house and had to purchase a few items at Ikea (which of course all adds up!). Finally, dining out was way up on last month. We had a lot of celebrations this month with Mrs Smiths 40th birthday. Every dollar was well spent in this regards!

Time to zero analysis

With the lack of incoming income, I’ve done some analysis on how long we can survive on our current financial resources. I looked at three scenarios, a high, average and low case and calculated at what point in time our cash would run out. It’s slightly sobering. We run out of cash any time between December 2019 and May 2020, depending on spending levels. Our current spending is tracking somewhere around the average spend scenario at the moment.

Zero day - how long till we run out of cash
Time to Zero cash analysis

Dollar per day measurement

I track a lot of our expenses on a “dollar per day” basis. I find that this gives a much better view of our costs over time. The big leap in the mortgage was a 10 basis point rise in mortgage costs last year. We have probably the lowest mortgage interest rate possible – I keep a very close eye on it. I also expect interest rates to be cut some time this year, which will save a lot. Hopefully we get an interest rate cut soon. There is plenty of media chatter about the RBA reducing rates in the face of a slowing economy. Fingers Crossed!

Dollars per day

The biggest components are the mortgage and food. These are pretty stable month to month. Its the other expenses that bump around a fair bit. Some expenses, like car registration or utilities, are lumpy and only occur quarterly or annually. For example, the big spike in Jul 2018 was a tax payment we made.

The mortgage dollar per day measurement is trending downwards. As we pay down the home loan the amount of interest was pay reduces. The impact of an amortizing home loan. I would also expect this to drop further with the recent interest rate cuts made by the RBA.

Dollars per day mortgage measurement
Mortgage dollar per day

We also break our spending down into discretionary and non-discretionary categories. April discretionary was higher due to our trip away. We would like to see the amount of discretionary expense come down over the next little while.

Net worth spend type
Discretionary spending as a percentage of total spend

Save then Spend

We are in a dis-saving period, given the lack of employment income. While we would love to be saving, that’s not occurring until someone gets a job!

Control Debt

Our debt is under control. We ended the month with a little bit on the credit cards, but these amounts are easily offset by our cash holdings.

Invest Wisely

Our net worth fell again this month, due to limited cash inflows and capital gains falls from falling equity markets.

Investment portfolio

Our investment return for May was (0.6%), which isn’t surprising given falling equity markets. The biggest increase was our holding of gold, which increased mostly due to falls in the AUD. The biggest fall was our brokerage account, which fell because of one, concentrated, holding. Our only cash income this month was from interest on cash.

May 2019 monthly returns by account type

Our investment allocation is still mostly in cash, until we start getting a higher income in. We have good exposure to equities and bonds through our retirement accounts and a small amount of direct holdings.

Given the higher cash holdings, we are obviously under weight all asset classes. I would expect this to change over time.

House Price

Our house value continued to fall, in line with the rest of Sydney. House price data is a little bit uncertain. I have used a Sydney-wide metric from CoreLogic monthly index to calculate the values below. I haven’t updated the house price data in our net worth for a while, as I’m not sure that our house price fall is consistent with Sydney-wide falls.

Give Back

We use Kiva to make loans to entrepenures in less developed countries. We write up a separate report for our Kiva lending.

Jim Smith

James Smith is a personal finance expert with over 20 years experience. He believe that money should not be stressful. By using the Stress Free Money pyramid it helps everyone achieve their financial dreams.

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