October Net Worth Update 2021

For something a bit different I thought I would do a blog post for my net worth update for October. I thought this would be a great way to break it down a bit further and give you an idea as to what my net worth is made up of! This month I was able to increase the total value by a little over $4000, which considering how volatile the stock market has been and how expensive my month has been, I thought was great!

Read on further to see a full break down of my total net worth.

Home Equity

My home equity is sitting just under a third of my total net worth at 31.2%. I calculate this based on my purchasing cost minus my loan amount. This isn’t all useable equity but is the amount I could get back if I were to sell. I bought in July 2020, and now that the market has gone a bit crazy my house is most likely worth more than what I originally paid for it. I haven’t added this into the equation, so I assume my equity may actually be higher than what I’ve used here.

Superannuation

I’ve been in the workforce full time since I was 20 years old, which has allowed me to build a decent super balance. Working as a paramedic, we are also required to make extra contributions. I was told this was due to our high burn out rate, and is mandatory for all SA Ambulance Staff. Before the increase in the super guarantee in July, our employer was also paying us an extra 0.5% (9.5+0.5= 10% total) on top of that contribution. That means that I have been paying about 14.5% into super for the last five years. Our employer is no longer paying any extra, so they are continuing with the 10% (in alignment with the whole of Aus) as well as our 4.5% contribution. I have not made any additional payments on top of that as I would rather invest outside of super so I have access to it before I am 60.

I also received the annual report from my super company and my net investment earnings outweighed my net contributions for the year! This means that my balance is already doing the heavy lifting and compound interest is already starting to take effect.

Shares

October is generally a pretty crazy month in share markets around the globe and is known by some as “The October Effect”. October has had a bad name in finance for over 100 years thanks to a few marked events during the month of October over the years. The last significant downturn was in 1987 yet there is fear that still remains. The stock market generally rises and falls with peoples expectations, so because of this “October Effect”, there seems to be plenty of volatility as people become worried and sell out of fear. This year has been no different, and my shares have been all over the place. It also doesn’t help that China’s second largest property developer Evergrande has been on the brink of collapse, scaring a lot of investors and causing issues in the market over the last couple of months. The Evergrande news brought stocks down in price quite a bit, and I was seeing drops of over 5% some days. As I am a long term investor, this was only good news for me and I saw it as a 5% sale, making October the perfect month to buy. I had some extra cash sitting in my offset so decided to buy some extra shares at a cheap price. The market has rebounded now so my shares are again back into the positive for this year.

This month was also a dividend month, so I was paid about $500 in dividends and that was all either reinvested through a DRP (dividend reinvestment plan) or transferred back into my investment account ready to use for my next investment.

  • US- a combination of two ETF’s – IVV & VTS
  • AUS- VAS ETF
  • NDQ- Nasdaq top 100 ETF (tech)
  • ACDC- Battery & Lithium Tech
  • VEU- All World – US ETF
  • Crypto- Bitcoin & Ethereum
  • Individual Stocks- couple of small cap stocks

Cash

My total cash allocation has decreased in the last month. As I said earlier it ended up being quite an expensive month, I bought and had fans installed in all four of my bedrooms in preparation for the three hot days we have in Mount Gambier in the summer. I also had my electricity, gas and water bills all come in at once which set me back about $400, and I had to buy a new phone as that unfortunately died on me. Despite these extra costs, I still have more than three months of living expenses saved in an emergency fund which is why I also funnelled a bit extra into my shares this month with their decreased costs. Even if I were to have another big expense come up next week I would still be able to pay for it, which is why I felt comfortable contributing extra to my investments.

I am looking to start increasing my cash reserves now that it has been announced that borders are being open. I love to travel and can’t wait to get back into it and to visit my overseas friends. I want to be ready for when I can do this and that means having some cash in the bank!

Disclaimer

Overall, I hope this post gave you a bit of insight into what I do personally. Obviously, it isn’t financial advice and I don’t want you to copy anything I am doing, as it will depend on your individual circumstances. If you have any questions, or want to learn how to invest, please feel free to message me, either on here, Instagram, or Facebook.

If you want to calculate your own net worth, feel free to download my Net Worth Excel Spreadsheet below!

And if you are keen to get started investing but don’t know where to start, give Pearler a go! It is such a simple platform, makes it so easy to get started and also has a great auto-invest feature so you can set up a regular payment and never worry about it again. Click on the link and use the code MINDOVERMONEY for two free trades if you sign up in November!

https://pearler.com/home?deal=mindovermoney

Paying Off Your Home Loan

Congrats on purchasing a home! You are one of the lucky ones in the financial position to own a home. No doubt it took a lot of hard work to get to this position, so well done! Now you may be wondering, should you be aiming to pay off your home loan quicker, or to put that money to use somewhere else? I will explore this question in more detail below!

Why You May Pay Your Home Loan Off Earlier

There are many reasons why you may pay off your home loan sooner rather than later. Below are a few examples:

  • You hate being in debt
    • If you are someone who is pretty risk adverse, having a big mortgage attached to your house may leave you feeling a bit ill.
  • You are putting money away to eventually use for renovations.
    • If you have a redraw facility, you may try to pump some money into your home loan to eventually withdraw to use on future renovations. Rather than taking out an extra loan, you could use extra money saved to fund these renovations, in turn also increasing the value of your house.
  • You don’t have any other money goals
    • If buying a home was the last of your money goals and you are content with everything else with your life, it may be worth just trying to smash down that loan to reduce the interest you are paying on your mortgage!

There are also many reasons why you may decide not to pay off your home loan any quicker. Below are a few examples:

  • You want to invest your money in higher returning assets.
    • Interest rates are at an all time low at the moment, so paying extra off your loan may only be saving you 2-3% per annum. You may instead prefer to invest in shares or another investment property to get you better returns. The Australian stock market typically returns about 8% a year on average which is significantly higher than the 2-3% you’ll save putting that money into your home loan.
  • Your property is, or will be, an investment property.
    • If you are currently living in a property that you plan to rent out, you may not want to pay off your home. The reason for this is that the interest you pay when you rent it out is tax deductible! Therefore it could be more tax effective to have a higher loan with the property and use your excess cash to invest elsewhere or save for another property.
  • You have other money goals that you want to achieve before paying off your home.
    • Again, if you want to save to buy a home or travel overseas, or have any other goals for your money, you probably don’t want to be paying off your home loan sooner. The mortgage is there for 30 years, you don’t want to waste all your time and energy trying to pay it down as quickly as possible when you can enjoy life. The mortgage repayments will never increase, so they will only get easier to pay thanks to inflation.
    • How inflation makes it easier- if your mortgage repayments were $1000/month in 2001 (20 years ago), that would be worth approximately $1600 today. Therefore, while money continues to rise in value, your repayments don’t, meaning they basically get cheaper and cheaper each year.

Still Unsure?

Why don’t you consider getting an offset account with your mortgage? Then you can have the best of both worlds! An offset account is an account that is linked to your home loan, and any money you have in it offsets the interest accrued.

For example, if you have a $300,000 mortgage and you have $50,000 in your offset account, you will only be paying interest on $250,000. This is the method I use, and allows me to save money on interest while also keeping the cash handy in case I need it at short notice. There can sometimes be fees associated with these types of accounts so make sure the savings outweigh the fees! The best way to do this is to go see a mortgage broker!

Final Word

What you decide to do with your home loan is personal and will depend on your own situation. It is important to consider all your finances and come to your own decision. Feel free to use this as a guide or a reference if you may not know what to do.

What does CHESS Sponsored Mean?

CHESS stands for: Clearing House Electronic Sub-register System. CHESS is the computer system responsible for settlements of trades. When you buy or sell shares, the title or legal ownership of those shares are exchanged for money, and this is called the settlement. Therefore CHESS is responsible for effecting these trades, or effecting the settlement. CHESS is also responsible for electronically registering the title of shares on its sub-register. So if you buy shares, your name would be held securely against those shares in the CHESS sub-register.

The main reasons why CHESS benefits investors is because it provides a way to own and transfer share ownership that is secure, efficient, convenient, seamless and also cost effective.

What is CHESS sponsored?

CHESS sponsored means that your shares are registered under your name on the CHESS sub-register. This is generally organised through a stock broker and is one of two ways you can register your shares. CHESS sponsored ownership means that your name will be on the legal title of the shares. You can also register your shares through an Issuer Sponsored sub-register, which is maintained by the company who issued the shares. This means that the company own the shares on the sub-registry, but on your behalf. This makes it slightly more messy and can be more difficult to sell shares and update information. For me, I like the piece of mind of directly owning my shares through a CHESS sponsor.

How to Register Shares on a CHESS Sub-register

To register on a CHESS sub-register, you have to find a stockbroker who will sponsor you on CHESS. The CHESS sponsor will operate your holdings on the CHESS sub-register on your behalf, which in no way changes your legal ownership of those shares. CHESS shareholders are always allocated a Holder Identification Number (HIN) which is kind of like a bank account number. A HIN is a unique number to you that identifies you on the sub-register. Once you have registered, this HIN should be mailed out to you. It is important to keep this in a safe place and protect it like you would a bank account number.

Which Brokers Offer CHESS Sponsorship?

There are a number of brokers to choose from in Australia, and quite a few that offer CHESS sponsorship. The Big 4 banks (Commonwealth, NAB, ANZ & Westpac) all offer their own CHESS sponsored brokerage platforms. These are great if you are already with that bank as fund transfers become quick and easy. Some of these platforms are more expensive per trade than others on the market, which would have to be weighed up by quicker transfer time & ease of use. The big 4 also have international trading and a range of additional features which may make the increased trading costs worthwhile for you.

Other CHESS Sponsored brokerage platforms include Self Wealth, Pearler and Open Trader. These are all quite different and offer a range of features, but all similarly have cheaper trading fees than the big 4 banks.

I personally have spent most of my time investing with NAB trade. When I first started investing I was banking with NAB, so it was the easiest choice and was very convenient. Since I bought my home I have moved my banking to Bank West who do not have a brokerage platform, so I am now using Pearler as NAB trade is no longer convenient. It is still early days with Pearler but am so far enjoying the platform and really like the features included. I also like the investors they are trying to attract, which is long term, passive investors like myself.

If you want to use Pearler for your investing, use the code MINDOVERMONEY to get a free trade!

If you are feeling overwhelmed about options for brokerage platforms, don’t be. Your first choice doesn’t have to be perfect, it is more important to just get started. Like me, you can always change later, or even have multiple platforms at once. It is free to sign up, the only fees are trading fees on the CHESS sponsored platforms I listed, so you have nothing to lose! In my opinion, CHESS sponsored is the way to go, however there are other options. Micro investing isn’t CHESS sponsored but is a great place to start, and there are also other platforms that offer even cheaper fees if that’s something you are interested in. For Micro Investing, have a look at my blog post Battle of the Micro-investing Apps, and for other cheaper, non-CHESS sponsored platforms have a look at Vanguard Personal Investor, Spaceship and/or Stake. I will write another post later on these non-CHESS sponsored options.

How I Invest

I thought this week would be a great time to share how I invest. Before I dive into the post I just want to say that this is in no way financial advice, this is just what I do based on what works for me. I just want to show you an example of a diversified portfolio. You should do your own research and think about your own goals to determine what you should invest in.

What Platform Do I Use?

You may have seen me talk about it on my Instagram and other previous blog posts, but this year I have just made the move to Pearler for my brokerage account. When I first started investing I signed up with NAB Trade as that was who I banked with. NAB trade is great for those who want to research extensively and pick some individual stocks, but for me I just wanted something a bit simpler and cheaper! NAB trade offers trades at $14.95 each, and has plenty of market data available. I like to invest in ETF’s at set intervals & therefore don’t need that data. That is where Pearler comes in, its cheap, simple and makes it so easy to invest regularly with their auto-invest option.

As you can see below, NAB has plenty of tools but it can be quite overwhelming, especially for someone new to investing. Pearler keeps it simple and is all about long term investing, rather than trading. This is what I love about pearler and why I now invest with them.

The home screens alone show you how different they are! If you want lots of research NABtrade may be for you. I find most of the stuff on there you can find online anyway, so if I ever do need to research I just look online before buying with Pearler.

What Do I Invest In?

Over the years since I have started investing, what I have invested in has changed slightly. My approach however, has stayed the same. My strategy is to invest in a well diversified portfolio of exchange traded funds (ETFs) that include companies from all over the world. Initially, I had most of my money tied up in Australia, which is still the case, however I am slowly increasing my exposure to the US as they are the largest and in my opinion most powerful market in the world. In order to get this worldwide exposure, I invest in three ETF’s:

  • Vanguard Australian Shares ETF (VAS)
    • Top 10 holdings
      1. Commonwealth Bank of Australia
      2. CSL
      3. BHP
      4. Westpac
      5. NAB
      6. ANZ
      7. Wesfarmers (Coles, Kmart, Bunnings)
      8. Macquarie Group
      9. Woolworths
      10. Telstra
  • Vanguard Total US Share Market (VTS)
    • Top 10 holdings
      1. Apple
      2. Microsoft
      3. Amazon
      4. Facebook
      5. Alphabet Inc Class A (Google)
      6. Alphabet Inc Class C (Google)
      7. Tesla
      8. NVIDIA
      9. Berkshire Hathaway
      10. JPMorgan Chase & Co

  • Vanguard All World excluding US (VEU)
    • Top 10 Holdings
      1. Taiwan Semiconductor Manufacturing
      2. Tencent Holdings
      3. Samsung
      4. Nestle
      5. ASML Holding
      6. Roche Holding
      7. Alibaba Group Holding
      8. Toyota
      9. AstraZeneca
      10. LVMH Moet Hennessy Louis Vuitton SE

These three ETF’s make up roughly 80% of my entire share portfolio, and give me exposure to 1000’s of companies all around the world.

My Target Pearler Portfolio:

Vanguard Australian Shares (VAS) 35%
Vanguard US Total Share Market (VTS) 50%
Vanguard All-World Excl. US (VEU) 15%

Use code MINDOVERMONEY for a free trade, or head to the link:
https://pearler.com/home?deal=mindovermoney

Why Do I invest This Way?

As I said earlier in the post, my aim with my investment portfolio is to be diversified across the globe. The best way to do this is through ETF’s, as one trade instantly invests me into hundreds of companies. This means, rather than buying the top 200 or 300 Australian shares individually, which would require very large amounts of money and cost thousands in trading costs, I can buy one ETF, for example VAS, and instantly own the 300 companies. They are the perfect way to get exposure to some of the best companies in the world.

Another reason why I invest in ETF’s over single stocks is to decrease the risk associated with investing. If you invest in a single company, you are exposing yourself to more risk. If they were to go bankrupt, you would lose all your money. They also may perform worse than the overall market if they have a bad year or just aren’t doing as well as other industries . By investing in an ETF, the only way for you to lose all your money is for every company in that fund to go bankrupt. If every company in the top 300 companies in Australia go bankrupt, we probably have more to worry about than our investment portfolio! The other great thing is even if a few companies go bankrupt in the top 300 Aussie stocks, you may have the share price dip for a period of time, but eventually those companies will be replaced by other companies and the share price will continue to grow as the companies grow.

The last reason why I invest in ETF’s is because they are easy and cheap! ETF’s literally just track an index (for example the Aussie market or US market), so there is no fund manager picking stocks. Because of this, the management costs are super cheap! Were talking less than 0.5% a year, or in the case of VAS- just 0.10% per year. If you invest in funds run by fund managers selecting stocks, you could be looking at a 2% fee. That means you would need to return 2% a year just to break even! I also love ETF’s because they are easy and require no maintenance on my end. I just buy at regular intervals, I don’t have to research or keep up to date with stock trends, and they just keep ticking along earning me money.

Summary

I’d encourage you to get started investing! It really is easy once you wrap your head around it and can really help set yourself up for the future. If ETF’s sound like they may be for you, I’d encourage you to sign up to Pearler and have a look. They are great for ETF investing, and really promote buying and holding for the long term. If you would like to do some stock picking/research or more active investing, I’d suggest you have a look at a platform like Self-wealth. They offer plenty of research and also offer cheap trading costs at $9.50 per trade. The big 4 banks also offer great market research and data but are generally a bit more expensive per trade, ranging from $14.95 to $19.95 per trade.

Resources

Pearler
Low cost investing- $9.50 per trade
Promotes buying ETF’s and holding for the long term
Use code MINDOVERMONEY for a free trade
https://pearler.com/home?deal=mindovermoney

Self Wealth
Low cost investing- $9.50 per trade
Promotes active trading
Plenty of market data
https://www.selfwealth.com.au/

ETF resources

ETF’s can be bought like any other share on the share market- through a broker. For more information on different ETFs, below are the ETF providers websites:

Vanguard
https://www.vanguard.com.au/personal/en/etf

BetaShares
https://www.betashares.com.au/

iShares/Blackrock
https://www.blackrock.com/institutions/en-au/investment-capabilities-and-solutions/ishares-etfs_en_AU

Ways to Cut Expenses

Want to cut expenses but don’t know where to start? Cutting out a weekly coffee probably isn’t going to cut it. Read on for some sure fire ways to save some money.

Save on Your Phone

One way I have saved a fortune over the years is by saving money on my phone bill. Going to a prepaid/postpaid option was a great start, going from $80 a month to $30 a month almost instantly.

The other way I have saved is by buying a refurbished phone outright. In the last few years I have been buying phones from Certified Tech Direct, saving me hundreds of dollars. They have always been in excellent condition and I’ve never had an issue. I know multiple other people who have bought from Certified Tech Direct and had great reports. If you are looking to save extra cash and don’t mind buying last years model of phone, this may be a great option for you.

I only know people who have bought from Certified Tech Direct so therefore cannot vouch for other refurbished phone companies. I would recommend buying only from companies/sites that offer full refunds if the phone is not what you expect, or at least a twelve month warranty. That way you will have some piece of mind if the phone doesn’t perform as it should.

Save on your Car

Expensive cars are overrated.

Sure if you love cars and it’s really important to you, than go for it. If you don’t really care, and are paying big bucks on a car loan for a car that is going down in value everyday, it may be worth selling it, clearing the loan and buying something a bit cheaper. At the end of the day, a car is there to get you from A to B. You may need to fork out a bit more if you want a 4wd or a 7 seater, but if all you need is a car to drive, 10k is plenty for a great second hand car that will do the job. These days you can get a lot of the smart features for a fraction of the cost, so paying hundreds a week in loan repayments just for heated seats and a sun roof just doesn’t seem worth it to me.


Decrease Living Expenses

Another big way to cut expenses is to bring down your living expenses. Rent and bills take away a large portion of our income so if we can cut these down we can make bulk savings. Cutting living expenses will take some sacrifices, so it is important that the sacrifices are worth it for you. To decrease rent you make look at downsizing and moving to a smaller home, or even getting another renter in to help pay the rent and bills. Being conscious of your energy and water consumption can also go a long way to cut back on bills. Turning off lights once you leave a room, putting on a jumper or blanket rather than the heater, and cutting down showers to only a few minutes are all small things that will add up in the long run.

Cook at Home

This is an obvious one, and I think most people know that this is a great way to save money but many are reluctant to do it consistently. Convenience is often what costs us the most, and taking the time to prepare meals for the week are a great way to save cash. Setting up a meal prep day to do a bunch of cooking seems like a popular approach. I also find it is great to have some freezer meals or easy things to cook like pasta kept in the pantry for the nights where I can’t be bothered cooking and am thinking of getting some takeaway. Heating up a frozen pizza is way cheaper than buying one from dominos and to be honest will probably taste better too.

Going out is always fun and enjoyable, so trying to cut this out completely in my opinion isn’t worth it. However limiting this to once a week and cooking the rest of the week will help your budget greatly. Having planned meals out in my opinion is fine, its more the convenient take out on weeknights or for work lunches that really blow out the budget.

Get a Better Rate

Do some shopping and find a better deal. Loyalty tax is a real thing & the longer you stay with a company, the worst off you will probably be. Phone, insurance and other companies give their new customers much better deals then their existing customers, so it pays to move around. It can be a bit of work to start with but could be saving you hundreds to thousands of dollars making it totally worth it.

Summary

At the end of the day, it is going to come down to what is and isn’t important to you when you try to work out where you can cut expenses. This list may not apply to you at all if you highly value all of these things. In my opinion, it is all about compromise, rather than completely eliminating expenses. Buying a middle of the range car with cash instead of a top of the range car with a car loan will do great things for your savings. Eating out once or twice a week instead of buying lunch every day will save you heaps. Living in a slightly older or smaller house will save you plenty in the long run. Deciding what isn’t as important and cutting expenses there will be the best option for your happiness and your wallet.