Category: Investing

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2023 Goals Review And 16 Months Progress Report

It is the end of April 2024 as I write this – so a review of my 2023 goals is long overdue. Apologies, my friends!

My word in 2023 was Adventure. I wanted to discover new experiences and activities as I prepare for retirement.

Well … there were two new big experiences in 2023.

1. Working a second job or as the young ones call it, a side hustle

2. Having Mum who has dementia in respite care at 2 different aged care facilities

There were also 2 overseas holidays in there somewhere …

1. Working from home

Working a side hustle from home is wonderful. I finally get to experience what working from home feels like and … I love it!

As a healthcare worker through the pandemic, I still went into work every day so I never got to experience the highs and lows of working from home that the majority of workers experienced.

But it is time consuming. I work one full day plus before and after my main job which doesn’t leave me much time to do anything else. There are upcoming changes – I’ll keep you posted when they eventuate later in the year.

2. Mum in aged care

Having Mum in respite care twice in aged care facilities was an adventure I wouldn’t wish on anyone. The emotional toll was horrendous. Watching her not coping in the facilities was very difficult. It will not get any easier as her dementia progresses and Dad needs time off from being her primary carer.

All right, let’s recap on what my goals were in 2023. I had 4 financial and 4 non financial goals. How did I go?

 

Goal 1 - Invest $30k in my shares portfolio

This goal was not accomplished because of Goal 4!

A reminder – my shares portfolio is what I will use to fund the 5 years of living expenses when I retire at 55 as I can’t access my superannuation (retirement account) until aged 60. 

My financial adviser, Deline assured me that I was on track to retire at 55 (HOORAY!!!) and that I could STOP investing in my shares portfolio. At this stage, the balance was not where I wanted it to be but I had to trust the math.

On a side note, the balance as at the end of April 2024 has exceeded that figure in my head – the figure I thought I needed to see before I could stop investing. So I’m very glad I listened to Deline.

I must admit I couldn’t stop cold turkey. I reduced the amount for a couple of months before stopping completely. But when the market was down in October/November, I couldn’t resist and invested some side hustle income.

In the end, I invested about $14k which included cash dividends received.

Goal 2 - Replenish emergency fund

I feel secure having 6 months of living expenses in my Emergency Fund. It was fully fiunded but I raided it to replace major appliances that died in 2021/22.
 
This goal was finally accomplished in May 2023. It’s taken more than a year and accomplishing it felt really good because it was a goal carried forward from 2022.

Goal 3 - Save $5k in home maintenance fund

This goal was accomplished, thanks to my side hustle income.
 

So I decided to aim for $10k.

I always wanted to have $10k in my home maintenance fund but didn’t think I could achieve it in one year so aimed to save $5k instead.
 

Because of this fund, I was able to take advantage of state government rebates and installed an electric heat pump hot water tank.

My original gas hot water tank was 7 years old. I didn’t want it to die in the middle of winter, forcing me to decide quickly to install anything recommended by the plumber. Which was what happened previously.

This is part of my plan to switch to an all electric house ie bye bye gas forever. There is still the central gas heating and stove to go – I’m waiting for more government rebates.
 
By the end of 2023, the Home Maintenance Fund was 90% funded.
 
Since I’ve been regularly contributing to this fund, I haven’t needed to raid my Emergency Fund.

2024 update – the dishwasher’s electronic control panel decided to die out of warranty, of course. So the home maintenance fund came to the rescue again.
 
And in February 2024, the fund is fully funded, YAY!!!

 

 

 

Goal 4 - Engage a fee only financial adviser

Mission accomplished.
 
I didn’t have a good experience at the start of 2018 after I’d pay off my mortgage and was wondering what to do with the ‘excess’ money that would have gone to the mortgage.
 

I had about $10k surplus at the time. I knew I should invest it but didn’t know what to do. No one was interested in talking to me. The guy at the bank said it wasn’t worth my while to engage him.

But thankfully, since then I discovered the FIRE community, educated myself and improved my financial literacy significantly.
 

All the saving and investing I’ve done so far is DIY. So I wanted an expert to cast their eyes over my numbers and tell me categorically if I’m heading in the right direction. I figured there is still time to course correct if I’m not!

I found Deline from Instagram. I had been following her for a while and liked her posts so I felt comfortable reaching out. Knowing that she understood FIRE was also important to me. It saved lots of explaining, haha.

Over the course of a few months and 3 meetings over Zoom, she worked through all my numbers. Based on what I told her I’d like to spend in retirement, she confirmed that I was on the right track. Phew! And could in fact, increase my spending a little. Believe me, hearing that was so comforting!

And as a result of her advice, I started new goals which I’ll detail below.

 

Goal 5 - Declutter

This goal was a massive fail!

I even enrolled in Joshua Becker’s 12 week online course, Uncluttered but didn’t do the work. The timing was unfortunate because the side hustle was starting at the same time. I can access the course at any time but haven’t done so again.

I just work in my cluttered study with towering boxes of stuff around me …

Sigh! I’m thinking this is one of those goals that will be accomplished when I finally retire – surely there’ll be no excuses then!

Goal 6 - Go to bed at 11pm

I would describe this as a semi failed goal. 
 
But I’m not giving up.

I succeed for the most part but get derailed on nights when I don’t have to work the next day.
 
This will be an ongoing goal.

 

Goal 7 - Go outside for 30 minutes every day

This goal can also be described as a semi failed goal.
 
I definitely do not achieve it daily but will try to make up for it on weekends. What having this goal has achieved is to raise my awareness of how little time I spend outdoors. It is much easier to achieve when I’m on holidays and exploring new territory.
 

So once again, this will be an ongoing goal.

 

Goal 8 - Do something new or visit somewhere I've never been before every month

This was definitely much easier when I was on holidays and exploring new places. I found it much harder to do at home though it started off well at the beginning of the year.
 

I visited and joined new libraries. Ok, this may have contributed to the semi failed status of Goal 7. I was able to borrow more books on my Libby app 🙂 And ended up reading 93 books in 2023.

Discovering park runs also contributed to time spent outdoors. I was participating in a 5km park run every week. And even participated in one for 2 weeks in London. But once I came back from my holidays, it was winter and I never went again until March 2024.

 

I visited Sydney, London, Amsterdam and Hong Kong in 2023. There was some work involved in Sydney but overall, I was on holidays.

I certainly enjoyed new experiences in these cities I’ve visited before in the past.

 – pattiserie/cafe crawl and omakase in Sydney
– explored canals in London, West End shows and of course, afternoon teas in various establishments
– visited art galleries, museums in Amsterdam and The Hague; enjoyed learning about windmills in Kinderdijk
– ate my way around and hiked new-to-me trails in Hong Kong. It was also a new experience to win a flight ticket to Hong Kong during their promotion to attract tourists back to the city
 
And now we come to the additional financial goals I set after the consultations with my financial adviser.

 

New goal 1 - Future car fund

I currently drive a work car so will need to purchase a car when I retire. The plan is to buy the car I’m currently driving from my employer.
 
The set amount from my weekly pay that was going to purchase shares was diverted to this fund instead.

It was 74% funded at the end of 2023.
 
2024 update – I am ecstatic to report that it is now 100% funded by the end of April 2024! Vroom vroom!!

 

New goal 2 - 2 years of living expenses cash buffer

The short answer is I did not make a start on this fund in 2023. 
 

At first, my plan was to use the side hustle income to save towards the 3 cash goals – home maintenance fund, future car fund and 2 years of living expenses fund.

In the end, I found it easier to use my side hustle income (which is variable per month) for the home maintenance fund and a regular amount from my main job towards the car. It was driving me insane watching all the funds grow at a snail’s pace.
 

Now that both the smaller funds are fully funded, I will direct everything towards the 2 year living expenses fund. And when this is fully funded, I can retire!

The purpose of this fund is to ensure I have cash on hand in case the market falls which in turn means the value of my share portfolio falls, just when I need to access funds at the beginning of my retirement. I will draw on my cash reserves instead of selling shares in that event.

More progress report …

Annual expenses in 2023

I spent 13% more in 2023 compared to 2022. 
 
The extra expenses were due to general inflation but the main increase was in home maintenance – installing the electric heat pump and fixing the electrical switchboard. I also started having a fortnightly cleaning service from September 2023, fully funded by my side hustle income. My travel expenses were roughly the same as in 2022. Food costs were 1% higher.

My income increased by 25%, thanks to my side hustle.

My savings rate was 42% (based solely on after tax income) which was a small improvement (increased by 3%) compared to 2022.

 

Net worth

My net worth grew by 21% 🙏
 

I have not included my paid off home in this figure. I don’t plan to move and haven’t kept up with the value of similar properties in the area. There is a lot of construction work in my suburb, with old houses replaced by gigantic units.

My net worth therefore consists of the value of superannuation, shares portfolio and cash accounts.
 
There were also 2 exciting milestones reached in the past 16 months.

 

Milestone 1 - $1M invested

My investments totalled $1 million 😮 at the end of 2023!
 
This is purely a combination of my superannuation (retirement account) and the shares portfolio outside of superannuation.
 
It wasn’t something that I was looking out for so it came as a surptise when I calculated my net worth at the end of December 2023 and realised a significant milestone was reached.
 
The predominant feeling I felt was RELIEF. The “end” is truly in sight now.

Milestone 2 - Superannuation balance doubled

My superannuation balance has doubled since 2018, the year I started to pay attention to it. During this period of 6 years, there were only 2 years when I maxed out the contributions.
 
When I reached Coast FI in April 2021, it had increased by 1.5 times. Since reaching Coast FI, I reduced my salary sacrificing drastically and relied mainly on mandatory employer contributions.

I cannot access my superannuation until 2031, when I turn 60 and no longer working. That’s 7 years away. Dare I hope that the market will be kind and another doubling occurs? I’ll update you on the progress 🙂

 

Final Thoughts

Until I sat down to write this post, I had no idea of how much was achieved in 2023!
 

Financial goals are being ticked off and milestones reached that I wasn’t even paying attention to.

And having only one more financial goal to aim for before I can quit work is doable even though the amount I need is quite high. But I still have two and a half years to go.
 
I did not factor in the time required for my side hustle in 2023. I am faster at the work now but the workload has also increased in 2024. But I am most grateful for the income it’s bringing in and the financial goals I’ve been able to tick off, purely because of the extra income. So I’m not complaining.
 

Overall, while my non financial goals were only semi successful, I’m happy to continue trying – I was aiming to enjoy the process and not focus on outcomes so much.

There you are – that’s my 2023 done and dusted. Follow me on Instagram or Facebook if you would like more regular updates or progress reports.

What will the rest of 2024 bring, I wonder?

 

Is it too late to ask ... how was your 2023?

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Reinvesting my dividends to grow my biggest passive income stream

In my previous post, I wrote about increasing my income streams and desiring passive income, in particular. I define passive income as income that I make in my sleep or income produced without much effort from me.

Yes, I know – this is everyone’s dream, isn’t it?

Ah, but I am a dreamer 🙂

I only started to track my income recently. And to my surprise, dividends from my share portfolio was my BEST source of passive income.

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What are dividends?

When we buy shares on the stock market, we are essentially buying a part (or a share) of a company that is listed on a stock exchange.

Companies listed on a stock exchange allow investors like you and me (ordinary people) to own a part of their company. 

As a reward, the companies may pay us a dividend or a share of their profits. 

These dividends are typically paid a few times a year.

And are paid according to how many shares you own at that time.

Reinvesting dividends

Of course once you receive your dividends, it is up to you as to how to spend the bonanza 🙂 

However when you first start investing in shares, it is not quite the ‘bonanza’ – it takes time to build up your shares and for those dividends to grow. Unless you win the lottery or inherit a big lump sum of money that you can invest all at once.

If you are like me and depend on an active income stream (aka a full time job) to fund share purchases, then it will take time to slowly build that portfolio and hence, dividend income.

I set aside an amount each week from my pay to invest in shares. 

But in addition to this strategy, I choose to reinvest my dividends ie I use my dividends to purchase more shares.

Therefore reinvesting my dividends is the extra fuel I use to build my portfolio. 

My passive income is building my passive income.

How to reinvest your dividends

There are two ways in which to reinvest your dividends – manually or automatically.

You accumulate dividends to a certain amount and decide which share you’d like to purchase. It can be more shares of the same company or a different company. You then purchase the shares via your brokerage firm. This is the manual method.

Personally, I like the automatic method better.

Some companies offer a dividend reinvestment plan (DRP). 

This means that the dividends can be used to purchase more shares in the same company. Typically there is a slight discount on the share price when compared to the market price that day.

Instead of getting a cheque or cash deposited into your nominated bank account, you will get more shares in the company.

Because dividends are paid per share, you will receive more dividends based on the increased number of shares the next time dividends are paid. 

It can snowball from here.

You still need to pay tax on the dividends, regardless of whether you receive cash or use it to buy more shares. Because it is considered as income ie the ATO doesn’t care how you spend it.

Dividend reinvestment plan - how does it work?

Companies use share registries eg Computershare, Link Market Services etc to keep track of their shareholders, communication about dividends and so on.

Find out which share registry your company uses and set up online log in with the share registry. This information should be on the company website or on the paperwork which you’ll receive after your share purchase.

Log into the share registry and check if the company offers a dividend reinvestment plan.

I always elect this option if it is offered.

Ok, so how does it work?

Say, we purchase 100 shares in Company A

Twice a year in March and September, Company A pays dividends.

It announces in February that it will pay 10 cents per share in March

Woohoo, that means we’ll receive 10 cents x 100 shares = $10

On the day dividends are paid, instead of $10 hitting our bank account, it will be used to purchase more Company A shares.

For example, Company A shares cost $1 per share – we’ll receive 10 shares in March

So our total number of shares is now 110.

In September when the next dividend is payable, it will be calculated based on 110 shares.

Let’s say, Company A chooses to pay another 10 cents per share. We’ll receive 10 cents x 110 shares = $11

Then this $11 will purchase more shares at say, $1 per share which means we’ll now have an additional 11 shares and our total number of shares = 121

Of course this is a simplistic example. 

But it demonstrates how your shares can grow without any effort from you besides logging into the share registry and ticking yes to the DRP. 

And you haven’t contributed a single cent from your active income to grow this portfolio.

My dividends are increasing every year!

Advantages of dividend reinvestment plans

It is automatic. What can I say – I am a lazy person. Full stop.

Once it is set up, I know that every time dividends are paid, I will get more shares. And over time (sometimes a very long time), my shares are growing and I’ll receive more dividends next time. And more shares. The cycle goes on.

I don’t have to remember to reinvest those dividends. 

And be tempted to use the money for other stuff while it is accumulating. This is the main benefit for me – kind of enforced savings.

The other advantage is that I don’t pay a brokerage fee for these share purchases.

Disadvantages of dividend reinvestment plans

Depending on how much the dividends are, it may not be enough to purchase a single share in the company. It is then kept until the next time dividends are paid. Depending on the number of shares you hold, the dividends paid and the share price, it may take a few dividend cycles before you can purchase a single share.

For example, one share in VAS costs $90 and you own 50 shares at the time dividends are paid. Let’s say VAS decides to pay 50 cents per share. That means you’ll receive $25 for your dividend. This is not enough to buy one share at $90.

This $25 is kept in trust until the next dividend is paid.

VAS declares that it’ll pay 60 cents per share the next quarter. You still own 50 shares. So your dividend will be $30 this time. Combined with the previous dividend of $25, you still don’t have enough to purchase a single share, assuming that the share price is still $90. 

As you can see, it may take some time to increase your shares. 

And those small dividend payments are not accumulating interest while they are held in trust.

Records must be kept as to purchase price – you’ll need it when it’s time to sell those shares. I use Sharesight (affiliate link*) to track my portfolio so I don’t have to worry too much here.

(*affiliate link – you get 10% off your annual payment when you sign up using my link, even if you start off with a free account)

You do need to review

While it is convenient to set and forget, you need to review at least once a year if it is still a good strategy to have a dividend reinvestment plan in place.

If the company isn’t performing, you may not want to continue investing in it. But then again, all companies have up and down times.

Because I only invest in LICs and ETFs from now on, I am comfortable with turning on DRP and leaving them turned on for the time being. All my individual shares (purchased before I knew about LICs and ETFs) are in the top 200 of the ASX and provide good dividends so I’ve left DRP turned on for the ones that do offer DRPs

Another time to consider turning off DRP will be at retirement when you can use the income to pay for living expenses.

Right now, I’m in the accumulation phase of my investment journey. 

Therefore I’m more than happy to keep reinvesting those dividends and to use dividend reinvestment plans to grow my portfolio.

 

Will dividend income be enough in early retirement?

My 3 phase retirement plan thus far has been –

Phase 1 – build a share portfolio outside of superannuation (retirement account) and save enough cash to fund years 55 to 60 (my bridge the gap fund)

Phase 2 – access superannuation at age 60

Phase 3 – sell paid up home to fund entry into aged care facility or other advanced care when I’m really really really old 

So far, phases 2 and 3 are taken care of, in that my home is paid off and by my calculation, my superannuation will be enough by the time I turn 60

That leaves phase 1.

The plan was always to sell down this share portfolio to fund the five years before Phase 2 kicks in. Because I don’t believe I have enough time to build up a big enough portfolio to generate the dividends I’d need. (The cash is to counter sequence of returns risk – I have not made any head start here, I admit)

I only have 5 more years to build this portfolio if I stick to my plan of retiring early at 55.

But you know what? I am sooooo attracted to the idea of living off my dividends. 

I just feel ‘safer’ if I can use the income generated, rather than selling those assets.

So now the experiment begins!

My dividends this calendar year, up to the end of September can cover 15% of my annual living expenses. I know it’s a long way to 100% but … I am keen to see where this is heading.

Final thoughts

Reinvesting my dividends automatically via dividend reinvestment plan is the best way for me to grow my portfolio. It is in addition to investing funds monthly.

I am using my passive income to grow future passive income 🙂

I have no idea if I can eventually live off my dividends but hey, I’m going to grow my portfolio regardless.

How do you reinvest your dividends?

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