Safe Withdrawal Rates

Interesting simulations of safe withdrawal rates over longer time horizons by ERN. The lowest withdrawal rate simulated is 3% p.a. Ed Thorp states that 2% is actually the safe capital preserving withdrawal rate. Our current spending is about 2.75% of estimated total net worth including the inherited money. But I expect our spending to continue to increase faster than inflation for a long time to come.

Art and Net Worth

On one of the many documents we've been sorting through my mother estimated her and my father's net worth in 1995. The number she came up with is equivalent to about USD 1 million today (£350k at the time). But she estimated that an inherited artwork* they owned was worth £20k (USD 56k today). The next year the artwork sold at auction for... £750k (USD 2.1 million). Another letter from my father to his brother in 1954 stated that the art had been valued at USD 880 or around USD 8500 today.

*The art consisted of panels like on this cabinet, but not the cabinet itself:

Sorting Things Out

We're sorting through everything in the apartment - first finding things specifically identified in the will to be given to various people. Mostly jewellery and silverware. But also a stamp collection, which I am supposed to get. We found most of them, but not all. Searching through boxes of documents - recycling a lot of routine financial statements and reserving others for further study. There are files and boxes of letters from the early 20th Century and even greeting cards from the 19th Century. Old books, some family books with names in, others that my mother saved from destruction. We are sorting books into ones we are interested in and others to probably give away. We decided to sell the apartment within a year - if we sell in less than 18 months our mother's previous tax status will apply and we won't need to pay capital gains tax. The apartment will need a lot of work to put it into saleable condition. But there is plenty of demand. My brother keeps getting asked if he is going to rent it out. But like me, he is not keen on owning physical assets directly....

My Mother

This weekend I am traveling to the other side of the world to visit the "home country", though it's not the country I grew up in.

Just over three weeks ago my mother died. She had dementia for several years. When I visited in December, things didn't look good, but she went through a few more cycles of getting a little better and then worse again. Still when the news came it was a shock, though it was so long expected. Maybe partly just finally hearing the bad news. I had decided beforehand not to rush to the other side of the world, right away. The custom there is to hold the funeral on the same day if possible. So, I would miss the funeral or hold everyone up. It seemed better to try to go on with life somewhat normally for a little while than inconvenience everyone here to sit on a plane and in airports on my own for two days each way. Now I am going for the ceremony when the gravestone is "set".

I am also going to work with my brother on sorting all the legal and financial stuff out. Things are actually quite well organized, especially as my brother and I managed all my mother's finance and care etc in the last few years, but there are still some uncertainties. My brother will have to handle most of the organizational details. The main  thing I have been involved with so far is paying the termination payment for the care worker who looked after my mother in the last 7 years. Her devoted work meant that my mother could continue to live at home and did not move to a nursing home or hospital. My brother and I shared in making the payment, which includes paying out her nominal superannuation savings - there aren't real accounts for foreign workers superannuation it seems. We transferred the money to her daughter in her home country. My mother's bank accounts are all frozen now until the probate is sorted out, so we have to take care of all these expenses. Luckily we have the means to handle this kind of thing - my share of this payment was equivalent to a few months salary for me - easily.

Out of IPE

I sold my 700,000 shares of IPE.AX on Friday and today at 13.5 cents each. This was after the company announced that due to a potential performance fee the net tangible assets of the fund were likely 13.8 cents a share. They will pay out next month a 7 cent per share distribution that is about half unfranked dividend and half capital return. If I had kept my shares I would have got a $A49k distribution with about $A11k of tax payable on it this year. By selling now and taking a capital gain, because I still have accumulated capital losses, the income tax is effectively deferred to a future year - by bringing forward the date I will have to pay capital gains taxes again. This probably doesn't make strict financial sense as I "threw away" about $2,000 to avoid paying $11,000 in tax this year rather than a year or two later, which implies a high discount rate. On the other hand, it's quite likely that the fund will have other expenses etc before we would get a final distribution from the fund.

On the other hand, Mercantile (MVT.AX) - Ron Brierley's firm - are still buying. They probably won't have the same tax consideration that I do and they must see some upside in the shares still. It will, therefore, be worth having another look at this stock again after the ex dividend day later this month.

Lifetime profits over the ten years I've been invested in IPE, starting with just 6,000 shares have been about $A31k with $A20k in gains since the beginning of this year.

I also recently sold out of Clime Capital (CAM.AX). Their performance has been subpar in recent years. Instead, I have increased my holding in Cadence Capital (CDM.AX).

Dividend Reinvestment Policy

If a company offers shares at a discount to the market price through a dividend reinvestment plan then I participate in the plan. Not participating seems like not getting part of the return on investment. We own shares in two companies that offer a discount – Platinum Capital (PMC.AX) and Cadence Capital (CDM.AX). But if a company or fund doesn't offer a discount, currently I'm not participating. We did this to help build up the money in our offset account, but it seems to make sense in the longer term to provide cash for rebalancing and new investments without paying fees to sell shares or increasing margin borrowing. There is one exception to this rule, which is the Winton Global Alpha Fund. But I am trying to increase the allocation to managed futures and so it doesn't make sense to withdraw money from the fund.

Optimal Portfolios

I have been doing some experimentation with designing optimal portfolios, something which I last looked at in 2011. I have the monthy rates of return on various asset classes going back to 1996. These include international shares (MSCI World Index, gross) both hedged into Australian Dollars and not. Australian shares (ASX 200 accumulation), Managed Futures (a mix of Man AHL and Winton), direct real estate (a particular US fund as a proxy), hedge funds (HFRI index), the bond market (again I'm using a fund as a proxy), Australian Dollar cash, and gold in Australian dollars. You can use the solver in Excel to find the allocation that monthly rebalanced gives the highest Sharpe Ratio. This optimal portfolio varies over time but generally it doesn't like hedge funds and allocates about 10-20% to gold, and 20-40% to managed futures. Because future performance won't necessarily be the same as past performance (particularly a worry for managed futures) and because managed futures, in particular, are not tax effective – they pay most income out subject to marginal tax rates – I wouldn't allocate according to a particular optimization. A target portfolio gets near the optimal performance while being more diversified and a bit more tax effective:

This graph shows the performance of various assets and a "target portfolio":

Here the target portfolio is 25% international shares (half hedged into Australian dollar and half not), 25% Australian shares, 25% managed futures, and then 5% in each of real estate, bonds, cash, gold, and hedge funds. Then the whole thing is geared up a bit with borrowing. It performs pretty nicely over various historical periods.

Here we have a close up of performance since the financial crisis:

I've managed to match the performance of the Australian index but have lagged behind the MSCI World Index. It matches the performance of the MSCI but has a smoother path. The next graph shows ten year rolling returns:

Here we see that such a portfolio clearly dominates in the long-run over regular stock indices or my own performance, which has not been good over a ten year period recently. The graph also shows how the performance of the Australian stock market has declined. It had very high ten year  returns prior to the crisis, but now has lower returns than international shares over the last ten years.

I have been moving in the direction of the optimal portfolio by diversifying out of Australian shares and buying managed futures, but it has been too slow so far. In the last few months I have been buying $A10k of managed futures each month. I also allocated more to international investments when I reinvested my CFS superannuation fund in their wholesale funds.

February 2018 Monthly Report

After eight months of gains comes a losing month. Here are our monthly accounts (in AUD):

"Current other income" which is mostly salaries (after tax) was $12.3k. Spending (not counting our mortgage) was a little on the high at $8.6k. But spending was elevated by $2.7k I paid for a plane ticket to "the other side of the world" - more about that soon. After deducting the mortgage payment of $4.1k (which includes implicit interest saving due to our offset account - the actual mortgage payment was $910 less than this), we dissaved $0.4k on the current account and added $2.2k in housing equity. Retirement contributions were $2.9k. Net saving was, therefore, $4.7k across the board.

The Australian Dollar fell from USD 0.7794. The MSCI World Index fell 4.16%, and the S&P 500 3.69%. But the ASX 200 gained 0.36%, the All these are total returns including dividends. We lost 0.43% in Australian Dollar terms and 3.92% in US Dollar terms. So, we underperformed the Australian market and outperformed international markets.

The best performing investment in dollar terms was CFS Geared Share Fund, which gained
$3.3k. The worst performer was the Winton Global Alpha Fund, down $4.5k. I am assuming that the market plunge was too sudden for them to change direction. The best performing asset class was hedge funds, up 0.44% and the worst commodities down 4.48%

As a result of all this, net worth fell AUD 3k to $2.156 million or USD 64k to USD 1.681 million.

Rising Local House Prices

The graph shows the percentage premium over the original sales price (when the development was originally marketed) of freestanding houses sold in our development since we bought. Ours is the first datapoint. The most recent sale at auction yesterday establishes a new record premium. The regression model I fitted to the data predicts a price for our house that almost exactly matches my recent upgrade of the value. I use two regressors – the original sale price and the date of the new sale. Premia are higher on the houses that originally had lower sales prices i.e. the smaller houses.

Long Term Investing Trends

The Australian Dollar tends to be high relative to the American Dollar during economic booms and low during economic crises. The recent low point in 2015-16 is related to a fall in commodity prices and slowdown in the World economy, especially in China. I think China probably slowed down by much more than the government admitted. During 2015 US stock markets went sideways or declined. The Australian market started 2015 optimistically but then had a steep fall:

There is now a lot of talk of renewed growth in the World Economy. On the other hand, US interest rates are rising as the Federal Reserve tries to reduce its balance sheet and with the Fed not buying US government bonds, but the US Treasury trying to issue even more after Trump's tax cut, the Treasury will need to offer higher interest rates, which makes government bonds an unattractive investment as rising yields implying falling prices for existing bonds. That is likely to both have negative effects on growth in the short run and make Australian Dollars less attractive in terms of interest yields. So, I'm a bit skeptical about the Australian Dollar rising strongly from here.

The US stock market is also very highly valued based on corporate earnings over the previous 10 years (Shiller's measure of stock market valuation, CAPE):

Historically, that has meant negative returns in the US market going forward. On the other hand, it is possible that something has changed and the risk premium for stocks has declined so that the stock market won't return to PE's as low as in past bear markets. It's unlikely that inflation would get as high as it did in the 1970s, which both raised the required rate of return and compressed growth profit. CAPE in Australia was 18.4 at the end of January, which is much more reasonable.

The best indicator of an oncoming recession is the yield curve. If short-run interest rates are higher than long-run interest rates, usually a recession follows. There is no sign of that at the moment in the US:

January 2018 Report

We gained for the eighth straight month in a row as US stock markets went parabolic, the Australian Dollar rose, and one of our private equity investments made a big gain.

Here are our monthly accounts (in AUD):

"Current other income" consisted entirely of salaries (after tax) this month and was $17.8k. It's higher than usual because I finally got my tax refund from last year of $2.6k. Spending (not counting our mortgage) was a little on the high side at $7.8k. After deducting the mortgage payment of $4.1k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $874 less than this), we saved $6.1k on the current account and added $2.2k in housing equity. Retirement contributions were $2.9k. Net saving was, therefore, $11.1k across the board.

The Australian Dollar rose from USD 0.7813 to USD 0.8077. The ASX 200 lost 0.45%, the MSCI World Index gained 5.66%, and the S&P 500 5.73%. All these are total returns including dividends. We gained 1.11% in Australian Dollar terms and 4.53% in US Dollar terms. So, we outperformed the Australian market and underperformed international markets.

The best performer in dollar terms was IPE.AX, which is a listed private equity fund of funds, gaining $8.7k. One of their funds made a deal to sell Threatmetrix to the former Reed Elsevier group, now known as RELX. The stock, which had been languishing at around 9.9 AU cents rose to 12 cents. Management estimates that if all goes well the net value of the stock has risen to 14 cents. I have bought some more shares at 11.5 cents since the deal was announced. Is this what Ron Brierley knew when he bought into IPE? I am at around 470,000 shares and hoping to buy more as the position is only 3% of net worth :) Early in the month I sold out of Platinum Capital (PMC.AX) at prices of $2.09-$2.15 and then recently when the price fell I bought back in at $1.96-2.00. I also reopened a position in Oceania Capital Partners (OCP.AX), another private equity investment. So far, my latest trade is down. Yes, it was the worst performing investment this month, down $2.7k.

The second best performer this month was Winton Global Alpha Fund, a managed futures fund, which gained $2.8k. I'm planning to increase my holdings in it too as a hedge against equity downside. Currently, the position is $110k after investing an extra $10k. Yeah, that's only 5% of net worth. Despite the craziness of the stock market rise in the US, there isn't a strong case for a big correction. The yield curve isn't yet near inverting, the world economy seems to be doing well, and Oscar Carboni is bullish for the year :)

Private equity was the best performing asset class, up 9.6%. All asset classes gained. Australian large cap stocks gained the least at 0.1%.

House prices rose here 8.4% for the year. Given this strong rise, I have raised the value of our house adjusting the September and December 2017 accounts. The carrying value is now $840k.

As a result of all this, net worth rose AUD 30k to $2.158 million or rose USD 81k to USD 1.743 million.

Projection for 2018

My fair weather forecast for 2018 is a net worth gain of about AUD 250k to reach about AUD 2.3 million. It is based on expected salaries and retirement contributions, an increase in spending of 6% and an 8% rate of return on investments.

ASX200 Alpha and Beta

Another new chart:

This is based on regressing my returns in excess of the RBA cash rate on the ASX200 returns in excess of the cash rate using 36 months of data. Clearly there is a negative correlation between alpha and beta. In recent years beta is less than one and alpha greater than one. Alpha was very negative during the financial crisis and there are some wild swings before that. The tech crash also had hugely negative alpha. Looks like I outperform in bull markets and underperform in bear markets but that it isn't all just due to too much leverage.

Annual Report 2017: Graphs

So here is how the last year looks on a graph in the context of everything since 1996:

The blue line is the sum of the other three lines. Medium term balance is liquid assets, the green line is retirement accounts. Both of these and housing equity increased. Markets performed well this year and we saved more.

This graph provides a slightly different view, breaking things down according to savings and profits. I don't break down housing equity into the two components as it's not worth it yet...

Though we are making savings outside of retirement accounts and housing equity - the blue line is rising - the slope is shallower than before we bought a house and had a baby but steeper than last year. So, a lot of this year's increase came from profits. In the long run we have done much better with retirement than with current accounts in terms of profits. Half of our retirement accounts are now made up of profits and half from contributions.

The next graph shows actual monthly non-retirement savings since 1996 and a 12 month moving average:

I have truncated the axis at -$15k - we dissaved $53k in January and $118k in February 2015 as we bought the house. After the big transfer of savings to buy the house, savings recovered, but to a lower level than in recent years. In the past year they have edged back up again to an average of $5k per month, though they are very volatile.

Housing Saving

A new chart - monthly housing saving:

It's mostly mortgage principal payments. Initially, we made our downpayment in two payments over two months. I've truncated the scale at $10,000 - saving in January 2015 was $37k and in February 2015 $115k. The main interesting thing on the graph is the upward trend over time. This reflects the increasing money in our offset account and the resulting lower interest payments. As a result, the part of our mortgage payments that's reducing the principal increases over time. The periodic spikes are the three mortgage payment months - we make a mortgage payment every two weeks. The red line is a 12 month moving average.

Annual Accounts 2017

This is our annual account - the sum of each of the monthly accounts I've posted - in Australian Dollars (one Aussie Dollar is currently 78 US cents - see accounts in USD at the end of this post). First a reminder about how these accounts are laid out: Current account is all non-retirement accounts and housing account income and spending. Then the other two are fairly self-explanatory. But housing spending only includes mortgage interest. Property taxes etc. are included in the current account. There is not a lot of logic to this except the "transfer to housing" is measured using the transfer from our checking account to our mortgage account. Current other income is reported after tax, while investment income is reported pre-tax. Net tax on investment income then gets subtracted from current income as our annual tax refund or extra payment gets included there. Retirement investment income gets reported pre-tax too while retirement contributions are after tax. For retirement accounts, "tax credits" is the imputed tax on investment earnings which is used to compute pre-tax earnings from the actual received amounts. For non-retirement accounts, "tax credits" are actual franking credits received on Australian dividends and the tax withheld on foreign investment income. Both of these are included in the pre-tax earning but are not actually received month to month as cash.... Finally, "core expenditure" for housing is the actual mortgage interest we paid. "expenditure" adds back how much interest we saved by keeping money in our offset account. We include that saved interest in the current account as the earnings of that pile of cash. That virtual earning needs to be spent somewhere to balance the accounts... It is also included in the "transfer to housing". Our actual mortgage payments were less than the number reported by the $8k in saved interest. For current accounts "core expenditure" takes out business expenses that will be refunded by our employers and some one-off expenditures. This year, I think there are none of those one-off expenditures. Oh, "saving" is the difference between "other income" net of transfers to other columns and spending in that column, while "change in net worth" also includes the investment income.

We earned $201k after tax in salary, business related refunds, medical payment refunds, tax refunds etc. We earned (pre-tax including unrealised capital gains) $107k on non-retirement account investments. Both of those numbers were up strongly from last year as Moominmama went back to work and investment markets performed very strongly in the first year of the Trump Administration. Total current after tax income was $308k. Including mortgage interest we spent $101 up 7.5% from last year.

$7.6k of the current investment income was tax credits, which actually was down on last year. Finally, we transferred $50k in mortgage payments (and virtual saved interest) to the housing account. The change in current net worth, was therefore $160k. Looking at just saving from non-investment income, we saved $60k. Both these numbers were up strongly from last year.

The retirement account is a bit simpler. We made $47k in after tax contributions and the value rose by an estimated additional $126k in pre tax returns. $15k was the estimated tax on that and so the increase in net worth was $158k. Taxes are just estimated because all we get to see is the after tax returns. I do this exercise to make retirement and non-retirement returns comparable.

Finally, the housing account. We spent $14k on mortgage interest. We would have paid $23k in mortgage interest if we didn't have an offset account. I estimate our house is worth $2k more than I did last year based on recent sales in our neighbourhood. After counting the transfer of $50k into the housing account housing equity increased $31k of which $27k was due to paying off principal on our mortgage.

In total net worth increased by $350k, $135k of which was saving from non-investment sources. Comparing 2017's accounts with the 2016's, we saved 34% more and net worth increased by 61% more. Total after tax income was almost half a million dollars, up 52% on last year. It is hard to get my head around that number and reconcile it with our fairly modest lifestyle. Of course, most of it was earned in retirement and non-retirement investment accounts and it includes a lot of notional unrealized capital gains. In 2008 we had a net loss of $150k...

Here are the same accounts expressed in US Dollars:

Because of exchange rate movements "non-core" investment earnings don't translate from one set of accounts to the other at a regular exchange rate. The "core investment earnings" takes out that exchange rate movement.

December 2017 Report

The optimistic annual projection was AUD 2 million. We exceeded this, reaching AUD 2.064 million at the end of this month. I'll do an annual report soon.

Here are our monthly accounts (in AUD):

"Current other income" consisted entirely of salaries (after tax) this month and was $13.1k. Spending (not counting our mortgage) was moderat at $6.2k. After deducting the mortgage payment of $4.0k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $994 less than this), we saved $2.9k on the current account and added $2.2k in housing equity. Retirement contributions were $3.1k. Net saving was, therefore, $8.2k across the board.

The Australian Dollar rose from USD 0.7571 to USD 0.7813. The ASX 200 gained 1.81%, the MSCI World Index gained 1.65%, and the S&P 500 1.11%. All these are total returns including dividends. We gained 1.43% in Australian Dollar terms and 4.67% in US Dollar terms. So, we slightly underperformed the Australian market and strongly outperformed international markets because of the rise in the Australian Dollar against the US Dollar.

The best performer in dollar terms was the Colonial First State Geared Share Fund, gaining $9.2k followed by Colonial First State Developing Companies, which gained $4.5k. Generation Global Share FUnd was the worst performer losing $0.3k because of the fall in the US Dollar against the Australian Dollar. Australian Small Cap stocks was the best performing asset class in percentage terms, gaining 3.54% followed by Commodities at 2.89%. Private equity was the worst performing asset class, but it still gained 0.45%.

As a result of all this, net worth rose AUD 32k to $2.064 million or rose USD 74k to USD 1.613 million.

How Did We Get to AUD 2 Million?

This month we hit $A2 million net worth for the first time. We reached $A1 million in September 2013. How did net worth increase that much in 4 years? This graph should help explain:

The biggest contributor is profits on retirement accounts at $295k. Stock markets have been very strong. Retirement contributions added $182k. Housing equity contributed $249k. Current savings added $72k and profits on non-retirement accounts $219k. But, of course, we shifted $150k of current savings as a downpayment on our house. So really current savings were a larger contributor than retirement contributions. Of course, mortgage payments come out of our current income too.

A lot of the time it feels like that we aren't doing any saving now apartment from mortgage principal payments and retirement contributions. The blue line shows that actually we are.

November 2017 Report

Stock markets rose again this month and our net worth went over the AUD 2 million mark. I am wondering how sustainable that is going to turn out to be. We hit the AUD 1 million mark in September 2013. So it's only taken just over 4 years to add another million and double our net worth.

Here are our monthly accounts (in AUD):

"Current other income" was $21k. This was a three salary payments month and I also got a large reimbursement. Spending (not counting our mortgage) was high at $8.5k. After deducting the mortgage payment of $5.6k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $869 less than this - it was also a three mortgage payment month), we saved $7.1k on the current account and added $3.7k in housing equity. Retirement contributions were $4.7k. Net saving was, therefore, $15.6k across the board.

The Australian Dollar fell slightly from USD 0.7672 to USD 0.7571. The ASX 200 gained 1.64%, the MSCI World Index gained 1.98%, and the S&P 500 3.07%. All these are total returns including dividends. We gained 1.98% in Australian Dollar terms and 1.68% in US Dollar terms. So, we slightly outperformed the Australian market and slightly underperformed international markets. The best performer in dollar terms was the Colonial First State Geared Share Fund, gaining $5.9k followed by Unisuper, PSSAP, and Platinum Capital, which all gained around $4k. 3i (III.L) was the worst performer losing $0.8k. Hedge funds were the best performing asset class in percentage terms, gaining 2.43%. Private equity was the worst performing asset class, losing 0.47%.

As a result of all this, net worth rose AUD 48k to $2.034 million or rose USD 17k to USD 1.54 million.

October 2017 Report

The Australian stock market rose strongly for a change this month and the Australian Dollar fell a little. As a result, our net worth increased strongly and now is quite close to the AUD 2 million mark. Here are our monthly accounts (in AUD):

"Current other income" was $15k. We received almost $2k in childcare subsidy that the government pays us quarterly. Spending (not counting our mortgage or business expenses that should be refunded) was a little higher than last month moderate at $7.0k. After deducting the mortgage payment of $4.0k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $828 less than this), we saved $1.7k on the current account and added $2.1k in housing equity. But we should get a $2.3k refund of business expenses at some point, which will be credited as saving in a later month. Retirement contributions were $3.1k. Net saving was, therefore, $6.9k across the board.

The Australian Dollar fell slightly from USD 0.7839 to USD 0.7672. The ASX 200 gained 4.01%, the MSCI World Index gained 2.1%, and the S&P 500 2.33%. All these are total returns including dividends. We gained 4.19% in Australian Dollar terms and 1.97% in US Dollar terms. So, we slightly outperformed the Australian market and slightly underperformed international markets. The best performer in dollar terms was the Colonial First State Geared Share Fund, gaining $17.5k. Cadence (CDM.AX) was the worst performer losing $0.5k. Australian small cap stocks were the best performing asset class in percentage terms, gaining 4.68%. Hedge funds gained 4.46% and US stocks 4.42%. Private equity was the worst performing asset class, but still gained 2.21%!

As a result of all this, net worth rose AUD 72k to $1.985 million (new high) or rose USD 23k to USD 1.523 million (also a new high).

TFS Capital Closes Its Mutual Funds

I was surprised to hear that TFS Capital is closing its three mutual funds. I have about USD 14k invested in the TFS Market Neutral Fund. I think they will send me a check with the proceeds. Following Interactive Brokers transferring my account to their new Australian subsidiary, this will be another step in reducing my financial footprint in the US. I still have a couple of bank accounts and a 403b fund there. I'm not planning on closing the latter and will also try to hang onto the bank accounts.

September 2017 Report

It was another relatively quiet month financially. Here are our monthly accounts (in AUD):

"Current other income" was $14.7k. I got paid about $2.5k of backpay. Spending (not counting mortgage) was about the same as last month moderate at $6.8k. Rates (property tax) and the body corporate (condo) fee added more than $1k. After deducting the mortgage payment of $4.0k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $840 less than this), we saved $3.9k on the current account and added $2.1k in housing equity. Retirement contributions were $3.5k. Net saving was, therefore, $9.5k across the board.

The Australian Dollar fell slightly from USD 0.7922 to USD 0.7839. The ASX 200 lost 0.02%, the MSCI World Index gained 1.97%, and the S&P 500 2.08%. All these are total returns including dividends. We gained 0.97% in Australian Dollar terms and lost 0.09% in US Dollar terms. So, we outperformed the Australian market and underperformed international markets. The best performer in dollar terms was the various Platinum Funds, gaining $6.0k. IPE was the worst performer losing $2.0k. That was the result of a tick down of 0.5 cents in the share price to the bid rather than ask side of the spread. Hedge funds were the best performing asset class in percentage terms, gaining 3.55%. Private equity was the worst performing asset class, losing 4.11%. Commodities were also down, 1.58%. All other asset classes gained.

As a result of all this, net worth rose AUD 22k to $1.910 million (new high) or rose USD 2k to USD 1.498 million (also a new high).

Moominmama's Taxes 2016-17 Edition

I've filed Moominmama's tax return for this tax year. The tax year runs from 1st July to 30th June in Australia. The figures ignore employer and employee contributions to superannuation (retirement account) which amount to a lot of extra income. Everything is in Australian Dollars of course.

Her salary is down because she went on maternity leave and the average tax rate also falls as a result. Investment income is up though.

Here are the reports on Snork Maiden's taxes for all previous years:

2015-16
2014-15
2013-14
2012-13
2012-13
2011-12
2010-11
2009-10
2008-9
2007-8

Moominpapa's Taxes 2016-17 Edition

I have now completed my tax return. Looks like I should get a $2,870 refund. This huge increase in refund compared to last year is mainly due to the 16% increase in tax witholding by my employer relative to only an 11% increase in tax owed. My taxable income is up by 8%. But my tax is up 11%. This is because the increase in income is taxed at the maximum marginal rate, which is 49%. Gross cash income is before tax income ignoring franking and other tax credits and adding in net undiscounted capital gains (not deleting losses from previous years). It was up 16%.

I again checked what information the government knows about my tax affairs as revealed by the prefilled information on my tax return. They are still missing as much information as last year.  I filed Moominmama's return online for the second time, using the prefilled numbers plus deductions.

Previous years' reports:

2015-16
2014-15
2013-14
2012-13
2011-12
2010-11
2009-10
2008-9
2007-8

Interactive Brokers Australia

Interactive Brokers have set up a subsidiary in Australia and are requiring all clients resident in Australia to move their account to the new broker. The only declared difference is that they won't hold cash in currencies apart from AUD and USD. A few years ago they told Australian clients that they couldn't borrow on margin any more. Maybe that was fixed in the meantime. In any case, the website indicates that you can borrow on margin. Formally, it doesn't change the obligation to pay US estate tax on US assets. These start at an estate of only USD60k for non-US citizens. But it would probably make it easier to avoid. I still have a US retirement account, which is a bit over the USD 60k limit and a US mutual fund worth USD 14k. I also have a bank account, but that isn't included in the estate tax liable assets. It seems though that the US-Australia estate tax treaty means that my estate wouldn't be required to pay US estate taxes.*

* This wasn't the case for my mother who lives in a country that doesn't have an estate tax treaty with the US.

Pay Offer

My employer announced the pay deal for the next 5 years. For the average academic it will be a 9.1% increase (less for me), which is less than inflation was over the last 5 years :( For the average non-academic it will be 10.6%, which matches inflation. It's the same deal for both groups but some years will have absolute pay increases and some proportional pay increases, so the more you are paid the less you will get. Also, the after tax gain will be even less, because additional pay is all taxed at your marginal rate of tax. Seems the union has agreed to this. A minority of employees belong to the union. In theory you can appoint your own representative if you don't belong to the union... but that doesn't really happen, I assume. When I went to check the local union branch's Twitter thread to see whether they had anything to say about the deal, it is all about same sex marriage and other political campaigns that they spend union fees on. Nothing on the deal the employer announced. No, I won't be joining the union...

10 Years in Australia

Today is the 10th anniversary of us arriving together in Australia. A lot has happened but in another way not much has happened. We live in the same city, though we moved suburb. Moominmama is still in the same job that we came here for her to start. But now we have a child. When we first came here, I was planning on quitting academia. That didn't work out, and I returned to academia and am now a full professor and also have had some heavy admin roles.

When we came here we had a net worth of about $A1/2 million and a relatively low income - Moominmama's (then Snork Maiden) salary and what I could make from trading. Now we are approaching $A2 million net worth and typically spend twice what she was earning then every month.

This is a snapshot of our net worth ($A) at the beginning of September 2007 and 2017:

It wasn't smooth upward sailing from 2007 to 2017. The financial crisis arrived soon and our net worth plummeted. It hit a minimum of $A284k in February 2009, though that was one month I didn't post a monthly account on this blog. Over the ten years retirement accounts grew much more than stocks in non-retirement accounts. This has been due to much better returns on retirement accounts, largely because of the huge negative effect of the financial crisis, and partly due to diversion of savings to buying a house and then stacking up money in our offset account. We saved more money in non-retirement accounts than in retirement contributions over the ten years. These are the sources of the change in net worth over the period:

Current profit is on non-retirement accounts and is pre-tax. Net tax is reflected in income and hence current savings. Of course, a big chunk of housing equity was once current savings, which we then contributed as a downpayment and since then we have been making mortgage principle payments. Only $37k is attributed to gain in house value.

Ron Brierley and IPE

 

Ron Brierly is a famous New Zealand investor, now based in Australia. He is chairman of MVT. This company is Gabriel Radzyminski and is supposedly a listed investment company, but one that has a habit of taking over other small companies. At Sandon Capital he also has an activist approach to investing.

They had a stake in IPE of less than 5%, but two days ago took their stake up to near 20% when they purchased a large block of shares from Wilson Asset Management. I infer that was who sold from the list of major shareholders in the IPE annual report. I did have 150,000 shares in IPE. Yesterday I bought another 250,000. Either MVT is planning a takeover of IPE, or they think that the remaining private equity assets are worth more than their carrying value. Given that the shares are trading at net asset value of 0.105 cents, they must think the latter either way. On the other hand, though Wilson Asset Management must have not seen additional value. Or perhaps a $2 million shareholding is no longer worth their attention when they are managing $2 billion and could find a willing buyer at NAV. The shares have fallen in value as the company has returned capital and dividends in a winding down strategy.

Anyway, I now own 0.3% of the company, which is a bit scary :)

August 2017 Report

It was a relatively quiet month financially. Here are our monthly accounts (in AUD):

"Current other income" was $14k which includes almost $2k of childcare subsidy from the government that we get paid quarterly and salaries (after tax). Spending (not counting mortgage) was a little higher than last month moderate at $6.7k. The electricity, water, and gas bills that totalled about $1,100 (we pay these quarterly here in Australia) partly explains the increase. After deducting the mortgage payment of $4.0k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $792 less than this), we saved $3.4k on the current account and added $2.0k in added housing equity. Retirement contributions were $2.8k. Net saving was, therefore, $8.3k across the board.

The Australian Dollar fell slightly from USD 0.7981 to USD 0.7922. The ASX 200 gained by 0.71%, the MSCI World Index gained 0.43%, and the S&P 500 0.31%. All these are total returns including dividends. We gained 1.13% in Australian Dollar terms and 0.38% in US Dollar terms. So, we outperformed the Australian market and the S&P500 index. The best performer in dollar terms was the Unisuper superannuation fund, gaining $3.5k. Clime Capital was the worst perfomer but only lost $0.6k. Australian small cap stocks were the best performing asset class in percentage terms. All other asset classes gained.

As a result of all this, net worth rose AUD 25k to $1.889 million (new high) or rose USD 8k to USD 1.496 million (also a new high).

Property Taxes

Our "rates" or property taxes are up 30% from last year! Presumably this is partly because of the shift in this state from stamp duty on buying a house (we paid $A 27,000 when we bought this house) to land taxes over time. Only the value of the land is taxed here in Australia, not the structure on it. For "townhouses" like ours - our house is actually a separate house - that are part of a body corporate (condo association) the land is valued as a share of the overall value of the land in the development. Our land share is only valued at $A168k, when a similar individual block in this suburb would be about $400k. So, this means our property tax is much lower than if we didn't live in a development like this. It's still $1,970 per year.

I just noticed that taxes on commercial property are outrageously high. The value in excess of $A600k is taxed at almost 5%. So you would pay about $A40k a year on land valued at $1 million.

July 2017 Report

Here are our monthly accounts (in AUD):

"Current other income" was very high at $26k due to a lot of money coming in from a consulting project. Spending (not counting mortgage), on the other hand was moderate at $5.6k. After deducting the mortgage payment of $3.9k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $690 less than this), we saved $16.5k on the current account and added $3.5k in added housing equity. Retirement contributions were lower than recently at $2.9k. I have stopped my voluntary retirement contributions due to the reduction in the concessional contribution cap from 1 July. Moominmama's employer also cut their contributions to her account since the beginning of the new financial year. Even though she has been working part time since the beginning of the calendar year they made contributions at the full time rate up till now. Housing equity increased by $2k. Net saving was, therefore, $21.3k across the board.

The Australian Dollar continued to rise from USD 0.7681 to USD 0.7981. The ASX 200 fell by 0.01%, the MSCI World Index gained 2.83%, and the S&P 500 2.06%. We gained 0.34% in Australian Dollar terms and 1.88% in US Dollar terms. So, we outperformed the Australian and  underperformed the international markets. The best performer in dollar terms was Platinum Capital, gaining $4.0k across our various different holdings. The worst performer was the Unisuper superannuation fund, losing $2.9k. Hedge funds was the best performing asset class in percentage terms thanks to Platinum Capital, followed by private equity. All other asset classes gained apart from large cap Australian stocks which lost 0.04%.

As a result of all this, net worth rose AUD 27k to $1.864 million (new high) or rose USD 76k to USD 1.488 million (also a new high).

June 2017 Report

This month we spent a lot of money. We went on vacation to Singapore - our first trip overseas with little Moomin. Since last year there are now direct flights between our city and there - one of two international destinations now available on direct flights. I think next time we will go to the other country where the weather is much more to my liking, at least in the summer. The trip ended up costing a lot more than expected...

This month's accounts are very preliminary as they include estimates of franking (tax) credits on managed funds ($3.9k) that we won't actually know till the end of July. Here are our monthly accounts (in AUD):

"Current other income", which is mainly salaries, was a bit higher than usual at $14.8k. Spending (not counting mortgage) was very high at $10.9k. After deducting the mortgage payment of $5.5k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $698 less than this) - there were three mortgage payments this month rather than the usual two - we dissaved $1.5k on the current account and added $3.5k in added housing equity. Retirement contributions were quite high at $5.1k as I got three retirement contributions this month. Net saving was, therefore, $7.1k across the board.

From next month I will stop my voluntary retirement contributions of $100 a week due to the reduction in the concessional contribution cap from $35k a year to $25k a year. My employer contributions will actually exceed the cap. As is usual in the public sector they are much higher than the 9.5% compulsory contributions. The excess will just be taxed at my marginal rate like a non-concessional contribution. I might still add some non-concessional contributions to superannuation in a few years time but don't feel like locking up more money than necessary when there is no immediate tax advantage and the rules on taxation in the retirement phase, could change at any time...

The Australian Dollar rose from USD 0.7437 to USD 0.7681. The ASX 200 rose by 0.17%, the MSCI World Index gained 0.50%, and the S&P 500 0.62%. We gained 0.38% in Australian Dollar terms and 3.68% in US Dollar terms. So, unusually we outperformed both the Australian and  international markets. The best performer in dollar terms was CFS Geared Share Fund up $5.6k. Next best was Platinum Capital, gaining $3.0k across our various different holdings. The worst performer was PSSAP superannuation fund, losing $0.8k. Small cap Australian stocks was the best performing asset class in percentage terms, followed by hedge funds. All other asset classes gained apart from commodities and real estate.

As a result of all this, net worth rose AUD 9k to $1.839 million (new high) or rose USD 51k to USD 1.413 million (also a new high).

30th June is the end of the Australian financial year. Over the last 12 months we had a rate of return of 13.7% in AUD terms (17.5% in USD terms). The ASX200 gained 14.1%, while the MSCI gained 19.4% in USD terms. Net worth increased AUD 262k and we are still on track to get close to the optimistic projection for 2017. Of course, anything could happen in the next 6 months!

May 2017 Report

Another month flies by. Financial markets were mixed, falling in Australia and rising globally. We earned a lot of extra income this month. Here are our monthly accounts (in AUD):

"Current Other income", which is mainly salaries was very high at $29k. The main reason is that I finally got paid some back pay for the additional duties I have taken on. From now on my usual salary will be a little higher, though I really hope to get out of these duties by the end of the year as with the baby and these it is hard to get my core job functions done. We also got the first childcare subsidy payment of $1.3k which covers the months of February and March. We will get this payment quarterly. On top of that this was a three paycheck month - we are paid every two weeks here in Australia.

Spending (not counting mortgage) was moderate at $6.0k. After taking into account the mortgage payment of $3.8k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $641 less than this) - which shows up as a transfer to the housing account, we saved $19k on the current account. We made $6.9k of retirement contributions, which is very high due to the extra pay, and saved a net $1.9k in added housing equity. Net saving was, therefore, $28k across the board. I increased the carrying value of our house by $2k, following the local auction.

The Australian Dollar fell slightly from USD 0.7475 to USD 0.7437. The ASX 200 fell by 2.75%, the MSCI World Index gained 2.3%, and the S&P 500 1.41%. We gained 0.06% in Australian Dollar terms and lost 0.45% in US Dollar terms. So, we outperformed the Australian market and underperformed the international markets. The best performer in dollar terms was Oceania Capital Partners up $4.4k - this is a thinly traded and volatile stock. Next best was Platinum Capital, gaining $3.4k across our various different holdings. The worst performer was the CFS Geared Share Fund, losing $16k. Private equity was the best performing asset class, followed by hedge funds. All other asset classes gained apart from Australian shares, with large cap Australian shares the worst performer.

As a result of all this, net worth rose AUD 32k to $1.832 million (new high) or rose USD 17k to $US 1.362 million (also a new high).

Another Very Local Auction

The house 2 doors away from us was auctioned today. It sold for $801,000 (AUD). Initially it passed in at $785,000 after one bid at that level after the auctioneer made a bid at $780k but then there was a negotiation with the highest bidder. The house plan is identical to ours. The main difference is that it is wedged between two other houses - side windows are frosted glass, while our house has open land or the street on all but one side. We have a much better view as a result. Our backyard is a bit less deep and our front yard longer. The presentation of this house is better than the current state of our house. I reckon we might need more than $10k to bring it up to standard. The original selling price was for some reason $10k more than our house. When I add this new sale into my model of the value of our house based on sales in this development since we bought, it only increases the carrying value of our house by $2,000 to $777k. I think this is a good conservative value for our house.

April 2017 Report

Yet another positive month for the markets and us. Here are our monthly accounts (in AUD):

Spending (not counting mortgage) was high at $8.0k (after taking out some business expenses that have been refunded - "Other income" includes the refund as well as salaries). Salaries etc. added up to $13.1k (after tax). After taking into account the mortgage payment of $3.8k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $642 less than this) - which shows up as a transfer to the housing account, we saved only $19 on the current account. We made $3.6k of retirement contributions, and saved a net $1.9k in added housing equity. Net saving was, therefore, $5.5k across the board. Still not getting the childcare subsidy.... This month we paid the apartment rent for our trip... part of which was the business expense that was refunded...

The Australian Dollar fell from USD 0.7637 to USD 0.7475. The ASX 200 gained 1.03%, the MSCI World Index gained 1.60%, and the S&P 500 1.03%. We gained 1.52% in Australian Dollar terms and lost 0.63% in US Dollar terms. So, we outperformed the Australian market and underperformed the international markets. The best performer in dollar terms was again the CFS Geared Share Fund ($7k) followed by Unisuper ($5.1k). Platinum Capital gained $4.4k after the share placement. The worst performer was Oceania Capital Partners down $3.0k. Private equity was the worst performing asset class, followed by small-cap Australian stocks. All other asset classes gained. Many investments, in particular international shares and large-cap Australian shares are at all time highs.

As a result of all this, net worth rose AUD 27k to $1.798 million (new high) but fell USD 9k to $US 1.344 million.

March 2017 Report

It was another positive month for the markets and us. Here are our monthly accounts (in AUD):

Spending (not counting mortgage) was high at $9.1k (after taking out some business expense that will be refunded). Salaries etc. added up to $11.8k (after tax). After taking into account the mortgage payment of $3.7k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $567 less than this) - which shows up as a transfer to the housing account, we dissaved only $1.3k on the current account. We made $3.6k of retirement contributions, and saved a net $2.0k in added housing equity. Net saving was, therefore, $4.3l across the board. We still aren't yet getting the childcare subsidy. One other big expense this month were a ticket for Moominmama and Moomin to come on a trip with me (my employer paid directly for my ticket). It will be Moomin's first foreign trip. It's hard to see anything else exceptional - property taxes, body corporate fee, dental bills... It's scary that the new normal is now $7-8k before the mortgage payment.

The Australian Dollar fell slightly from USD 0.7686 to USD 0.7637. The ASX 200 gained 3.32%, the MSCI World Index gained 1.29%, and the S&P 500 0.12%. We gained 2.05% in Australian Dollar terms and 1.40% in US Dollar terms. So, we underperformed the Australian market and outperformed the international markets again. The best performer in dollar terms was again the CFS Geared Share Fund ($15k) followed by Unisuper ($5k). All asset classes apart from private equity gained with bonds being supposedly the best performing asset class (not a very accurate estimate). The worst performer was Oceania Capital Partners down $1.8k.

As a result of all this, net worth rose AUD 32k to $1.766 million (new high) or rose USD 16k to $US 1.348 million (ditto).

Asset Allocation Update

As I mentioned in the monthly report we did a big asset reallocation recently.You can see the step down in the allocation to large cap Australian shares to about 35% in the graph above (this is gross assets rather than net worth). We increased the allocation to all other asset classes. Also on the graph you can see various phases in our recent financial history - the financial crisis and the recovery from it; saving up the cash for a house downpayment; buying the house; saving up cash in our offset account to pay off the mortgage. This month our mortgage interest is down to $1,217. In the first month after we moved in it was $2,189.... The plan when we pay off the mortgage is to redraw it for reinvestment making the interest tax deductible.

I didn't include our house in the graph. If I did, it would be about 25% of gross assets.

February 2017 Report

It was another positive month for the markets and us. We did a big restructure of some of our investments, which I'll discuss after this month's numbers. Here are our monthly accounts (in AUD):

Spending (not counting mortgage) was normal at $7.8k. Salaries etc. added up to $11.8k (after tax). After taking into account the mortgage payment of $3.8k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $650 less than this) - which shows up as a transfer to the housing account, we saved only $250 on the current account. We made $3.6k of retirement contributions, and saved a net $1.8k in added housing equity. Net saving was, therefore, $5.7k across the board. One reason for higher spending is that we are now spending $306 a week (for 3 days) for childcare and so far not getting any government benefit for this. Yes, people on our income can get a big subsidy for childcare here in Australia.

The Australian Dollar rose from USD 0.7580 to USD 0.7686. The ASX 200 gained 2.25%, the MSCI World Index gained 2.85%, and the S&P 500 3.97%. We gained 1.83% in Australian Dollar terms and gained 3.23% in US Dollar terms. So, we underperformed the Australian market and outperformed the international markets. The best performer in dollar terms the CFS Geared Share Fund ($11k) followed by Oceania Capital Partners (OCP.AX), which gained $4k. Every asset class  gained, with private equity the best performing asset class and Australian small cap stocks the worst.The worst performer was the CFS Global Resources Fund down $1.9k.

As a result of all this, net worth rose AUD 36k to $1.745 million (new high) or rose USD 45k to $US 1.341 million (ditto).

We shifted most of our Colonial First State managed funds and superannuation from the old now closed to new investors retail platforms to the newer wholesale platforms. I have no idea why these new platforms are called wholesale as you don't need to invest very much. The fees are lower on the newer platform. I did a little reallocation especially for my superannuation fund. This reduced our overall exposure to large cap Australian shares by 8% points of total assets. Total leverage (gearing) went down by a similar amount. All other asset classes increased their shares, especially small cap Australian shares. But generally we are now a bit more diversified and a bit less levered and cloe to what I think is an optimal allocation for us.

January 2017 Report

This month was fairly quiet though there was a strong rise in the Australian Dollar, which boosted our US Dollar returns. Here are our monthly accounts (in AUD):


Spending (not counting mortgage) was normal at $5.7k. Salaries etc. added up to $13.1k (after tax). This will likely be lower going forward as Moominmama is back at work but on a part-time basis and so her pay will be lower than in the last couple of months. After taking into account the mortgage payment of $3.8k (which includes implicit interest saving due to our offset account - the actual mortgage payment was more than $600 less than this) - which shows up as a transfer to the housing account, we saved $3.7k on the current account. We made $3.6k of retirement contributions, and saved a net $1.8k in added housing equity. Net saving was, therefore, $9k across the board, which hopefully will be typical in the future.

The Australian Dollar rose from USD 0.7229 to USD 0.7580. The ASX 200 lost 0.79%, the MSCI World Index gained 2.76%, and the S&P 500 1.90%. We lost 0.81% in Australian Dollar terms and gained 4.03% in US Dollar terms. So, we about matched the Australian market and outperformed the international markets. The best performer in dollar terms Oceania Capital Partners (OCP.AX), which gained $3k. Not surprisingly the CFS Geared Share Fund was the biggest loser (-$8.6k). Private equity was the best performing asset class. Despite a down month, many of our investments are at all time highs in terms of cumulative profit: Unisuper, PSSAP, Platinum Capital, Clime Capital, Oceania Capital Partners, TIAA Real Estate, CREF Global Equities, Generation Global Fund, Boulder Income Fund, 3i, and Woolworths.

As a result of all this, net worth fell AUD 2.5k to $1.713 million or rose USD 59k to $US 1.299 million - a new all time high.

2016 Annual Accounts: Graphs

So here is how the last year looks on a graph in the context of everything since 1996:

The blue line is the sum of the other three lines. After flatlining last year, things took off again this year. Medium term balance is liquid assets, the green line is retirement accounts. Both of these and housing equity increased. Markets performed well this year and we saved more.

This graph provides a slightly different view, breaking things down according to savings and profits. I don't break down housing equity into the two components as it's not worth it yet...

Though we are making savings outside of retirement accounts and housing equity - the blue line is rising - the slope is much shallower than before we bought a house and had a baby. So, a lot of this year's increase came from profits. In the long run we have done much better with retirement than with current accounts in terms of profits.

The next graph shows actual monthly non-retirement savings since 1996 and a 12 month moving average:

I have truncated the axis at -$15k but we dissaved $53k in January and $118k in February 2015 as we bought the house. After the big transfer of savings to but the house, savings recovered, but to a much lower level than recent years. They are at about the level around when we moved from the US to Australia. Savings have been high in the last couple of months. How well they will behave this year depends on some potential major expenditure on the house that I will discuss soon on the blog.

2016 Annual Accounts

This is our annual account - the sum of each of the monthly accounts I've posted - in Australian Dollars. First a reminder about how these accounts are laid out: Current account is all non-retirement account and housing account income and spending. Then the other two are fairly self-explanatory. But housing spending only includes mortgage interest. Property taxes etc. are included in the current account. There is not a lot of logic to this except the "transfer to housing" is measured using the transfer from our checking account to our mortgage account...

We earned $158k after tax in salary, business related refunds, medical payment refunds, tax refunds etc. We earned (pre-tax including unrealised capital gains) $58k on non-retirement account investments. Total current after tax income was $216k. We spent $77k, $71k of that was "core spending". (I always regard business expenses that are refunded as non-core, but also some one-off things).

$9k of the investment income was tax credits. These increased our after tax "other income" but are also counted as part of the pre-tax investment income. So, they have to deducted to get things to add up to the change in net worth. Finally, we transferred $45k in mortgage payments to the housing account.* The change in current net worth, was therefore $85k. Looking at just saving from non-investment income, we saved $36k.

The retirement account is a bit simpler. We made $45k in after tax contributions and the value rose by an estimated additional $54k in pre tax returns. $6k was the estimated tax on that and so the increase in net worth was $93k. Taxes are just estimated because all we get to see is the after tax returns. I do this exercise to make retirement and non-retirement returns comparable.

Finally, the housing account. We spent $20k on mortgage interest. We would have paid $25k in mortgage interest if we didn't have an offset account. I estimate our house is worth $21k more than I did last year based on recent sales in our neighbourhood. After counting the transfer of $45k into the housing account housing equity increased $40k of which $19k was due to paying off principal on our mortgage.

In total net worth increased by $217k, $100k of which was saving from non-investment sources.

Comparing 2016's accounts with the very exceptional 2015 accounts, we saved 56% more and net worth increased by 34% more. Salary and other current income was down as we would expect in a year that Moominmama didn't work (she went back to work yesterday). Of course, she got a lot of maternity and other payments and so current income was only down by 15%. Invesment income was up 18%. Expenditure was down 41% and even core expenditure was down by 18%.

* $5k of this is actually interest we saved by having money in our offset account. I count this as investment earnings and so to balance the books I need to count this as spending on the housing account and need to record a transfer between the current and housing accounts.