Small Time Dividends – Don’t let them Escape!

Today I got my Abano Healthcare dividend. It was approximately $29 or enough to buy a 6 pack of craft beer and 500ml bottle of something special on the side. Yum! But drinking my profits was never the plan (well one day maybe).

Abano Health share price graph
Its been a fun 6 months or so, I bought in around $6.70, thanks Abano

So no beer for me because I have the dividend re-investment plan activated. My money has automagically turned into 3 more shares. Every 6 months the dividends are used to purchase more shares on my behalf and any remaining money is rolled over till the next 6 months.

Dividend re-investment plans work really well in New Zealand for a couple of reasons.

  1. We currently  have no capital gains tax. This means that these small amounts of money aren’t going to become a pain in your ass years down the track when you need to calculate your capital gains on all the small share buys.
  2. Brokerage fees here are really HIGH! It costs a lot to make a trade so anytime you can buy shares for free is a win in my book.

So if you’ve been wondering what to do with all your little dividends get online and check if the company has a DRP or Dividend re-investment program. Its way better than receiving a cheque (argh so inconvenient!) or having the measly $29 sit in your account doing nothing and not earning its keep. Dividend re-investment is already happening for most of you in your kiwisaver accounts and probably in your index funds as well (unless you checked the dividend pay out box!).

Out of sight out of mind, it happens with out any extra input and that tiny dividend is no longer tempting you to buy some craft beer that your waistline doesn’t need! Make sure your money makes you more money by keeping it invested. It’s the aim of the FIRE game and it will get you the the finish line faster.

 

Frivolous Investments

I guess I must be feeling pretty flush because I just dropped $500 on a share in a craft brewery. As far as frivolous investments go this is pretty high on the list.

Parrotdog put out the call for 2 million dollars to upgrade their brewery to a new location with a taproom and takeaway sales. Being the craft beer lover that I am how could I resist? I love craft beer! Owning part of a brewery is like a dream come true. My share doesn’t quite entitle me to drink for free but I do get 10% off all online and takeaway orders.

However after looking over the share offer I found myself feeling a lot less optimistic about their projected growth than Parrotdog brewery. Their projected sales seem too good to true even with New Zealand’s exploding craft beer scene.

Consider this graph for instance, projections like this usually have me running of the hills! Which hills? I dunno, the safety hills?

Screenshot 2016-08-20 18.21.05

But I still made the purchase because craft beer is a hobby and it brings me joy. The creativity and camaraderie in the New Zealand industry is inspiring and its becoming less fringe and more mainstream by the day.

The investment was made knowing that it might never be worth more than $500 and it might even be worth less! I am at a point in my life where I can afford to throw $500 at a pet project, its like lending $500 to your brother in law to start a business….lets just call it a donation and not worry about ever seeing that money again.

Screenshot 2016-08-20 18.35.50

$500 is currently 0.083% of my current net worth but if I was only just starting the journey to FIRE and $500 was 1% of my net worth I don’t think I would risk it.

With crowdfunding platforms the world over becoming more popular these kinds of private off market listings are a lot easier for everyday folk to find and throw cash at. While its exciting to be part of these smaller businesses and start-ups the risks can be a lot higher and there seems to be less regulation. Its my first time investing in a company off market like this, so I’ll let you know how it works out. In the meantime, please purchase ParrotDog beer!

I’ve Paid off my Maxed out Credit card – Twice!

Some lessons in life are hard to learn. So hard that you have to learn them twice. Credit card management is definitely one of them.

The first credit card I got was handed over to me with little ceremony when I was a student. It was my second year and I’d moved out of the halls of residence and into my very first flat on Cook st.

My campus had a branch of the National bank down by the (man-made) lake (full of huge eels that would eat the baby ducks) and students were eligible for an interest free $1000 overdraft and a credit card with a $500 limit. For a broke student it was just free money, I figured it would be easy to pay back once I graduated and started earning my kick ass amazingly high wage. (Yeah right, turns out science graduates aren’t nearly as in demand as I thought).

Some of the $1000 went on text books, I bought a woolen electric underblankets (it was a cold town!) and heaps of beer, takeways and …….. well I can’t really remember where the rest of it went. It just went! I probably bought CD’s and cool posters for my room.

Poster- Picasso Print

It wasn’t long before everything was maxed out. Each week my student allowance came in plus a little side income from working in a lab downtown. I paid my rent and everything else went into the overdraft but before the next pay day the overdraft was maxed out again. It wasn’t till a I finished university and finally got a full time job that I was able to pay it all back. Each fortnight I had to call the bank and ask them to reduce the overdraft by a measly $50. I learned the overdraft lesson and never used one ever again. The weeks dragging by and the embarrassing calls to my banking manger left a lasting impression.

The credit card however had no such lesson, the payments to visa were to this vague external entity. I never met anyone from visa and I never had to call. In fact I think they even increased my limit once I started working full time.

Fast forward to 7 years later and I was still always carrying a credit card balance. I thought it was normal. By now I had a limit of $3000 and things were getting dangerously close to that limit. The first hint that I wasn’t exactly managing things was when I made my first call to visa. I wanted a limit increase for a trip to vegas “just in case”. Just in case what I’ll never know because they turned me down. I had made a large cash withdrawal the week before. I mistakenly paid too much off the card that fortnight and hadn’t calculated enough reserves to make rent! The bank wasn’t too impressed with my money management skills.

After the trip added even more debt to my card I decided I had to tackle the debt. Each pay day I paid the bills that had to be in cash (e.g rent) then every single left over dollar went on the credit card. No cash left in checking, everything was now on the credit card. It was a huge payment and each payday bought the promise of progress. But I still had groceries and petrol to buy so I would use the credit card. It was a 3 steps forward 2 steps back kind of deal but I got there in the end.

The second time I maxed out my credit card was way worse. It involved spending money on family, spending more than I earned on day to day expenses and having nothing to show for $12,000 worth of debt. Yep twelve grand. It happened over several years. I didn’t buy myself clothes or gadgets or things like that. But I bought movie tickets, takeaway pizza’s, groceries, dinners out and a trip to the Gold coast for my partner and their children. So in the end I had massive debt and no assets to show for it. Deeply ashamed I hid my debt from everyone. I carried on as if everything was normal with this huge debt anxiety in the background.

This time I transferred the debt to a credit card with 0% interest for the first 6 months. After 6 months I transferred to a card with the same bank with a low interest rate (about 1/2 the standard rate). It took me about 3 years to get it under control. During those years I paid my mortgage and invested in kiwisaver. I bought shares but I didn’t mange any cash savings. Once I got the balance down to $1000 I started to save cash. Actual cash reserves. Looking back I was lucky to have a good paying job and to manage the rest of my money so I never got behind in repayments. It never became an “issue” or stopped me from being able to afford rent, power, food etc. It could have been a lot worse.

Now I pay the balance in full on my card every time I get paid. Transfer over enough money to zero that balance and sometimes it hurts the checking account a little because I’ve spent more than I thought. Even now spending on the plastic doesn’t trigger the feeling of spending my own money. Its a future me problem not a today me problem.

So thats my consumer debt story, going through the painful repayment process taught me a lot about money and how I interact with with it. So for that I am grateful. (Obviously I would rather not have spent the money and have it investments but we’ve always got to look for the silver lining).

 

 

 

July Expenses – SPEND ALL THE MONEYS

Oh sweet July, thank you for my tax return which allowed me to pay $4000 off my mortgage in one hit. BEST FEELING EVER.  It was a one off so not accounted for in these totals.

Screenshot 2016-08-03 18.13.44

Everyday expenses, are a little up this month since I was trying to remain in holiday mode (futile). Being back in winter and at work is all too bleak so I treated myself to some things. After about 3 years of buying bugger all clothing I splurged again this month on a couple of jackets, a winter and summer weight one both nice enough for work as well. As for the Household goods category, I replaced a duvet inner that had to be over 20 years old and was starting to fall apart. I bought a space heater for the teens room downstairs as its been pretty cold (ah I’m so nice. She has her very first job interview tomorrow). Car registration was due (annual car tax I guess for those non NZ’ers) it includes medical cover in the case of an accident and road maintenance .

So the odd transport cost because I caught an Uber home from my bosses 65th birthday. Spending money this month was contributing for a gift for previously mentioned boss. (She is awesome, she built her own house!). A movie date with my husband and loads of craft beers. Anyway I feel pretty spendy this month. I am trying to throw some money into my investment properties so I can get some improvements done. The Hamilton property needs heating installed which is planned for next month.

Utilities – I got a bit ahead on the power bill, so I didn’t have to pay much this month.

Screenshot 2016-08-03 10.51.39

As you can see I don’t exactly fall into the frugal category when it comes to spending. Sometimes I struggle with that and beat myself up over it. Other times I really need that little luxury in my life and no guilt over dinner out.  I’m sure it would be a different story if we had consumer debt or student loans to worry about, but thankfully we only have the mortgage to worry about.