I want to Lose weight and Gain income

A recent meta-study confirmed what many overweight and obese workers probably suspect - that they are discriminated against in the workplace. The meta-analysis of 25 studies showed that obesity could lower a woman's annual earnings by as much as 6.2% and a man's by as much as 2.3% - and that's if you manage to get past the job interview. However, the statistics also show that employers have good reason to be wary of employing obese workers. One study showed that between 1997 and 2004, obese workers filed twice the number of workers' compensation claims, had seven times the medical costs and lost 13 times the days of work from work injury or illness compared with other employees. And the study of 11,000 Duke University employees found that the average medical-claims costs per 100 employees amounted to $US51,019 for the obese, compared with $US7,503 for the non-obese. That's an extra $435.16 in medical costs per obese worker. So in one sense the lower annual earnings for obese workers are largely offset by extra medical benefits from being employed.

Even if being overweight doesn't directly reduce your income, the extra calories required to maintain a higher BMI cost considerable amounts of money. For example, when I last changed jobs nearly ten years ago I had been eating a healthy diet and regularly going to the gym for a couple of years. My BMI was around 24 - probably the best it had been since High School. Since then my weight gradually crept back up until my BMI was back into the obese range (around 31) the past couple of years. And although I'd stopped going to the gym since changing jobs (it was no longer conveniently located on the way home from work, and I had less time available once we started our family), I think most of this weight gain was simply due to eating too much junk food. The core of my diet is still the same as when my BMI was under 25, but I'd started snacking on confectionery in the afternoons and eating ice cream for dessert almost every day. This year I'm attempting to stick to my basic, healthy diet plan and get some regular exercises - but I quite regularly lapse into eating some extra junk food. For example, the confectionery and ice cream I ate yesterday cost around $8.80 and added an extra unwanted 1,200 calories. If I did this every day for a year it would cost me over $3,200 and add around 65 kg to my weight! Fortunately today I've avoided ANY junk food (so far), and went for a 45-minute walk at lunchtime. One day down, 364 to go (again)...

Subscribe to Enough Wealth. Copyright 2006-2008

Goals progress and changes

I've added a new 'long term' goal to the graphic in the RH margin - it shows how close I am to fully funding my desired retirement income solely from the money socked away in my retirement fund (SMSF). I've set the goal at a fairly modest 65% of my current pre-tax salary, the rationale being that

a) the pension paid out of my SMSF will be tax free (under the current "Simpler Super" regime),

b) I currently use up a large part of my salary on expenses that won't exist during retirement [eg. retirement savings (at least 13% via salary sacrifice), daily commute (2%), income tax (at least 10%), mortgage, children... - hey, I looks like I won't need any money in retirement ;)],

c) I'll also have my other investments to draw on for any large one-off expenses, unexpected health costs etc. (although I'm not planning on consuming my investment portfolio during retirement if I can help it).

The calculation also assumes that I can withdraw a pension from my SMSF at the rate of 5% of the total value each year without reducing it's real capital (this assumes a tax-free 8% long term ROI and 3% inflation rate). This gives me a target in current dollars to which I can compare my current SMSF balance. Using this target amount and the currect balance of my SMSF I get a figure of 27%.

This month I've "written off" around 1/4 of my education goal for 2008, as I've fallen behind in my MIT course work this semester and decided to take a leave of absence for next semester, when we'll be away on holiday overseas for more than a month. I'm still hoping to complete the course work for my BTeach and DFS(FP) enrollments, but at the moment I'm struggling to find the time to get on top of things.

My investment goal for 2008 is still looking unattainable after a poor 1st quarter, and my weight loss is progressing much slower than I'd intended (at least it's still heading in the right direction).

I won't be moving the "goal posts" though, as I still want to try to get as close to my original targets as possible on the annual goals, even if I don't quite make 100%.

Copyright Enough Wealth 2008

How I set my Net Worth target for 2008

You may have noticed my new goals for 2008 are listed in my sidebar. Having them there will help "keep me honest" and the desire to achieve some progress each month will help keep me on track, especially with the study and weight loss goals. Those two goals were easy to set - achieve my desired (healthy) weight and pass all the subjects I'm enrolled in for 2008.

The financial goal of increasing my net worth by $150,000 (approx. 12.8%) is less within my control than the other targets, but is still set at what I think are reasonable assumptions. As my overall portfolio has a mix of direct real estate, Australian and International shares, and some bonds and fixed interest (via the asset selection within my superannuation fund) the overall portfolio has a better chance of meeting my growth and income projections than the individual components.

So, what are the assumptions built in to my 2008 financial goal?

1. Continue with my current retirement savings plan rate. I'm currently contributing $1650 per fortnight pre-tax into my SMSF via salary sacrifice. However, $650 of this is effectively "re contributing" the $34,000 I withdrew from my superannuation account last year for tax reasons. So, my real retirement savings rate is $26,000 pa (which is around 30% of my pre-tax salary. In addition my employer contributes the compulsory 9% SGL amount, which adds another $7,560. As all these amounts are "untaxed", there will be a 15% contribution tax deducted. The overall amount being added to my SMSF after tax is therefore around $28,500.

2. A total return (dividends reinvested plus capital gains) on my SMSF balance of 10%. Based on my current SMSF balance this would add around $33,000 to my net worth over 2008.

3. Real estate capital appreciation. While DW is working part-time we are only paying interest on around half of our total mortgage balances, and are using a redraw of advance payments to help meet the P+I payments on the remainder. Overall our total mortgage balances are staying fairly static, so the only contribution to increasing my net worth will come from increased house prices. Luckily after a couple of poor years it is expected that Sydney prices in our area will increase by around 6% next year. This would add roughly $27,000 to my net worth.

4. Stock investments. With interest rates increasing and Australian stock returns likely to be lower than the past 3-4 years, I'll just plan an an overall ROI of 10% on my equity in my geared stock portfolio. This would provide an increase in net worth of $40,000.

Adding this all up comes to only $128,500 - so I'll have to add another $21,500 during the year via non-retirement savings. When I had a lower net worth my savings rate had a much greater impact on increasing my net worth. These days asset allocation and the ROI on my investments is much more important. I'm hoping that by the time I complete my BTeach qualification and a suitable teaching position becomes available, I'll be able to take the pay-cut required to change careers without it affecting the growth of my net worth significantly.

Copyright Enough Wealth 2007

Setting Goals for 2008

As the year draws to a close it's time to review how I went in achieving my goals for 2007.

My financial goal of reaching a net worth of approx. $1.18m (based on an overall ROI of 13% plus savings) is within reach, but as my property valuation will drop a bit this month it will all depend on how the market finishes 2007. It will also help if the HR department at work finally gets it's act together and gets the arrears in my retirement contributions. With the steady raising of interest rates in Australia over the past two years, and the prospect of less stellar gains in the stock market after four years of strong results, I'm planning of reducing my margin loan balances during 2008. As I don't want to increase my taxable income too much this financial year, and have prepaid the margin loan interest until the end of June 2008, I plan on selling some stocks in the latter part of the year and using the proceeds to wind back my level of gearing.

We also completed the planned move of our superannuation accounts from BT to a Self-managed superannuation fund. Over the long term this move should save us around 1%pa in admin and management fees on our retirement savings.

My educational goals of completing 4 subjects towards a GradDipEd degree while also completing 1 subject towards my MIT weren't achieved. I ended up only completing 1 subject for the GradDipEd (assuming I pass - the results are due out on 20 Dec) and withdrawing from the other subjects (due to poorly timed bouts of the 'flu just before some major assignments were due). For next year I've enrolled in two subjects for the GradDipEd and two for the MIT. Hopefully I'll be able to get these completed. So far my rate of progress towards completing these post-grad qualifications has been glacial, as shown below:

I'm planning on completing 4 or 5 subjects each year for the next several years, which would allow me to complete both degrees in 2011.

My enrolment in the Diploma for Financial Services (Financial Planning) was a spur of the moment decision mid-year. I've completed one of the four subjects and have read through the other subjects and started work on the assessment items. I expect to finish this off sometime in January, making use of the two week break over Christmas/New Year. I may enrol in the Advanced Diploma course next December when my uni courses have finished for the year, so I have something to keep my busy poolside during the Summer vacation.

I didn't achieve my goal of losing some excess weight and improving my fitness during 2007. So next year I'll again be aiming to reduce my BMI from around 30 to less than 25. If I just cut out all junk/snack foods I should be able to lose 0.5 kg a week. I did manage to take some regular walks at lunch times, but now that the hot Australian Summer has begun I need to start swimming laps at home instead.

I didn't have any particular career goals for this year - I'm happy with my current position and wage, and with a couple of young kids I'm not keen on devoting extra hours at work to win any promotions, and don't want to change jobs in pursuit of a pay rise as new jobs inevitably require unpaid overtime while establishing yourself as an "indispensable" employee. For next year I'm just planning on staying in the current job and getting a standard cost-of-living rise in the middle of the year. I have a fair amount of annual leave accumulated, and my 8 weeks "long service" leave vests next July, so we'll probably take a four week overseas holiday towards the end of 2008, and I'll continue using some leave to take a "long weekend" every two or three weeks. In the longer term if I progress with my BTeach studies I'll see how much I enjoy the practical teaching sessions and decide whether or not I want to make a career changing into teaching when I complete my degree (around 2012).

I removed the goals widgets from the blog recently when I revamped the template. Although using the html code made it easy to update the progress each month, I found that they didn't display correctly in both IE and Firefox. So the new goals will be updated as a graphic using paint, which should ensure they display correctly in all browsers.

Copyright Enough Wealth 2007

Real Estate Appears to be Picking Up

Owning our own home plus an investment rental property (albeit with large mortgages) means that my net worth is dependent in large part to the vagaries of the Sydney property market. The latest average house prices for the adjacent suburbs where our home and investment property are located shows considerably higher averages prices for house sales than were reported for the previous month:



Combined with the recent strength in the Australian stock market it looks like this month will give a boost to my net worth. Hopefully todays CPI figures will mean the interest rate on our mortgages doesn't increase again (our house is a variable rate loan, and the rental property is a 5-year fixed rate loan, with four years left to run). It may also help breath some life back into the property market - new house construction is running below the required rate to meet increased housing demand, which is starting to make rents increase. Any confidence that interest rates have now peaked will encourage both investors and home buyers back into the market, which should form the basis for the next increase in house prices in Sydney. Housing in Sydney tends to run in a 7-10 year cycle, and it's now been almost three years since the last peak in house prices.

Of the three goals I set at the start of this year (see side bar), my Net Worth and US Stock Portfolio goals are on track, but unfortunately my goal of getting down to my ideal weight by 30 June is not progressing as well as I'd planned.

In some ways diet and saving plans are similar - you pick your ideal behaviour and make an effort to stick to it until it becomes habitual or "automatic" behaviour. Unfortunately it seems easier to eliminate "junk spending" than it is to eliminate "junk food". I think the problem is that while you can arrange for your "essential" expenses (utility bills, home loan etc) to be paid automatically and can therefore focus on eliminating spending entirely (eg. "no spend" days), some basic level of food consumption is needed to maintain health. Food intake can't just be set on autopilot - every time you eat there is the chance you'll choose junk food instead of a more healthy food. I find that I'm most successful in sticking to a healthy eating plan if I have a fixed menu of healthy items for my breakfast, lunch and dinner - that way I CAN completely exclude eating anything that isn't "on my list".

Ah well, time to start writing down what I eat every day and tracking it on my diet spreadsheet...

Enough Wealth