Sunday, December 07, 2014

Cash flow - not an issue

In the post on the first anniversary of my retirement I commented that the current break even cash flow was not as good as it looked because of the effect of the special dividend from HWL (HK:13) and only taking two holidays instead of three this year. Without the special dividend and with three holidays scheduled for 2015, income from investments will fall a little short from meeting all of our cash outflows.

I have spent a bit of time playing with my spreadsheet and concluded that that assessment was unduly pessimistic - the short fall is a very small one. I will finish my master's degree next year and will stop paying course fees after that - this is more or less enough to wipe out the deficit. In the short term, part time incomes of either myself or Mrs Traineeinvestor or the return of my remaining capital from firm will also more than cover the shortfall. In fact, if we continue with both part time arrangements through to mid-2015 then, with the capital return, we are good for about four years. It is possible that rising dividend levels over those four years will deal with the issue after that. Reinvesting more of the cash currently held (in addition to the carpark just purchased) will also help. In the longer term, the mortgage on our home will be paid off in about seven years and cash flow will be strongly positive from then on.

Lastly, if things get tight, there is plenty of room to cut our expenses without having much effect on our standard of living. We can also shift non-income producing assets into income producing ones if we have to.

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