Rickardo's 10 years to freedom blog

[Rickardo]

Hi All,

Time for an end of (Australian) financial year update, it’s been a while. Starting with spending, I had a relatively expensive year (well over my long term average) but a lot happened and I had a really amazing year, so I’m not too concerned. A couple of highlights:

Overall spent 6 weeks on holiday, including an amazing trek through the Himalayas, travel through India and a really relaxing week of decadent bliss in Hawaii
I got engaged (will be married later this year)
Started a new role at work, same pay but much more interesting and less stress
Decided to take a break from my second job for an unspecified amount of time (but can go back if I want)
Started studying again

The spending break up is below:

Rent $10,950
Travel $9,055
Presents $6,970
Car $5,799
Self/Financial Education $3,447
Food – supermarket $3,228
Food – restaurants $3,139
Alcohol $2,222
Financial Assistance $1,700
Entertainment $1,680
Health (incl insurance) $1,571
Utilities $1,451
Public Transport $1,200
Food – take out $1,101
Other $621
Wedding $750 (most of the expense will come in the next 4 months)
Clothes $905
Sport/Gym $772
Snow $262
Coffee $259

Total $57,083

Many of the categories I’m happy enough with however a couple stand out.

Travel – This is well above average, but as I mentioned above I had some amazing experiences which I will remember for a lifetime so money well spent. It also includes some pre payments for a holiday later in the year, which means next years expenses will be much lower.
Presents – This included the engagement ring purchase. My fiancée isn’t really that material so would have been happy with something much more modest, but I felt for something that she will treasure forever it is worth the cost. It really is beautiful too, and she loves it.
Self/Financial Education – I have started some further study to advance my knowledge/qualifications in my professional field. Not absolutely vital to my current role but will set me up well for future opportunities
Everything else I felt was reasonable, although I still seem to spend too much on alcohol (which is a recurring theme!) and food, especially restaurants – I’ll work on both of these from now on.

Next year my travel, presents and education expenses will be much lower, so should bring my spending back closer to my long term average, however we also have a wedding to pay for so it depends on what the net cost of this will be.

I think using a 3 year average of expenditure will give me my best indication of what I can expect moving forward, as this is enough time to include ordinary and ‘one off’ type expenses. This currently stands at $46,500 which I would like to lower a bit, however it doesn’t overly concern me at this point. My ‘core’ living expenses of rent, utilities, transport, essential food and insurance is still about $25,000 a year, so everything else just goes to living an extravagant and comfortable life (which I do make sure I appreciate, rather than consider the norm). I will also have to start thinking about how I incorporate my soon to be wife’s income/expenditure into the equation, as generally we’ve kept things pretty separate (and may continue to do so initially).

Regarding my second job, which I’ve had for almost 10 years in addition to my full time job, while I was still getting enjoyment out of it, I decided this enjoyment (and the additional pay) just wasn’t worth the negative consequences. These include being in a constant state of tiredness afterwards, having less physical and emotional energy to pursue other interests, having less time to spend with my partner/other social activities, etc. I may go back to it after 12 months but will see how I feel then. It’s the first stage of me starting to exit paid employment because my financial position now allows me more choice in how I allocate my time. It feels good!

Now to the net worth:

I’ve now cracked the $1million net worth barrier in $AUD (which on current exchange rates is about $750,000 USD). I am quietly proud about this and feel like it’s a solid achievement. However I don’t really feel any different and it hasn’t affected my lifestyle at all, plus $1mil certainly isn’t a massive achievement in Australia, where the median house price is anywhere from $500,000 to $1,000,000 depending on which capital city you live in.

But I realise I sit somewhere around the top 1% of net wealth holders within the world (depending on which stats you use as a guide, the value of the $AUD, etc). As a middle class resident of a developed nation, I don’t think this is overly surprising however I sure do try and make a point of remembering this. I have a number of family members and friends who would probably be in a similar situation (although a bit older) and would still think they’re struggling financially. I do not think like this, and have the mindset of gratitude, knowing the time I’ve put into building my financial education and skills have really set me up to have an amazing quality of life. I’m also lucky I’ve found a partner who thinks along similar lines.

In terms of my investing income, my strategy of acquire shares in the form of exchange traded funds (ETF’s) over the past 2.5 years is now starting to pay dividends (pardon the pun!) with my dividend income being about $8500. Even though i’ve made some capital losses on the purchases (down about 10% currently) they are a long term play towards providing me with a reliable income stream somewhere around the next 5-8 years onwards. I am currently reinvesting the dividends into more shares, however when I finally decide to work less and therefore lower my employment income, I will start drawing upon them for living expenses.

Over the next few years both my dividend income and rental property income should rise significantly, and put me in a position where at least my core (if not all) living expenses are covered.

[EdithKeeler]

It looks like you're doing great!!

[Rickardo]

Hi All,

Time for an update. Starting with spending, I’ve been able to have an incredibly enjoyable 6 months, while still spending within my planned range.

In total between July and December 2016 I spent $20,918, the spending break up is below:

Rent $10,950
Travel $3,021
Food – supermarket $1,770
Presents $1,757
Wedding $1,232
Food – restaurants $1,074
Utilities $990
Furniture $859
Alcohol $850
Clothes $795
Health (incl insurance) $787
Food – take out $628
Entertainment $528
Public Transport $550
Self/Financial Education $357
Car $147
Coffee $128

Savings Rate: 58%

I’m pretty happy with this spending. The way I’ve calculated wedding expenses is to offset costs against gifts received, so the above is what it cost me net. I also had much lower car expenses than usual as my car was on loan, however I have it back now so the expenses will pick up in the next half year.

Now that I’m married and we’re starting to work more as a couple financially, I will have to come up with a way of incorporating both of our spending in, which I may implement starting July this year.

Now to the net worth:

$1,169,267
ERE Net Worth (Excludes retirement accounts): $913,219

My net worth continues to climb and each day I get closer to my net worth and passive income covering my living expenses. I am still a fair way off, but feeling like I will easily achieve it by my set date. Financial (and other) aspects of life are going good!

[Rickardo]

Hi All,

Time for a slightly early end of Australian financial year update, as my wife and I are about to spend a month holidaying in Europe. As I’m now married and we are starting to combine our finances, this will be my last update based solely on my own personal finances. This has caused me to re-evaluate the goals, my initial long term goal when I started this blog in December 2013 was:

At 40 years old (10 years 6 months from now), obtain a passive income through investments of $70,000 per annum.
In March 2015 I changed this to: At 40 years old (9 years 3 months from now), obtain a passive income through investments of $50,000 per annum
I now have to discuss with my wife to fully explore our joint goals. I’ll get to this in a later post, although I’d still like to align this with my original timeframes, being the ability to fully retire after 20 years of full time work. This will still give my wife and I 40+ good years of living in financial freedom.

Now for the update:

Passive income as at June 2017:

Defined benefit pension: $15,502 (I can’t access this yet but I’m recording it now as it forms part of my long term strategy relating to accumulating other categories of passive)
Gross Share dividends: $12,919
Property: $1000
Total $29,421

Current Employment income: $110,000

Some of the highlights over the year:
- Got married and had an incredible party and honeymoon
- Almost finished my further study (just a bit left to go!)
- Had a great overseas family holiday with the inlaws over Christmas
- Had an enjoyable year at work

I had a great year and have been extremely happy with my spending, the categories are below:

Rent $10,950
Food – supermarket $3,602
Car $3,469
Travel $3,247
Presents $2,430
Food – restaurants $2,413
Entertainment $2,245
Health (incl insurance) $1,987
Alcohol $1,901
Utilities $1,719
Food – take out $1,444
Wedding $1,232
Clothes $1,182
Public Transport $1,041
Furniture: $984
Self/Financial Education $535
Sport/Gym $139
Coffee $298

Total $39,585

This is much lower than last year (over $17,000!) however last year I had a few exceptionally high categories, which I knew wouldn’t repeat (presents, travel, education). This year is right where I want to be, I had a really enjoyable year and didn’t feel like I was missing out on anything, but still managed to keep the spending down.

To expand on a few categories, ‘Wedding’ was very low as we calculated the total by subtracting the amount we received as gifts. My wife also covered the car expenses for half the year, as she was using it for work purposes. Apart from that everything was good!

I recently read Tony Robbins Money book and i’ve adapted some of his spending/wealth descriptions below:

Financial Stability (Basic 2017 living expenses, including rent, health, insurance, utilities, transport, food - excluding restaurants): $25,000

Financial Vitality (based on the total above plus half of all other expenses): $32,000

Financial Independence (3 year expense rolling average): $46,000
As you can see from my passive income, I’ve already met ‘Financial Stability’ and I’m pushing towards Financial Vitality. This will change from my next update, when I start incorporating my wifes income/spending.

In terms of NetWorth, I have now hit over $1,250,000 Australian dollars (950,000 USD based on current exchange rates). I know it sounds relatively high, however as I’ve mentioned before housing costs in Australia are high, so unless I move away from capital cities I’m not where I want to be yet.
Overall, I’ve had a great financial year. Once my wife and I start to combine everything over the next few months, I’ll be posting our long term strategy moving forward. Until then, happy ERE’ing!

[wolf]

Financial Independence (3 year expense rolling average): $46,000
In terms of NetWorth, I have now hit over $1,250,000 Australian dollars (950,000 USD based on current exchange rates).

Hi Rickardo, Thank you for the update. I discovered your journal because I searched for "finance" and "freedom". Then I had a look on your latest post and I saw that your progress is really great.
If I divide your NetWorth by the Financial Independence Number then I get = about 27. You have already saved 27x your FI-costs. That's great. Have you also thought about it that way? It is a WR < 4%.
Keep on saving. Take care. Cheers.
Looking forward to your next update.

[Rickardo]

Financial Independence (3 year expense rolling average): $46,000
In terms of NetWorth, I have now hit over $1,250,000 Australian dollars (950,000 USD based on current exchange rates).

Hi Rickardo, Thank you for the update. I discovered your journal because I searched for "finance" and "freedom". Then I had a look on your latest post and I saw that your progress is really great.
If I divide your NetWorth by the Financial Independence Number then I get = about 27. You have already saved 27x your FI-costs. That's great. Have you also thought about it that way? It is a WR < 4%.
Keep on saving. Take care. Cheers.
Looking forward to your next update.

Hi,

No I hadn't really thought of it in that way, it does sound nice!

[Rickardo]

Hi All,

It has been a while since I’ve updated this journal, and quite a lot has happened since then! Since my last post, my wife has given birth to our son, I have sold all my shares and one investment property to fund the deposit on our family home and my wife and I have fully combined our finances. The family home purchase was significant, almost $1.2million with a large mortgage attached. I gave a lot of thought as to whether to buy anything at all / keep renting, or to buy something more modest. In the end, I thought about why I had been investing in the first place and decided it was two main reasons; to provide me with options on how to use my time and to provide a suitable lifestyle. So I decided given it will be our family home for a long time, it was time for a nice, enjoyable purchase.

One of the other points my wife and I discussed at length was about how we wanted our careers to look compared to how much time we wanted to spend doing other things, with the most important thing for the next few years being raising a family. I initially wanted to be financially free at 40, however as I get closer to this timeframe, while I’m still pushing for the goal I think I will keep working in paid employment but just cut back the hours. Given my life situation has significantly changed with me getting married and starting a family since I started on the financial independence path, this has changed my goals too. My wife doesn’t really like to plan as far in advance as me but we’ve come up with a plan on how we’d like to spend our time over the next 5 years:

- My wife is taking 1 full year off working after the birth of our child
- Her to go back part time 3 days a week after the 1 year off
- Me to do part time 3 day weeks for a year when she starts back at work, this way either my wife or I will be home looking after our child until he’s approx 2 years old, after this we’ll consider childcare a few days a week, my wife will continue her 3 day weeks and I’ll return to full time
- We’ll repeat this for baby number 2
- This should take us to sometime in 2023

By this time, I will have been working for over 18 years and will be close to my goal of 20 full years, but it will be pushed out a little due to my periods of part time work. However, it’s following the concept of ‘mini retirements’ by giving me and my wife much more time with the kids when they are young, and this is important to us as it’s a time period you can never get back. The discipline I’ve put in so far over the years will allow us to do this without too much strain on our financial position. I’ll provide a more detailed financial update shortly, but just wanted to get some higher level thoughts down first.

[Rickardo]

Hi All,

Time for a late end of Australian financial year update. I am now married with a young child so I will be providing updates based on family income/expenditure from now on rather than solely my own expenses. This means a lot of my historical postings around income/expenditure are not as relevant now, I had a pretty good handle on what I historically spent however when adding a family it becomes a little different and the year below will be the first of the new normal going forward. I mentioned in the last post we had purchased a family home, but as this was done half way through the year only some of this expenditure will be shown in this update.


Employment income (me): $114,000
Employment income (wife): $82,000

Passive income at June 2018:

Defined benefit pension: $18,680
Share dividends: $0 (have sold them all to buy family home)
Property: $4000
Total $22,680

Spending between 1 July 2017 and 30 June 2018:

Rent/Mortgage Interest: $27,986
Food – Supermarket: $8608
Food – Take away: $5154
Baby $5144
Car $4384
Travel $4174
Misc house $3964
Health (including insurance): $3943
Entertainment (including new phones): $3470
Utilities: $3431
Food – Café/Restaurant: $2946
Whitegoods/furniture $2423
Public Transport: $2250
Presents 2103
Clothes 2120
Alcohol: $2001
House improvements: $1554
Coffee: $792
Misc cash spending – Wife $685
Sport/Gym: $499
Financial/self education $413
Beauty/toiletries $333
Other $237

Total $88,342

Savings of Gross Employment Income: 55%

I don’t think I will expand much on the categories above as it was a transitional year it’s probably not an ideal one to analyse, however our expenditure outside of rent/mortgage interest sat at just over $60,000, which is where my wife and I discussed we’d like to be. There will be a few major expenses (car and house related) in the next financial year which will blow out the overall spending, however I think $60,000 in general expenses is probably a good balance for both of us. What I’m starting to understand is there are a lot of unknown expenses as life stages change, from single to married and married to family. Some things are just hard to estimate and I think every year there’s ‘something else’ that pops up that increases the expenditure.

Now onto the Net Worth:

Assets
Property: $3,400,488
Shares: $320
Cash: $149,099
Retirement Accounts: $414,783
Total $3,964,690

Liabilities:
Mortgages $2,552,154
Student Loans (wife): $58,393
Total $2,610,547

Net Worth $1,354,143

A couple of highlights from the year:

Had an incredible month travelling around Europe
Wife got pregnant and number one son was born
Bought a house to live in
We both had overall great years and work was good

Overall, things are good. Our mortgage will significantly increase our overall housing expenditure moving forward (not very ERE friendly) but I’ll be covering my thoughts on this and how I’m addressing it in a future post.

[jennypenny]

Congrats on the family!

There's a bit of a baby boom on the forum of late.

[wolf]

Hi Rickardo! Great to read, that you had a good year. There were many highlights. Congratulations to all of them!

Where have you been to Europe?

[niemand]

@Rickardo: Amazing how similar our life situations are. I'm also Australia-based, got married and had a child recently, similar age, similar work arrangement plans with DW (I'm currently part-time). I'll be following your journal with great interest.

[Rickardo]

Hi Rickardo! Great to read, that you had a good year. There were many highlights. Congratulations to all of them!

Where have you been to Europe?

On my last trip we did Italy and the south of France, however I've also been to Spain, Germany, Paris, London and other parts of Italy. I enjoy travel!

[Rickardo]

Hi All,

Wow, nearly 18 months have passed since my last update. While I have still been thinking about and working towards FI, with a young family I have spent a lot of time simply enjoying life with them, so I haven't been all that active with things like this blog. I have realised previously I've been too focused on numbers without taking enough time to enjoy the present, so that's what I've been mindful of recently.

Highlights from the last 18 months:

- First son now over 18 months old and loving life
- Second son on the way
- Continued living in the (expensive) house we bought 2 years ago, which we absolutely love
- Sold some investment properties to reduce debt
- Reduced my working hours and took between 1 and 2 working days off per week to look after my son
- Wife took 9 months off when son born, returned to work 3 days per week and managed to get promoted
- Spent a lot of quality time together as a family
- Went overseas with our son, and have done some shorter beach holidays
- Kept saving towards FI while life ticked along brilliantly

Now onto the financial side (all in Australian dollars, where $1AUD is approximately 70 US cents):

Annual after tax salary (me) $85,000 (wife) $65,000

Passive income:

Defined benefit pension:$22,364 (nominal, can't be accessed yet)
Rent: $5,100

Spending:

Between July 2019 and Jan 2020 spending has been approx $30,000 for all general expenses and $17,000 for mortgage interest. This is split broadly as follows:

Food $7,785
Baby $5,208
Entertainment and Travel $4,000
Car and Transportation $3,464
Health (inc. Insurance) $2,271
House related $2,000
Utilities $1,540
Everything else $3,000

Saving of after tax salary: 38%

These savings have gone into a combination of putting money into retirement accounts, paydown of mortgage and cash savings. Overall while the savings rate has dropped over the last few years I'm comfortable with where spending is at, given it includes a lot of baby spending that wasn't factored in a few years back. While the interest payments on our house are high and I'd like to see these drop, which should happen over the next few years as we aggressively pay it down, the flip side is owning a nice home has given us more joy than expected.

Now onto Net Worth:

Assets
Property: $2,380,000
Cash: $170,938
Retirement Accounts: $509,763
Total $3,060,761

Liabilities
Mortgages: $1,666,320
Student Loans (wife): $52,086

Net Worth: $1,342,355

2 years ago when we bought our house to live in I knew given its cost I would have to take on more debt than I was comfortable with in the short term. This was correct, as for the first time my finances were giving me stress. So I sold some assets to reduce debts (a very hard decision for me) and now that stress is fully gone. So while our rental income and investment asset base isn't as high, the stress factor is gone, which makes it worth it.

I realise while we have plenty of assets, they are still not the type that will allow us full early FI. For now this is not a big deal, as I'm happy to continue working (good job with decent hours) and we still get to spend a lot of time together as a family, which is what FI seems to be about for me. It's nice we'll have the option of my wife taking 2 full years off when our second son is born, which will be funded from my salary and savings/investments. With these 'mini' retirements along the way, although I'd like to be closer to FI, I really can't complain.

Hope everyone is doing well!

[Nicolino]

Great to hear you are enjoying life, sometimes we forget to do that, don´t we? Even though you might be focused on "life" now, your numbers still look great. Taking it from your "core" spending of for July - December looks like you guys are at ~25x times annual expenses in networth, and that combined with a high savings rate puts you in a great position to have flexibility on the coming years.

You guys stay strong in Australia, such a great country!