Alice_AU journal

Where are you and where are you going?
User avatar
Alice_AU
Posts: 26
Joined: Fri Aug 09, 2019 2:42 am
Location: Sydney Australia

Alice_AU journal

Post by Alice_AU » Fri Aug 23, 2019 10:00 pm

Hi All,
I'm new to ERE concept and also found out about it quite late - just recently, at the age of 38.

I have a husband, 2 kids and 2 dogs and we recently moved to Australia from UK where we lived since 2004.

I also have many regrets about past financial mistakes, stupid spending and living paycheck-to-paycheck all of my life which means I'm almost 40 now but have no assets, no property, no real savings etc. Well, the past is the past, can't change it. Can only get to grips with the present and try to do my best for the future.

Hence starting this journal. I've been reading about ERE for about a month now but still not fully clear about what I should be doing. Hopefully writing things down will help me to get a more organized view.

Cheepnis
Posts: 126
Joined: Mon Dec 31, 2018 11:52 am

Re: Alice_AU journal

Post by Cheepnis » Fri Aug 23, 2019 10:36 pm

Welcome! There isn't any concrete pre-prescribed thing you "should" doing. However, if you start reading most folks journals from the beginning you will find the first 10 or so pages are some variation of figuring out how to raise income and reduce expenses. Once that's figured out most turn to more philosophical fodder like "what even is happiness, maaann?"

Following that order: Do you know what your monthly expenses look like? Do you have any financial goals outside retirement?

User avatar
Alice_AU
Posts: 26
Joined: Fri Aug 09, 2019 2:42 am
Location: Sydney Australia

Post by Alice_AU » Fri Aug 23, 2019 10:47 pm

So, I'm 38, my husband is 40, our kids are 12 and 14 years old.

I'll be writing mostly about myself here. I haven't had "the ERE talk" with my husband yet, and we always kept our finances separate anyway. We both contribute a set amount into joint expenses, it is $900/week from him and $2000/fortnight from me. Then we each do whatever we want with the rest. I manage the joint expenses - food, utilities, kids, old debts, vet, etc. Any personal needs and wants me or my husband have come out of our own budgets.

At the moment, all of the "joint budget" above gets spent so this makes our family living expenses AUD $95,800 per year. This is so high it makes me cringe. We would need $2.4m to cover it with 4% SWR! Obviously, not going to happen - especially not with 0% savings rate we've had till now. I can't reduce this $96K per year a lot - Sydney is very expensive to live in, especially when you're renting! But I'm going to try.

Personally, I'm paid $3630 per fortnight so after contributing $2000 to living expenses I have $1630 left every 2 weeks. I used to spend it all previously, but since the start of the year decided enough is enough and was very conscious not to. For the first time ever, I managed to have some money in my savings account, and it feels incredible! It is only $23K but it is more than I ever had saved up my entire life.
Last edited by Alice_AU on Fri Aug 23, 2019 11:02 pm, edited 1 time in total.

User avatar
Alice_AU
Posts: 26
Joined: Fri Aug 09, 2019 2:42 am
Location: Sydney Australia

Post by Alice_AU » Fri Aug 23, 2019 10:50 pm

Thank you Cheepnis!

I'll analyse where exactly $96K per year goes, and post here. Hopefully I might find some room for improvement, however small. Living here is not cheap...

wolf
Posts: 900
Joined: Fri Jan 06, 2017 5:09 pm
Location: Germany

Re: Alice_AU journal

Post by wolf » Sat Aug 24, 2019 12:01 am

Welcome Alice_AU!

I'd also suggest to first analyze, then optimize.
I've seen journals here, where people started also with high expenses and reduced them bit by bit quite significantly.

Do you know numbeo? I've just used it to guestimate the cost of living in Sydney. I was astouned to see that it is indeed not quite cheap to live in Sydney, based on minimal expenses. It estimates about 72k AUD for 4 familiy members, living in a 3 Bedroom apartment outside of the city. If you'd like to see the numbers for yourself and change them, just follow the link: cost of living estimator for Sydney

Looking forward to read more of you!

Zanka
Posts: 59
Joined: Tue Aug 01, 2017 2:33 am

Re: Alice_AU journal

Post by Zanka » Sat Aug 24, 2019 1:45 am

Following! Being almost 40 is def not to late! Most people never find ERE so be happy that you did before your 70s:)

I would start by looking trough next months (or this) expenses. You might not feel like it is possible to live on less than 90k right now but a lot of small changes will get you a long way. Also it is not all about retiring early but maybe even more about taking controll over your life and making good decisions for yourself and your family.

Also id recomend talking to your husband but do not start with savings, start with talking about His dreams and make him talk about things he would want to do (travel, spend more time with kids or whatnot), then talk about How you could get there. I have read more than one that get all hyped up and want their SO to be onboard but end up in arguments instead of dreams. Be a bit careful and take it easy:) Good luck!

Zanka
Posts: 59
Joined: Tue Aug 01, 2017 2:33 am

Re: Alice_AU journal

Post by Zanka » Sat Aug 24, 2019 1:49 am

Also, saving up 23k this fast is huge! And if you can get your spending down by ”only” 10% you will have a savingsrate of 50% so you are in a good position IMO!

User avatar
Alice_AU
Posts: 26
Joined: Fri Aug 09, 2019 2:42 am
Location: Sydney Australia

Re: Alice_AU journal

Post by Alice_AU » Sat Aug 24, 2019 2:51 am

Thank you guys!

@Wolf, I haven't seen this tool before - thanks! It is amazing and so accurate. Actually, without credit card payments our expenses are really close to the predicted $6.5K per month I got from there.

@Zanka, thank you for your encouraging words. I will speak to my husband at some point... but when I can give him actual evidence that saving a bit of money is possible for us. If he agrees to open a joint savings account then every month I can put everything I hopefully manage to save from "family budget" there. I'm hoping he'll start getting enthusiastic eventually if he sees that the balance is growing. I still intend to keep my own savings separate though. If he knew about my $23K he'd be talking about car upgrade faster than I can say "ERE" :-)

User avatar
Alice_AU
Posts: 26
Joined: Fri Aug 09, 2019 2:42 am
Location: Sydney Australia

Re: Alice_AU journal

Post by Alice_AU » Sat Aug 24, 2019 3:22 am

Took me half a day to add up our expenses. Not everything tallies up fully but I'm pretty sure it's quite accurate. I put the family budget in a table and marked yellow the rows where I could potentially optimize. Weekly food spend is probably the biggest area where we could save a little, and takeaways have to go almost completely. Maybe still get one once a quarter but not every week for sure.

I also marked purple those rows where the payments will end soon as long as we stick to the repayment schedule - can't wait! Thankfully our debts are not that huge: £3900 in UK credit cards at 0% balance transfer rate, and $6000 in Australian credit card at 9% APR. Plus payment plan for our daughter's braces, and payment plan for her phone. Hoping to get rid of credit card debt ASAP, and payment plans soon after.

Image

User avatar
Bankai
Posts: 545
Joined: Fri Jul 25, 2014 5:28 am

Re: Alice_AU journal

Post by Bankai » Sat Aug 24, 2019 3:50 am

Good job on saving $23k in only seven months - annualised that will be $40k - not bad at all! Do it for a decade and we are talking over $0.5m with compounding. Also, expenses reduction and possible pay rises will feed into that as well. You might be starting late but with high income to work with.

As for expenses:
Rent - assuming it's cheaper to rent in Sydney considering RE bubble?
Food - this is very high; many people here do on much less. Do you guys cook your own meals? First steps would be to look at most expensive items and either find cheaper way to get them (is there Aldi or equivalent in Australia?) or replace them completely. You should be able to gradually slash this by half as you gradually build skills.
9% Apr card - have you considered using your savings to pay it off and then charging back on joint budget? This would cut interest.
Also, seeing as debt is due to holidays, I don't think you guys can afford expensive holidays anytime soon, at least until you have a year of expenses saved. Maybe start taking local trips instead?
Similarly takeaways need to go. It's not only money it's costing you, it's health as well.
Contents insurance seems very high. Do you have enough stuff to justify needing extra $12,000 in capital at 4% to insure it? I never had contents insurance and quite sure many people here don't either.
Definitely check for possible better deals on all utilities, these might be easy wins.

Strategically, your situation will improve over next few years as you build skills to reduce expenses, get your snowball going with compounding and eventually kids will leave the house freeing some money and also giving you option to move somewhere cheaper.

Do you have any savings in retirement accounts, even in UK?

User avatar
Alice_AU
Posts: 26
Joined: Fri Aug 09, 2019 2:42 am
Location: Sydney Australia

Re: Alice_AU journal

Post by Alice_AU » Sat Aug 24, 2019 5:17 am

@Bankai, wow... so much food for thought.

$23K in seven months is probably not sustainable in the long term) Just like I was crazy before buying whatever I wanted with the money I didn't have, I went a bit crazy with saving this year too and spent literally NOTHING on myself since January, except dental and medical. No clothes, no shoes, no work lunches. If I ever forgot to bring my own lunch to work, I'd walk to a nearest supermarket and get a $1 can of Campbells instead of $12 sushi set like I used to before. Haven't even been to hairdresser, have to go soon. Just not to my usual $300 per visit hairdresser probably :-)

You are right to think that in Sydney renting is often cheaper than buying. We live in a great neighbourhood, with excellent high school for our kids, ~45min commute to CBD for work, and great infrastructure. I think this house is worth around $1.4m. It is nice but not new and is on a main road, next to a petrol station. Houses just around the corner are more within $1.6-$2.2m range. At 5% deposit and 3.75% interest rate, our house would cost $4156 per month in mortgage interest alone (first year after purchase) plus council tax and maintenance; but the rent is only $3000 per month, and hasn't increased since 2017 when we first moved in. There are cheaper houses elsewhere but we want our kids to finish school undisturbed. And an apartment is a bad option for a family with 2 dogs)

Food - yes we both cook. But I can probably do better with weekly grocery spend. This will be the first thing to focus on.

9% APR card - I promised myself it'll be paid off before year ends, whether joint budget or my personal or both. And yes, no takeaways and no expensive holidays next year... God, I hate camping... but kids seem to enjoy it )))

Contents insurance is an interesting one... need to calculate how much our "stuff" is actually worth.

And as retirement accounts go, luckily for me my UK employer paid into private pension for me all the time I worked there (13 years) and that pension is now worth around $135K in AUD. Australia has an excellent superannuation system where all employers pay 9.5% of annual salary into so-called Super Fund, I have accumulated around $37K since coming here in 2016 and my husband has around $20K here but nothing in UK unfortunately. When we can afford to, we'll have to start doing additional voluntary contributions as well. This pension will be accessible at 60.

User avatar
Bankai
Posts: 545
Joined: Fri Jul 25, 2014 5:28 am

Re: Alice_AU journal

Post by Bankai » Sat Aug 24, 2019 5:29 am

Yeah it makes sense to rent in your circumstances.

Pensions - that's some nice numbers! If you both worked in UK for at least 10 years, you will be also eligible for (small) state pension at 65/67 (if rules don't change) even if you live abroad. Best to treat it as potential small future boost.

Re spending on yourself - you're in very good situation as having not spent much for many months, you 'reset' your needs/wants and can start adding things you really want from scratch instead of trying to deduct. So you can only add what you now consider essential as you've already done heavy lifting of removing nonessentials. It's like starting from zero and only adding what's really needed if that makes sense?

User avatar
Alice_AU
Posts: 26
Joined: Fri Aug 09, 2019 2:42 am
Location: Sydney Australia

Re: Alice_AU journal

Post by Alice_AU » Sat Aug 24, 2019 6:58 am

UK state pensions are funny. On one hand, we have very little hope that the qualifying age will remain at 68 as it is now. Will they raise it to 70? 75? Make it means-tested? Cancel completely? But on the other hand, we must feel optimistic enough because we have chosen to keep making voluntary contributions into UK National Insurance even after we left the country. HMRC allowed us to pay it as "Class C", so only £150 per year counts as another qualifying year towards future state pension, what a bargain!

I like the way of thinking about resetting personal expenses. Temporary abstinence made me realise I don't really need anything. There are plenty of clothes, shoes, makeup and skincare products, stationery and hobby supplies to last a while. Makeup and skincare will expire but the enormous pile of patchwork fabrics can sustain a whole year of happy quilting even if I suddenly could do it full-time.

Zanka
Posts: 59
Joined: Tue Aug 01, 2017 2:33 am

Re: Alice_AU journal

Post by Zanka » Sat Aug 24, 2019 8:48 am

Seems like you could have a nice talk with your husband and feel out what he thinks of the future and what kind of life you want to have, and then, if you feel like he will be onboard, you can slip in "so I saved 23k and am now going to pay of (pruple rows adds to 23.6?) all our debt so we can start our journey today". ;)

singvestor
Posts: 124
Joined: Tue Jul 21, 2015 12:48 am

Re: Alice_AU journal

Post by singvestor » Sat Aug 24, 2019 4:02 pm

Interesting journal! Can I share unsolicited advice? ;)

Paying off debts early would help reducing interest paid and increase cash flow. 9%APR credit card debt: I would pay this off with savings. 9% guaranteed return!

Would also recommend Jacob's book and your money or your life. Would also look into the interest of braces and daughter's phone. Clearing debts, freeing up cash flow and increasing saving. After all debts are paid off you can have around AUD 2000 more money available each month. If you keep all things constant that means AUD 24000 a year. Not bad!

As someone else said getting to a joint vision with the husband is key.

User avatar
Alice_AU
Posts: 26
Joined: Fri Aug 09, 2019 2:42 am
Location: Sydney Australia

Re: Alice_AU journal

Post by Alice_AU » Sat Aug 24, 2019 5:23 pm

Thank you All!

@singvestor, unsolicited advice is most welcome here!

In fact, I'm amazed by people's generosity, giving free and detailed comments like that to a complete stranger first day on the forum, thanks guys :-)

User avatar
Alice_AU
Posts: 26
Joined: Fri Aug 09, 2019 2:42 am
Location: Sydney Australia

Re: Alice_AU journal

Post by Alice_AU » Sat Aug 24, 2019 6:30 pm

In addition to the family budget above, I approximated the personal expenses. It is not very interesting now when I live like a nun :roll:

With direct debits set up for everything, I have literally no discretionary money left over after each pay ($11 per week :lol: ), but there's this trick I use:

I contribute to the family budget fortnightly but expected to do it only twice a month. This way two times every year (usually March and September) I get three salaries in a month instead of two, and from the third salary I contribute only $500 instead of the usual $2000, so I have around $1500 as "discretionary spend and emergencies" to last about 6 months till next March or September. I feel very rich first month or two :D

Image
Last edited by Alice_AU on Sat Aug 24, 2019 7:09 pm, edited 1 time in total.

User avatar
Alice_AU
Posts: 26
Joined: Fri Aug 09, 2019 2:42 am
Location: Sydney Australia

Calculating savings rate in AU

Post by Alice_AU » Sat Aug 24, 2019 7:06 pm

Total savings rate is different if one includes Australian Superannuation ("Super"). Without it, I have net weekly income of $1815 and save $600 (33%). However, when my employer pays 9.5% of my pre-tax salary into Super and it gets taxed at 15% rate, I can also calculate my net savings rate as ($600+$216) divided by ($1815+$216), making it 40%!

User avatar
Alice_AU
Posts: 26
Joined: Fri Aug 09, 2019 2:42 am
Location: Sydney Australia

Re: Alice_AU journal

Post by Alice_AU » Tue Aug 27, 2019 1:08 am

Work has been difficult today. Every $ of pay that I don’t deserve based on productivity and experience, I deserve in suffering :lol:

User avatar
Alice_AU
Posts: 26
Joined: Fri Aug 09, 2019 2:42 am
Location: Sydney Australia

Australian RE

Post by Alice_AU » Sat Aug 31, 2019 9:45 pm

Ever since we moved to Australia in 2016, house prices have been my main worry and concern.

We have no regrets of moving, the country is great. Wonderful weather, amazing scenery, friendly people, jobs that pay well, so many things to do and places to go... all together, life is good :)

But housing... so, so expensive. We pay $3000 per month for a house worth around $1.4m. There are cheaper areas further from the city, but it already takes us 45 minutes to get to work each way. Up to 1 hour each way would be bearable but it is still not far enough to get tangible reduction in rent or purchase price. Also, the high school here is great, and the oldest child has only 3 years of it left, after this year is finished. Youngest has 5. We already dragged them across the world leaving their home, school, friends, grandparents behind, so I feel that moving them again would be unfair.

After children finish school, we'll have more options. My husband can get a job anywhere, he is a chef. I on the other hand can only work in a large city. I keep thinking and thinking and considering various options, even crazy ones, but still haven't found a good strategy. To retire at all, one needs a paid-off house. Australian government recommended retirement income for 1 person is $26K pa for "basic" lifestyle (pretty much bills and food, nothing else), and $44K for "comfortable" lifestyle (add visiting family, occasional cinema and a holiday every couple years). Both figures assume that the person has somewhere to live, and the mortgage has been paid off.

HOW?! I just don't see it... How can I contribute to Super, and save outside of Super (because Super alone isn't enough), and at the same time save for the deposit, buy a house and pay it off before I reach let's say 60? ... seems like impossible task, or a magic trick... sorry for the rant...

Post Reply