benecia's journal

Where are you and where are you going?
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benecia
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Joined: Fri Aug 04, 2017 10:05 pm

benecia's journal

Post by benecia » Sun Aug 06, 2017 1:01 am

I love the byline on the journal section in the board index, “Where are you and where are you going?”

So ... where am I? I mostly enjoy my job, it’s challenging and the people I work with combined with the problems I get to solve and think about all make for an environment I enjoy. So why the FI focus now? Simple … I recently got every single payment summary and added up everything I’ve earned since I started working and compared it to my net worth and it was depressing.

The purpose of this journal isn’t to drive me towards an ERE, it's too late for that anyway, the main aim is so that I am able to track my progress towards FI in a way where I can’t just sweep any slips in fiscal restraint under the carpet. I'm Australian so apologies for any terms or acronyms specific to Australia.

I have spent 127.67% of my after tax income so far this year. 44.89% of that extravagance has been on getting my house ready to sell.
Everything else staying the same, if I hadn’t started the renovation then savings this year would have been 33.19% of my net income so far, not very good at all. The breakdown is as follows:

Food 2.49%
Bills 25.71%
Dog 1.29%
Debt Reduction 35.98%
(inc. Student loan and Mortgage)
Renovation/Maintenance 44.89%
Books, Social inc. Presents 1.34%
Savings 15.97%

My current ratio is 1.76, which is ordinary to say the least.

Ignoring my superannuation and assuming I was living in a property I owned, ignoring investment income or growth, at my current savings rate it would take me 35 years to save up enough money to cover the basics with some buffer. A very sobering thought which is why things have to change.

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

Re: benecia's journal

Post by Zanka » Sun Aug 06, 2017 1:49 am

Good luck!

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Eureka
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Location: Denmark

Re: benecia's journal

Post by Eureka » Sun Aug 06, 2017 3:08 am

Welcome to!
I think it looks pretty well once the house is sold and the loans are paid off. How would that budget look?

MDFIRE2024
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Location: Germany

Re: benecia's journal

Post by MDFIRE2024 » Sun Aug 06, 2017 3:17 am

benecia wrote:
Sun Aug 06, 2017 1:01 am
My current ratio is 1.76, which is ordinary to say the least.

Ignoring my superannuation and assuming I was living in a property I owned, ignoring investment income or growth, at my current savings rate it would take me 35 years to save up enough money to cover the basics with some buffer. A very sobering thought which is why things have to change.
Hi Benecia, welcome!

Don't be depressed by "35 years to save up enough...". If you learn and implement ERE-principles, it could go faster maybe. There may be "small miracles" along the journey as well. First step, as you mentioned, is your intention to change things. That's energizing and motivating!

One question: What do you mean by "current ratio"? Is that Income vs. Expenses or Networth vs. Expenses?

benecia
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Joined: Fri Aug 04, 2017 10:05 pm

Re: benecia's journal

Post by benecia » Sun Aug 06, 2017 6:05 am

Hi, Thank you Zanka.

Hi, Eureka, once the house is sold I'll pay off the student loans and mortgage, but will borrow again to buy a property that will cost 10 - 16% of my after tax income.

Hi MDFIRE2024, my current ratio calculation is pretty crude, I use total assets/total liabilities. So I am almost at the point where my assets are double my liabilities, this will probably go backwards with the next purchase but my current plan is to buy a place to live in as well as rent out so should accelerate the debt repayment. Not that impressive, there are people on this forum with a current ratio greater then 25.

Noedig
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Joined: Tue Aug 26, 2014 10:15 pm

Re: benecia's journal

Post by Noedig » Sun Aug 06, 2017 9:40 am

Hey Benecia - Plenty of us here in our fifties so you are likely early to the party, not late.

At a savings rate of " 33.19%" - almost exactly 1/3, you'd be retired in 25 years https://networthify.com/calculator/earl ... awalRate=4

But you have taken steps, acted with agency and unswerving dedication to getting your house in order, in your case quite literally. That "Debt Reduction 35.98%" will reduce to "10-16%" which means another 20% at a minimum free for FIRE. Feed that 16% figure into the calculator and it gives 14.9 years

https://networthify.com/calculator/earl ... awalRate=4

or if you can make it 10% then 12.4 years. "Wake up and smell the eucalyptus, FIRE I am coming for you" you might well sing.

https://networthify.com/calculator/earl ... awalRate=4

... and all that's *without* factoring in your super, or any other changes in your lifestyle at all, or any pay rises, and assuming a pretty modest 5% growth/4% withdrawal (you can tweak those in the link)

Not saying it's all roses. But me old antipodean battler you, you are off to a flying start, as in journey of thousand miles starts with single step, the best time may have been then but the second best time is now, and all that stuff. Best of luck with it all. Once you have wrassled that to the ground for now you can work on the next biggie "Who am I and what do I want?"

benecia
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Joined: Fri Aug 04, 2017 10:05 pm

Re: benecia's journal

Post by benecia » Mon Aug 07, 2017 1:34 am

Hi Noedig, thank you for the links, great resource.

benecia
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Joined: Fri Aug 04, 2017 10:05 pm

Re: benecia's journal

Post by benecia » Thu Sep 07, 2017 3:11 am

A month goes so quickly, firstly the numbers:

Food 4.55%
Bills 28.8%
Debt Reduction 40.18%
(inc. Student loan and Mortgage)
Books, Social inc. Presents 3.64%
Savings 23.22%

Not having a functioning kitchen is expensive. Spending in the Food and Social categories was above average in August as I ate out and bought food that didn’t need much preparation. Who knew the importance of fire and running water ☺

The car battery died so I had the unexpected expense of call out fee plus replacement battery.

In terms of renovations, the bulk of invoices have now been paid. Renovations are being funded by money accumulated specifically for them so don’t impact long-term savings but in income terms I spend 170% of my monthly income on renovations in August.

Still to be completed:
Painting
Splashback
Window dressings.

So nearly there. I have optimistically booked the agent to give me an evaluation next week, plus advise if there is anything else that I should really get the builder to look at.

Where am I going? In the short term the plan is to complete the renovations and sell for a good price and buy something that I can live in and pay down during my accumulation phase over the next 10 years. Mid-term plan is to just stick to the accumulation plan.

Sounds simple, right? And it is fundamentally, the difficulty/messiness is always in the property search as where you live is so important as your environment shapes your thoughts, your actions and ultimately your life. You can always shape and change your environment but the right starting point always helps. I will be moving cities for work as part of this move so the property search/research phase may take me a little longer then it usually does.

Jason
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Joined: Mon Jan 30, 2017 8:37 am

Re: benecia's journal

Post by Jason » Thu Sep 07, 2017 7:57 am

Don't let age get to you. Keep at it. Don't let your own mind be your enemy. God knows, we all have enough of those already.

benecia
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Joined: Fri Aug 04, 2017 10:05 pm

Re: benecia's journal

Post by benecia » Fri Sep 08, 2017 2:54 am

Hey Jason thank you for the encouragement. I do appreciate it. I've probably given the wrong impression, sorry I should explain myself more.
I'm almost middle aged, which isn't old or young. It's just the site is called early retirement extreme and my retirement won't be early and I'm not taking any extreme measures compared to others on this forum. I'm actually quite excited about the next phase, just impatient to get through all of the gear changes till I can start just methodically following a plan and my net worth and savings graphs go back to straight line trajectories instead of lots of peaks and troughs due to the renovation spending and debt reduction.

benecia
Posts: 11
Joined: Fri Aug 04, 2017 10:05 pm

Re: benecia's journal

Post by benecia » Thu Oct 12, 2017 4:22 am

I have to say that there are a lot of active journals on this site, which is awesome. I had to go 3 pages in to the journal section to find my journal :D

September Summary
Food 2.86%
Bills 28.77%
Debt Reduction 43.9%
(inc. Student loan and Mortgage)
Books, Social inc. Presents 3.29%
Savings 31.94%

Ignoring renovation spending, September spending has room for improvement in the Social area and food. Bills included work travel expenses (reimbursed in October and will be counted in October income), new running shoes, foundation (I know frivolity) as well insurance etc.

The Renovation was finished a week and half ago and all of the invoices are paid. Overall the renovation costs came in at less then 10% of the value of the house which I'm happy with. The house is now listed for sale and I have had to spend a little bit on staging the house, plus marketing costs which will mean savings in October will be down, which is OK.

This is the transition phase and I'm quietly excited about the change and impatient just to have sold the house, bought the new one and moved and have settled into my next phase.

A lot of people on this site seem to have a regular trajectory, whereas my journey seems to have been slope of increasing savings/investment then flat line or dip as I change lanes/strategy (i.e. sell down property, pay down debt, move capital) and then it settles back into a regular upward trajectory. I'm OK with that as each step change seems to bring acceleration to an area. By that I mean increased achievement or ability, e.g. increased earning capacity, net worth, knowledge or skill or something similar. Anyway this is why I'm excited about this next step change and what it will bring.

MDFIRE2024
Posts: 370
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Location: Germany

Re: benecia's journal

Post by MDFIRE2024 » Thu Oct 12, 2017 11:24 am

44% + 32% = GREAT TOTAL SAVING RATE. Do you also count debt reduction as SR? Keep on going!

benecia
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Joined: Fri Aug 04, 2017 10:05 pm

Re: benecia's journal

Post by benecia » Fri Oct 13, 2017 4:42 am

Hi MDFIRE2024, No I don't count debt reduction as saving rate, I use it as motivation telling myself that "the sooner I pay down debt the quicker I can increase my savings rate" and also it makes me think very carefully about any debt I take on. I only have student debt and housing debt

benecia
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Joined: Fri Aug 04, 2017 10:05 pm

Re: benecia's journal

Post by benecia » Wed Nov 01, 2017 3:16 am

October was a very expensive month in which I had negative savings, as I had to use savings to pay for the costs of putting my house on the market.

As well as the usual house and contents insurance, property rates (equivalent to US Property tax) I included the cost of putting my house up for sale in the bill category. So with real estate marketing fees, plus flowers and cushions, and the cost of getting the second bedroom certified (ceiling height was lower then code) bills were 71.79% of income.

The grocery bill also blew out this month with some comfort food included.

And savings was 0% !! Detailed breakdown below.

Food 4.7%
Bills 71.79%
Debt Reduction 43.6%
(inc. Student loan and Mortgage)
Books, Social inc. Presents 2.19%
Savings 0%

The marketing worked and was worth the money as the house sold within 2 weeks of listing. I will know in a couple of days if it’s unconditional.

In November I am expecting having to pay removalist costs as well property search costs. I will stay with family during the search phase, but am moving interstate so will be spending a bit of money travelling to look at property.

My saving rate so far this year (ie total amount saved/total amount earnt) is 17% which is abysmal. I am looking forward to having finished the move, be settled and back in a financial routine.

Worst case monthly Budget during Property Search phase:
Bills 34%
Property Search 29%
Savings 35%

Bills include storage fees, board and food.
Property search costs includes two trips to Sydney a month, with car hire, airport parking and airBnB.

What I need to work out are the property inspection and conveyancing fees, the state I will be buying in requires that property inspections are done before you make an offer, whereas in the state I live in, contracts are subject to satisfactory building and pest inspection. This means I may have to spend money getting building and pest inspections done on properties where my offer isn’t accepted.

Worst Case Monthly Budget In new City
Bills 25%
PPOR 43%
Saving 32%

This is just current thinking and may change depending on where I end up buying. Sydney is a big city and very expensive, but in terms of maximizing my ROI for time spent working I believe it will be worth it. Plus I am looking forward to the challenge of moving to a new city by myself and living somewhere different.

There is a property near work going to auction next week, which depending on the contract terms I’ll bid on. If I buy it would mean I can walk to work, which drops 5% of my monthly living expenses plus builds exercise into my routine.

benecia
Posts: 11
Joined: Fri Aug 04, 2017 10:05 pm

Re: benecia's journal

Post by benecia » Sat Dec 02, 2017 9:50 pm

Just a word of warning, November was not a normal month and income included house sale proceeds and debt reduction included paying out all of the mortgage and most of my student debt (~$5000 left which won’t fall due to next year) all of which have skewed some percentages.

Food 0.05%
Bills 1.15%
Debt repayments 71.01%
Social 0.04%
Savings 28.09%

A significant amount of bill spending is related to property search and moving costs. The next couple of months will probably see me spend 20% of my income on property search/purchase/moving costs as well as a significant draw down on savings for the deposit.

The budget for the next couple of months is likely to be:
Bills (including board, food, transport) 32%
Property Search 20%
Savings 47%

With my savings I am going to allocate half to my long term savings and half to the saving for the relocation expenses and new property.

It will be good to not be in a state of flux. I find that when I am out of routine or in the middle of developing the new norm that it is very easy for spending to get out of control.

The good news is that most of the work Christmas functions and gifts are done. Aside from property search expenses my planned spending for the next couple of weeks is minimal; food, board, final electricity bill from my house, a couple of Christmas gifts which I still need to get and one more work social event as well as Christmas day.

Christmas isn’t that expensive in my family; we do secret santa for the adults and my brother and I go halves in presents for our nephews. For our version of secret Santa we all give vouchers to each other. I generally use reward points to get the voucher so it works out well as I’m not going to use the points otherwise and someone I love gets a voucher to spend during the year.

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Eureka
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Re: benecia's journal

Post by Eureka » Mon Dec 04, 2017 4:14 am

Congratulations selling the house and my best wishes that you soon find a suitable place to live

benecia
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Joined: Fri Aug 04, 2017 10:05 pm

Re: benecia's journal

Post by benecia » Mon Dec 11, 2017 2:12 am

Thanks Eureka, I think I have found something, just waiting for confirmation of the results of the bank valuation and building and pest reports

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