Alice_AU journal

[Bankai]

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.

Quite a lot of assumptions. You don't need paid of house to retire, and you certainly don't need 1.4m house to retire. With 1.4m you can retire very comfortably in many places in the world with housing cost being fraction of that. As for any recommended by government spending level - it's tailored for average consumer. One can do much, much better than that and we have many examples here of people spending below so called poverty line.

Australia is certainly not cheap, although salaries are good. Its great place to accumulate assets for sure. Are you thinking of staying forever or is it just a chapter in your lives?

[NPV]

Given how weak AUD currently has been (0.67 USD currently), Australia is hardly the best place to earn anymore. In most high paying fields you can get paid significantly more in the US, and taxes are higher in Australia. On the other hand, Australia has decent free healthcare, decent public schools (if you live in the right neighborhood), infrastructure etc. And when you multiply the prices (and salaries) by 2/3 to compare to USD, they don't look crazy high anymore either...

[Alice_AU]

Quite a lot of assumptions. You don't need paid of house to retire, and you certainly don't need 1.4m house to retire. With 1.4m you can retire very comfortably in many places in the world with housing cost being fraction of that. As for any recommended by government spending level - it's tailored for average consumer. One can do much, much better than that and we have many examples here of people spending below so called poverty line.

Australia is certainly not cheap, although salaries are good. Its great place to accumulate assets for sure. Are you thinking of staying forever or is it just a chapter in your lives?

Yes, I'm only in the beginning of figuring things out, so making a lot of assumptions. Some are:

- I'll stay in Australia. Unless one or both of my children move to another country when they grow up, I won't leave. I was an adventurous child myself, and left my birth country at 20 (my poor parents!) so all adult life was spent far away from my parents and siblings... now my mother lives in Bulgaria, my parents-in-law live in UK, they see grandkids once a year at best and I don't want the same for myself.

- Having a paid-off, almost paid-off, or at least half-paid-off house in retirement is a must for me. I worry a lot, about all things in life, and the idea of paying rent when retired and knowing the rents can grow unpredictably in the next 5-10-20 years would be too stressful.

- $1.4m house, on the other hand, is not a must. In fact, it is not even an option. I'll have to save $40K per year for 35 years to get that. Retiring at 75? - hope not!

- Now we are paying $700 per week rent close to CBD. In retirement, I would look to reduce it a lot. The cheapest but still livable places within 200-300 km are around $350 per week. This requires $455,000 invested, with 4% swr. If I had this much, I'd rather buy and not worry about rent increasing every year or landlord kicking me out. $455K gets you nothing in Sydney and suburbs of course, maybe a studio apartment. So I'll need to aim for somewhere rural, ideally within 2-3 hours drive from Sydney so I can still see my children regularly (assuming they'll live in Sydney).

[Alice_AU]

Given how weak AUD currently has been (0.67 USD currently), Australia is hardly the best place to earn anymore. In most high paying fields you can get paid significantly more in the US, and taxes are higher in Australia. On the other hand, Australia has decent free healthcare, decent public schools (if you live in the right neighborhood), infrastructure etc. And when you multiply the prices (and salaries) by 2/3 to compare to USD, they don't look crazy high anymore either...

Hi NPV. Yes, US has higher earning potential. But they don't just let people in so easy. DV lottery, H1B lottery, spouse having no right to work on H1B visa... Immigrating to Australia was much easier. And now I got to know it and love it, I no longer submit my DV lottery entries every year

[Alice_AU]

First week trying to reduce grocery shop budget was a failure

Spent $250 as I originally planned instead of the usual $300, but then ended up running out of staples (eggs, milk, bread, yoghurt, tomato paste) and spent another $40 in small runs to the corner shop. To add insult to the injury - cleaned up the fridge this morning and had to throw away a lot of leftovers which look old and inedible, items with expiry dates over 2 weeks ago, and rotten fruit:



You'd think I'd be better at this after 20+ years experience of running the household...

[Zanka]

Haha:)

Just plan 3-4 cheap meals for the next week and you will be fine. Panncake is one example, chili and lentil soup another. And go for food that you can freeze if there are leftovers:)

[Alice_AU]

Today I done my first ‘side hustle’ in many years. Last time this happened must have been in Uni. And today, after 18 years of relying 100% on full-time jobs, I got paid $50 for 30- minutes market research group. Feels so good! Can’t live on it but this is like a first glimpse of “life doesn’t end outside of day job” if this makes sense... I realise that I might be making way too much fuss over a very small sum of money but it’s somehow so exciting I almost want to frame it, or do something else very special with it

[Alice_AU]

Came home tonight to find a $600 cheque in the post. Totally unexpected! Insurance company told me 3 months ago they won't pay for my wisdom teeth extraction, so I paid and forgot, and now this. Completely out of the blue

Maybe they made an error and will ask for it back?.. meh, don't care... going to deposit it anyway...

[Alice_AU]

Decided to do something really fun with the extra $650 I got this week. There is this new app my bank just introduced - CommSec Pocket. It is aimed at small investors, offers about 8 different ETFs and the annual fee is even lower than Vanguard. I decided that from now on any side money that are not from my job will be kept separately and this would be a good place. Just to encourage me to look for ways to find more side hustles I guess, and to keep track of how much these brought in.

I suppose I'm not taking this whole thing seriously, am I? Feels a bit like some kind of simoleon-collecting game

[Sabaka]

I think putting your "side hustle" money away in a separate account is a good idea. It will help to incentivise you to keep finding different opportunities. Especially since a lot of side hustles can be quite boring, and therefore gameyfing (real word? ) should help to keep it relatively exciting!

[Alice_AU]

Yes, that’s the idea - having a bit of fun)

On a less positive note, my mentality probably hasn’t adjusted yet, that’s why I don’t view the money I don’t intend to spend as “real” money so to say...

[Alice_AU]

September was a month of small improvements at home. Changed Internet provider to save $20/m, put some things on Ebay, done two market research "jobs" for $150 total. Trying to control food expenses and minimize throwing away uneaten food at the end of the week. Not always works. Yesterday family demanded pizza delivery so given it is three of them against one of me I was outvoted and so it was $50 of unplanned takeaway spend.

Also persuaded my husband to open a joint savings account. He was quite reluctant, he likes our separate budgets and doesn't like the idea of mixing money at all. The intention is to put only $25 per week each into this account for now - this is so little it is almost nothing, but I see it as a first step anyway.

[Alice_AU]

I've heard/read online that a lot of people in modern-day Sydney can no longer afford to buy where they live so instead they choose to buy elsewhere while continuing to rent. As I'm quite scared of the thought of property prices running away from me completely and ending up old and 'homeless' one day, I've also been thinking about a possibility of buying something just to get a foot in the property market.

Spoke to the bank yesterday - looks like I need around $60K saved for 10% deposit and 5% purchase costs and will be looking at apartments or houses around $450K price. I only have 30K saved now so have plenty of time to think and decide if this is a good idea or not. I know owning an investment property can turn in a complete disaster. But I can see how not owning a house could end in a disaster for me too... difficult choice...

[wolf]

Wow, that's a tough decision to make.
Maybe there are alternatives, like REITs?
Did you compare two scenarios: 1. being in debt and paying interest and 2. not being in debt and still having money in the Australien real estate market?
In Europe it is quite inexpensive to be in debt, because the interest rates are very low. Is it the same in Australia?

[Alice_AU]

Thanks wolf, I had to google what REITs are and will read about them more. The rates are quite low here, although maybe a bit higher than Europe. The banker said yesterday that for investment property I'll be looking at around 3.8%. The other thought is the leverage:

- If I invest $60K in $450K house and the price doubles in the next 20 years then by age of 60 I have a $900K house to live in and some remaining mortgage debt.
- If I invest and the price doesn't grow at all, I still have the same house to live in and the same mortgage debt.
- If I don't invest and the price doesn't grow it's fine - I do better with having kept the said $60 in index funds all this time
- If I don't invest and the price does double - now I'm in trouble. My $60K maybe doubled as well (from compound interest) to $120K, but the houses are $900K now and I still have no means of getting one...

Now what will really make my mind one way or the other is whether I can find a property where potential rent is at least close to covering mortgage interest and other costs: repairs, vacancies, RE agent fees, taxes, any strata fees and the like. I don't think there is anything in Australia right now that is cashflow-positive, so can accept being out of pocket a little... maybe up to $50-$100/week, but hopefully no more.

[Alice_AU]

Yes, I'll have to think very hard about this one. Maybe the fact that I don't have that deposit yet is a good thing, at least I won't do anything too rushed and silly

[mooretrees]

I wanted to chime a little bit about owning a house. You are really focused on it and it does seem like a big hurdle in your area to buy. While it does seem like you could gain some security owning a home, it is more expensive than just the mortgage costs. Once we bought a house, we started spending money on it, gardening and paint, renovating and the like. So, really I'm trying to say comparing rents to mortgage prices is not the fullest picture. We are renting a room out now and so it is an asset in that sense, but most home owners don't want to share their home. I know that houses 'appreciate' and generally go up in value, but I also don't want so much money tied up in one spot. I don't have any advice for you going forward, just wanted to add that all homeownership is not roses and security. I don't exactly regret buying a house, but it isn't the only way to achieve the security you seem to need.

What happens if in the next five years your rental situation stays the same, you have two kids out of the house and you have managed to save a ton of money? Do you want to drop most of the money into a home? Or put it into investments and move away from full-time work? I have read that many landlords will keep a good renter even if they could ask more for the space, it's worth more to have a steady rental income from good renters than it is to chase a little bit more money. So perhaps your fears about rents increasing are slightly unfounded? Do you have a good relationship with the landlord?

I think you've just started this ERE journey and the last thing you should do is tie yourself down with a 30 year mortgage (or whatever the AU equivalent is). You have plenty to work on with reducing expenses and seeing where that takes your family. Perhaps what you could also do is look around for folks that are retired and don't own a house? Some of the hard part of ERE is that is it not the common example of how people live so it is not easy to see examples right in front of you all the time. Homeownership is so common that it seems like it SHOULD be the best way to go, but if you look around you might find examples of other ways to go about this living that don't include gobs of money in a home. I'm not so good at getting to a point, but what I think you actually really need to do, is have some success with reducing expenses and starting to save more. What you learn by reducing expenses (and I'm still in progress....) is that reduced needs IS SECURITY. A home is a fragile thing that can be taken away, your skills at navigating life with fewer money outputs will always be there. Give yourself that gift instead of a house. Anyway, good luck and I'm rooting for you.

[Alice_AU]

Thank you mooretrees. I have been reading your journal earlier, it is very interesting. I have to say am quite open to creative and even somewhat ‘extreme’ ways of organising my own life and space but only when children grow up. And the husband will never understand if I suggest anything that is ‘non-mainstream’

[Alice_AU]

Many people note how well Minimalism goes with ERE/FIRE/MMM/general frugality concepts. I finally understand why all of my previous minimalism attempts failed and why just after 3 years post international move I once again have garage full of stuff, closets full of stuff and messy house full of stuff. Because I was getting rid of old things I don’t need but soon replaced them with new things.

Now after almost a whole year of zero shopping - I didn’t buy any clothes, shoes, handbags, houseware, stationery or hobby supplies... strangely, it turns out a year of zero shopping was not enough. I’m sorting through my closets and there is nothing that is worn out enough to be thrown away. Looks like I’m going to need two or three years before no-shopping gradually leads to natural decluttering...

[paretotime]

Great job on the no spend year, and looking forward to reading more of your journal. Wanting to be more mindful or minimalistic is the first step (getting rid of stuff and having it slowly creep back in could be considered steps 2 & 3) I've definitely been there.