Aussie Firebug

Financial Independence Retire Early

Nothing written below is financial advice. The below questions and answers are for general information only and should not be taken as constituting professional advice. You should always do your own research when making any financial decisions.

So I’ve got a bone to pick before I get started today.

I’m well aware of my struggles with the word ask (thank you for constantly reminding me 😂). I pronounce it like A-K-S (arks) instead of ask.

Well! I opened an email from a reader the other day who shed some historical light of my pronunciation of the word.

In a stunning turn of events, it turns out the pronunciation of the word ask, now considered standard, descends from a northern England version of the verb that in most midland and southern texts through the 1500s was spelled with x or cs (arks).

The reason that it’s now pronounced ask is because of a process called metathesis which is the transposition of sounds or syllables in a word or of words in a sentence.

I don’t claim to know what that exactly means but from what I could gather from the Wikipedia page, it’s basically when two very similar sounds switch inside of a word. Other common ones are
comfortable > comfterble
nuclear > nucular
prescription > perscription

The word ‘ask’ was most likely pronounced incorrectly but over time people wrote it the way they said it and it became the standard we have today.

They’re also a lot of evidence to suggest that the way you pronounce the word will be heavily influenced by where your ancestors were from as it was spoken differently in different places in England.

So wrapping up. The word is definitely pronounced ‘ask’ but now I have a better understanding of why I and many others say it the way we do!

And with that, let’s jump into today’s episode.

 

Other readings: 
Metathesis (linguistics)
People Have Been Saying “Ax” Instead of “Ask” for 1,200 Years
Why do some people say “aks” or “ax” instead of “ask”?

 

Question (4:15)


G’day AFB,

I am 29 with $70k saved and I don’t own any property. I am completely sold on parking my 70k savings into a LIC, re-investing my dividends plus contributing an extra 5k/year at minimum and not touching it for 30 years. But here’s the plot twist – through my work, I am entitled to a one-off 20-25k (after-tax) payment that can only be used to purchase a first home (which I must live in for 12 months). This is not including the Queensland first home owners grant of 15k, which I am also eligible for.

I have never been interested in real estate, and I am just about to pull the trigger on shares… but now that I consider the 20k+ extra that I can access, it is really making me think about buying a cheap two-bedroom apartment, living in it and renting out 1 room… instead of investing in shares.

So my question is – am I crazy not to take the extra 20k available and buy property instead?

Thanks for the great blog, and thanks in advance!

Regards,

Tom

Firebug’s Answer


Hi Tom,

That’s an amazing work perk!

I’ve been out of the property game for a while now and wasn’t aware Queensland has a $15K FHOG. If you combined that with your entitlement from work, that’s creeping up to be potentially ~$45K! This is not a small amount of money and something you’ll need to put serious consideration into.

Personally, I would never make such a big decision like buying a property just because of a grant… but a grant that’s going to give me $45K… hmmm I can probably make that work tbh!

My question to you.

Are you ever going to buy a home to live in? I understand first hand the appeals of renting and investing the surplus of money into the stock market but an opportunity like this seems too good to miss if you’re ever considering buying a home in the future. Unless there’s you’ve got something specifically against it that I don’t know, if I were you, I would take advantage of the free money from your employer and government.
You have to remember, even the governments FHOG can be axed and is never a guarantee.

I experienced this first hand back in 2012. A few years beforehand, one of my mates received something like ~$40K from the Victorian FHOG to build a new home in country Victoria. 40 bloody thousand bucks from the government! And he was going to buy anyway so this was just money for jam! The grant decreased the next few years and I ended up getting a tad over $20K back in 2012. After that, I believe it disappeared for a while.

My point is opportunities like may not come back around…

Have a long hard think as your two options are both good IMO.

-AFB

Question (11:31)


Hi Aussie Firebug,

I have been listening to JL Colin’s a bit and he talks about leaving a legacy for his kids. He believes his investments will, following the 4% rule, be greater when he dies thus leaving it to his kids. His kids will then live on his investment following the 4% rule who in turn can leave it to their kids.

In the Australian contexts using your strategy 3, one would have a large amount to pass onto the kids. Have you thought about how you would do this? Would some sort of trust be the most appropriate way to set up this continuing legacy? I have two girls and would like to protect the investments from any failed relationships etc they may have.

Interested to hear your thoughts

Andy

Firebug’s Answer


Hi Andy,

This is such an interesting question and I bet you could ask 10 people chasing FIRE and get 10 completely different answers. I’ve thought about this a little, not a lot, but at this stage right now (and it could change). I want to give my children as much as they need to fulfil their full potential and not a cent more.

But how much will that be you ask?

That Andy… is the million-dollar question!

I think it’s going to be hard enough not to outcast them socially by being the only kid in school without the latest phone or povo brand sneaker. I had experiences from my childhood where I was teased because of the brand of shoes I wore… but this helped thicken my skin and I had the personality type to deal with it. Will my kid be like that? Or will they suffer psychologically from something I could have easily prevented? Maybe I’m overthinking this?

Raising them through to adulthood while simultaneously teaching them the value of money is a struggle every parent goes through I’m sure.

But having a multimillion-dollar portfolio to pass on to the next generation may be a little bit more specific to us FIREbugs.

This may sound selfish to some but please hear me out. As of right now… I don’t plan to leave my kids anything!

I plan to do my absolute best raising them. This will include free housing, unlimited food, paid for education, etc. But what I don’t want, is for them to know that their future financial security is taken care of because their parents are financially independent and they will eventually inherit the colossal snowball!

I truly believe that if I choose to do that I would be robbing them of an opportunity to participate in what I consider to be one of the most fulfilling accomplishments anyone can do in their life. And that is to reach financial independence through hard work and dedication.

We’re all dealt a different hand in life and everyone receives help along the way, some more than others. But passing on the entire fortune to your kids is like giving them the Super Mario Warp Whistle so they can skip straight to the end. They won’t know how much fun the game is if they don’t play it!

I hope my kids are financially independent before I kick the bucket. I’m unsure where I want the snowball to go. Most likely a charity I’m passionate about.

If are set on leaving a legacy behind for your kids, I don’t think you can beat the estate planning of trusts. There are so many ways you could do it too. Maybe they don’t receive everything at once? Maybe they only ever receive the dividends from the portfolio each year? I’d go see a trust expert and explain what you want to achieve and I’m sure they could implement it.

-AFB

Question (22:15)


Hi Matt,

Like yourself, I’m also looking at moving overseas to work for a while in the next couple of years. I’m assuming that your existing property investments may be negatively geared to take advantage of Australian income tax law. Now that you are earning income (and paying tax!) overseas, what impact is this going to have on deductions and cashflow for your Australian property investments?

Bryce

Firebug’s Answer


Hi Bryce,

Nice to hear that mate. Moving and working overseas has been one of the best decisions I’ve ever made in my life!

Our two remaining properties are positively geared before depreciation is factored in. With the depreciation schedule, they are negatively geared.

However, we bought both the properties in the trust which was a mistake in hindsight. So we have never been able to reduce our income through negative gearing on those properties. What we have been able to do though is reduce the taxable income of the trust using those deductions. Even though the trust earns money in the form of dividends from the shares. It has never had to make a distribution because the deductions have always been more than the income.

When we sell the properties, the trust will start to distribute income like normal since there won’t be anything left in there that will cost the trust money.

The flexibility of the trust has actually been really handy whilst we’ve been overseas and has meant that we are able to distribute income (when it comes) to other people and not be taxed 32.5% because we are not residents of Australia for tax purposes. It also enables us to continue to purchase shares as they’re not in own personal names but rather the trusts.

The money I make through aussiefirebug.com will be taxed at 32.5% from the get-go which is not ideal. I did seek advice from my accountant and was willing to bet that I would have greater tax savings on my consulting checks while being a resident of the UK for tax purposes rather than staying an Australian one.

It’s all a bit complicated and I’m going to publish my Australia to UK article when I finish it that will explain this in detail.

-AFB

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