We’ve been on the road now for over 6 weeks and honestly, it feels like this year has just been one enormous adventure.
They say a change is as good as a holiday and ain’t that the truth!
I did enjoy my job back home but just like your favourite game or movie, you eventually get sick of them and loading in a new disk every once in a while can be therapeutic.
Even though I managed to find work in London this year, the novelty of a career change made it exciting. Yeah, there were a few late nights here and there and I had to figure how this game worked at the start. But it’s been a lot of fun so far and I’m looking forward to booting it back up when we get back to London at the start of October.
We continue our European summer trip finishing up in Spain and heading over The Middle East.
Here are some of the spots we hit up in August.
La Sagrada Familia, Barcelona
The Great Pyramids of Giza
Diving in the Red Sea
Petra
Travelling through the Middle East was one of the coolest experiences I’ve ever had. Going in the middle of summer was a big mistake in hindsight. It pretty much worked out that we had to do it in summer but wowee she was steaming!
I’m talking 46°C in the middle of the desert with humidity 😅🌡🔥☀
Seeing the Pyramids and Petra was truly mind-blowing and the culture shock was one I’ll never forget.
Being a finance and economic junkie, it was extremely interesting hearing first hand from the people of Egypt and Jordan about jobs, future prospects, education, health care and all the other topics I managed to chew their ears off about.
Both countries rely heavily on tourism. And if you can remember the 2011 Egyptian Revolution, it may shock you to know that the country has still not recovered from it all these years later. Some industries that relied on tourist were completely destroyed overnight apparently and the Nile cruises, for example, are only back to about 60% capacity. I would highly recommend them too if you’re down that way. The people didn’t lack education either. Maybe not all, but a hell of a lot of taxi drivers, tourist group leaders and even the dudes that looked after the camels had university educations! I can’t tell you how legit they were but it seemed that the issues were not education, but rather job opportunities that paid a decent wage.
Jordan also was hit hard when they took in refugees from Syria in the last couple of years too. I couldn’t get to the bottom of it but apparently inflation had eroded the local currency with prices for goods and services going up but wages staying stagnant. This is what I was told anyway and I’m definitely not an expert in this area but I found it interesting to listen to.
I continue to have a newfound appreciation of what Australia has and offers as we continue our journey around the globe. I can see quite clearly now why so many people want to migrate to our neck of the woods and sometimes cringe whenever I come across a story about a 20-something millennial who can’t afford a 3 bedroom house in Sydney’s CBD.
Like, yeah, housing and living costs in Melbourne and Sydney are bloody expensive, probably overpriced. But fm dead, if you’d have seen some of the living conditions, opportunities and wages of some of these countries, I feel as though a lot of the first world struggles would seem minuscule. I also believe that it’s a major reason why Sydney and Melbourne will never ever be cheap to buy. Australia would have to go way downhill for bargains to start appearing in the biggest two cities.
Anyway, that’s enough ranting for now. The Middle East was kick-ass and I’d highly recommend. If you do Petra, try to go to the night show before you see it in the day. It’s completely different at night and was an unforgettable experience.
Net Worth Update
As impressive as August’s update seems to be (especially considering the how far the markets fell), there is a looming tax burden that’s about to hit.
I’ve been raising invoices for my contracting work and each invoice has an additional 20% tax added to them called the VAT tax (similar to our GST I believe).
I get to keep around 5% of that 20% tax apparently as sort of a ‘collection payment’ from HMRC which is the UK’s version of the ATO.
I’ll go through this for the first time very soon so I’ll have a much better understanding of how it all works by next month.
I only have one invoice left too which means no flowing income until I start working again. And even if I do get work asap when we’re back in October. It won’t be paid until the last Friday of the next month! So it’s almost a certainty that the update for October will be negative unless the markets have an upswing.
We also haven’t spent a lot of money this month believe it or not. This is mostly due to pre-booking nearly everything and subletting our London flat. So we only really have spent money on food and activities which have been pretty cheap for August thankfully.
Properties
No changes in the properties this month.
Property 1 was sold in August 2018
*DISCLAIMER*
Various data sources (RP data, Domain.com etc.) are used in combination of what similar surrounding properties were sold for to calculate an estimate. This is an official Commonwealth bank estimate and one which they use to approve loans.
ETFs/LICs
A few divvies but mostly red across the board with Aussie shares taking the biggest hit.
I’ve been expecting this for some time now considering just how much the ASX has gained over the last couple of months. What’s also interesting to see is how much the LICs drop in value as they pay out their dividends. A popular strategy I’ve seen out there is to wait until ETFs or LICs go past their ex-div date and buy on the drop. This theoretically means you can buy more units of the same fund and slightly delay being taxed on the dividends until the next payout.
I don’t do this but I can see how it makes sense.
Also…
We ended up buying another lot of A200 again this month and for everyone out there that keeps asking about our strategy, I promise to have published the newly tweaked strategy before the end of this month!
I have some things I want to cover that requires it’s own article. Nothing too drastic but my thoughts and opinions nonetheless that a few have been asking for. Sorry it’s taking forever. It’s really hard to find time atm but I’ll finish it off in the next couple of weeks.
Networth
congrats mate, fantastic to see you out there ‘living your best life’ (as they say) and continuing to move the Net Worth meter in the right direction somehow also! Just on those Investment Property charts, it may be easier to read if you make the x-axis scale start from zero, so that when viewing it we get a sense of what % of the property has been paid off (a key metric).
Cheers!
Thanks Kev!
I’ll see if I can tweak the graphs mate. I don’t actually set the X axis to start there, it just does it itself.
Let me see what I can do 😎
Hi Aussie FB
Great work and thanks for your content.
Apologies, I might have missed it on your blog, but how do you figure in Super when achieving your FIRE number (assuming you reach it before the Super becomes accessible)? Or do you seek FIRE without taking that into consideration and look forward to a pleasant bump in net worth when you hit the withdrawal age?
Cheers
Hey,
In a nutshell I’m looking to build our FIRE snowball (that’s a weird concept haha) completely outside super.
I know it’s not the most optimal path and I even made the Aussie fire calculator to show that using two pots is the most optimal to reach fire in Oz…
However!
The psychology doesn’t stack up (for me anyway) to draw down on my pre super snowball until I reach my preservation age.
I think it makes more sense when you’re a bit older but for us, we’ll just build it up outside super and enjoy the little bump when we hit our preservation age like you’ve touched on.
Cheers
No worries. Thanks for the reply. Keep up the great work.
Hi, I was just wondering with Property 2 and Property 3 graphs it shows that the debt decreased from Dec 2018 onwards. Could you please advised if you actually paid off the IPs? Apologies if this has already been covered, but I couldn’t find the answer.
Had the same query re: IP’s, you say you Refinanced home loans in April 2019; any more information on that and the now gradual decrease on the debt?
Basically switch to P&I because the rate difference was so extreme.
If they were the same or even closer to each other I would opt to keep the extra cash flow and invest it rather than pay down the debt on the IPs.
Damn, I’ve found with our IP’s that fixed is cheap and P&I is much higher
Yeah fixed is usually higher but I’d wager that this is because the banks are predicting that the rates are going to go even lower!
P&I being higher definitely doesn’t sound right to me. Were they for an investment loan? Everywhere I went P&I was way lower than IO for investment loans.
I’m pretty sure that in another post he said that he used some cash to pay a littleof the loans to get a better LVR and a better rate for his investment properties
Yep! I forgot of the LVR. I had to get the LVR down for the best rate I could find with Macquarie.
So basically APRA made it so that interest rates on IP interest only loans were so much higher that we almost saved money each month by switching to P&I.
I believe this was the intended affect from APRA and it worked on us. We refinanced to P&I and received a much much lower rate so that’s why ad of last year we have been chipping away at the debt.
I would prefer not to tbh. It’s just that the difference in rates has gotten to the tipping point for us so we made the switch.
Hope that answers your question.
Cheers
Great update – Nice top ups throughout the year, great progress
$21,341
$16,652
$3,066
$4,354
-$1,255
$45,247
$14,873
$17,484
$121,762 YTD
It’s been a great year 🤑🤑🤑
Hey Aussie FB,
Just wondering how this month is worked out to be +$17,484?
Your ETFs/LICs portfolio were all down (with some dividends) and there were no changes in properties?
Apologies in advance if I may have missed something
Hi,
Sorry, I wasn’t very clear with this. But basically the gains all come from cash via a consulting invoice being paid.
The reason the invoices are so high and consequently, the big bump each month, is due to the expenses I get refunded within the invoice plus the actually day rate I charge.
It’s a decent amount to begin with but it’s the expenses that can push it to sometimes £14,000 a month.
Why?
Because I have to pay for everything out of my pocket and then everything is expensed back to me through the invoice. The biggest cost is accommodation. Our team stays at the Hilton and this can run you £200 a night. Easy to rack up £2K alone on accommodation that gets added to the invoice. And then there’s everything else. It works out to be a lot of cash each month.
The other thing that you’ve touched on as well is that we pre paid for most of this trip. So when the invoice rocks up, it’s a massive bump. But during the month our expenses are high because I’m paying for everything.
It’s very confusing but I hope that paint’s a clearer picture.
I have one small invoice coming in next month and then that’s it until I find work again.
Cheers
Good explanation, thanks AFB. In that case.. if you’ve been paying up front for all these expenses, I guess you’ve actually done well to not hit the red in the months preceding August?
Correct. The markets have been pretty good during those months.
Also, something I forgot to add is that I haven’t paid the tax on the invoices yet too. I get an inflated invoice of around 20%
Thanks for the explanation Aussie Firebug!!
Hope you’re making the most of the awesome weather over there before the terrible cold and short days hit 😛
The funny thing is… I’m actually kinda looking forward to the cold weather (I know I will instantly regret this but hear me out). I’ve been absolutely COOKING in the middle east and I skipped the Aussie winter by leaving the southern hemisphere this year so it’s been back to back summers.
The other thing is that the London sun rises so early in summer (like 4.30 AM) that it’s hard to get a good sleep in sometimes… I’m definitely sounding like a little whingey flog here haha but I wouldn’t mind a bit of chill. Will most likely change my mind within the first cold day lol
Aren’t the expenses just reimbursement for what you’ve already paid yourself, so should be net zero?
You’re correct.
But those expenses are incurred during the previous month. So for August, I was reimburst for all my expenses I incurred during July. And because we started travelling in August there were no big expenses that I had to pay for last month. That plus the pre paying of the holiday resulted in a big bump!
hey matey this is such a great post. I’m a little confused by how you’re up $17k despite the fact shares were -$6.5k. I know you said you didn’t spend much this month, but did it really have that big an impact on net worth? I’m trying to see where the growth is but I don’t understand.
Hey Ricky,
See my response to the other comment mate.
Cheers
Do you plan to remain an Australian tax resident?
No.
I’m not a resident of Australia for tax purposes any more. I’m a UK resident.
I’m going to write an article about it when I find the time.
Hey mate, awesome blog. Always been into real estate but this is exactly what I needed to help me get into the share market.
Can you explain the steps to work out if LIC is trading at a premium or not? Where do we get the data and where is the formulas?
1. Check both AFI and Milton’s NAV compared to their share price on the ASX to see if they are trading at a premium or discount (currently developing a web app to make this easier)
Invest in whichever LIC is trading at the biggest discount
If both LICs are trading at a premium, buy A200
Hey Bruno,
Aussie Firebug wrote a really good article explaining how LICs are trading at a premium or discount here:
https://www.aussiefirebug.com/etfs-vs-lics-and-strategy-3-revisited/
Strong Money Australia also wrote a really detailed article here as well:
https://www.strongmoneyaustralia.com/lic-premiums-and-discounts-complete-guide/
Hope this helps,
FIREPhan
So eye balling that pie chart, it looks like you have ~25% in VTS/VEU? And a whopping ~75% in Aussie shares (in AUD)?
Not worried about having such a huge home bias? (three quarters of your shares in one country’s economy which makes up like 4% of the world)
Also not worried about home currency downside risk?
I guess you’re chasing dividends/franking credits, but at what cost?
Hi zdamant,
I’ll be addressing this in my next article mate.
Cheers
Fantastic. Looking forward to it
Just read
https://www.aussiefirebug.com/our-investing-strategy-explained/
https://www.aussiefirebug.com/etfs-vs-lics-and-strategy-3-revisited/
https://www.aussiefirebug.com/sep-2018-net-worth/
So even though I don’t agree, and won’t be doing it myself, I understand what you are doing
So yeah – good luck and hope it works out for you (and all those other people doing it)
Just noticed your supers surging ahead in leaps and bounds also, its ETF’s and LIC’s, is this with a SMSF or AusSuper /Similar?
We havr our allocation set to the most aggtessive (100% shares). We dont dont SS and haven’t added to super since about April this year. All gains have just been from the markets. And we won’t be adding fto super for some time now since we’re overseas.
Hi AFB. Great breakdown – your NW updates are fantastic and your really showing your living that FI/RE lifestyle and killing it. I enjoy reading about your travels and how you incorporate a bit more of your lifestyle into the NW updates rather than just a graph or spreadsheet – it really helps dispel the myth of FIREstarters as living this horrible frugal life and never doing anything – quite the opposite with you and Mrs Firebug I can barely keep track of all of your adventures. I’m hoping to start a bit more personal/recreational travel in the next few years, as I’ve really only flown around the world for work. I’ve enjoyed this and its helped me do it whilst getting paid a salary (and allowances cover a lot of the touristy things we get to do on our crew rest periods or downtime). August was an interesting one for me – my NW is down just over $22K, mainly due to the share market volatility. I actually threw a heap of cash on this ‘FIRE’ as I sniffed a bargain, and my portfolio has since recovered in September – I’m trying to stick to my ‘DCA the DIP’ regular investment plan but couldn’t resist a bargain haha! Great work and please keep them coming!
Thanks Cap,
People think that every FIRE person must be living a life of deprivation and misery just to retire early. It was a hope of mine to dispel those myths a bit.
Hi AFB,
I am a bit of a newcomer when it comes to the FIRE movement so I apologise if the following is a bit oversimplified. I was under the impression that the focus of the FIRE movement was on deriving passive income over your lifetime. Once that income was above your expense base, you have achieved your goal and you no longer need to be tied down to the J.O.B. By passive income, I mean income from enterprise (business or dividends), rentals and money leading. If passive income is the goal, why the focus on net worth. Such a focus implies a focus on current valuations rather than income. How is that different to the person in their 40s, 50s or 60s who is accumulating capital prior to entering the drawdown phase. From what I can understand, you are simply looking to do the same with one exception – moving into the drawdown phase much earlier than traditional retirement strategy. Is that correct?
Hi Shirley,
No need for apologies, it is a fantastic question 🙂
I publish our net worth each month to keep me accountable and so others can follow along and see exactly where our assets are allocated.
The plan is to create a passive income stream to live off in retirement and it could be argued that a better way to track this progress would be to publish our monthly passive income. The only issue with this is that the properties don’t produce much income at all but a lot of our capital is still tied up in them.
Our plans are to sell them off when the times right and to place the money into the share market via ETFs.
Someone’s net worth paints the clearest financial picture IMO. If you gave me the choice of seeing a very wealthy individual’s net worth or monthly cash flow, I’d be much more interested in their net worth.
I just published our latest strategy on how we are going to reach FIRE here.
Let should answer some questions.
I hope that helped and thanks for the comment.
-AFB