How tf is it the end of September already!?
Man, I remember thinking about this once in a lifetime Euro trip (that we’re currently on) for years and now we only have a few more months here before we head back home… and that’s if we are even allowed back home 😅. The Aussies in London Facebook group is littered with stories of flights being cancelled at the last minute and there’s already a big backlog of ex-pats trying to return. I’m 🙏 that things open up a bit next year and we can make it back without too much hassle.
On a positive note, we managed to sneak in a late Summer trip to the Greek Islands/Italy in September.
We booked a one-way ticket to Kefalonia with a group of 6 mates for some sunshine, beers and bulk Gyros 😀
The Island was stunning with some of the clearest water I’ve ever swum in. And it was relatively cheap too which was a bonus. I’ve heard that If you go to the more touristy/popular islands like Santorini or Mykonos it’s a lot more expensive. But to be honest, anything that isn’t London is pretty cheap lol. The 6 of us would all go out for dinner ordering a small feast with drinks in a stunning beachfront restaurant and the bill would be ~ €80 👌.
We stayed in Kefalonia for 5 nights and then caught a 30-minute flight to another Greek Island called Corfu to explore that bad boy.
We loved Greece! Very friendly people, the weather was amazing (a lot hotter than I thought it would be for Septemeber) and the food/beer was phenom.
The other couples we were travelling with had to fly back to London but Mrs FB wasn’t ready to leave the sunshine just yet so we jumped on Sky Scanner to look at flights. I’m lucky that I can work from my Laptop in my current role which means we can do a bit of travelling whilst I work which is a big bonus.
We decided to head to Sicily for a few reasons.
- It was hot
- My Nonno/Nonna are from a small town in Sicily and it’s been on my bucket list for a while to see where my dad’s side of the family come from
It’s pretty insane to think about how many families uprooted their entire lives to migrate to Australia all those years ago. It’s something I find hard to relate to growing up in a country like Australia where opportunities are everywhere. But of course, this isn’t the case for most other counties as I’ve witnessed first hand over the last 2 years.
Can you imagine what they would have gone through? Leaving everything they’ve ever known to move to a foreign country that speaks another language, all the animals are trying to kill you and it’s upside down 😜
So when we landed in Trapani, I hired a Vespa and Mrs FB and I took off around the Sicilian countryside to my Italian grandparent’s home town of Calatafimi.
Burning around the Sicilian countryside on our Vespa 🛵
Temple of Segesta, Sicily
Island of Favignana, Sicily
It was a bit anti-climatic when we did arrive at our destination because there’s really not much going on in the town… which is why I guess they decided to migrate in the first place right. But it was very cool to walk the same streets that my Nonno and Nonna did 70 odd years ago.
We spend the rest of the week in Trapani where I worked during the day and Mrs. FB hit the beach. We went out for dinner in the old town that had otherworldly Italian delicacies 😋.
Freshly piped cannoli 🤤 lord have mercy!
Net Worth Update
Not much action going on here.
The markets had a little slump and we’re back to one income now that Mrs. FB furlough payments have stopped. She might try to find some work before we leave but has actually booked another girls trip with her mates to Cyprus for next week 🙄 so I think it will basically just be my contract up until the start of December and then we’ll both be unemployed 🎉. So I can’t see us saving too much over the next few months. Any gains will most likely have to come from the portfolio.
No changes in the properties this month.
Property 1 was sold in August 2018
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.
The above graph is created by Sharesight
We bought ~$34K of VAS last month which might surprise some of you since we have been investing in A200 so heavily for our Australian weighted part of the portfolio. The reason we decided to go with VAS this time around and not A200 is to spread out our risk a little bit. The MER between both A200 and VAS is largely irrelevant for a modest portfolio. And it’s really a race to the bottom with fees anyway so the chances of them going even lower in the future are high. I also like the idea of investing in multiple companies. The A200 piece of the pie was starting to become very large so I just went with VAS this time around.
To be honest, there wasn’t a whole lot of thought behind this decision. I think both A200 and VAS are suitable financial products for any Firebug to build their snowball with. I logged onto the computer the other week to do our monthly purchase of shares, seen that the Australian part of the portfolio was the most underweight, looked at the A200 piece of the pie and just thought “hmmm… I’m feeling VAS this time” 😂. I’m definitely not an investing genius (as you can probably tell) and our investment strategy is incredibly vanilla and boring.
Other than that, the markets took a bit of a tumble but nothing out of the ordinary (especially this year).
The below article is actually a chapter I wrote for a great collaboration ebook put together by Pearler. I would highly recommend checking out the entire eBook (for free of course) which you can grab here.
“A dollar saved is better than a dollar earned”
We’ve all heard that one before. The ability to save more than you earn is a fundamental principle upon which FIRE is built.
Hands-down the most important step for reaching FIRE is how much of your paycheck you can keep and invest.
You cannot earn/invest your way out of bad money habits. It will eventually catch up with you no matter how much money you make. If you’re spending more than you earn, you’re going to be broke. It’s just simple mathematics!
It’s sorta the equivalent of trying to outwork a bad diet and expect results in the gym. In fact, there are so many parallels between good financial habits and being fit and healthy it’s uncanny. Most health/fitness experts would agree that your diet probably plays the biggest role in keeping your body happy. The other two major players would most likely be exercise and sleep. If you’re nailing all three of those, there’s a pretty good chance your body is feeling awesome.
Savings is to FIRE, what eating the right foods is to living a healthy lifestyle.
And if we follow this little analogy a bit further we might conclude that…earning money in FIRE is equivalent to or around the same level of importance as exercise when it comes to health and fitness. And maybe we can put getting a good nights rest at the level of investing.
It’s not a perfect one for one comparison but it makes for a good metaphor so let’s keep rolling with it.
I’d wager that 90% of FIRE content is either about saving money or investing. But we seldom read how to earn more money even though it has astronomical benefits when implemented correctly. It’s true that FIRE is income agnostic, two people with a savings rate of 65% will both reach FIRE in around 10 years even if one earns $60K and the other $400K.
But there comes a point of diminishing returns for both saving money and investing.
The purpose of this article is to explain how beneficial it is to spend more time and energy increasing the amount of $$$ that flow into your accounts. Anyone who is on this path is already doing some form of exercise (earning money) but if you can look past your standard crunches and pushups you’ll discover there are gymnasiums out there filled with weird and wonderful machines that provide all types of workouts. And when you combine a great diet with a dialled in training routine that works best for you, the gainz can be off the charts.
The aim here is to illustrate just how much of an impact increasing your income (even a tiny bit!) can have on your journey towards FIRE.
Let’s try and apply the same metric to the three most important focus areas IMHO when it comes to reaching FIRE.
- Save more than you earn
- Increase how much you earn
- Invest your savings
We’ll call the metric BFYB (bang for your buck).
BFYB = The amount of effort required to improve a focus area
Let’s look at our first focus area (save more than you earn) and re-establish why it has the best BFYB value.
Increasing Your Savings Rate
Using The Australian Financial Independence Calculator we can plug in Joe Smith’s journey towards FIRE starting from $0.
We’re assuming he is a single 30-year-old Sparky from Brisbane who owns his 3 bedroom home (no mortgage), works 38-40 hours a week, doesn’t have kids and all the below numbers stay constant over the next 30 years to make the modelling super simple.
Ok, so an Australian who earns $80K with a savings rate of 30% can retire in 21.2 years. Not too shabby.
A 30% savings rate is already way above the average but let’s just assume Joe, whilst obviously a diligent saver already, is living a pretty normal consumerist 21st-century lifestyle with a heap more fat to cut. I don’t think it’s unrealistic or even that hard for him to go from a 30% savings rate to 40% given his circumstances above. The difference between 30%-40% is $5,538 a year or $106 week. I would almost guarantee that 90% of Australians spend more than $106 dollars a week on things they don’t need or even want half the time (myself included). Optimising big-ticket items like housing, transport and food would almost certainly save a whole lot more than the $106 a week we require for this example.
Anyway, if we bump the savings rate up to 40% we wipe off 4.5 years!
Everyone’s circumstances will vary but the effort required in my guesstimation for Joe to increase his savings rate 30% to 40% is rather small and the BFYB is high.
This is what we want. Low effort, high reward.
And it’s why focusing on your savings rate is absolutely the best way to decrease the amount of time towards FIRE… up to a certain point.
There comes a point of diminishing returns where focusing on your savings rate will not yield a good BFYB and the hard part is that it’s different for everyone because of circumstances. I can only speak for ourselves but this is what our savings rate BFYB chart looks like:
Currently, we can pretty much save close to 40% of our after-tax income without breaking a sweat. That means no sacrifice or comprising on anything. The effort for us to save 40% is almost the exact same as saving 10%. But the effort required to maintain a savings rate of >60% is when things start to change. For us to optimise our lifestyle further and squeeze out a few more percentages is astronomically harder to do when we start to get around the 65%-75%+ range. Don’t get me wrong, we could do it. And that would speed up our journey to FIRE… but at what cost?
If I can draw from our earlier metaphor of our savings rate being similar to a diet, we could say that cutting out junk food during Monday-Friday and making sure you eat some sort of leafy greens every day is a realistic goal with huge health benefits. But if we tried to never drink alcohol or eat Macca’s ever again, firstly we might be setting ourselves up for failure and secondly, whilst being the healthy option, it’s not going to have as big of a health benefit as the first goal. There are diminishing returns for eating healthy just like there are diminishing returns for improving your savings rate.
Increasing Your Income
This is the focus area that doesn’t get enough attention.
Increasing your income has a direct correlation with your savings rate but for whatever reason, a lot of people never put in the time and effort to improve it. There’s so much low hanging fruit which doesn’t really require a whole lot of effort but has a high BFYB value.
Let’s look back at Joe Smith from above but change one thing. Instead of him saving $5,538 a year, let’s have him earn an extra $5,538 (after tax) a year and see what happens.
Joe increased his after-tax income by $5,538 which in turn wiped off 2.7 years!
BFYB: Really good
We’re going to be talking about the low hanging fruit later on but if I’m being honest, Joe could easily make an extra $5,538 (after tax) purely from giving up more of his time. If we assume he’s making an after-tax hourly rate of $28, he would only need to put in an extra 197 hours worth of work over the year. And that’s not even factoring in overtime or weekend rates. An extra hour for 197 working days a year is really not that much.
Some of the stories I’ve heard first hand from young London bankers is absolutely mind-boggling. Think 70-80 hours per week… and work on weekends is to be expected!
2.7 years is not as good as our savings example above which wiped out 4.5. But if we combined them, we get epic results!
Improving our savings rate and increasing our income by the very same amount has annihilated 6.53 years of working.
Now we’re cooking with gas!
But just like our savings rate, there are diminishing returns in the pursuit of increasing your income. And I keep coming back to circumstances but unfortunately, it’s very much a circumstantial question when we start talking about this focus area because we all aren’t on an even playing field.
Below is my personal increasing income BFYB chart:
Let me explain what this means because it’s important.
Let’s say I’m unemployed next year (which is what’s most likely going to happen when we move back to Australia) and my salary is $0 (ignoring any investment income of course). I’m scanning through the classifieds looking for my next job, which, for this example will be the sole source of my income.
For my circumstances personally, it doesn’t require any extra effort for me to land a job paying $100K as opposed to around $35K annually. I don’t want to sound overconfident but I have a certain set of skills and experience that the market is willing to pay me and I’m 99% sure I could land a job paying close to $100K no worries. In fact, I’d probably have a harder time getting my old job back at Coles if anything. Beyond $100K is when the effort required starts to increase and the BFYB value starts to go down.
Remember, BFYB = The amount of effort required to improve a focus area.
The effort required to earn a salary past $100K starts to increase a lot and for me personally, the extra effort doesn’t justify the extra income at around the $130K-$150K mark. Beyond that, there’s too much sacrifice with not enough gain. Too many responsibilities and work-related stress that I don’t feel is justified for the extra $$$. You may have certain skills and experience where earning $150K is actually quite easy and no different (in terms of effort) than earning $100K.
If we look at the ABS data from 2018 the median income for a full-time employee in Australia is $76K a year. If we adjust for two years of inflation we can round it off to 80K and we now have a benchmark.
$80K a year is the standard form of exercise for full-time Aussies. One light jog and occasional push-ups weekly would probably put you in the average to above-average category of exercise in Australia as sad as that is.
If you’re earning under $80K a year and have already optimised your expenses, you may be in the position to grab some really low hanging fruit and increase your income for an excellent BFYB return.
Adding in some resistance training 2 hours a week is such a small amount of effort that has an incredible return. Not only will you become healthier and stronger, you’ll potentially save yourself a lifetime of injury and illness that’s so common in our sit down all day 21st-century culture. Cardiovascular and resistance training has shown to help with sciatica, pelvic tilt, back pain, heart disease, diabetes etc. I have always considered myself a pretty active person but even I had hip issues 3 years after starting full-time work which I 100% attribute to sitting down all day and not stretching my hip flexors or strengthening my glutes. This hip issues crept into a lower back pain issue and before I knew it, I was going to the physio a few times a month. It didn’t take longer than a few weeks of specific stretching and strengthening exercise to completely resolve all of my issues and I continue parts of that program to this day nearly 10 years later.
You don’t need to jump into a 5X5 strength split or start yelling “Yeah buddy…Ain’t nuttin’ but a peanut!” after every rep in the gym. Three focused 45-minute sessions a week offers great health benefits just like spending a bit more time increasing your income can wipe years off your FIRE journey!
Improving Your Investment Returns
And now we’ve come to the most talked about, most analysed… most overrated focus area.
I want to bring up two quotes to set the tone for this focus area.
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” – George Soros
“There seems to be some perverse human characteristic that likes to make easy things difficult.” – Warren Buffett
I am so guilty of the second quote. When I first discovered financial independence I was convinced that there’s some sort of magic formula that these rich guys must be using to get ahead. It’s part of the reason I started investing in a trust. It was like this complicated black box with all these advantages that only the rich guys understood and used. I wanted in on the secret and did my research hoping to stumble upon the golden goose. While there are some benefits of investing within a trust, I must admit that I was lured to its complexities and perceived mysteries (for whatever reason). It took me years to fully appreciate the power of simplicity and if I could start again, I would have never bothered with the trust.
I feel so many FIRE n00bs fall into the same trap. They go looking for a magical formula that simply does not exist. And even if it does, it’s almost certainly locked away in a secure blockchain quant investment hedge fund somewhere.
Here’s the deal, you can absolutely optimise your investment results up until a certain degree with barely any more effort involved. I’m going to ignore inflation, risk appetite and investment horizons for a second to make the point.
Investment returns have historically fallen around these marks:
0% – Storing your money in a shoebox under your bed
2% – HISA
3.5% – Bonds
7% – Real estate
8% – Shares
You can argue back and forth about how those numbers were gathered and what methodologies were used but it doesn’t really matter.
Realistically, any Aussie out there can achieve those returns rates in those asset classes without an economics degree. Index investing opened Pandora’s box and enabled the average Joe to grab a piece of the market without needing to spend the time researching and analysing financial statements.
Diversification and low management fees provide the best BFYB when it comes to this focus area. Everything else has such minute benefits that it’s laughable so many people spend so much time and effort trying to see which ones better.
To demonstrate this here is our BFYB chart for investment returns
So basically we can get up to around 8% without much effort required. It’s always good to put the time and effort into understanding the asset class but theoretically, any Joe Blow could dump their money into a diversified index fund like VDHG and get ~8% over the long term.
I don’t know any assets class where you can get a better return without extra effort. There’s plenty of ways to improve your return on investment. I sold my first investment property and calculated an after-tax annualised return of 36% but the number of extra hours I put into that investment was the equivalent to another part-time job.
Newbies to FIRE and investing don’t really understand just how hard it truly is to beat the market consistently over a long period of time (20+ years). There are people who can do it, I’m not saying it isn’t possible. But the amount of effort and skill that is required to actually discover alpha year after year is something only a very few incredibly skilled people have managed to achieve.
We’ve all heard the famous story of Warren Buffett betting a $1M bucks against 5 hedge funds that a simple index-tracking ETF would outperform them over an eight-year period. Not only did he win that bet, but it wasn’t even close.
But let’s just entertain the idea that you’re an outlier. You possess incredible skills and techniques far beyond most active traders and hedge fund managers all around the world and you’re able to consistently beat the market.
How much better off would you be if you were able to outpace the market by a whopping 100 basis point (1%). 1% doesn’t sound impressive but if someone can beat the market by 1% over a long period of time then you’re most likely going to make more money in a hedge fund picking stock than you are at your day job. Your skills are extremely valuable.
We’re going to pretend that you keep this incredible skill to yourself and only use your god-given talents for your personal share portfolio. How much of a difference would 1% actually make?
Let’s find out.
Even using our top tier investing prowess we only managed to wipe off 2.3 years which was actually the worst result compared to saving $5,538 (4.5 years) or earning an additional $5,538 (2.7 years).
Think about how much time and effort some funds put into research for investing. It’s a full-time job with an army of analysts and advisors all crunching numbers, creating models and using the latest predictive methods in the odd chance that they can justify their hefty management fees. And most of these funds don’t even beat the index when fees are accounted for.
What hope in hell do the rest of us have?
The example above used a huge 1% difference over nearly 20 years.
How many times have you seen someone ask about A200 vs VAS on the internet? It’s gotta be one of the most discussed and analysed topics within FIRE communities. The difference in management fees between these two funds is 0.03%…
Let me say that again. 0.03%
They do track different indexes (ASX200 vs ASX300) and do you know what the difference has been between those two indexes over the last 10 years… 0.04%
So maybe… just maybe those two funds might return a difference of +-0.1% over the long term.
10 basis points of difference is your reward for correctly picking the better performing ETF over that time period.. and that’s assuming you’re even able to use skill to pick the one that’s going to perform better (which you almost certainly won’t be able to do).
A200 or VAS?
A200+VGS or VAS+VTS+VEU?
IVV or VTS?
AFI or VAS?
LICs or ETFs?
VDHG or create my own?
Most of these arguments don’t make a huge difference. It’s really important to understand the key concepts around management fees, diversification and why index investing works. But just understand that if you’ve got one of the above combo’s, you’re already more diversified and paying lower fees than most Australian investors to begin with.
The basic investing principles for Australian FIRE is to build a low cost, diversified share portfolio mainly made up by ETFs/LICS. You want to buy consistently no matter what the market is doing and grow your snowball to a point where it’s passive income can fund your lifestyle.
There’s going to be a 100 different flavours of that ice cream but once you have those basics down pat, the bulk of the work is done. You can always tweak and improve your portfolio to suit your circumstances but honestly, if you’re trying to reach FIRE faster and think that crunching numbers in Excel for 10 hours a week is going save you years of working, you might be in for a rude shock!
Keep your investing simple and boring. Use your precious time optimising your expenses and working on ways to increase the amount of money that flows into your account because IMHO, focusing time and energy on savings and increasing your income has the best BFYB returns.
Different Ways to Increase your Income
I hope after reading the above you can now appreciate just how underrated increasing your income is. The saving rate is held in high regard within the FIRE community thankfully, so there’s not much to add there.
But my goodness does investing get way too much of the limelight. It’s largely out of your control too. Other than choosing your diversification levels and sticking to a low-cost fund, you’re very limited to how much you can improve the results.
When it comes to increasing your income though, the complete opposite is true. The harder you grind the more money you will make! And the more money you make, the higher your savings rate will be (if lifestyle inflation doesn’t get ya)
So let’s jump in to see how we can improve our crunches and pushups and maybe head over to the dark corner of the gym, away from the treadmills and cross-fitters… the weight room!
Ask For A Raise
We’re going to start by improving our current workout (salary job).
One of the easiest and most low hanging fruits on anyone’s list should be to simply have a conversation with their boss about their salary and ask for a raise if they think they deserve more money.
How many times have you heard about someone complaining for years that they’re underpaid but never actually taking the action of setting up the meeting to discuss their pay? I’m not saying this will have a 100% success rate but more often than not, it will start the process of you either getting more benefits or creating the plan for your next raise or bonus.
You probably want to approach the meeting with some sort of reasoning like citing average incomes within your industry or comparing the work you do with someone else that’s being paid more.
Hardly any effort with the potential to add thousands extra to your accounts for years to come! No real risk either and it’s not like you have to learn something new.
Change Jobs Regularly
Asking for a raise or putting your head down and bum up climbing the corporate ladder is a noble way to jump the food chain and reap the rewards. But the sad truth in my experience is that loyalty to a company (or business for that matter) is rarely rewarded.
Your utility provider doesn’t offer a better deal when you’ve been a loyal customer for 10 years. It’s only when you leave do they all of a sudden roll the red carpet out.
If your goal is to make the most money in your field, changing jobs every 2-3 years is the best way to do it.
Be bold, be confident. Apply for positions beyond your capabilities. Back yourself to get the job done after you land it.
Fortune favours the bold!
I’m not saying to lie your way to a position only to fall flat on your face. Just understand that an ungodly amount of people are in jobs they were never qualified for or completely lacked the experience necessary to perform it at the start.
When I worked for the government back in Australia, we would engage with consultants all the time from various companies who always charged an obscene day rate to perform projects. Think $1,000+ a day. I worked directly with a lot of these consultants on the technical side and it always struck me as odd when they clearly didn’t know a whole lot. Here we were, getting charged $1,000 a day and I would end up doing 30% of the work.
Fast forward 5 years and I became a consultant myself after picking up contract work in London. My second contract was at one of the big four global consulting firms who are widely regarded as having some of the best professional services networks in the world. And boy do they charge accordingly for that reputation.
I worked on client-side with a team of consultants but was the only contractor. Two of the team members were really junior. One was 18 months out of uni and whilst really smart and willing to learn, didn’t know a whole lot about the technologies we were implementing.
My day rate for that contract was a whopping £500. It was more than double my daily earnings from back home and I couldn’t believe that a company would be willing to pay me so much.
Well, you might have guessed that I was completely blown away when I found out that the consulting company who I was subcontracting for, was actually charging me out at their SC (senior consultant) rate which is a staggering £1,250 a day 🤯. Even at £500 a day, I was only getting 40% of the pie!
And now it made sense why all the firm’s partners were driving McLaren’s…
But here’s the point of the story… everyone on the team was also being charged out at £1,250 a day!
I mean… honestly. One of them barely knew anything. And it was at this point that I realised that companies will lie and exaggerate the skills and experience of their products/services in order to get the most amount of money they think they can get away with.
You should be doing the same!
Last point on this one, be prepared to move somewhere where your skills are in demand. This might mean international.
Time to get out of your comfort zone!
The two tips above were focussed on improving your current situation. Everyone’s working out to some degree so it would make sense that we start by improving your running technique or buying training gear. But now I want to take you into that dark corner of the gym where you might not have been before. It’s not going to be easy and learning new things can be difficult. But I promise you that the benefits here are worth the effort.
I’d rather not bore you by listing every single side hustle I can think of either. I have personal experience in a few side hustles which I’d like to talk about but there’s really an unlimited amount of ways to bring in a little extra cashola.
Work a second job:
This one depends on how exhausted you are working your main job, but there’s plenty of people who work two jobs and cope just fine. Mrs FB used to do a bit of bar work on Thursday and Friday nights even though she didn’t need to. She worked with her sister and a few friends and half the time most of her friends were drinking at the bar (a small country town so not many other options lol) so she was sort of where she’d be anyway just earning money instead of spending it. A little bit of extra work equated to thousands of extra dollars in her account without too much effort involved.
The second gig can be anything too. Teaching piano, tutoring, Uber driver etc.
One of my biggest pet peeves is throwaway culture. The amount of effort that went into digging something out of the ground, refining it, transporting it, manufacturing it, shipping it, storing it and to have someone finally buy/consume it… only for it to be thrown away in the trash not long after.
Never throw away something just because you don’t want it anymore. If it was once a good product, odds are you can sell it online to someone and recoup some of your losses. Hell, I even managed to sell my old pair of Nike’s for $30 once. Legit took me less than 10 minutes to list it. How many of you out there would be willing to work for $180 an hour?
At worst go down to your local Salvos and donate it. Chucking something that is perfectly fine in the trash is sooooo lazy, a bad financial habit and adds to humanities ballooning trash pile that mostly ends up in our oceans.
Credit Card Hacking:
I’ve been credit card hacking for nearly a decade. In a nutshell, you sign up to new cards to take advantage of the signup bonus these CC companies offer and then spend the points on products, flights or convert them to cash. You can also pay for everything on the CC and accumulate points over the course of the year. A little bit of effort for a pretty decent bump IMO. The only risk is that you need to ensure you pay off the CC amount in full at the end of each month.
Oh, and some cards come with free travel insurance which can cost hundreds of dollars.
Something I only discovered in 2019 after ignoring it for nearly 6 months because I thought it was a scam. The principles are very similar to CC hacking. The bookies offer you signup bonuses where you join with the caveat that you need to gamble the bet in order to access it. Matched betting is the mathematical approach for discovering arbitrage opportunities between back and lay bets. Or simply put, playing the bookies against each other to make money. When you do it correctly it’s mathematically impossible to lose but it’s a lot more complicated than CC hacking.
There’s a lot of low hanging fruit here for those who who want to put the time and effort into learning it. The two advantages that matched betting has over CC hacking is that firstly the amount of money you can make is a lot more. The low hanging fruit can be anywhere between $1K-$2K. And secondly, matched betting can be done for an extended period of time and not be just a one-off. I’ve had many people email me about the money they have made from matched betting exceeding $15K.
The signup bonuses are the low hanging fruit because after that it basically turns into another job. The fact that you can do it over the internet is a huge plus in my book.
Full warning with this side hustle though, you must do your research because if you make mistakes you can lose a lot of money. I’d suggest listening to the matched betting podcast I recording in 2019 and reading about the feedback I received from readers later that year. Some people had good experiences, some had bad.
Start An Online Business
I’ve become an enormous advocate for having a crack at online business.
There are just so many advantages that being 100% online offers to the traditional way of doing things.
Some of my favourites are:
- Can run the business/company from anywhere in the world as long as you have an internet connection
- Startup speed. You can literally create a website/blog/YouTube Channel and begin creating content/a product and have the world at your fingertips within hours. This is simply mindboggling and it gives any entrepreneur a realistic chance to create something that will be successful.
- Incredibly small start-up costs. Gone are the days where you’d have to risk financial ruin in order to start a business. How many people over the last 100 years have had a killer idea but lacked the capital to get it off the ground? I think Aussie Firebug cost me <$100 the first year.
- Can scale as your business grows. This is what I love about cloud services in general. You only pay for how big you are and you can scale in a matter of seconds to accommodate a larger audience if/when you get there.
Aussie Firebug will always be a passion project but around late 2018 I officially started to monetise my content and miraculously it managed to make over $30K last year and I’m on track to make it again this FY.
I could do an entire article about how to monetise a blog/podcast because making money digitally is such a new concept (relatively) and there’s a lot to get your head around. Even though I’ve already listed a whole bunch of benefits above, probably the biggest advantage that an online business can offer someone on the road to FIRE is its ability to make semi-passive income.
A website/podcast/YouTube Channel is constantly available to everyone in the world. It’s not like a shop where you need to physically be there to make things run. And if your product is digital (you’re not selling something physical) you don’t need to store it and it can be replicated without any cost. If you sell a physical book you will need to pay to get that book printed and shipped. If you sell an ebook, you can literally just copy and paste a new version and send it to people straight away. The power of the internet!
Plus there’s a whole bunch of automation you can set up in the background where a lot of the day to day business operations can run on autopilot.
I think back to how many hours I put into Aussie Firebug during the first three years. The amount of time was crazy, probably averaged 1.5 hours each weeknight for 3 straight years. But the beauty of something like a blog/podcast is that most people are making the content because they really enjoy it. I didn’t earn anything for the first three years but I built the content that would later be the main drivers to allow the site to be monetised.
I’ve made over $60K during the last 2 years and I’d say on average I’m lucky to spend ~5 hours a month these days. My life has become completely different since moving overseas and travelling around and I just can’t dedicate as much to Aussie Firebug as I would like to.
But the point is that I’ve set up certain automations that enable the site to make me money while I sleep. I can’t tell you how satisfying it feels to wake up most mornings and see people taking advantage of companies that I use and recommend.
This concept is immensely powerful no matter what the online business is. Work can be recycled and can continue to make you money even while you sleep. I know a YouTuber that basically earns most of his money from a few videos he recorded years ago. Yes, he still continues to make new videos to keep the channel up to date, but the bulk of his income is still being generated from 2 or 3 pieces of digital content he created a long time ago.
That’s something you simply cannot do when you trade your time for money.
If you’re thinking about creating content I’d probably say that YouTube is the easiest way to start earning serious cash, followed by starting a podcast and unfortunately, dead last would be blogging.
The Double Whammy Effect
Side hustles and online businesses are a great way to bump up your income but there’s also a massive opportunity to simultaneously work on something that’s often forgotten about.
What are you going to do once you reach financial independence?
You don’t need to be FI to start plugging away at your passion project or whatever it is you’ve always wanted to have a crack at.
Start that project this weekend!
Momentum is a powerful force. If you have a little side hustle or project you get to work on for fun in your spare time, more often than not, when you do decide you’ve had enough of sitting in a cubicle for 40 hours a week, the transition is so much easier because you’ve already built up something to further sink your teeth into.
My preference will always be an online business but it doesn’t have to be that. Make candles, sell scented oils from Etsy, create a monthly COD tournament in your area. Anything you’re interested in will do. And don’t worry about making money because 9/10 times if you start doing something you love it somehow finds a way to pay for itself eventually.
Wrapping It All Up
I wrote this article with the intention of highlighting one of the most underrated focus areas in our community. Everyone should know by now that your savings rate is king but rarely do I see such admiration for putting time and effort into earning more money in your day job or by hustling on the side.
Far too often people come to the FIRE community hoping to discover the secret sauce that enables us to retire 30 years earlier than most. The methods we use to invest are actually incredibly boring and simple.
If you’re anything like me, discovering the concept of FIRE can change your life. I was bursting with excitement and enthusiasm when I realised that financial independence was an achievable goal that nearly any Australian can achieve if they prioritise it highly enough.
Focus more of this energy into something that’s within your control. That’s saving money and earning more. The majority of investment returns are largely out of our control which is why the never-ending debate between which investment is the best is largely a waste of your time. I’m not saying you shouldn’t educate yourself about investing. Just know that the difference between choosing A200 or VAS will not be a difference-maker that could potentially wipe years off your journey.
On the contrary, starting a hobby of making and selling custom jewellery in your spare time does have the potential to eliminate multiple years and maybe even decades. But more importantly, side hustles/businesses can offer the more important benefit of shaping your future in retirement. No one wants to reach financial independence just to say they did it. We want the freedom that it grants. But using that freedom to create your ideal lifestyle doesn’t have to start once you reach that magical number, you can start meaningful work right now and it can help you along the journey!
If I can refer back to our metaphor from the intro one last time I’ll leave you with this…
Most of you guys already have a great diet. Some are dialled in so well that you are hitting your macro and micro-nutrients to the gram. But it’s time now to look at your workout routine and see if you can fit in a few more sessions every week to really take it to the next level!
Spark that 🔥
Things are finally starting to feel semi-normal again here in London 🙌.
We’re still wearing masks in indoor places but most of the things we care about (restaurants, gyms, markets etc.) have opened back up and really the only major hassle for us at the moment is the risk of having to quartine when travelling outside of the UK.
I finally was able to take a holiday in August after working at an unsustainable pace for the last 8 months 🤪 (which is the reason for the lack of podcasts this year). I managed to snag two weeks off and Mrs. FB and I ummed and ahhed about whether we wanted to risk quarantine and head overseas. We decided it was better to explore a bit of the UK instead and to aim for a Euro trip in September depending on what happens, which I felt was the right move.
So we decided to load up the playlist with bulk Taylor Swift bangers and head north.
After doing a nearly two-hour roundtrip commute for 5 years at my first job, I’d never thought I’d say that I was really looking forward to jumping back into a car to set off on a 1,500 miles road trip. There’s something different about blasting your favourite tracks on a road trip that I’d sorely missed.
We headed up north to explore some of the other cities in England and pop over to the top of Scottland visiting the following:
- Stratford-upon-Avon (birthplace of William Shakespeare)
- Lake District
- Inverness (home of the Loch Ness monster 🐍)
- Isle of Skye
- Newcastle (we got mortal)
First off, I feel like the department of tourism for the UK has done a terrible job promoting the Lake District or I just haven’t been paying attention. I had no idea that places like this existed here.
Like… what the hell England? Since when do you have stunning lakes with rolling countryside 😍
We went back to Edinburgh for a day even though we’d already been there because Mrs. FB wanted to catch up with a friend and I wanted to catch up properly with Brandon aka The Mad Fientist. I’d met Brandon briefly at the London Premier of Playing with Fire and even had him on the podcast back in 2016 but I always wanted to sit down and have a chat with the man that really inspired me to create Aussie Firebug. They say that imitation is the sincerest form of flattery and if you look closely, you can clearly see that this website and podcast is heavily inspired by Brandon’s work at the Mad Fientist.
Aussie HIFIRE wrote a great article last year called Folks Need Heroes (and the equally fantastic follow-up article Folks need heroes – but you shouldn’t follow them) which really summed up the Australian FIRE scene and listed a whole bunch of Aussie content creators from different stages of life with different creative styles.
Everybody who’s into FIRE knows who Mr Money Moustache is and a lot of people would probably say he’s their favourite FIRE blogger. But that wasn’t the case for me!
I clicked with what Brandon was writing/podcasting about a lot more because he was more related to me than Pete and the others. MMM had already retired and had kids. Brandon was still on the road towards FI and I have (and still do) an unhealthy obsession with podcasts so naturally, I gravitated towards his content the most.
This guy really played a pivotal role in the direction my life has taken and I’ve always felt like I’d like to tell him that in person. As a blogger, you might get a few extremely heartfelt emails from people explaining just how much you’ve helped them, but it’s different when you meet these people in real life.
We braved Scotland’s scorching summer heat of 19 degrees to have some street food at The NeighbourGood Market and the funny thing is we didn’t really chat about FIRE at all. It was a great experience getting to know someone you look up to and I hope he makes it down under one day.
I was so glad we made it back to Scotland to explore the highlands. The 500-mile road trip called the North Coast 500 was truly epic. I couldn’t get a good shot of the road (the below is from Google images) during the drive but it has to be one of the most beautiful and scenic trips I’ve ever done in my life.
All throughout Scotland, we kept seeing this bright purple like growth throughout the giant hills and valleys. I originally thought it was a little patch of flowers or something but the stuff was everywhere! Turns out that it’s actually a gorgeous flower that’s commonly referred to as heather which enhances the already stunning views throughout the countryside.
We saw and did a lot within the two weeks but my favourite place we visited had to be the Isle of Skye!
I mean… check out some of these photos!
Old Man of Storr
I felt like I was in The Land Before Time or maybe Lord of The Rings.
We were absolutely blessed to have good weather for the majority of the trip too. A lot of people I’ve spoken to that have done the same trip had to fight the elements the whole time. So it’s very weather dependant unfortunately but worth seeing it either way.
I also received a super cool email in August from an extremely talented fella called Beau. Beau actually reached out to me years ago and he shot me through an update which mentioned something along the lines of an Aussie Firebug brand re-design/App he made for a project. Well, I don’t know what I was expecting but the work he did for the fan piece blew me away.
Check this out!
It is so impressive and professional-looking, I just had to give it a shout out in the monthly update!
Beau is probably going to kill me because I had to reduce the quality of the pics but if you want to check out the whole re-brand piece, head over to his Behance Page. There’s even a little video demo showing how the app would function 🤯👏.
And if anyone is reading this thinking “HOLY CRAP THAT’S GOOD DESIGN! I need a digital designer for my business” I would more than recommend you hit up Beau on LinkedIn.
Net Worth Update
$781K 🤯 that’s a record baby!
Talk about that V-shaped recovery
We have officially climbed our way back from the COVID bear market to reach our all-time high 🙌. I’ve probably jinxed it now (but secretly all non-retired people should hope for another crash😉) but it’s pretty crazy how quick that crash was. I’m sure all this government stimulus has lead us into a false sense of security but you have to celebrate the wins when you get em right.
It’s funny because at the start of the year I was hoping that we’d be closing in on $900K, not $800 lol. But that’s the markets for ya.
If you read our last update you would know that Mrs. FB withdrew $10K from her Super last FY. She withdrew another $10K for this FY which we need to get into the markets as our cash reserves are way too high for our liking. We still might buy a house next year so part of me likes having a big fat deposit ready to go but the other half feels like all that money is just losing value in our offset (I know it isn’t but still).
So, after seeing the unexplainable real estate boom that my local town back home has witnessed throughout lockdowns I thought, “What the hell, let’s take another look at the market on the Goldie and see if the prices have picked up at all”.
I’ve had pamphlet after pamphlet delivered to my parent’s house back in Oz to ask if I’d be interested in selling. I emailed one of them saying I was looking for offers and to get a free appraisal done.
The appraisals didn’t exactly blow me away so I’m back in the camp of waiting until things improve. That could be many years away but we’re in no rush to sell. I’ll definitely be updating you all in these articles if things change here.
Property 1 was sold in August 2018
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.
The above graph is created by Sharesight
The markets continue to march ⬆ and we continue to DCA into it each month as per the plan. Pretty boring 🙂
One big change that was made in our portfolio during August was the sell-off of our holdings in AFI. We only had around $15K in there and the plan was to always sell it eventually to simplify our portfolio because it doesn’t really make that much of a difference to our weightings. A200 and VAS make up the bulk of our Aussie holdings and we will at some point probably sell MLT too. I was happy with the 8.1% return AFI gave us over the last ~18 months but I can’t say the same for Milton, which unfortunately is currently sitting at 1.61% 🙃. I know it’s a long term game so I think we’ll wait until MLT bounces back before we eventually sell it and get down to only 4 holdings. I think we’ll keep VAS + A200 for the foreseeable future in case VAS does lower their management fees in the future which is almost a certainty.
This years review is a bit tricky once again because we (Mrs. FB and I) earnt money in two different countries so some of the tax stuff has not been accounted for (yet).
You can check out last years review here where we achieved a savings rate of 56%.
So how did we do this year?
Let’s get into the numbers.
Savings Rate For 19/20 Financial Year
Our savings rate for last financial year was… 61% (▲+5% from last year)
We earned $200,919 (▲+$15,478…mostly after-tax*)
And spent $79,182 (▼+$1,635)
I’m honestly shocked that we ended up with 61% as our savings rate. I think a lot of that had to do with COVID hitting which essentially stopped us (and most of the world) from spending money on anything other than the essentials. The only way I can explain how we managed to spend less than the previous FY (other than COVID) is that we pre-paid for a shit load of travelling in May 2019 that obviously is not included in this year’s report. That travelling lasted all the way up until the end up September so even though we have been technically paying for London’s notoriously high living costs, 3 months of this years review was pre-paid for from the previous year which makes it appear that the last 12 months were cheaper than they really were.
*This year’s update does account for AFB tax obligations since I was required to pay them during the year but the dividend components are not finished yet. I’ll update this article once it’s done
Breakdown Of Spending
Because we use two different pieces of software (pocketbook for Oz and money dashboard for UK) to track expenses, they are broken down into two categories.
Australian expenses = AUD $8,328
UK expenses = AUD $70,854
Below is our Australian expenses for the last FY.
There were a few expenses we still needed to take care of back home like car rego (Mrs. FB’s mum is currently driving her car), insurances and some odd bits and bobs. The biggest expense above is Holiday & Travel because there were occasions where we used our Australian Citibank card instead of our UK card and hence those expenses showed up in our Aussie accounts.
And here is a high-level breakdown of our UK expenses
And here are all of those categories broken down again so you can get a better idea of where we spend our money.
It’s no surprise that for the second year running our Holidays category is right at the top. The Cash category is hard to group because we went to a lot of countries where we would have to withdraw a heap of cash to spend whilst we were there. Egypt was a good example of a country that still predominately uses cash as opposed to EFTPOS. So you could almost certainly group up to 90% of the Cash category into the Holidays too which would make it number one. We try a new restaurant in London every single week and dined out a hell of a lot during our travels so I’m not surprised to see Dining and Going Out up so high. It’s one category that will plummet once we get home back to our country town purely because there are not that many options where we’re from 😅.
Anyone who has lived in London can back me up when I say that the cost of living here is insanity! I mean honestly, unless you have a decent-paying job (>£50K) you’re much better off moving to Liverpool or Manchester. Rent will be halved and the general cost of most things will be down too but you’ll still get the benefit of being on Europe’s doorstep for travelling. One thing to take into consideration with the above number is that we only paid 8 months worth of rent for the last financial year because 4 of those months we were travelling and had sub-letted our room.
Food and Groceries is one area that we have been really lazy with. Unfortunately, overpaying for the sake of convenience is a common occurrence when we shop at the moment. We’re not set up to succeed with this category in London. I’m missing a few key kitchen utensils that I can’t justify buying because we’re leaving this year plus the freezer is not that big which makes it hard when you have to share it with 4 other people and It’s just generally harder to meal prep without spare time. We still do meal prep a bit but I’ve often found myself asking Mrs. FB if she wants to go out for dinner because it’s an amazing night in the city and I’m exhausted from work and don’t want to deal with the messy kitchen back home.
These are all excuses but the difference really can be night and day when you create an environment to be successful with anything in life vs trying to push a rock uphill. If you study in a quiet library you’re probably going to have a better chance of retaining the information vs trying to study whilst watching Netflix. If it takes you 30 minutes to get to your gym, you’re probably less likely to keep a consistent training schedule because it will be easy to justify not going etc. etc.
This is one area I can’t wait to improve on when we’re back home. A veggie garden will be built asap when we finally have a backyard again 🍅🥕🥒😁
I’m gonna go out on a limb here and say that 80% of this category can be attributed to Mrs. FB 😜
Buying a bike and COVID hitting has reduced our transportation costs enormously.
Breakdown Of Income
All numbers are in AUD
* There were a few big expenses for the properties during the last FY and it resulted in them actually costing us $2,776 🤦♂️ which is why you don’t see rental income in the above pie
It’s absolutely insane that we managed to earn $200K mostly after-tax considering how much travelling we have done during the last financial year.
When we decided to YOLO at the start of 2019 to live out a life long dream travelling Europe, I was convinced that my dream of FIRE would have to be put on hold and this once in a lifetime trip would delay our financial independence for a few years. What I honestly didn’t expect to have happened was the dramatic increase in income. I work in data (currently a BI Dev) and always knew that Melbourne and Sydney offered a higher paycheck for the work I do but those cities have a much higher cost of living than the country so I never really bothered pursuing it figuring the net gain might be a little bit more but not that much.
Well, let me tell you right now that London contract rates for tech workers are insane!
Before I get into exactly what I was paid I want to remind everyone (especially any newcomers to this blog) that my average wage, previous to moving to London, hovered around $90K for 8 years. My first job out of uni was around $72K in 2011 and it peaked at $110K before I left Australia which I understand is still high (especially for the country). I really want to emphasise that FIRE is possible without a high salary. It might take you longer, but almost every Australian can realistically reach financial independence with the right lifestyle.
With that being said, my first two contracts were at £500 a day and the one I’m on now is a fixed-term contract for 10 months with a base of £80K plus a £20K bonus.
That’s a lot of money, to begin with. But what makes the contracts outrageously lucrative is the way that limited companies are taxed in the UK (you need to be a resident of the UK for tax purposes to take advantage of it). I’m not a tax expert and I don’t know why they even do it the way they do, but for whatever reason, you essentially get taxed bugger all if you operate outside of a ruling called IR35.
Let’s assume that I worked for 12 months with a £ 500-day rate (I was actually asked to extend one of my contracts but had to turn it down because we were travelling during the European summer and the amount of money I was passing up did kill me inside a little bit 😂) which works out to be £130,000 a year. Here is roughly how it breaks down according to the laws currently using a UK Contractors calculator.
So you can take a £9K salary from the company which is like the minimum wage which means you won’t have to pay any tax on that part. The rest can be taken from the company as a dividend which is where the tax rates are insanely low.
So taking £97,986 as a dividend with the current tax rates looks like this.
Those rates are crazy low! If we double the £ to make the conversion easy that essentially means that someone who received AUD $188,972 (£94,486 * 2) as a dividend only paid $43,664 in taxes. The equivalent for a salaried worker in Australia earning $188,972 is ~$62K in taxes and that’s including with the $18K tax-free allowance!!!
So if we wrap up everything here and assume I did accept my contract extension that lasted 12 months. I would have ended up with:
£130,000 (annual revenue) – £22,984 (corporation tax) – £21,832 (taxed owed for dividends) = £85,181 after-tax income
If we double that number we get AUD $170,362.
I would have to be earning ~$280K AUD as a salaried worker to get the equivalent after-tax income 🤯🤯🤯
I mean… that’s more than some CEOs right. I would never, ever, ever have thought that this earning potential was out there.
I can only really speak for tech jobs (mainly in data) because I’m not too sure what the difference is like for other fields. Mrs. FB, for example, makes almost the same here and when you factor in the difference in living costs it was definitely a net negative for her to move across.
If you’re in one of the following (there’s a lot more but these spring to mind):
- Data Analyst
- Data Scientist
- BI Developer (Power BI, Tableau, Qlik)
- Data Analytics
- Data Engineer
- Data Warehouse Architect
- Data Pipeline Developer (SSIS, Data Factory, Alteryx)
- Software developer
- ML/AI specialist
- Dev Ops
- Cloud Architect (AWS, Aszure, GCP)
There’s a lot of money to be made out there (assuming you’re willing to move).
Unfortunately, the crazy low tax rates for contractors are coming to an abrupt end next year. It was actually meant to end this year but COVID hit and they postponed it another year. I don’t know what things will look like after they make the changes but I’m glad I was around before they did.
I have to admit that my eyes have been opened after working these contracts in London. Sometimes I feel like we, in the FIRE community focus too much on reducing expenses and investing but nowhere near enough on trying to earn more money. I recently wrote a bit more about this subject in Pearler’s ebook project actually. And low tax rates are not something that’s unique to the UK. I’m pretty sure Singapore has a really low-income tax rate and Dubai has no income tax at all!
Reducing expenses is still 👑 but I’m convinced that so many people reach a point where they would be served much better investing in themselves and trying to find a higher-paying job. It can really help the process!
This blog had another amazing year generating an after-tax income of ~$24K. The taxes were brutal for me this year because I’m a UK resident for tax purposes (to take advantage of the crazy tax rates) which means I pay a high rate straight out the gate for all income made from AFB.
The craziest thing about this site still being able to generate some serious cashola is how little time I have spent on it during the last financial year. I’ve spoken about this before but I put a crazy amount of hours into this passion project for the first three years. And it didn’t flip a cent because I never cared if it made money or not. There’s no way you’re going to work on a project for 3 years without making any money if you don’t love it! But all that hard work is still paying dividends today because a lot of my traffic is still generated from some high ranking articles/podcast there were made all those years ago.
We’ve just been so busy during the last year that I haven’t been able to make as much content as I would have liked. Shit, I haven’t released a podcast in three months but I’m still ranked at 38 (humble brag 😜) for Aussie Business Podcasts according to Chartable. I guess my point is that even though I’ve really been slipping with AFB stuff, the site/podcast continues to churn away even when I’m sleeping. The internet is an insane bit of technology!
Dividends were broken down like so:
Nearly $16K even with the effects of COVID! Pretty pumped with that tbh. It’s just shy of double what we received last year ($8,057) so I’m really happy with how things are progressing. It’s going to be interesting to see the results for these next coming 12 months but after a few years (hopefully), if the payouts are similar to what they have previously been, we should see a strong uptick in dividend income which is really exciting!
What About You?
That’s it for another year!
Tracking your expenses is a must if you’re serious about financial independence because unless you know how much you spend, you’ll never know how much passive income you’ll need to FIRE. I’ve been blown away with the job market in London for my field and it’s opened my eyes to what’s possible earnings wise. This has been an unexpected benefit of moving to another country but a welcomed one at that.
So how did you go the last time you checked your expenses? Is there an area you’d like to rope in? Or maybe investing a bit of time and energy into your earning capacity would pay even higher dividends.
Let me know what you think in the comment section below 🙂
Spark that 🔥