Aussie Firebug

Financial Independence Retire Early

Ask Firebug Fridays 25 Feat. Captain FI

Ask Firebug Fridays 25 Feat. Captain FI

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.

Enjoy ✌

 

Heads up grammar Nazis, the following transcription is half human half machine and not 100% perfect (nowhere near it 😅) so expect a few typos and errors…

 

Aussie Firebug: Hey guys, welcome back to the very first episode of ask fire Fridays for 2021. This is the monthly fine Q and a, where you guys get to submit your questions and I try my best to answer them. It is so good to be back in Australia, back on my good mic and back to recording these episodes and creating content for you guys.

It’s been a little bit challenging creating content during the last two years, especially last year. Uh, but you know, I’m back now. I’ve got. My proper workflow environment set up. So I’m really excited to be able to produce these episodes on a consistent basis. And we are doing things a little bit differently at the start of this year.

And I’m very interested to know what you guys think. So, yeah. Usually the  Friday episodes would just be me responding to Redis questions, but that can be, I can get a little bit boring and lonely, and I thought it’d be good to get someone else in on these episodes to bounce ideas off and, you know, just have a bit of banter and get another person’s perspective on the question and how they would respond to it.

So with that being said, the first guest that I’ve invited on is none other than captain fire himself. You might know him from his own podcast, the captain of fly financial independence podcasts, which is very popular. And I’m really looking forward to getting other fire content creators onto these episodes and just other people in the community to join me in these episodes too.

Like I said, get another person’s perspective and have a bit of banter, have a bit of fun with it as well. Um, so that is where I’m heading with these episodes. Please let me know if you like them or if you don’t like them and yeah. Just tell me what you think. Now, we’ve got a great episode today. We’re going to be covering three questions that has been written in from readers.

The first question is all about financial advisors. Where should you go? If you want to find a good one, things of that nature. The second one is the Oso controversial topic of Bitcoin. And is it a good time to buy now? And then we’re wrapping things up with a dollar cost averaging versus lump sum investing.

And we mean. Captain Phil. I speak a bit about our experience when we’ve come into some money and then you’ve got to make that decision. Do you dump it all in the market at, at once or do you dollar cost average it over a few months now? Unfortunately, there were some technical difficulties with this podcast.

So you might. He a few bits of audio drop out, um, during the podcast and the middle and towards the end there a little bit. So, uh, please bear with me and I’m working to resolve that next time we record. And with that being said, let’s jump into the pod. Hey guys. Welcome to another episode of ox Firebug Fridays.

We are joined today by captain fire from captain fi.com. Welcome to the podcast.

Captain FI: Hey,  thanks so much for inviting

Aussie Firebug: me on. No worries. Now I’m sure most of the audience already knows you from your podcast and written material, but for those out there that are listening, who don’t know who you are. Can you tell us a little bit about yourself and what captain fire is all about?

All right. No worries.

Captain FI: So, um, yeah, a little bit about me. Um, I’m Catherine fi uh, I’m 29 years old, uh, pilot living in Sydney and flying my way to financial independence. Um, I discovered fire, um, probably about four years ago. Um, actually thanks for yourself, mate. Um, I really hooked, um, and you know, you used all your guides to set up my cell phone account and, you know, my, uh, share side, everything like that.

Um, and yeah, just, you know, just slowly chipped away at it. Um, trying to build up a portfolio outside of my superannuation. Uh, and really just enjoyed, um, describing the process, uh, and keeping myself and keeping myself accountable, um, via the blog and yeah, just being really fortunate to connect with, um, older, awesome bloggers and content creators like yourself.

Aussie Firebug: I, I have no idea how this is going to go today. Cause this, you are the first guest that I’ve had on the ask Firebug Friday episodes. And you know, we were talking a bit before we started recording. Um, so plenty of banter there. So this is what I’m hoping that, you know, we can just bounce off each other with these questions from the readers.

So should we get into the first question?

Captain FI: Right? Yeah, look, I’m Kate and I’ve never done anything like this before.

Financial Advisors and where to find good ones (05:39)


Aussie Firebug: We don’t recall loss so I can clean up anything in the attitude. Or, um, I first question from a reader is coming in from Alex, Alex, rotten. Hi, thanks for the great podcast and website. Would you recommend seeking a financial advisor?

If yes. How might we find a good one? Cheers, Alex. Thank you, Alex, for such a great question. And I appreciate the kind words about the podcast and website, um, lock. Have you ever had a financial advisor in your life?

Captain FI: My, I have, I have been burned, not once. Well twice thrice like

Aussie Firebug: Roy, they were the same word or a different one

Captain FI: different different ones.

So yeah. Quite quote, unquote financial advisors. Now it’s not completely fair to tar financial advisors, um, with this brush because as actually, as I found out, I wasn’t actually talking to financial advisors, I’m talking to, um, spruikers so properties. And fund managers. Yeah. So,

Aussie Firebug: um, without illegal, like I dunno, what sort of questions you asking them?

Oh, I thought it was like, you can. Specific financial advice, like what, you know, and for the record with these episodes, of course, we are just saying what we would do in situations. Never, um, never giving personal financial advice of course, but, um, yeah, thought you needed a license to, to do that.

Captain FI: Yeah, mate, you definitely do.

I actually spoke to an awesome financial advisor, um, who I met through Instagram. So her name was Dee. She actually blogs on think it’s budget boss babies. Um, on Instagram is her handle. She actually came and I interviewed her and she was. Amazing. She kind of laid everything out. She spoke about all the regulations and actually, um, what I might do is I might actually just paraphrase a couple of the things that she’s mentioned to me.

And that way, you know, listeners can hear it from a licensed, well, I’ll be at secondhand information, but, uh, yeah, you’re right. Um, they do need to be regulated, but the actual, um, re uh, Property spruikers and, um, property investments, you don’t actually need a qualification to be a property spruiker. So if someone’s actually trying to tell you to invest in it in a property development, or, you know, a turnkey or a jewel or something, odds are, they’re actually just trying to get you to, um, to buy that because they want their 5% or their, their 10%.

And actually that’s happened to me in the past. Um, and yeah, like I said, been burned a couple of times, so. No, I don’t want to, um, tar the name, the good name of financial advisors, because there are a lot of really good independent fee for service financial advisors out there. And there are a lot of really good financial counseling services people can access.

Um, all I’d say is you need to be careful and there’s one crucial step when it comes to financial advisors and that’s actually checking their qualifications on the, um, on the, uh, ACIC

Aussie Firebug: website. Yeah, for sure. Absolutely. And I’ll, I’ll, I’ll put a link in the show notes, um, for that asset website, I think with this question, because it gets brought up a lot within the community community and a lot on the, um, the Facebook group, the Ozzy Ozzy fire discussion group.

And it’s such like it’s so circumstantial because. Yeah, I I’ll speak for our situation and it’s probably not the best situation because the wine we have structured our investments, they quite complicated. It’s through a trust. Um, all was working in London. The last two years. I had my own company in London.

Um, I was, uh, a resident of another, um, a tax resident of another country. And I had investments in Australia, so there was all this stuff going on. So I have paid for financial advice where I’ve reached my limits of what I know and what I’m comfortable with. I, I don’t think you will ever go wrong, painful financial advice from a qualified professional.

And I actually think it’s, it’s quite, um, it’s a good move to do. I guess there’s so many people though that write in and I’ve heard of a lot of stories where. That’s all they’re asking for. Like, they’re just about to pull the trigger on investing in like a really, um, simple, passive, um, Vanguard ETF or something like that.

And they go to a financial advisor and of course, you know, they, they create that, um, Uh, like the, uh, there’s a specific word that they call it, but like, uh, uh, different scenarios of, you know, you invest in this, you can give you this result, um, X, Y, Z sort of stuff, and they might pay like four or five grand, which is, you know, that is what.

That professional is worth, but what they get out of the end of it, or they feel like they didn’t discover anything new at the end of the whole process. And they feel a bit, I guess, um, let down or ripped off or something like that. And I get like, this is a hard question to answer because some people need to be, have their hand held a little bit and like, Verification that what they’re doing is correct.

And you probably shouldn’t trust, like, I would say, never trust, um, blogs or podcasts for that matter. Like always do your own research, but I never think like it’s a bad move going to a financial advisor, if that makes sense. Yeah.

Captain FI: Yeah. I’ll, I’ll, I’ll agree with you on there. My personal opinion. Um, and again, you know, Try this with a grain of salt, because I’m some random dude on the internet.

I think for most people it’s, it’s maybe not necessary, but can be quite reassuring. So ,

Aussie Firebug: yeah, this is hard like it, because I say this all the time investing is so much more psychological than it is math and numbers and everything because 20% knowledge, a hundred percent time and time again, like you always read of the stories where.

Uh, people sell in a downturn and stuff like that. And there’s always people online that have, you know, nothing invested and they say all like that, those people are dumb. And why did they do that? Everyone knows to, you know, buy more when the market’s crashing. And that is true. And I would say that like, majority of people probably know that.

Right. But I I’m telling you right now, eat is different when you’re in the hot seat. And you’ve got, you know, six figures invested in the market and then it, it loses tens of thousands of dollars. Like your mind can play tricks on you. And I actually think the most important thing when it comes to investing is understanding how your investments work.

Like never rely on just reading something, even a book, or even from your financial advisor. Like always, I’m a real advocate of, you need to understand how it’s working and to pay someone to do that work for you whilst you can do that. I could just never sleep well at night without doing the research myself and knowing what’s actually happening behind the scenes.

Yeah.

Captain FI: And look, even some of the most experiences those can get, um, I can get intimidated, like, Oh, I’m not gonna lie. You know, I. In the March downturn. Uh, I had my regular investment strategy and look even I it’s locked, um, you know, uh, slotted away a little bit extra into my mortgage offset rather than actually investing.

And I look back and go, ah, why did, why did I do that? Um, you know, thankfully a month or so I, you know, stuck to the plan. Um, but yeah, it, you know, it you’re right when you’re in the hot seat, it does change. And, um, look, I think. A lot of us can get away with like a good enough solution, thanks to, you know, self-education discipline and being a savvy customer.

You know, if you’re getting a good deal for the things that you’re buying, you know, and you know, often, like you speak about on your podcast, if you deal with those big four areas, what’s that like accommodation food.

Aussie Firebug: Yeah. Holidays food.

Captain FI: Yeah, and you can, you can get those under wraps. You know, you’re tracking your expenses, um, your following a fairly straightforward, simple conservative, you know, ETF, and you’ve got your splits, you know, Australian versus the international, you know, that’s a pretty, that’s pretty close to a good enough solution for most people admitted, you know, I’m coming from, you know, a single young, white male perspective.

So, um, from a, you know, Quite a financially privileged perspective. I don’t have kids that I have to worry about. You know, I have a stable job. So some people listening is probably art or I captain fire. It’s rich coming from you, mate. Um, so, you know, I think there are some places where it really is appropriate to get independent fee for service financial advice.

So I would suggest, um, for anyone who’s a young or inexperienced. In finances who doesn’t have a mentor or coach that’s someone who might benefit from a financial advice. Similarly, if you are really not coming with your finances, you have, um, poor self discipline, uh, or you’re easily spooked. Maybe that’s another great reason to go and see a financial advisor.

Certainly you are paid, you know, or physically or mentally or acting on behalf of someone who is. Um, you know, if there was a significant change in your personal circumstances, you know, marriage, birth of children, relationship, breakdowns, death in the family, um, coming into significant wealth. You know, if you’d won the lottery, you’ve got a large wound power or an inherit.

Um, if you worked in a high risk occupation, like a doctor or a lawyer, or even some might consider builders to be in a high risk occupation, you know, were an athlete. Um, or finally you are considering buying a significant investment, like a house or an investment property where here in Sydney, that can be easily.

Easily over a million dollars, you know, that is just a crazy amount of debt to come into without getting some form of professional wise.

Aussie Firebug: Yeah, mate. Um, and to the, to the second point of that question, EVs, you know, how might we find a good one? Yeah, isn’t there. I thought there was a registry registry, um, independent financial advisors, like a website or something that you can look up, um, all advisors that are, um, you know, independent and you actually have to pay them and they don’t get any commissions or anything from, um, like services and other businesses.

Captain FI: Yeah. Yeah, absolutely. Um, so when I spoke to Dee, um, she basically said that a lot of people will look to the superannuation fund first, but she explained how that might not be a great idea because of destinations in the fund. She also suggested that you can look at the services Australia or that’s basically sent the Centrelink website, um, which is where you can access, um, financial counselors and financial planners.

And they’re actually awesome. Um, Eligibility criteria. Um, my mum, when she retired, um, we were able to go and see a financial advisor through services Australia. Um, and when she had her workplace injury, um, similar, so that that’s another great place that people can look. Um, there’s actually two registered bodies for financial advisors in Australia.

Um, and that’s the FPA or the financial planning association or the a F a, which is the association of financial advisors. Um, and they’re both two, um, professional bodies that, um, financial planners or financial advisors will, you know, be a part of, I guess it’s. Kind of like lucky, I’m not sure. Um, they both have websites that you can, um, access and they do have databases and they have almost had like a bit of a name and shame.

So when some, when a financial advisor does the wrong thing, they actually get publicly spanked. So by, as you said, the best place is the ACIC financial advisor registered, um, or the money smart financial advisor at register. Uh, and you can, Chuck links to those and that’s where you can earn qualifications.

Um, you can look at their experience, um, check if there’s been any regulatory breaches or any complaints against that advisor,

Aussie Firebug: like any personal, okay. Yeah. I’ll Chuck those links in the show notes for anyone that wants to check them out. Like I said at the start, I think the most important thing is to do your own independent research and go with a professional.

If you know, I was going to say, if you think you need to, but it’s like, it there’s never gonna be any harm or I’d like to think not by going with an independent advisor. Um, so it’s probably a good thing, but does everyone need to do it? Probably not. Especially if you keep it simple and you structure your, your, your portfolio simply.

Is it a good time to buy bitcoin? (18:38)


Okay. Well, I think we’ve covered what we wanted to cover in that question. So we will move on to the next one. And this one comes in from Chad, Chad writes in. Hello. Thank you for taking time to respond to all the questions I would like to know if it is a good idea to invest in Bitcoin or any other coins regards, Chad.

Well, this is such a controversial topic, isn’t it? And I’m assuming with any other coins they’re referring to other cryptocurrencies, all we’ll start off with this one. I mean, people might not know actually, but I actually do have 2% of a Bitcoin. And the story behind that is. I bought a hundred dollars worth in 2017 because the it department in which I was a part of, we were all techies at heart.

And we like to play with new technology and, you know, um, muck around with the, the bleeding edge stuff. And someone come up to the team like one day, someone’s like, I’m buying Bitcoin who wants to buy some. And I was like, Oh, like, if you’re doing all the hard work, I don’t even know how to buy it, but yeah, sure.

I’ll throw in a hundred dollars, whatever. And, um, we all bought a hundred dollars worth in the it team. I think one person bought like a thousand bucks maybe, and we transferred some money to each other. We seen it on the blockchain. It was all very exciting and long story short at the end of that year.

Uh, cause we bought like the start of 2017 for a hundred dollars. And by the time the transactional costs like the brokerage and stuff went through, I think I only had about 93 or $94 worth of Bitcoin, which I was a bit like paved off about at the start to begin with. I was like, it costs so much money to just buy it.

Anyway, it went up to like $550 December. 2017. And then there was a massive crash and it’s only just it’s come back now to be like, I think it was like six, $700 at the moment. And I don’t include it in my net worth update specifically. Cause I don’t want to like deal with all the, you know, people talking about Bitcoin and everything.

Crypto is boss. I do actually have a little bit and I’m not like I would never invest in it per se myself, because I think part of me is like, We are close to financial independence anyway, and I can see like where at the end of the road nearly. And there’s just no need. To go down that path, even though I’m not like totally against the technology or anything like that, it’s just, I don’t, to me at the moment, it’s hard to say it would be investing.

I would say it would definitely be speculating. And I actually, this is, I guess what I’m in the minority here, but I wouldn’t. Feel too uncomfortable with like having a tiny bit of the portfolio allocated towards it. Like if someone said, you know, thinking about having, um, five or 10% in crypto, I’d be like, look, you do what you want to do, but I wouldn’t be like totally against that.

Even though, even though I don’t do it at the moment, it’s an exciting space. And like, People sometimes say that it’s only an asset. If it’s generating money, what do you think cap is golden cash or I guess cash generates interest, but you know, gold, for example, do you consider that an asset?

Captain FI: All right.

Just, uh, I just want my mind on fire, but I got just grabbed a cold one out of the fridge. Well, this was a very entertaining question

Aussie Firebug: and it is a good

Captain FI: question. I need a stiff drink to calm my nerves cause, um, I just, I write a few little notes before we started talking today. And, uh, I’ll probably write far too much about Bitcoin.

Um, but look, the only kind of coins that I personally invest in are chocolate coins and that’s because I think they have something in common with the rest of the crypto coins, especially I think they’re all going to go to zero and leave a big mess. So

Aussie Firebug: why do you think that though? Do you like, have you, have you looked into the technology behind it and like the blockchain and everything?

Uh, cause I know how, like it’s very. How it all works, but I like, like, um, I’m a tech guy at heart and I’ve read the white paper on Bitcoin. I’ve watched enough YouTube videos to like generally get an understanding of the blockchain and everything. So what makes you think it’s going to go to zero

Captain FI: that’s that’s probably a bit of an unfair, unfair claim.

Um, and like, I can’t ever know something’s going to go to zero. Um, Um, my, my background was in my technical background was in engineering. And so, you know, I’ve done a little bit of coding, a little bit of software engineering. Um, but I do not understand. I understand the basic premise of blockchain technology and the ledgers, and I’ve, I’ve watched the YouTube videos.

Um, but it’s not something I understand. Um, it’s gonna,

Aussie Firebug: I don’t understand it completely either, but like, you know, I get the whole de-centralized. No one is controlling it aspect because that’s the big thing, right. Coming out of 2008, the global financial crisis. And you’ve got a whole bunch of, um, crypto cryptography nerds and math wizards and everything.

And I come up with this, you know, they combined a whole bunch of, um, technologies to bring about this decentralized currency. So like that does that.

Captain FI: So it does sound, it does sound good in theory. Um, but. You know, many, many things sound good in theory, and looking at the practical application. And I mean, let’s be honest, um, who controls the world’s wealth currently?

You know, who are the ruling elite,

Aussie Firebug: some, some, a bunch of white dudes or something old white guys.

Captain FI: Do they want to lose their wealth? Do they want Bitcoins replacing their fear currency systems? Look, I don’t know. Um, I, I think that traditionally crypto, you know, has been the currency of the dark web funding, a lot of criminal illegal terrorist activities.

And the regulatory side of it is a bit of a nightmare. And I think that’ll lead governments to be pretty slow and hesitant to adopt them as like an official currency. Um, Again, this is going to sound very qualitative. Um, one standard Bitcoin, why invest in things? I don’t understand. No, I invest in nonproductive assets like cash or gold.

I mean, let’s say best case. Um, you know, it sticks around forever, but what is it supposed to be? It’s a currency. It’s supposed to be a store of wealth, you know, and that just makes it virtual gold. Prayed on the greater full principle. You know, you need to find a fool that is happy to pay more for it than you paid for it.

Um, it wasn’t that long ago that people did the same thing with bloody flower bolts, you know, chocolates or, you know, or

Aussie Firebug: textiles. I haven’t, I think there’s like a little bit of a difference. A new technology verse, like some flowers. Right. I don’t know. And I hope I’m not sounding like too probate here cause I’m just like coming.

I’m trying to present another side of the argument, I guess. And I actually, you know, I sent, I had a question in the, um, Ozzy five discussion group, Facebook group about Bitcoin, because it is such a hot topic at the moment. You know, the price is exploding. I asked them, I asked the audience, you know, do you guys want to hear.

A podcast purely on Bitcoin. And it got a lot of, um, Yeah. A lot of people got around that and I’m trying to look, I feel I’m going to have one with the expert that’s pro Bitcoin, and I’m really, I’m trying to find someone that’s an expert that understands it. That’s against Bitcoin. And it’s really hard to find, I don’t know too many Bitcoin bears that like are very knowledgeable on the subject matter.

So if you’re listening and you know, anyone out there, Twitter, anything, um, you know, even each national, I’d love to hit them up and try to organize a pot about that. But like, you know, back to the whole. Uh, you know, tulips and the greater fool theory, I, part of me agrees with you what you’re saying, but then the other part is like, it may have some practical applications, like even gold, right?

I know gold doesn’t produce any income and just sits there as a precious metal or whatever. It, you can use it like it does have some practical use in terms of like, having that precious metal in stuff like smartphones or whatever. I feel like Bitcoin, I don’t know. I don’t know a Bitcoin as well is going to be the, the.

Uh, cryptocurrency of the future, like no one knows. I think that’s the big thing. Um, I think the, the blockchain definitely has some really cool applications and which coin like becomes the ruling sort of which one is the winner in the next 10 years is anyone’s guess that I like, I just don’t, I don’t think it’s quite.

Fair to say, like it there’s no practical use in it, even though I will say it sounds like this is why I don’t invest in it. I don’t really consider it an investment, but if they want to use it as a currency, it’s the price fluctuates so much that, yeah, I don’t see. I don’t see it anytime in the near future, you know, overtaking a major fee at currency that I’m just like, I’m not as I’m not shutting it down.

As, as men, as much as like a lot of people do. And I’m still like, um, I’m interested, I’m watching the space with a lot of interest, but I guess to answer the question, well, it’s an impossible question to answer really. Is it a good time to be calling. I’ve got no idea, but it, but it’s a controversial topic.

So we’re talking about it. Who knows? Maybe we’ll revisit this question in 10 years and it will be like part of everyday life, these cryptocurrency, I mean,

Captain FI: some of the pilots I’ve flown with, um, have got crypto and they’ve done it right so well that I don’t work with them anymore. You know, these guys have made millions of dollars

Aussie Firebug: riding they’ve rode the train,

Captain FI: they sold it and now they have ETFs and property.

Aussie Firebug: Th they’re pretty much gambling. Right. We can both agree that to become a Bitcoin millionaire is essentially gambling. Like, you know, they’ve, they’ve hit the, that, um, one concept though. I don’t know if you’ve come across this. Have you ever heard of defy before? So apparently, cause I know like it’s a big, a lot of people bring up the point like.

Bitcoin is not investing in. You can’t make money off Bitcoin. It’s the greater, it’s the greater fool theory. Like I get all that and I tend to agree with a lot of it, but I’m not, I’m like got to do, I’ve got to get someone on the planet. And maybe it’s defy, apparently there’s ways to make money consistently.

Like I’ve seen websites. I don’t know how it works. And, um, I really want to get someone to explain it to me a little bit, a bit. Apparently you can earn, like you can get a yield. On your Bitcoin through some mechanism out there, and I’m not too sure what it is, but like I’ve seen, I’ve seen, um, a few articles and a few websites that will give you like five and 6%.

If you hold your coins in some exchange or, you know, somewhere, which could be, uh, no doubt. And I don’t think it’s, I dunno, share sponsored, but like, if you’re earning five, if you’re already earning some sort of yield to hold coins, like. That makes me feel a lot better. I don’t know about you, but that, like, that would be like a, I feel like that would open up.

I’ll feel a lot more comfortable, you know, having crypto like as a small part of my portfolio at if it’s earning know 6% yield, um, every single year. W w w what were your thoughts about that? If that was like a legit thing,

Captain FI: that’s definitely a bit of a game changer. I mean, ultimately if it’s supposed to be a currency, isn’t it just supposed to be a store of wealth that grows?

I

Aussie Firebug: think, I think Bitcoin is. But there’s other crypto currencies that do a lot more than just hold wealth. Like I know I’m not an expert, but you know, there’s like these smart contracts out there, it’s this there’s this like whole universe that is blockchain technology has enabled to be like, if you, if you write a contract a specific way and you lay out all the rules and the conditions.

Once it’s, you know, put on the blockchain or however you do it, like, that’s it, there is no human person that can change that now. So when certain conditions are met, there are certain things will execute on the blockchain and things will go through. And like, I guess I think it’s this  movement that didn’t, it’s kind of like a lending structure.

Yeah. You can do it like a lending structure apparently. Yeah. So like, it there’s just a lot of possibilities. Like it really does feel. The more I read about it and I’m not really too obsessed, to be honest, I might sound like I’m really obsessed, but I’m actually not. There’s a lot of like parallels to the early internet.

A lot of people have said, and I tend to agree. Like we, we’re not people don’t are not too sure what the blockchain and these crypto is where. You know what role they’re going to play and how it’s going to impact the future or anything like that. But there’s a good chance that it will play a role. And that was sort of like the internet in the nineties.

Right. But the hard bit is finding on which website will come out of the internet on top. Like if you had to choose a search engine in, you know, 1999, and you were lucky enough to get Google, then you’ve just hit the lottery. But like, there’s probably like. A thousand other search engine out there, like there is a thousand other cryptocurrencies and know all this other stuff that’s going on.

So, um, who knows, but, but I also think it’s interesting that it crashes, but then it also comes back. Like, I don’t know the history with that with the tool of mania. Like I know a little bit about it, but did it ever peak again, like Bitcoin is literally died, you know, 10 times now and it keeps coming back, you know, bigger.

The next time. I don’t know if that happened with a lot of bubbles.

Captain FI: I

Aussie Firebug: don’t know the answer to that. Yeah. Wrapping this question up now. I have absolutely no idea if it’s a good time to invest in Bitcoin. And I don’t think anyone really knows if it’s a good time to invest in Bitcoin or not. Uh, what I will say is the technology is very exciting, the blockchain, and I’m not as dismissive of it as a lot of other people are in the community.

As I mentioned earlier, for us personally, Uh, where we’re well on track to reach financial, financial independence. So I don’t feel the need to take on additional risk or to sort of go off on another path or anything like that. But what I will say is I’m not totally against dabbling in crypto and, and exploring this and potentially buying some coins in the future.

DCA vs Lump Sum Investing (33:07)


That’s not, I’m not shutting it down completely. And it may be something that we do. Moving on to the very last question for today, we have a reader called DC who writes in Haley  Firebug. I know your dollar cost averaging the proceeds of the investment property. Number one sale into your equities portfolio over the last 12 months or so wondering if you’ve run the numbers on what the difference would have been.

If you put it all in, when you first received it. I know you wrote about needing guts and courage to invest at all. Now that you can put a dollar figure on your foregone investment returns versus the actual investment returns you made, how do you feel about this? Knowing what you know now would you have acted differently?

Thanks mate. W uh, these questions referring to, and this one was actually, it’s a bit old, so I know I have done bug Ozzy Firebug stuff, you know, for. A long time now I’ve just been overseas in the last two years. So this one I think was put in like nearly a year ago, but it’s a, it’s a good question, I think.

And what is referring to is we sold our investment property, um, in 2018 and we got quite a large cash payout with it. Everything, when everything went through on the banks, you know, the mortgage was paid off and everything thing, it was like, Close to $200,000 or something of cash was just sitting in your bank.

I basic, I wrote about it in a few updates, but instead of putting it all into our portfolio in one hit, which is what the literature says to do, and it works out. That’s a more often than a dozen I dollar cost average. So I went from like, we try to do about $5,000 a month, anywhere portfolio. And we bumped that up to 15 to $20,000 and we just, we dollar cost average debt, um, over the next 12 months, because always, and this goes against everything I stand for, but I was like really worried that there was going to be a huge crash.

And if people can remember at the end of 2018 in December, so we sold in like, September, I think to 2018 in December, there was a big crash and it actually pulled back a lot in December. And I thought, you beauty, here we go rash. And I’ve got, ’em all cashed up and it actually recovered real quickly. And in hindsight now, um, I would have totally been better off putting it all in at once.

I haven’t run the numbers to figure out how much better off we would have been. Uh, but again, it’s such a psychological thing. I just was like, So are scared to be crashed, what’s going to happen. And it’s just what I felt comfortable with $2 cost average. Um, but that’s just me. So what about you cap? Have you ever had like a logic.

The money that you need to put into the markets. And how did you approach that?

Captain FI: Yeah, the con the convent, they shouldn’t be out at dollar-cost averaging versus some investing is, um, it’s a really good conversation to have. Um, personally I fancy myself as a, want some style investor, like most things in investing, you know, sometimes you can romanticize, uh, Um, but, but in general, I always try to invest as much as I can, as soon as I can.

And that’s just kind of been my personality. I won’t lie. Sometimes I just jump in with two, my two left feet and sometimes I get fit well

Aussie Firebug: that that’s what the, um, analytics say that that’s the best way to do it. And that was definitely true for my delight in the question. It says, you know, not knowing what you know now would you have acted.

Of course I would, because hindsight is 2020. So if I knew what the market was doing, I’d invest exactly at the right time, but that’s, you know, you read a lot of, um, analysis on this end, the lump sum. Historically has been the better way, more fun than not. Um, so it’s actually a good way to be. It’s interesting

Captain FI: though, when you look at, um, the concept of DCA and, and LSI for me, you know, I’m an employee.

Um, I receive a regular income and as soon as I get it, I invest it. So ironically, that’s kind of both dollar cost averaging and mom’s time investing. But I think more specifically, I guess the question is what happens when you fall and yeah, look, I’ve been in that situation. I, um, I received a, a small payout.

Do you do like a work, um, work dispute? Um, basically, you know, a back pay, um, for more of a better term. Uh, and you know, my response was to invest it. Um, I get, like I said earlier in the episode, I did get a little bit scared of the much Downton and not the sort of convenient, like shove over a bit of cash, emailed for investing into my mortgage.

It rather than investing it. And it, that was a bit of an excuse and I was a bit scared. Thankfully, I came to my senses and resumed that sort of regular

Aussie Firebug: investing. I don’t think anyone. Yeah. Like if you’ve got, I always tell people this and you know that right in, like once you have a significant amount of your wealth taught up in the markets, when it does draw, you know, five, 10, 15%, whatever it, unless you have some sort of robot, unless you’re a, some sort of spreadsheet Excel robot that just does the perfect thing at all times.

Like, The stuff is going to happen and your mind is going to play these tricks. There’s nothing worse. I know you’ve been in this situation, a cat that if you second guessing yourself and you’re like struggling to sleep at night, daddy’s the worst spot you want to be in. And that’s where knowledge is power.

And like, you will only sleep soundly at night. If you know, How it works and what you’re investing in and why you’re in that. And this is like tying back to that first question with, you know, do you need a financial advisor? Like that is so important. And I think that’s the most important thing. Something

Captain FI: that I’d bring up as well is, you know, the concept of, um, debt payoff.

Isn’t something that we really talk a lot about in the fire community, but the fire community and the debt, you know, the debt-free community, um, uh, you know, are overlapping. And, you know, you’ve got the concept of debt snowball versus the debt avalanche. And if you read the barefoot investor or, you know, Dave, Dave Ramsey, um, you know, you’ll see that they would, um, be proponents of the debt snowball, and that means paying off your smallest step first, knocking them over building momentum and using that to pay off, um, the, the highest debts

Aussie Firebug: last.

It’s like, it’s like a psychology. It’s like a psychological. Yeah, absolutely.

Captain FI: Whereas the debt avalanche would take a more analytical little analytical perspective to pay off the highest interest rate first. So people with maybe brains like ours, um, you know, typically referred to us, I guess, an analytical or an engineering brain.

You know, we, we’re probably a bit more comfortable with the debt avalanche and we’re probably a little bit more comfortable with lump sum investing, but the power, the psychological benefit of the debt snowball is similar to the psychological power of the dollar cost averaging. Yes. I mean, I think to, to weigh into my situation a little bit more, uh, personally, you know, um, having an investment property, um, building at the moment and I don’t ever envisage selling it.

So I don’t imagine that I’ll ever be in a situation like you were, and you had a bit of cash to invest. Um, my plan is to just sort of have it sitting in the background, hopefully it appreciates and capital value and, um, you know, I’m able to refinance on an interest only loan, you know, that’s the plan at the moment to say, you know, again, re romanticizing myself as an investor.

If I did sell it for whatever reason, yes. I would like to have that money reinvested into ETF’s websites or another property development or purchase as soon as possible. It’s very, very easy to sit here and say that now, but very difficult to actually do it. When it’s your,

when

Aussie Firebug: you were in the hot seat, I absolutely do.

You know, there’s so many parallels. To invest in personal finance and, you know, the whole realm of fun and maintaining a living the lifestyle and like going to the gym and everything. There’s so many parallels between the two, because, and I even wrote, like I had an article, um, about increasing your income and I drew upon, you know, health and fitness, a lot in that area on how it can relate to good financial habits.

And I feel like in this situation, so like to answer the question. If we are ever in the situation where we have a lot of money and we need. The markets. I like to think that I would do it in one lump sum. Like that’s what I’m thinking now. That’s what I want to do. Um, but it might change, you know, when I’m putting the hot seat, but like with health and fitness and especially like going to the gym and eating right.

And stuff like that. It, most people are like to think no, what they should be doing. Like it’s not easy to, to have the, you know, uh, an APAC and those washboard ads, ads, and everything, and like to it’s it’s it takes a level of discipline to stay fit and healthy for most of your life. But it’s not the lack of knowledge.

It’s not like there’s like a secret sauce or anything to it. Most people, I would like to think so anyway, know what they should be eating and that they should be doing some sort of, sort of exercise, you know, everyday breaking into a sweat, you know, not sitting on the couch for 10 hours a day, whatever.

It’s just like doing it and knowing what to do. Uh, two very different things and there’s that level of discipline and like, you know, enthusiasm can only take you so far. You’ve got to rely on the, um, the discipline and the routine that you’ve built to like sort of maintain that lifestyle feel as though a lot of that has to do with investing as well.

Like you can read and read and read all the things that you have to do and, you know, what’s best to do and stuff, but to start actually doing it. And developing that self-discipline, it’s going to be a lot different than just listening to what’s best and reading what’s best. If that makes sense.

Captain FI: Yeah, absolutely.

Mate, you know, Tom it’s people say, well, how do I get good investing? How do I do this? The most important thing is to just stop and find out what works for you.

Aussie Firebug: Um, I got to get it perfect. The first time I know that I had analysis very well because. All was like, okay, I can’t possibly invest without investing in the best product ever.

Like, you know, how could I possibly invest $5,000 in less? I do 12 months of research and it has to be the best investment that’s possibly available, but like the best investment doesn’t actually exist because everyone has slightly different circumstances and goals. So it’s like, Just start. It is definitely one of the most, um, it’s one of the hardest things to do.

Even for me, I was researching this stuff for a good 12 months before I went into the share market, but just starting making those mistakes and then like building on them and like figuring out what works for you is, um, It’s like, it’s all part of the journey. Isn’t it

Captain FI: getting, getting some skin in the game?

Yeah, mate, I just wanted to say, look, I, um, I’ll put it out there right lately. I kind of been struggling a little bit, you know, I’m back to work and my job, you know, confidence and, um, you know, your mindset is really, really important in aviation, uh, because it’s, you know, it’s a time critical environment and you’re constantly making decisions.

You’re constantly evaluating what you should be doing. And some of the stuff that I’ve been chatting with my therapist about, and, you know, there’s absolutely no shame in talking to a therapist. Mental health is super important. There’s a bit of stigma about that in my field, but let’s say, yeah, we can move on from that.

But. One of the things we talk about is, you know, comparison is thief of joy. And what I’ve learned in my journey to financial independence is that, you know, yes, we need to keep track of our finances and yep. We should not be afraid to make changes if you know, things clearly aren’t working. But for me personally, the level of scrutiny, scrutiny, and comparison that I’ve applied to myself and comparing myself to other people, you know, that’s been a huge source of anxiety and tension for me.

So one of the things that we’ve been working on is basically the kiss principle, keep it simple. Don’t overthink it. You know, the 80, 20 principle in a focus on the 20% of work that gives you the 80% of your results, you know? And so for me, agonizing over what could have been. If I had a, it slightly different investing choice or what someone else achieved or, you know, or what the  did.

And damn, I wish I had done what he did or, you know, should I have listened to Mr. Money mustache? You know, should I invest differently? That’s not, for me, I’m stepping away from that mindset. And I just want to focus on a simple proven strategy and not overthink it. Um, and that is what helps me sleep at night.

And so, yeah, so I try not to, I try not to overthink and get the analysis paralysis.

Aussie Firebug: Absolutely. Some wise wise words, inmate to, to end the pod actually we’ve reached the last question, dude. It was an absolute pleasure having you on. Thank you so much for making it’s been

Captain FI: wonderful. And, uh, I even got to have a beer, so how good.

Aussie Firebug: Yeah, we’ll have to grab on in real life. Eh, one, one day I’ll, uh, you know, when all this COVID stuff blows over, will I know some that they should be a fine meet up at some point might even, you know, try to organize one, but yeah, we’ll have to have it be in real life, man.

Captain FI: Uh, and, uh, the good, the good thing about my job is, you know, you can generally see sneak over the border at 30,000 feet and yeah.

Aussie Firebug: Yeah. Private plane. All right. Really appreciate it.

Shout out to the cap, making the time to come on, highly recommend his pod as well. If you just search for captain fire, you’ll find him. And that’s a wrap because that’s the first episode in the books for 2021. Uh, like I said at the start very excited for this year. And I’m looking forward to creating that consistent content and really getting back into the swing of things.

And with that, enjoy your Friday guys. And I’ll see you on the next episode. Thanks guys for listening to another episode of the Ozzy Firebag podcast, for links to all of the resources, plus an entire transcript of this episode, head over to Ozzy firebug.com. Make sure you never miss out on another episode by subscribing now on iTunes or SoundCloud.

 

Podcast – Dev Raga

Podcast – Dev Raga

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Summary

Today I’m chatting to Dev Raga, a doctor from Melbourne who migrated from India as a child in the 80’s. Dev runs his own podcast at devraga.com and is breaking the stereotype of doctors not being the best with money with his educational content on various personal finance topics.

We chat about Devs upbringing, what motivates him to become financially independent and also unpack what the journey looks like to become a doctor in Australia. You might be surprised to hear how much Doctors earn straight out of uni and just how many years it takes.

Some of the topics we cover:

  • Dev’s background
  • How long does it take to become a doctor and when do they start earning the big bucks?
  • How Dev became interested in FIRE
  • What Dev invests in
  • The Dev Raga Podcast

Show Notes

 

Transcript:

Heads up grammar Nazis, the following transcription is half human half machine and not 100% perfect so expect a few typos and errors…

 

Aussie Firebug: Hi, Dev, welcome to the podcast. Thank you so much for coming on.

Dev: Thank you for having me.

Aussie Firebug: For those out there who don’t know who you are, Dev, why don’t you give an overview of who you are and where you’re from?

Dev: Yeah, sure. I rise. So my name is Dev. I’m based in Melbourne in Australia. And a bit of background about myself. I’m a medical professional. I’m actually a practising doctor. We arrived as a child in 1990 from India with my family. And this was this was at the time I the start of Australia’s recession. So I was basically a 90s kid. And since then, you know, my patients, which I see are actually born in the 90s, which is pretty scary, given that, you know, technically I’m a millenial.So I work full time in the field of field of medicine. A part from medicine, my passion really is finances and teaching since I’ve been in medical school. So  this sort of is a sort of a part time gig, which which I’m really interested in.

Aussie Firebug:Yeah, nice. Now to your doctor from Melbourne, which is really interesting because there’s a bit of a stereotype that doctors are bad with money. So I have to ask you, first of all, is that stereotype true in your opinion?

Dev: Yeah, it’s interesting, look, doctors do struggle with the concept of money and finances, and I do get a lot of questions from doctors who can get quite easily confused with saving or investing or debt reduction or financial principles on a guess which which can be quite a surprising thing to find because when you think about it, most doctors did reasonably well at school and then went to medical school, which wasn’t generally easy to get into, and then went on to become specialists. They are Generally quite a bright bunch, but a lot of them also don’t have the slightest clue about finances or money. So I think the general stereotype, although sounds a little bit extreme, but in my sort of personal experience from the questions and the types of questions that I get from doctors and sometimes nurses, yeah, a lot of them don’t have much of an idea about money or finances.

Aussie Firebug: It’s really interesting because like you said, everyone knows how much schooling you have to go through to become a doctor and yeah, it’s usually the bright, the brightest people go and get the right sccores do the exams and become doctors. So it’s yeah, it’s very, very weird that there is that stereotype that seems to be a true that doctors are perhaps not interesting in finance maybe. Is that something that you’ve come across?

Dev:  I think if you look at a life of a doctor or how you become a doctor, for example, is a fair bit of temptation for doctors to, you know, as soon as a graduate, you know, by the fancy cars or big homes. I guess thinking about my sort of medical career, it was six years of medical school. Then you kind of become a doctor, called an intern. You haven’t really seen any money until then. So there’s a fair bit of temptation to spend money and buy things you probably don’t really need. And one of the things that I find interesting is when I became a doctor, the skills as a doc doctor or even as an academic doctor are not easily transferable to the world of finances. So the assumption that being smart to get into medicine automatically equals being smart with money is quite incorrect.And, you know, many doctors get into the habit of really focusing on their career and subsequently sort of leave their finances on the back end, on the back track and not really think about it actively.

Aussie Firebug: Yeah. And I guess that’s true for a lot of professions, not just doctors. What my sort of confusion there and I think a lot of people just assume, yeah, like you said, they’re usually the smartest people or the brightest bunch of people. So you would just put two and two together and think really smart people are good with money, but it doesn’t necessarily work out that way, which is really interesting.

Dev: One of the things that I get asked a lot, actually, you know, even in it when your consulalting patients, is there is quite a misconception with patients sometimes sayin “oh, you’re a doctor, you must make a lot of money. You must not even think about money because there’s so much money around”. And that’s a sort of general conception that patients of the general public have in terms of doctors, you know, big houses, fancy cars, happy family, all that sort of stuff. In a lot of cases, from certainly from a financial point of view, that’s that’s actually not true. I’ve had some doctors have contacted me who are in financial strife just and sometimes I wonder about how did you go so wrong or how did you get the basics so difficult?

Aussie Firebug:Do you think there’s a bit of keeping up with the Jones amongst the medical professionals?

Dev: I think there is some element of that, but I think a lot of the element is just the doctors just not concentrating on on money per say. It is a bit of a taboo topic in the medical profession to discuss finances and money. The vast majority of doctors don’t do medicine to make a lot of money despite what a lot of people might think. That’s actually not true. A vast majority of doctors do it for the right reasons. But this byproduct of that is if you are a great doctor, then you will get a lot of patients. If you see a lot of patients, you will make a lot of money. Then you become a great doctor because you’ve seen a lot of patients. You’ve far more experience and the average doctor. And of course, you see a lot of patients and you make a lot of money. It’s a bit of a cycle. And I think that’s where you can get quite busy and quite engrossed in your profession and not really focus on your finances. And I think to your point, there is a bit of keeping up with the Joneses, but there’s also a fair bit of, look, I’m not very good at finances, I’m very good at medicine. So therefore, I’m going to go out and let my accountant deal with it or let myAdvisor  Deal with it and not really spending the time to learn about finances themselves. And I think that’s a real issue. And of course, in any medical school finances is not taught. And I think in any Australian university degree, finances are not taught. And I think the first time a doctor may have some sort of inkling about learning about finances is when they actually become a consultant, which is, you know, six years in medical school, maybe up to sort of six to 10 years of postgraduate training.You’ve done all that training. And eventually there’s probably a, you know, two or three hour seminar about how to set up your private practice. And they’re talking about finances and trust accounts and all that sort of stuff. And that’s sort of gets squeezed in when perhaps that should have been discussed quite early in the career.

Aussie Firebug: You know, that’s super interesting for me to hear. I’ve I’ve actually had a few friends that have gone on to be doctors, but they weren’t really close friends. So I’d like to get the information from a doctor. How does it work? If you want to become a doctor, you go to university, how many years or how long does it take from you?Study uni to actually become a doctor? And what is sort of the salary progression like? Because people do think as soon as you become a doctor that you must be minted earning hundreds of thousands of dollars, which assuming that you do eventually. but what sort of the how many years is it take to get to the big bucks, 

Dev:It’s a good question. So certainly in Australia there are two pathways for medicine. One is the undergraduate pathway, which is fast evaporating. I think a lot of the medical schools are converting to the American style post-graduate pathway. So for ease of ease of clarity and future proofing this podcast episode, perhaps we’ll talk about the postgraduate pathway. I went through the undergraduate pathway but not many universities offer that anymore. There are some who do say if if you if you took the postgraduate pathway, you know, after year 12, you get into pre-med and sciences, which is usually three to four years. Then you’ve got to sit an entrance exam called the GAMSAT or and and sit an interview panel. And if you’ve got in the first attempt, then medical school is generally about four years after your first degree. So you’re already looking at the earliest if you did a three year science degree. You’re looking at the earliest finishing up medical school is about seven years or so. Now, if you took the old undergraduate degrees, which I did, which is around six years. So you’re sort of on par with that. Once you’ve done the seven years of training, you need to do what’s called internship, which is kind of your apprenticeship really, where you get assessed every sort of three months or so. And subsequent to that, you become a resident medical officer or hospital medical officer, depending on which part of the country you’re from.So then you become a doctor without having to have active supervision so that when you’ve finished your internship. So now we’re probably about sort of eight, nine years down the track.And then you’ve got to start thinking about what specialty you want to do. Now, the shortest specialty in Australia. If you’re lucky to get in first attempt is general practice. You still need to do a post-graduate training for that, which is at the very least three years. So the shortest pathway to becoming a specialist in Australia would be eight plus another three years equalling about 11 years or so. Now, if you were looking at other specialties like surgery, opthamologist, a gastroenterology and all this sort of subspecialties you’re probably looking at about sort of 14 to 16 years, at least sometimes even longer. Now, the difficulty about medicine is that you’re constantly having to sit exams. So even if you get into a postgraduate training programs, you need to sit an exam to get in. You will get assessed every six months.And after you finish your training, whether it be general practice or other super specialty programs, you will need to sit exams during your training, but also sit exams at the end of your training and then go on to exit exam. So a lot of special specialist colleagues have that. I guess one of the what we are sort of called the bottleneck and what tends to happen is that either you either never get into a program or you get into a program, then you kind of sit these exams, which hopefully you’ll pass the first attempt.Now, most people probably will pass the first attempt depending on the specialty, but a lot of them won’t. So if you got through medical school, got through internship, got through residency, got through registrarship all in one hit without having to restart anything, you’re looking at at least 11 to 16 years depending on what specialty you choose.

Aussie Firebug: Well, that it is. That is mind boggling. At what point are you actually earning money? Is it that when you get into the the officer stage?

Dev: You start earning money as an intern. So they’re asked basic salaries for interns across Australia depending on the state.So you’d find that the populous states like Victoria and New South Wales with a lot of interns tend to get paid the lowest. Whereas if you went to South Australia or Northern Territory, your internship salary is higher because they want to attract doctors to those areas. So you do get paid as an intern and that’s all set wage. Then as a resident, your salary increases and this is all in public health. So you can’t privately practise in Australia unless you’re a fellow, unless you’ve fully completed all of your training. So you must stick around in the public system and then you start earning some money in residency. Then if you get onto the program in in surgery or general practice or physician training, then you earn a little bit more. And of course, each year the hourly rate increases depending on your experience. And that’s all governed by the enterprise bargaining agreement. So you don’t have any bargaining power on that. So it’s a little bit different to IT, where every job has a different. Hey, you can sort of negotiate. Whereas if I was a registrar in surgery at the Royal Melbourne based on year three, I will be getting paid roughly the same as St Vincent’s Hospital or Monash Health. You know, it’s all sort of governed by the public health LBA. So you do make money. But in terms of, you know, serious money, I would argue you’re probably making serious money midway through your registrarship, which is your specialty training and possibly when you’re a consultant.

Aussie Firebug: And what are we talking here like for the interns? And then the I forgot the second one.What would an intern start on? That’s about six years to get to an internship. Is that right?

Dev: I fondly look upon my internship and I think my base salary was like nineteen and a half bucks an hour or something like that. I’m not particularly sure what the hourly rate is these days, but I would say as an intern, if you’re making less than sixty thousand dollars as a starting salary, I’d be pretty surprised. And of course interns are very protective and they’re really not allowed to work more hours in what’s scheduled. Whereas when I was an intern, it’s free for all. It work, you know, 60, 70 hours a week if you wanted to. So residency probably looking at about sort of, you know, 80 to 100 thousand, depending on how much extra work you want to do. And of course, that sort of increases. And registrarsship you probably looking at, you know, sort of between sort of eighty five and and, you know, potentially, you know Hundred thirty one hundred and forty thousand, depending on the specialty that you do.To give me an example, if you’re a registrar in surgery, you’d make a fair amount of money as a registrar in surgery. But of course, with that is a fair amount of work as well as you constantly on call and having to work extra hours. So you do. You do make money, but on a per hourly rate, it probably doesn’t work out as much.

Aussie Firebug:Yeah, definitely. Like, you know, as you said, sixty thousand, even 80 to 100. That’s that’s good money. Definitely. By any profession. I think the median income in Australia for a household is is something like seventy or eighty thousand. And that, you know, most of the time includes two people. I don’t know how they work that out, be it household to me. Yeah, two people maybe once not working, but that’s still good money anyway you look at it. But I guess when people think of doctors, they think, you know, if you know a couple of hundreds of thousands of dollars, which you eventually do get to in the end.But it’s interesting, very interesting to hear you speak about the process and how long it actually takes to build up to that. The other question I had as well, how much does a medical degree roughly cost? What is typical, hexed debt at the end of a 11, 12, 13 year degree.

Dev: Yeah. So in Australia, we’re very lucky, unlike our North American colleagues, where medical school can cost in excess of three hundred thousand dollars for six years.it’s an absolute rort in America. In Australia, we’re very lucky to have Hecs or help.Essentially, if you get the marks, you get into medical school under what’s called a merit system and hecs and help debt I think nowadays is, between sort of 7-8000 per year. I don’t know exactly how much it is nowadays, but certainly when I when I graduated, I graduated with a Hecs debt of less than 40 grand over 6 years. So and the beauty of that is you dont have to pay any of that upfront. Your your cost to study is basically your living expenses. For me, it was, you know, living in Tasmania had to pay for my water, my rent and all that sort of stuff. But I had a scholarship and a stipend from the government that helped me. Butyou dont need to foot that bill up front, which is I think is a fantastic system because otherwise people like myself would not have been able to afford to study medicine in Australia. There is another way to do it. I think there is something called a full fee paying student. Now, I think you still need to get the marks to get in. There are some universities that also full fee paying students. That’s for Australian citizens in addition to international students. And of course, if you go through that pathway, you’re you’re looking at at least sort of 30, 40 grand a year in terms of tuition costs. But most people in Australia wouldn’t be at all for that. And that is not the majority of students that go to medical school. And I think I think even in my class, the class of 2006, (if you’re listening. Hello) most of them came from average families and all of them were merit based.

Aussie Firebug: Very interested. Yeah. I sort of I just had in my head that it was like, yeah, roughly like close to $100000. I dont know why I thought that. But to hear that you graduated with such a small hecs debt, that’s I think that’s a good thing. Australia needs more doctors and if we make it like the American system or it eventually does become like the American system would make a career like medicine offputting. Like if I have children one day and they aspire to be a doctor and if it costs three hundred thousand US dollars to become a doctor I’d be like, well if you really like it, go for it. But then that’s such an off putting figure and such a hurdle that you gotta get over, especially if you don’t come from affluent family that has a lot of money to help you pay for it.

Dev: Absolutely, I mean, I always sort of view debt as not a great thing. I know there’s technically good debt and bad debt, but I always imagined debt to be trying to swim a lap of, you know, 50, meet a lap pool with an anchor basically weighing in on your feet. If you’re graduating from medical school with a debt of $300000. You can imagine why the North American health system. The American health system is so expensive because then the fees and charges and the procedures mean doctors will have to jack up their bills because they need to pay their student loans off. Medical care in America is so much more expensive than what it is in Australia. I think fortunate we are very, very fortunate in Australia to have a great public health system. And I’m spruiking it a little bit, but I’m very fortunate to get to work in a health care system that’s fairly equitable and also very fortunate to live in a country where you don’t need to be a millionaire to become a doctor. I think that’s that’s fundamentally still achievable today in Australia.

Aussie Firebug: Yeah, for sure. That’s very good points. And I’m in London at the moment and I live with the nurse who is working in the medical system here, the NHS.  Australia does have that reputation to have it of having a really good health system Even here, she said that the nurses and medical professionals do recognise it as one of the best in the world. So that gives me a bit of pride, you know, coming from Australia, knowing that we’ve got such a good health system. So, yeah, that’s a good thing. Definitely.

Dev: But I think that just your run knowledge is if there if if a UK citizen walked through an Australian hospital and certainly at the hospitals that I work at, they get free health care here, too. We have reciprocal rights. 

Aussie Firebug: I like the Commonwealth connection there. I think that’s a good thing. So why don’t we transition and Why don’t you tell us how you become interested in the world of finance and fire? And was there a light bulb moment or did you just stumble across it?

Dev: Yeah. So, look, I’ve been I’ve been frugal all my life. I wasn’t as I explained before, I wasn’t born into a wealthy family. You know, I come from come from an immigrant family, arrived here in 1990. One of the things that my parents instilled in me is in fact one of the reasons why we came to Australia was we wanted a fairer system and Australia offered that. My parents always instilled the value of hard work and also the value of not not wasting money because we didn’t have much money to waste when we came in and that sort of translated all my life in high school. When I did get into medical school, I was fortunate enough to get a scholarship and a stipend from the Australian government. I used to study for six years and I had to learn to be very careful with my money. So there was only, you know, set amount of money coming every month. And I had to be very, very careful. Now, I’m not sure whether you’ve been to Tasmania any of. When I lived in Hobart, one of the things that I found really interesting was the electricity bills were quite expensive. And I was well known to turn off my hot water system overnight so that I can save on electrcity bills, So I was a bit of a stingy bugger. That sort of carried through  medical school. I applied basic financial principles and I said I have to say 50 per cent of my scholarship and stop and money every month. That was my goal. And by the time I finished medical school after six years, already learnt the importance of saving and I had a sizeable lump saved, ready to buy a house pretty after 2007. So that sort of principle continued throughout my internship and residency, which I finished in 2008. And in 2009 I started investing outside of super and this sort of started off as a research experiment, to be honest. And then I thought about retirement and how to maintain the lifestyle in the long term. I didn’t have any formal plan back then, and I initially started off in the top 20 stocks of Australia, the ASX 20, and branched out to index investing. In 2009 I bought my first home, which is that was part of my saving because I’ve saved a lot of money for medical school. So I didn’t really know anything about fire when I was doing all this. And the irony behind by my first time was I thought I’d paid too much for it. Never in my wildest dreams did I imagine the property market to end up where it is today. And subsequently, between 2009 and 2013, when I started doing research about investing, saving debt, et cetera. Two names kept coming up. One was Jack Bogle, the founder of Vanguard, and the other one was J.L. Collins. And I started listening to another American podcast called Dave Ramsey. His American based. I’m not sure whether you’ve heard of Dave Ramsey. There have been out there that. And then then by 2013, now we’re looking at sort of, you know, how many years now? Sort of six years after I finished medical school, I’d consistently invested money outside of my super, super into the index funds. And I noticed one of two things. And again, but until then, I had no idea about fire. And I noticed one of two things. One was the investments happened behind the scenes because I’d set up an automatic system by BPay which is very similar to super contributions. And the second thing I noticed was I’d received dividends the entire time. Now, I wasn’t really aware about dividends And despite my core value of investments rising just a little bit over those years, when I took the dividends into account, this is what made the difference. And I think at about 2013, perhaps you could call it that was my light bulb moment when I said, well, hang on, I’ve just consistent invested small amounts of money. And the actual core value hadn’t really risen too much, but the dividends made it all worthwhile. That started off what started off as a hobby, really. And an experiment ended up being a light bulb moment in 2013. I think that was when I sort of went, wow, this this can actually end up in a really, really nice place some 30, 40 years down the track. And since then, I’ve just been playing money into index funds as much I possibly can.

Dev: Well, that is that’s a great story, Dev.. A lot to unpack there. First thing I want to say is I feel like there has to be some sort of connection between immigrant mentality and being good financially or having strong foundations for financial health. Because I’ve I speak on my blog about my dad, who he’s Australian, but he has Italian parents.And I and he I feel like he had that immigrant mentality. His parents were immigrants and he brought that into my childhood. And a lot of the values he taught me, I feel that those immigrant mentalities. I just actually we’re still running the annual fire survey that’s running through the month of April this year. But I feel like I should have added it added in a question about some sort of. Are you from an immigrant family or were your grandparents from Australia? Because I feel like this, that there has to be some sort of connection there between the bulk of people in fire with sort of that save money, tuck it away for a rainy day mentality and having some sort of heritage from from an immigrant family, which is it’s funny that you mentioned that, but it’s so true, I feel. Secondly, so I’ve mentioned earlier in this podcast. Well, I’ve had a few friends that went on to be doctors and from my limited experience, there seems to be a driver for someone to want to be a doctor, whether that be wanting to help people after losing a loved one, the status symbol or another reason after all that schooling. The idea of retiring early might might seem crazy. So I have to ask you, what are your plans in the context of retire early and how’s that going to work? And why did you even start to think about having a comfortable retirement? Because, as I said, most people that that I know of and there’s only a few going to medicine with the idea of sort of helping people for the rest of their life and sort of never retiring per say.

Dev: Yeah, great question. And just to win back a little bit about your sort of immigrant mentality point, I think I think you’re spot on in the sense that, you know, I come from India and there is no social safety net there. You have to, you know, work hard and you have to save money. You have to invest for yourself and your family. I think people that immigrate out of countries in the subcontinent, Asia and some of the poorer countries are probably a bit more careful with their money because they’re understand that they’re coming from a country where there is no social safety net. So and that’s probably that’s probably the biggest factor when you come to Australia. Yes, there is a social safety net, but often it’s considered not in good light to be under the social safety net program, particularly in Indian culture. So there’s always this sort of drive to have a job. I mean, the first thing people ask you in India is what do you do for a living? And if you said, I’m not doing anything, then that’s that’s not a great look.So that’s probably where that sort of immigrant mentality comes from.

Aussie Firebug: There’s so much poverty. If people who haven’t travelled outside of Australia or if only, you know, go to New Zealand or I guess rich first world countries like it’s crazy how much poverty there is in the world and how lucky we are to live in Australia.Unless you see it, I guess you can’t you don’t realise how how hard some people are willing to work. And it doesn’t matter that they’re earning fifteen, you know, $10 an hour, whatever it is, they are just really happy that they’re in a job in the first place because where they’ve come from, any sort of life that they’re living in Australia, you seem to be, you know, like they’re they’re a paradise, which is just crazy to think about.

Dev: Absolutely. I think, you know, we are very, very lucky and very fortunate to live in Australia. Just to highlight your other point about, okay, well, you’ve done all this training for medicine and you become a doctor and become a consultant. Then why would you want to retire? I think for me personally, I don’t think I will retire. Really? So the RE component of fire is probably not going to be applicable. What I would want to do personally is to achieve financial independence early so that I have the option of reducing my hours. So I’ll still be a practising doctor.But I would like to, you know, not work full time, perhaps maybe just work sort of two or three days a week as I become older. So that’s really my plan. if you’re doing medicine to retire after 10 years, then then it’s probably not going to be worth it. Going through 14 years of training to work just for and then retire.Although some doctors this thing saying I’d love to retire tomorrow, but in reality, I think I will just be too bored.

Aussie Firebug: How many hours does or how many hours do you work?Because that’s one that’s another sort of stereotype that I always hear that doctors were crazy hours, 70, 80 hours a week. How many hours do you usually work a week?

Dev: Yes,so I’ve just recently reduced my hours actually prior to that. It would not be unusual for me to work 70, 80 hours a week, not would be unusual.

Aussie Firebug: Goodness gracious. Yeah. I can understand you wanting to reduce that. 

Dev: Yeah. So it’s not unusual. And look, to be honest. That’s that’s that’s not the most that I’ve ever worked in my life.And when I was doing surgery, it would not be unusual to work longer hours.I mean, you could resident medical officers or house surgeons for a reason because you kind of have to live and work in the hospital. SO the hours are quite grueling depending on the specialty.Now that I’m achieved coniltancy so I’ve got the option of reducing my hours, which I’ve done actually just before Covid struck. I actually reduced my hours. I usually finish up at about 9:00 p.m. at night, but I finished early. So I have that option to try and reduce my hours. And that would be my plan moving forward in terms of, you know, quote unquote, retiring early.And one of the things that I want to really want to be involved in more and more in the future is teaching.I’ve always been involved in medical education, even in medical school. I’m currently employed as a lecturer at a university. I love medical education. I’m well-known to just randomly start doodling on pieces of paper to nurse and medical students. So that’s something I really want to do more and more of that and reduced my clinical time, of course, depending on where this financial thing takes me I really want to provide principles and knowledge to younger doctors that are graduating medical school and younger doctors, interns and residents very early on in their career to make sure that they don’t get trapped and they don’t fall for these traps in terms of financial products and and try and instill some basic principles for those young junior doctors to make sure that they get their finances in order. I want to explain to them that it’s not particularly complicated. A lot of doctors think finances are very complicated. We put so much effort into our careers, but you don’t really need to put that much effort into learning about finances. So that’s where I want to see myself in the next sort of 10 or 15 years in the future.

Aussie Firebug: Awesome. Awesome. Yeah. I feel like you can pass exams to be a doctor. You can learn about index funds. Its Really not that hard. It’s probably a hell of a lot easier than what it takes to become a doctor. You speaking about those crazy hours and it sort of makes sense to me now why a lot of doctors aren’t necessarily great at finance. Because if you are working those sort of hours and you’re living in the hospital or wherever you’re practicing, then yeah if you get out or you have a weekend free or whatever it is, then you do like you’re earning all this money. Eventually you do want to sort of make the most of it. It reminds me of my mates that flew out west and did the FIFO work and were making all this money. Some of them would know just finish their trades. They’re making over 200 grand a year. It’s crazy sort of money. But they were working on an oil rig or on a mine site for four weeks and they were coming back home for one week and sometimes you would take a day to fly home on a day to fly out. So they’re only there, only at home for like five days. So in that five days, they got all this money.They’re being pent up. They’ve got to have fun. They’ve got to do absolutely everything. So in the span of five days, you know, they’ll go out to the pub four out of five days,shout everyone drinks. They’ll buy a new set of golf clubs because they go on golf and on the weekend and they’ll never use them ever again. Like they just blown all this money. Not saying doctors do the same thing, but I think it’s like a similar situation where you’re just burning all these hours at your job and you’re earning all this money. Then when you do get your leisure time, you probably know you’re probably not going to go for the, you know, conservative option. You’re probably going to do something really grand and maybe buy a new car or do something crazy like that because you feel like you’ve earned it. I don’t know about if that’s how you look at it, but that’s sort of reminds me of my mates that earned all that money in th FIFO work.

Dev: Absolutely, I mean, there’s always that risk of, you know, rewarding yourself. I deseserve a Mercedes or I deserve a luxury home and I deserve a huge mortgage that I probably shouldn’t or couldn’t afford. And I think you’re spot on. I think the other thing is a lot of doctors, if they don’t, you know, if if they work sort of long hours last week, the last thing you want to do after a 24 hour call is to come home and learn about finances So I think one of the one of the things that I’m really trying to target is I’m targeting those interns and residents who don’t, you know, who probably work, you know, 40 to 60 hours a week, you know, before they become registrars and consultants and they’re working crazy hours. Really targeting them to sort of explain to them that you need to set up your finances in such a way that it’s uncomplicated and make sure that it just automatically happens in the background because you will get busy and you also get to do things  and that’s where mistakes can happen. I think that’s one of the things that I learned in medical school, is that if I had a system in place, if I can set it up in such a way that I don’t have to think about it and it just happens automatically, then hopefully one day, 40 years later, when I’m about to retire fully to open up my portfolio and say, wow, you know, it’s a bit of a snowball that’s that’s become quite large in that time. And I think that’s that’s really critical.

Aussie Firebug: I couldn’t agree with you any more. And that’s that’s such a great point. You bring up because I think about my situation, I started Aussie firebug the website and learning about finance everything when I was working in local government and it’s a bit of a cliché, but it sort of is true. I had a lot of spare time at the job so my mind would wander and I did have time to like research stuff and I clocked out of work at. So I started work back then at like seven. I was an early starter because it was flexi time and I had the clock out at four and then I’d go straight to the gym after work and I’d had dinner and I’d sort of have like close to four and a half hours free every single night to do whatever I wanted, which is really like not not many people have that, especially as you progressed through your career and everything and the kids come on the scene, you sort of your time is sucked up everywhere. So I had all these spare time. And you do you learn when you have spare time, like it was really hard, like you said when you got that meant mental fatigue after working 50, 60, 70, 80 hours a week from work you’re not going to be in the state to absorb anything or want to learn anything new. And I’m dealing with that right now, working in the private industry in London. It’s so. Go, go, go. Busy, busy, busy. And I’m enjoying it. It’s fun. It’s a different it’s a different change of pace.But I don’t have hardly any time to do my AFB stuff. Like we’re recording now. But I think about how long it took me to get the website up to like to make the content at the very start to get all the processes in place at the very start. Took hours every night. I was working on it and I was learning about index investing. Everything like that just took so long because I was in a position to be able to do it. So when my life did get really busy like it has been for the last 18 months or so, I already had stuff in in place and already had processes of how to record a podcast like we’re doing now, how to edit all all that sort of stuff was already in my head. I’d already learnt it. So it wasn’t as hard to do, but I’d already built up the knowledge beforehand. So I think that’s a really key point that you mentioned there. It’s less easy to absorb this information if your if your brain is too busy in your career doing 80 hours a week, it’s just crazy to expect people to learn new concepts. So yeah, I think absolutely a good.

Dev: common themes that I find with with doctors is that, you know, like like all things like all other professions, actually, to be honest, is that they put it off. And of course, you’re an intern. You’re really keen to learn medicine. See, putting it off. You’re a resident. You really came to get into a training program. So you’re putting finances on. You’re a registrar now. You accountable for your training. So you’re putting that off because of exams. Then you become a consultant. Then you got to start your public and private practice and you’re putting that off as well, see, putting finances up. And eventually you find that you’ve done you know, you’ve done so much training in medicine, you put the financial side of it. Often, often, often often off. And guess what? You know, what is the most important thing in finances is the power of compounding. The irony is you end up making a lot of money when you’re a consultant. You know, some consultants make 506 out of seventeen thousand dollars. But if you haven’t started investing and haven’t set up the processes early in your career, it’s gonna be very difficult to catch up. You know, it’s not impossible because you’ve got a huge amount of income, but it’s gonna be that much harder. And of course, now you’re ten years older as well. So your ability to absorb information outside of medicine is a lot less.

Aussie Firebug: Yeah, it’s great point. And it goes through all facets of life, like building good health habits at an early age will serve you well throughout the rest of your life. good financial habits of building good relation habits is so important at a young age or at the start of your relationship or whatever, wherever, whatever area it’s in is good to start. Start young.But you almost get trapped. It’s like a it is sort of the rat race, isn’t it? If you go into the career and then you block out everything, you might come out of the career 30, 40 years later, having neglected what’s really important in life but you’re making a whole bunch of money. It might almost be too late, which is yeah, it’s like the whole hamster wheel thing, isn’t it?

Dev: Absolutely.

Aussie Firebug: Okay. Let’s, um, let’s talk about what you actually invest in. And being a doctor, I’m interested. Do you actually invest in a trust or do. Do you do it in your own name?

Dev: Look, I just do it all in my own name only because I’m a public health employee. I think if you have a private practice, a business ownership or a sole trader, it may be beneficial to create family trust so you can put our assets within those trusts.And that’s that’s basically taxed, effective, but also protects those assets. But I’ve I’ve left my private practice some years ago. I just didn’t enjoy it. I’ve actually found it quite stressful, to be honest. And I’m now entirely in the public system. So I just get paid a wage and I just invest in index funds.I’ve just kept it as simple as possible. In addition to my super

Aussie Firebug: And is it just the standard like Vanguard index funds? You do like some beta shares?

Dev: No, I just use Vanguard ASX 300 Index Fund. I don’t. I don’t do ETF use because I invest sometimes multiple times a week through Bpay. If you if you log into my net bank, all you see is recurrent BP payments into the Vanguard Fund.And if I have extra money, then I invest that as well. But basically, the the the the investments that I do is if I get paid at, say, on Tuesday, I know how much I’m gonna get paid.I’m sort of, you know, lucky because, you know, being a public health employee, you kind of know exactly how many hours you’re doing and you get paid a wage, 20 percent of that after tax income. Just go straight into the straight into the Vanguard Fund. So, you know, if you log into my Netbank, all you see is that 20 percent goes straight in every single week. And I also invest a little bit extra every fortnight because I have a couple of jobs. So the other job that pays me pays me the alternate fortnights. So and that’s basically what I’ve been doing for many, many years. I’ve I’ve sort of stopped, you know, my separately managed accounts and ASX 20, I’d just get the vanguard ASX 300. I subscribe to the wholesale fund and money just goes in.

Aussie Firebug: Yeah, great. That’s timeless, timeless wisdom. Just automating those investments. I do wish that it’s such a powerful feature that automatic BPAY. The only thing is, well, it depends on how much you’re investing, but usually for most people, the ETF option has a slightly lower management fee. But I do wonder like my mind has sort of shifted over the years between lowest management fee is the way to go 100 percent. Nothing else matters. But I’ve come to realize that if something helps you build a good financial habit like doing that automatic BPAY option and setting up that automation, that is probably worth a lot more to you mentally and probably financially in the long run, because you might have not even bothered to set up the ETF option. So I do wish the vanguard lower lowered its fees on the the fund through investing directly through them to be more in line with the ETF option. And I think there’s a whole bunch of reasons why they don’t do that. But still, it is such a good feature that I wish I could do even through the ETF. Just set up that automatic payment where I didn’t have to log into my broker account and actually make that trade.

Dev: So yeah, I’ve found Vanguard. Very easy to use. They don’t have a very sophisticated online sort of system to be on. And I still think that just launched these personal investing platform. It’s called the Personal Investor Service, where they are suggesting Vanguard ETF support through that services brokerage free. I haven’t really looked into it in detail, but so I think I think they’re trying to reduce the fees and I think they’re trying to get rid of retail index funds as well. So basically offering old customers wholesale management fee rates. So I think my my management fees 0.16 percent, which which is slightly higher than ETF, but I don’t think there’s any brokerage. But yeah, you’re right. I mean, you know, if I get paid on a Tuesday by Tuesday at midnight, 20 percent is gone. So I can’t spend money that I don’t have.

Aussie Firebug: Yeah, powerful stuff, powerful stuff. Yes, I did. I did see that product, by the way, the Vanguard brokerage product, which is a bit weird because it is free if there’s no brokerage costs, but there’s a there’s a subscription or like management fee associated with it, which I think is like 20 basis points, which is really it’s a bit of a hidden fee. 

Dev: I think the fees cap out at 600 bucks or something. So if you’ve got a portfolio greater than 300000, everything after that, it’s technically free is my basic understanding, but I need to look into it in a bit more indem.

Aussie Firebug: If the previous 10 years or so has taught us anything, the fees are just coming down and I’ve been hearing about zero management fees on a few funds for a few years now.So it is good that more competition is good for us investors at the end of the day. And it’s just crazy how low the fees are compared to some of these managed funds that are not index trackers. So, you know, we can’t complain too much. 

Dev: I say to doctors in general are just people that listen to my podcast. I say keep your keep your fees in total less than 1 percent now. In the scheme of things, to me, one per cent sounds like a huge, huge fee. Yes, but there are some and it’s fees, as you suggest, is, you know, 1 to 3 percent even.Some of the some of the people that contact me my jaw drops when I say, you know, 3 percent management fee. I mean, are you telling me that you’re getting 30 times the return is what I’m getting, you know, for those fees? The irony is that probably getting less.

Aussie Firebug: Yeah, I know. It’s absolutely crazy. Although the education about index investing and how much fees do cut into your total return is so much better now. The amount of exposure that has gotten over the last couple years and I think a fair bit thanks to the FIRE movement like I know a lot of people have yet written to me as well, and they’ve looked at their investments with a few managed funds and they like this, you know, 2.5 percent. That’s that’s a bit high. Yeah, that’s that’s like ridiculously high. You know, unless they’re giving you that extra return, which, by the way, it’s sort of impossible to know which funds are going to outperform in the future. Past performance is not a indicator of future performance. So yeah, it’s nuts how how much they’ve been running it. But I feel like the index investing is growing at a crazy rate. So it just means that those managed funds, if they’re going to be going to be still charging those exorbitant fees, you know, they’re going to have to back up with results. And I think in the grand scheme of things, with the rise of index investing, it should weed out those managed funds that are performing well and in the future will only get some of the cream of the crop of the managed funds. So if you want to go down that route, which you know, I don’t, but if people do, it should be a better product in the end. Now you run the dev ragged podcast over at Dev Ragga dot com. How long have you been creating content and what can someone expect when they have a listen?

Dev: Yeah. So I first started podcasting way back in July 2018. So it’s about sort of almost two years now.And currently it’s available via the website, but also various podcasting apps and also have a Facebook page associated with it where I’ll post articles and thoughts of interest and people can contact me or comment on it.Facebook seems to be the primary medium in which questions come through. Matt, not my intention was never to podcast with the general public. My intention was actually to leave a blueprint for my children. So I needed a way for them to learn about finances so that, you know, one day, you know, touchwood, I’m still here in 10, 20 years time, But if I’m not, they can listen to dad. You know and in a strange way, talking to them by podcast medium. And I started to put together 10 episodes and I did it via voice and did it via podcasting because I’m a terrible writer. I mean, I could have started a blog, but my my writing skills are much to be designed for. And subsequently, I put together a 10 episode series covering the basics of personal finance as everything from, you know, the power of compounding to pay your self-concept to who are listened to. Wills to personal insurance, to investing, to debt repaid, debt reduction, etc.. And basically, I came up with five relatively simple concepts that I wanted to instill into my children, and that’s one of the reasons why I started podcasting. And, you know, if if if I can have a couple of minutes, I’ll just go through that and I talk. Repeatedly in each episode. And that is I wanted my children to take a set amount of money and pay it to themselves, and that set amount of money is 20 percent of after tax income. I wanted them to invest it. I wanted them to always reinvest dividends and I wanted them to do it for the long term. For me, long term is at least 20, 30 or 40 years plus. And finally, my favorite ways to automate it. Which is the five core principles that I’ve used in my life over the last 10 years of investing. And the aim was to provide these concepts to my kids, the boom times over recessions, etc., which they can implement in their own lives. Then I floated it to some family and friends, medic’s and non-Medics, and I said, Well, don’t you have a listen to this? See what you think, you know, because I’ve never podcast it before. I don’t know anything about podcasting. I’m very bad at technology. So then they listened to it and they suggested that they know I should keep going because they actually found it relatively useful in their lives. So that’s how it all got started. Then a few of my medical colleagues jumped on board because they found it quite interesting. Then I contacted one of the administrators of a very large medical Facebook group, predominately targeting doctors, and they were keen for me to publish them on their Facebook group.So if the administrator of that group is listening and all the members. Thank you very much for allowing me to publish it on that Facebook group. And it kind of spread from there. And now I’ve got a few thousand downloads per episode, which is quite satisfying and and content wise is very much directed at personal finance, debt saving and investing and more focusing on the concepts of these topics rather than individual personalized advice which I can’t do over the podcast. So what started off as a way for me to provide a blueprint for my two very young children who are very young, One of them is in primary school, the other one’s in kindie, turned out into a more of a serious sort of podcasting episode by episode release online. And and for the people that do listen to my episodes, it’s very much me talking. I don’t have any guests. You don’t need to be a doctor or a health care worker to listen to it. It’s designed for anyone. In fact, it’s actually designed I think for kids above sort of 13, 14 years of age. Some of my business families and kids listen to it. And basically it’s me discussing about financial concepts and trying to relate it to the individual personal finance situation. And that’s the story. So it all sort of started off as a blueprint for my kids and now it’s sort of slowly growing.

Aussie Firebug: But what a great concept. If I will put a link to the podcast in the show notes for anyone out there that wants to have a listen, highly recommend. I couldn’t let it go, Dave. You are a doctor, so I couldn’t let you go without some sort of question about the pandemic that is gripping the world at the moment.. The Corona virus, what is because you hear so much information from this media outlet, from this article, from this president. And, you know, probably we shouldn’t be injecting bleach, but that’s that’s a whole nother topic.But it’s hard to know what is actually happening on the ground. So from your opinion, you’re a doctor. You’re in the hospitals. I’m assuming that you’re seeing Corona in your work.What is going on in Australia? Is it getting better? Do you have any predictions or when do you think these restrictions should lift in your professional opinion? And when do you think maybe they will lift in a political sense?

Dev: Yeah, good question. So, look, I’ve actually learnt a lot about public health policy during this pandemic and and how important public health policy is. You know, people people say, you know, doctors and nurses, we save lives, et cetera. You know, we’re as health care workers are heroes of the world. But strangely enough, the real heroes, I feel are you know, I know it’s gonna sound a bit politically incorrect, but the politicians and the young chief medical officers and the public policy makers who make policies for us to abide by and and what was interesting about this pandemic, which we all thought in Australia was never going to come, let’s face it. I mean, January 1st, 2020, I woke up. I didn’t think a virus in China was going to impact the entire globe, let alone Australia. And what’s interesting is, you know, the concept of social distancing, you know, the concept of staying that 1.5 metres apart and the concept of not leaving the house unless it’s essential duty such as going to work or, you know, grocery shopping. And following those rules, how important. It is because had we not instituted those measures as a country, had we not instituted those measures, measures as an individual and as a family and as Australians, then we would potentially be in a very, very difficult scenario today. So I always think about it this way, right? I mean, the Grand Prix. I remember. I think it’s mid-March was the Grand Prix in Victoria. I remember I was worried that the Grand Prix was going to go ahead and Victoria very and very close.And if I’m not mistaken, just prior to that, eighty thousand people got together at the MCG for the Women’s Twenty20 World Cup. If I’m not mistaken. So, you know, that literally was, you know, six weeks ago. six weeks down the track nowhere in my slightest imagination did I ever think that we would be in such a great position as a country in terms of trying to defeat this pandemic. I guess one of the concerns that I have is now that we’ve done so well, we can get quite lax. So, you know, we just need to  slowly let you know the foot off the accelerator and slowly ease into these restrictions being eased because, you know, it’s it’s not it’s not a situation where we can just flick the light switch on and every everyone goes back to normal. I just don’t think we will achieve normal for some months yet. And I guess What’s the way out of this? I mean, I’m no public policy expert, but the first thing we probably need to do is keep our international borders shut because most of this virus and most of the patients that I’ve called up for positive results and most of the patients are in Australian hospitals and most of the transmission is coming from overseas visitors or some sort of contact with overseas visitors. So I think that’s got to be kept for a while. Of course, it won’t affect you because, you know, if you’re in australian citizen, you can still come back to Australia. It’s more the tourists and the visitors. And the second thing is got to be a little bit calm. It’s all about what are we going to do for non-essential businesses? I mean, Matt, this is taking a huge economic hit around the world, especially in Australia. People are suffering. Many patients have lost their jobs. It’s very distressing for them. And it’s it’s an incredibly difficult time for Australians. But I think we’re on the right track. I think I was a bit nervous when the Grand Prix was going to go ahead. And but I have a lot more faith now in the government of a lot more faith in our chief medical officers and the public policy experts. And I’ve a lot more faith in Australians because I think we’ve we’ve all banded together. We’ve all supported each other. We just gotta go a little bit more, perhaps another couple of weeks. I think in Victoria, they’re going to try and ease restrictions in mid-May, if I’m not mistaken, and go from there. Just please don’t inject yourself with disinfectant. I think what I have several colleagues in the United States, some of them in the west west of us in California, some of them in the east in New York City. And I’ve got relatives in other states that I’m very concerned about in Texas and other states and you know, the Texas governor has recently said He really keen on opening the state. I’m actually very fortunate we’re very fortunate to live in Australia where, you know, politicians actually listen to medical experts and public health policy experts rather than say random stuff. So I think we’re very fortunate here and Australians are looking on in horror what’s happening in the United States where things are very difficult.

Aussie Firebug: Yeah, it’s very it’s such a polarizing topic like one because the whole world is shut down. But it’s it’s almost the social experiment of a lifetime in, you know, for better or for worse. The United States, like I think there’s a picture of a beach that opened up in Florida or something that everyone was just at the beach and, you know, just going about their business. And even actually the one country that I don’t feel enough people are talking about is Sweden. Sweden is actually using the herd mentality approach as opposed to the social distancing approach as well. So it’s going to be, you know, give it another 18, 24 months, which, you know, if you’re a policymaker, you’re not going to risk killing more people than necessary or not necessary, but killing more people than what who otherwise could have been saved by experimenting like this. But it’s going to be super interesting to see what happens between the two different approaches. I know everyone is saying the social distancing one is working the best bit. I’ve been reading a bit about Sweden and how they’re having success over there. I don’t know what America is doing, but it’s it’s definitely interesting to to see the fallout of all this.

Dev: Yes. So that has got me thinking as well in terms of, you know, the surge hasn’t really happened in Australia. But is it going to happen three months, six months down the line when restrictions are basically eased? It’ll be interesting to see. And I would hope that the government and, you know, based on their policies, have some sort of game plan on how to do it. And I guess because one advantage of that is we’re far more prepared now and even every single hospital is far more prepared now than we were just two, three weeks ago and I think weeks ago had been hit by a surge of covid 19 cases in Australia I can categorically say that, you know, apart from what some of the bigger hospitals, I think a lot of the mid-sized to smaller hospitals would have been absolutely stuffed. And so at least if a surge does come in three, six months time, we’d be more prepared. We know a lot more about the virus now than we did six weeks ago. And you’re right. I think I am a little bit nervous. I’m sort of expecting if things go haywire, it’s probably gonna go haywire in about sort of six to twelve weeks time. But but personally, in terms of my knowledge about the virus, the way I’d be managing sick patients, the way that I’d be resuscitating them if needed, The way that I’d be transferring them out because of a work in a very small sort of public health hospital, a few hospitals that I work at. You know, we’re far more prepared now than what we were, you know, just, you know, four to six weeks ago when all of this started happening.

Aussie Firebug: Well, that’s that’s excellent to hear Dev now wrapping things up. Last question for you, Do you have any advice out there to other Aussies who are in the medical industry who are on the road to financial independence?

Dev: Yeah. So, look,my advice, the number one thing is, you know, I’m a firm believer in keeping things structured and as simple as possible. I found that the more complex an investment is, the likelihood of it returning better than average returns is lower. And I think it’s probably something difficult to get your head around, because a lot of people think, oh, you know, the more complex things are, the better it is. Right. Because when you think about it, you know, when you go buy a car, the more expensive car that you buy, the better product you get, but in finances that may not be true. In fact, that might be inversely true. So that’s one thing. And generally, I believe in the Australian economy. I believe in humanity in general, even though we’re in a bit of a pandemic. But I think humans will aim to do better for themselves in the long term. So I guess, you know, in terms of basic principles, here they are, right. So you don’t need a huge amount of money to get started in investing. And please don’t keep huge amounts of cash if you want to lose money that’s the best way to lose money to hoard money under your bed or in the bank account because cashes of depreciating over time due to inflation, the value of money just erodes.And as a general rule, stay away from consumer debt and ideally debt in general.But I understand you manage to borrow money to invest or buy a home and make sure you always borrow less than what you can afford. I think that’s one of the timeless principles that Peter Thornhill talks about not the maximum amount of money that you can afford. Always pay yourself first. I use the 20 per cent rule if you can’t afford 20 per cent and start with 5 per cent, start with 10 percent. It doesn’t matter. But start early. Don’t wait until you graduate out of uni or don’t wait until you become a intern or Don’t wait until you become a consultant. Because, you know, even if you have a part time job during medical school or a university, take that money and start investing with that income because the power of compounding is absolutely epic. And now try to understand finance, make an attempt. Who knows? Might actually enjoy it. And lastly, share ideas and keep an open mind and try and find Like-Minded People. I mean, it was a great feeling, Matt, to find your podcast. I think you’ve got a bit of a fan base, by the way. You probably don’t know, but you’ve got a fan base amongst the medical community. I mean, your pod cast channel is widely circulated in in doctors Facebook groups around Australia. So because in Australia. And correct me if I’m wrong, talking about money is a bit of a taboo. What do you think? We don’t openly.

Aussie Firebug: Yeah. Now that’s it’s one of the biggest. It’s why everyone talked about how much they were paying for their bills, how much their home loan was, and everything that we spend money on. We’d all save a bunch of money I could was all open out on the table and we discussed it. Everyone would be richer for it.

Dev: Absolutely. I think I’ve always found that a bit strange compared to other countries, particularly in North America and even in India. People are far more open to talking, talking about money and sharing ideas, talking about it and learning, because at the end of the day, we’re here to learn. And, you know, I’m really happy that I found your podcast because, you know, strangely enough, you are one of the first podcasts that I started listening to when I was, you know, looking up this concept of fire because I was kind of doing it, but I kind of didn’t really know what I was doing until I was able to consolidate what I was doing. So I think what you’re doing is fantastic for the fire community. What you’re doing to the medical community is fantastic. You’ve got a favorite of listeners there. Keep things as simple as possible. I think the more complex things get, it may not be, the higher the returns. The complexity may not actually be the best thing for you. May actually cost a lot of money to have complex investments.

Aussie Firebug: Wise words there Dev. Thank you so much for the kind words as well. It’s nice to hear that I do have some fancy out there in the medical industry. So that is that is nice. If anyone wants to get in contact with you, did they be listening? They may do it maybe in the medical industry themselves. What is the best place to contact you?

 

Dev: Yes. So DevRaga.Com or if you Google me and just type in personal finance, I’m all over Google and there’s Facebook page associated with that and contact me via Facebook as well. Most of my followers contact me either via the podcast itself, which is cast box or the Web site or most of them actually contact me via Facebook 

 

Aussie Firebug: It’s been an absolute pleasure chatting to you. Thank you so much for coming on the show.

 

Dev: It’s an absolute honor. And thank you for having me, Matt. And stay safe and really looking forward to catch up with you when you get back to Melbourne.

 

Aussie Firebug: Yeah, that that’s if I make it back or if they open up the borders for me, hopefully I get back. Hopefully it’s or will not blown over, but hopefully a bit more relaxed come January next year. It’ll be lovely to meet you, mate. And yeah. Looking forward to it. Fingers crossed. Thanks, Matt.

DEC20 Net Worth $859,482 (+$30,096)

DEC20 Net Worth $859,482 (+$30,096)

And so we have reached the final NW update of 2020.

WHAT. A. YEAR.

I finished my contract in early December before Mrs. FB and I jetted off to Sweden for Christmas and some sightseeing.

I’ll be honest…  the last couple of months in London were a real struggle for me. The second lockdown plus our housemate testing positive for Covid in November (which resulted in us being locked inside for two weeks) really got me down. It felt like a weight was lifted off my shoulders when I finished up work and secured my bonus. We’re going to miss this amazing city and all the friends we have made here a lot, but because of Covid/lockdown, the goodbye was a lot easier and we were keen to get out of the UK if I’m being truthful.

With that being said, I made it into the office during our last week to see that killer view one last time… and I actually managed to get Mrs. FB a guest pass too. She got to see this beautiful sunset with me on my last day which was very special.

Going to miss this view 😢

After saying our goodbyes and packing up our London life it was off to Stockholm to squeeze in one last trip before returning to the motherland.

We originally wanted to do a Scandinavian tour that also included Iceland and Norway to end the year but given the current environment, I’m just thankful we at least got to see Sweden. I was super interested to see how the Swedes were handling Covid because they were one of only a few countries that didn’t implement strict lockdown measures. It was a bit weird to be walking in and out of shops without putting on a mask in Stockholm and tbh, you wouldn’t really know that there was a global pandemic if it wasn’t for the signs.

The Swedes have a bit of social distancing already built into their culture (they rarely stand close to each other in general) which was a common explanation I received from asking the locals what they thought about their country’s response to the situation. That and their government seems to trust the citizens to do the right thing and for vulnerable people to isolate.

We then made our way up north to a town called Abisko to see the northern lights. And when I say up north, I really mean up north.

Abisko, Sweden

I was staring at the map when we got to Abisko and I’m pretty sure it’s the furthest away from home I’ve ever been (in terms of distance). We went there with the sole purpose of seeing the aurora borealis dance across the sky which has been a bucket list item for many years.

If you’ve ever been this far up north, you’ll know that it starts to get dark around 2:30 PM 👎 which feels so unnatural. I honestly don’t know how people live up there. I can handle 6 hours of light for a few days but I could never do a full season.

Anyway, the first night was -4°C and full of clouds. We couldn’t see any stars which is a bad sign. We lasted around 2.5 hours on the lake (you have to head down to the lake to reduce the light pollution from the town) before we called it quits at around 10:30 PM freezing our asses off!

We booked a photo tour on the second night because we had read that they will drive you to the best spots and you need a good camera to capture the lights properly. The tour wasn’t cheap at around $170 AUD a head 💸 but we thought “What the hell, when are we ever going to be here again”. Off we went into a chilli -7°C night chasing the aurora in the minivan. We pulled up to a few different spots but the issue remained… more… god… damn… clouds. Try as we might, the heavens just wouldn’t play ball and we ended up finishing the tour seeing diddly-squat. The tour guide did give us some good pointers and basically said that to see the lights, you just need to be patient. Abisko is one of the best places to see the aurora because it’s situated between a mountain and a lake which means the clouds have a tendency to clear up to reveal the magic of the lights that sit behind them. I headed back out to the lake after we got back from the tour just in case the clouds cleared up but I could only last until about 1 AM before calling it quits.

Google weather was predicting that our third and final night was going to be clear up around 11 PM and I was absolutely HELL BENT on seeing this goddam spectacle. And just my luck, this night was also the coldest of the three with weather dropping down to -10°C plus wind 🥶. I bought some firewood from the shop and put on 100 layers of clothes and headed out to the lake at around 8 PM to start a fire in the pit.

The annoying thing is the town has a ‘webcam’ live feed pointed at the sky which you can look at from your phone/laptop in the cabins. It’s theoretically meant to show you when the lights are visible so you don’t have to sit down by the lake in the cold all night. But the issue with that feed is that the camera picks up lights that you can’t see with the human eye. I was down on the lake for a few hours before a lot of people from the town came down because the live feed was showing green streaks in the sky. But if you looked up, you couldn’t see anything 😕… it was at this point that I started to wonder if the aurora was just made up by the tourism industry 😅.

Mrs. FB tapped out around 11 PM and I pushed on into the night waiting, hoping, praying that I would see a glimmer of green. I kept updating Google weather waiting for the sky to clear up but frustratingly, every time I did, the predictions were continually pushed back 30 minutes and before you knew it, 4 AM was upon us and I had to wave the white flag.

We left Abikso sad and exhausted after not being able to see what we went there for. But in a weird way, I guess that’s what makes the northern light so special. You aren’t guaranteed to see them and you’re very lucky if you do. I’ll try again one day but after failing this time around I definitely have some pointers for anyone out that wants to see them.

  • Don’t plan your trip with the sole purpose of seeing the lights
  • I’d personally go to the Norway city of Tromsø next time. Abikso is meant to be one of the best places to see the lights in the world but there’s literally nothing else there. At least you have a lot of other activities to do in a city
  • The odds of seeing the lights as epic as they are advertised on tourism ads are extremely unlikely. Our guide said they only really come out like that and dance across the sky a few times a season. You can get some good photos with a proper camera but the naked eye experience can be a letdown
  • Try to stay for at least a week to ensure you have multiple chances of seeing them
  • Don’t trust any website/app. The accuracy of forecasting the lights is incredibly low.

We then caught the overnight train to a snow mountain called Åre. It had to be one of, if not the most scenic mountains I’ve ever been to because of the unique sunrise/set that lasts for hours whilst you’re snowboarding. It also has an incredibly pretty little snow village that looks like something out of a movie.

Åre, Sweden

The cutest little Christmas snow village

Frozen Lake with Mrs. FB

One of the most impressive things about this mountain was the fact that it had a train station in the middle of town.

The Polar Express

I’ve never seen that before. It must have a really gradual incline up the mountain for a train to work right? Whatever black magic the Swedes were casting, I was very grateful it was there because it made travel super easy for both up and off the mountain. We caught a sleeper train off the mountain to our friends home town of Ängelholm to spend Christmas with her and her family.

We almost had a meltdown in Åre when we read on the news that Singapore had stopped transit flights from the UK after a new strain of Covid was discovered 😩. Our ticket home departed from London on the 2nd of January and included a stopover in Singapore before flying to Adelaide… It was so hard to figure out what our options were and if we were actually allowed to fly home. Because things were moving so fast, Singapore Airlines couldn’t really give a definitive answer on anything. What a nightmare. After a really intense 4 hours of phone calls and panic Googling, we decided to switch our first leg to leave from Copenhagen instead of London. Thank God Singapore Airlines had an available flight from Copenhagen that they let us switch to free of charge.

Christmas was very fun and NYE was a bit boring which was fine, our focus was well and truly on getting home at that stage.

On the 2nd of January, after two years of being away, we finally boarded the plane that began our journey home.

Arriving in Singapore was an experience I’ll never forget. We got out of the plane to 6 people in full on hazmat suits lol. I’d heard about how serious Singapore was taking Covid but it was still pretty surreal to go through it.

You know those movies where the army sets up a makeshift camp with quarantined off areas and there will be a bunch of people trying to get through all different stages of security… yeah it was like that. The only thing that was missing was a dude with a huge hose blasting naked people down before they’re allowed to enter 😂. I’ve got some videos of the whole ordeal that I’ll be showing my kids one day I’m sure. Crazy times!

We finally got to Adelaide and were ushered away to The Playford hotel in Adelaide where I sit typing up this post in quarantine. We have been really lucky with our hotel which includes an upstairs loft, big 50 inch TV and spa 🤩. We’re apart of the ‘Aussies in Quarantine’ Facebook group and some of the stories we have been reading have been horrific

And with that, our overseas adventure has come to an end. We’re now onto the next chapter in our lives and even though we’re stuck in this hotel for another 10 days, damn it feels good to be back home 🐨🦘♥.

Net Worth Update

The NW had solid contributions from our share portfolio and Super this month. But the big bump came from my bonus I received which was £20K.

We started the year at $770K and finish at ~$860K. A $90K increase in net worth is the lowest yearly jump for us since 2014-2015 but considering we had one of the worst stock market crashes in history, I’m very happy with those results.

I thought we might be on track to crack a mil in 2021 but this is looking less likely now unless there are some big gains coming up. I used to dream about becoming a millionaire before 30 when I was a kid and you know what, I came pretty damn close. Mrs. FB is keeping that dream alive though as she won’t hit the big 3. 0. until late December this year.

There are two big factors that will have major impacts on the net worth for us in 2021.

  1. I’m officially unemployed 😁. This means no fat London contracting checks anymore. Mrs. FB is back into fulltime teaching in two weeks which means we’ll be on a single salary until I figure out what I want to do (I’ll have more on this in the next update)
  2. We’re going to buy a home this year 🏡🎉. This will have a pretty big impact on our net worth because I don’t classify a PPOR as an asset. It doesn’t really make a difference to us in terms of reaching our FIRE goals but the deposit we use as a down payment for a house will essentially be removed from these updates. I’m looking at debt recycling atm because the plan is to put as much money into the home loan as possible and either withdraw or use a line of credit to get that money back out so we can invest it but have that portion of the loan be tax-deductible (AKA debt recycling). I haven’t been able to sink my teeth into the finer details just yet but please rest assured I will be making an article detailing my experience.

 

Properties

No changes in the properties this month.

Property 1 was sold in August 2018

*DISCLAIMER*
The current value of our properties is a rough guesstimation based on similar surrounding properties. I only really update these when we get an official bank valuation

ETFs/LICs

The above graph is created by Sharesight

Not much going on here.

We didn’t buy any shares in December and won’t be buying any for a while now. The priority has shifted to buying a home and increasing our deposit for when the right property comes up. We were looking at spending around $400K-$450K but house prices have jumped significantly in 2020 and I think we won’t be able to get what we want for under $500K.

We have ~$70K in cash right now and I hate holding this much without doing anything. I’m obviously a big fan of having an emergency fund of around $25K (that’s what we’re comfortable with), but anything past that feels like wasted gains. We do have an offset that makes holding a lot of cash much more attractive (vs storing it in a HISA) but the amount of money being created all around the world worries me a lot. I don’t want to be holding the bag if inflation gets out of control.

 

Networth

A Firebug’s Guide To Moving To London + Investing overseas

A Firebug’s Guide To Moving To London + Investing overseas

I’m writing today’s article as if I could somehow post it back in time, two years prior would have been perfect.

You see, Mrs Firebug and I were packing up our life in Australia, about to jet off to the other side of the globe with a strong desire to see all the wonderful and interesting places that Europe offers. But quitting your job and moving to London can be scary shit yo! I’m a pretty confident person normally but you do second guess yourself when you’re out of your comfort zone.

But you know what? Working hard and investing during our early/mid 20’s left us in a really good spot financially and we avoided a lot of potential worry and stress had we made this trip beforehand.

Still, I really had no idea what to expect and wasted a lot of time and money simply because I didn’t know what I’m going to share with you in today’s piece.

I’m writing this guide to help ya out. If you fall into one of these categories:

  • You want to move to London
  • You already live in London
  • You want to move overseas but continue to invest in Australia as we have done

Then this is the guide for you!

Are you sure you want to live in London?

Before we dive into the article, I want to warn any would-be Londoners of one unavoidable fact.

London is stupidly expensive!

It ranked 19th in Mercer’s 26th annual cost of living report. To put that into perspective, Syndey ranked 66th and Melbourne came in at 99th.

You really need to ask yourself what’s important. We predominately moved to the UK to be close to Europe for travelling. Mrs. FB is a school teacher and she basically earns the same amount of money in London as she would in just about any other city or town in the UK. But most of the high paying contract jobs in tech were in London which is the reason we decided to move there.

Had I been in an industry that didn’t attract a premium in The Big Smoke, there’s a very good chance we would have ended up somewhere else like Liverpool, Edinburgh or Belfast.

IMO, you really should heavily consider living somewhere else if your salary is < £35K or you can get paid a similar wage somewhere else in the UK.

I know a lot of people who moved to London straight after uni that worked minimum wage jobs at a bar and couch-surfed through Europe. London would be one of the last places on earth I would choose to live if I had a minimum-wage gig (Cafe work in Thailand/Mylasia comes to mind). Don’t get me wrong, it’s an amazing city, but there’s an array of other really good cities in the UK where you can do lower-paid work and not have to pay the outrageous rental costs of The Big Smoke.

But if you’re still keen on London, please do read on.

Setting up life in London

Find a home

We lived in two apartments during our tenure, the first being in Norbury (Zone 3) before succumbing to the classic Aussie stereotype and set up shop in Melbourne 2.0 aka Clapham (Zone 2). We were paying £900/m (bills included) in Norbury for our room that had a private ensuite in a brand new apartment right next to the overground station. In Clapham North we paid £900 + bills (£60) per month for a classic Edwardian style flat that was a lot older but actually had more character which grew on me.

The Zones dictate how central the location is to the city (Zone 1 being the most central location) and they actually make a difference in the cost of public transport too.

Zone 1 is too expensive IMO (you may be able to find a cracking deal) and we found the sweet spot in terms of location and price was in Zone 2. Zone 3 was ok but if you’re planning to commute via bike, you could be looking at a 45-60 minute trip each way which is a little bit offputting for most. IMO it is so worth paying a bit extra to be closer to the city so you can cut down your riding time to be 20-30 minutes to the CBD. Check out this zone map for more info.

One of the best resources I can recommend is the Aussies in London Facebook groups. There are a few of them getting about and sometimes the groups that are a bit smaller (<15,000) are actually better. These groups are not only fantastic to find spare rooms, but they also act as a market place for second-hand bikes, clothes plus tips and tricks. You can usually get some killer deals on there when people move back to Australia and sell a lot of their stuff. If you post a pic of yourself with a bit of a write-up, there is a great chance that you’ll get some messages from people looking for a flatmate. I’m not on Facebook anymore but I’m sure there are a few people in those groups who’d benefit from this guide so feel free to share this around.

We personally found this way of finding a place much better than going through websites like Spareroom which was the website we used for our first place. Those other websites will charge you a premium to be able to access newly listed rooms/properties plus dealing directly with the flatmates was always a better experience even when we didn’t want to live in the flat.

It depends on what you’re looking for too. A lot of people will say that you should live with people from other cultures/countries to get the proper experience which probably won’t happen if you’re looking for rooms on an Australian Facebook page.

Here are my general recommendations based on our experiences for finding a home in London.

  • Flat sharing is fun and is a key part of the experience (way cheaper too)
  • Couples have it much cheaper than singles even factoring in the extra price couples sometimes have to pay for
  • Having our own ensuite was worth it (for us)
  • London has great public transport but there are some black spots. Try to get as close to a tube station/overground as you can. If you can get near a big hub (like Clapham Junction), even better
  • Biking is the best way to get around the city (more on this below)! Bike superhighways are a recent edition (I believe old Bojo had something to do with them actually) to London but they are superb and something I would try to live near to make my commute into the city a hell of a lot easier. There is a world of difference riding in a dedicated lane vs weaving in and out of traffic

Banking

Thank your lucky stars that you didn’t move to London ~ pre-2016. Setting up a bank account used to be one of the most bothersome tasks before the digital banking shakeup in 2014 that changed everything. Horror stories used to be common where people would move to London and get stuck in a shit sandwich loop. They couldn’t sign up for a flat because the rental agency wanted to see payslips/bank statements but the old school banks wouldn’t let someone open up an account that didn’t have a place of residency in the UK, but they couldn’t get a place without… yeah, you get it.

What a nightmare!

From what I heard, the 2008 financial crisis introduced extremely strict banking rules which meant a whole bunch of red tape and general pain for ex-pats trying to start a new life. Fast forward 6 years and the government started to ease the barrier of entry for banking licences and reduce the restrictions which gave rise to a new concept in baking… the challenger banks.

You might have heard of 86 400, Volt and Up. These are called Neo banks in Australia but they’re really just copy cats based off a concept that was started here in London.

I bank with both Monzo and Starling and can recommend both. They are seriously epic. The apps for both are extremely well developed and do everything you need. You can’t get a better interest rate for international travel either and there are no fees associated with the account.

But the best feature of all, hands down, is how effortlessly you set up your account. It’s 100% done through the app. No branches or dealing with people at all. You fill out a bunch of questions, record a selfie video saying who you are, take a photo of your passport and a few other documents and you’re done. The card gets mail out to your location and that’s it!

If I had to choose, I’d probably go with Monzo purely because it’s more popular and they’re cool features you can do if you share a meal with a group and everyone uses Monzo.

Phone Plans

Boy oh boy is it ganna be hard going back to Australian phone plans after you see what kind of deals you can get in the UK.

Mrs. FB and I are both with Voxi (a subsidiary of Vodaphone) and their plans are very good. Going from country Victoria where I was paying something like $40 for a gig of data which wouldn’t even bloody work half the time, to deals like these was unreal.

Unbelievable! £12 quid (~$24 AUD) for unlimited video streaming/social media. And the connection was never a problem for us here in the south of London.

It’s cheap and it works but the best feature bar none was definitely not having to get a new sim card when we were hopping around Europe to all the other countries. I love technology 🙏.

We can only vouch for Voxi because it’s the plan we used but I have seen other similar ones that were just as good.

Transport

This is a big topic and one that can potentially save you £1,000’s of pounds each year.

First things first. Download City Mapper right now! It’s hands down the best navigation app for getting around London. I’m a massive Google Maps fanboy and it took me a while to migrate over to City Mapper but man, once I did, I was well and truly converted. It is really designed for cities (there’s one for NYC, Paris, Hong Kong) and I found it to be a lot more accurate than Google Maps was when it came to service disruptions.

IMO, biking is the most superior form of transport in London and it’s not even close! You might be rolling your eyes because this is such a FIRE thing to say but trust me with this one, London is a really bike-friendly city with the additions of the Bike Superhighways that were added in the last few years.

I’m not even saying this because of how much money you save and the added benefit of the extra exercise, it’s generally a mood booster to cycle around this gorgeous city each morning when I was commuting to the office. It’s also the quickest form of transport (I consistently flew past cars commuting up High street on my way to the city) and you are never rushing to catch a train or bus. How many of you guys out there look forward to your commute in the mornings? If the sun was shining, my morning rides were more often than not one of the best parts of my day. Now granted I have been told that 2020 did have particularly good spring/summer/autumn and the weather does play a big part. But boy oh boy when the sun does come out, riding through Battersea park, over London Bridge and around the cute streets of Notting Hill are memories I’m going to cherish forever and I know I’ll miss those rides when we’re back in Australia.

Handy tip: Check if your employer participates in the Cycle to Work scheme. You get a bike for free at the start, then the amount is deducted from your pay every month until it’s paid off. Because the amount is deducted before tax, you end paying less tax, and therefore you pay less than the bike actually cost.

The London Underground AKA “The Tube” is a feat of engineering the likes of which I’ve never seen before. It boggles the mind how I can miss a train and wait no more than 90 seconds before another one rocks up. The efficiency for a network to run like this is mindblowing for my simple noggin 🤯 and I have to admit, when I first started catching the tube, there is a little bit of novelty it.

I have fond memories of landing my first contract and catching the tube to work in central London. I really felt like a Londoner power walking through the endless crowds of white-collar city slickers in my new chinos and overcoat… and theeeeeeeeeeeeeen the novelty wore off three weeks later 😂.

I really only caught the tube (pre-covid) when I had to after I bought a bike. It’s bloody handy to have it up your sleeve though.

One of the best features of ‘Transport For London’ (tfl) is being able to use your cards tap and go technology straight off the plane. You know how travellers have to buy a Miki card when they get to Melbourne and want to use public transport? You don’t need to do that in London which is fantastic. You as long as you have a VISA/Master Card with tap and go tech you’re good to start using the public transport system. You can even use your Apple watch to tap on and off. Pretty sweet!

Handy tip: If you’re under 30, the number 1 thing I would recommend is buying a railcard as soon as you get here and pair it to your Oyster card which is the equivalent of a Myki/Oapl (city transport card).

Unfortunately, you need an Oyster card to have the railcard discount apply to your fares (there was talk about linking the railcard to your bank card but not sure how far along that is). The card costs £30 and you can seriously make that back within 2 trips out of the city if you’re using the national rail for a big trip. The card typically saves you 1/3 of the fair for both buses and trains during non-peak times and you’d be hard-pressed to find anyone who wouldn’t save money buying this card.

It’s a digital card too which is cool. You download an app and when you buy national rail tickets, you just select that you own a railcard and you’ll get a discount (you’ll have to show the app if an inspector comes by of course, however, we never got asked to show our railcards).

Buses cost £1.5 per trip (or £1 if you use your railcard during off-peak) and get the job done. They aren’t as quick as the tube usually, but unless you’re in a rush, the buses are great and it can save you a lot of £££ during your stay.

Gyms

We had memberships at PureGym and TheGym which are budget gyms (around £19.99/m) and had everything we needed. You can keep fit just by running and doing bodyweight exercises tbh. I’ve just always prioritised a gym and those two above were the best value for money that I could find.

Tips and Tricks

Cheap Flights

Sky scanner is pretty much the go-to website for searching and comparing flights. However, I would recommend to book directly with the airlines especially with so many cancellations due to covid and the third party websites can be a nightmare to get refunds from.

Euro-star 

The Euro-star was a fabulous option for us to travel directly to Paris and Brussels. It can be quite expensive but if you book in advance you can get some really good deals and avoid the dreaded airport. It leaves from St Pancras International Station which is attached to Kings Cross Station.

Sending Money Back Home

I have sent over $60K AUD back home (to continue investing of course) using a company called Transferwise. They have the best rates for sending money back and the process is really simple. You can get a free £500 transfer by using my affiliate link* which means you won’t have to pay any fees.

I’ve also sent money from Australia to my Monzo bank account too.

* This link is an affiliate link and I may earn some commission from it. Please see my affiliate page for more info.

Finding a job

We only have experience in two areas which I’ll cover below. But there’s just so many different pathways to finding a job in London that it would impossible to cover them all.

I will say that for white-collar workers, LinkedIn is utilized heavily. Make sure that’s up to date and looking good.

Teaching

By Mrs. FB

Being a teacher is a great job to have when moving to London or any UK city for that matter. I am a Primary school teacher and was able to take care of a lot of the admin side of things before I left Australia. I chose to sign up with anzuk Education as I had a friend who had used them as her agency. They took care of a lot of the paperwork before my arrival and organised my DBS and International Police Check which you will need to work in schools. They will give you copies of these at your registration appointment. I found them to be organised and professional.

When we arrived in London I went to my registration appointment at the agency and spoke to them about what type of work I was looking for and they asked if I wanted to use an Umbrella company or PAYE. I chose PAYE because I was only using one agency and this would be a higher day rate in the end as the umbrella company take a chunk for their fees. I started with day to day supply work so I could become more familiar with the school system. This was okay but requires you to be flexible and move around to a lot of different schools which I didn’t always love especially when you get a tough class! I also felt quite overwhelmed trying to find different schools especially being new to London and using the tube and overground for the first time. I ended up only saying yes to work that had a reasonable commute time as some days it would take an hour to travel to the school.

I started at £135 a day (PAYE) and just accepted that rate initially. This was probably my biggest regret as I should have negotiated my pay from the get-go and would encourage you to do so. At the time I had 5 years teaching experience and my friend who was working with the same agency and only had 1-year experience started at the same rate. I learnt pretty quickly that all agencies are the same in that respect and will try to pay you as little as they can get away with unless you challenge them.

After a month of supply work, I ended up taking a long term contract for the summer term teaching a Grade 3 class at a Catholic school in Vauxhall. I was lucky that the class were lovely and I got along really well with some of the teachers at the school. We would go for Friday night drinks at the pub to debrief about the week. I preferred working at the same school each day and being able to make better connections with the staff and students but with this comes more responsibility and planning. I made sure to ask for a higher day rate from the agency and was earning £160 (PAYE). After the summer break, I was called by the agency to once again work at this school and cover a Year 4 class which I was very excited about, especially not having to find another school. I taught there until the pandemic hit and was then able to go on furlough pay through the agency which I was super grateful for.

Overall, my experience of teaching in London was really positive. My top tips would be:

  • Negotiate your pay: don’t be too scared to ask for a higher rate. I am a people pleaser and it was very difficult for me to do this but with a little pep talk from Mr FB I was a pro in no time 😉. You will hear the same spiel from the agency each time about them only taking a small cut for their fees etc (don’t believe them lol). You can even speak to other agencies to get an idea of how much they offer as a day rate and use this as leverage.
  • It’s okay to be picky: If you didn’t like the school or the class you were teaching for the day and the agency want you to continue working there, say no. I did a number of trial lessons/days at different schools before I accepted my long term position.
  • Find a contact at the school: If you like a particular school, make sure to talk to the deputy headteacher or whoever is in charge of finding supply teachers at the school. Tell them you had a great day and would love to come back, that way they can request you again through the agency.

Hope this was helpful 🙂

Contracting (in tech)

Okie Dokie, this part below is probably what I would have liked to have known the most when I got to London at the start of 2019.

A lot of people are attracted to contracting predominately due to the below three reasons

  1. Contractors charge more than their PAYG counterparts
  2. Contractors pay a lot less tax
  3. Contractors can deduct a lot of expenses

I had always heard how lucrative contracts were in Australia and you could reasonably expect to double your hourly wage in sacrifice of job security, Super, holiday pay, sick leave etc. etc.

This suited me down to a tee! We didn’t come to London to build a career or to try and save money, we wanted a job that would allow us to make enough money to live and travel basically.

And after 8 years in the public sector, I wanted to see if I had the chops to handle the private industry in one of the most competitive job markets in the world.

To say I was unsure is putting it lightly… and I’ve always been a confident/optimistic type of guy but quitting your job and moving to the other side of the world can strike fear into even the most bullish of people.

The below guide is everything you’ll need to know to land a high paying contract gig in London and something that would have saved me a lot of headaches and wasted time. It won’t cover all the administration tasks for running a company (too much to cover) but I’ll link to some great resources that go over everything in detail.

Limited, Umbrella or PAYE?

The structure in which you contract in is probably the first piece of this puzzle you need to figure out.

Almost all contractors I met in London were operating under a Limited company structure due to the major tax advantages. But that doesn’t mean it’s the best option for everybody so it’s good to know what the options are.

I know it can be a bit boring but you really need to know about a piece of legislation called IR35 because it has major implications for contractors and is more often than not, the deciding factor for what structure you choose.

In a nutshell, IR35 was introduced to stop contractors working as ‘disguised employees’ whilst receiving all the tax benefits on being a contractor. The lack of job security and employee benefits are the reason why contractors have tax advantages in the first place. Therefore if you’re working as a ‘disguised employee’, HMRC (UK’s ATO) will argue the point that you’re not accepting the increased risks and you will not be entitled to the tax advantages.

You can read up on their definition of a ‘disguised employee’ but I think we all known who they’re talking about. You know the guys that work a job for years and then decide to start a company and contract back to their employer at double the rate without skipping a beat. I’ve meant a few people who have done that within government over the years and it’s a smart thing to do really. The UK government see this as a tax loophole and I can understand why they want to plug it.

The definition of what is considered outside of IR35 (you’re not a ‘disguised employee’) vs what’s inside IR35 (you’re a ‘disguised employee’ and will not receive any tax benefit) is a grey area and will be assessed case by case if you ever get audited. Usually, the contracts are advertised as either inside or outside IR35 online which helps.

Limited Company

Generally, if the gig falls outside of IR35 and you’re going to be making > £30K then you’ll most likely be better off using a Limited Company (otherwise an Umbrella Company is the way to go).

Ther’s a lot more administration overheads Limited Companies though so be aware that you’ll have to do a lot more work. Raising invoices (and following them up 🙄), paying for insurances, registering your company and submitting a separate tax return etc.

The UK’s government website is a fantastic resource with a lot of really great written articles. If you’re convinced that setting up your own company is the right move, I’d strongly recommend this starting guide.

Umbrella Company

The major advantage here is everything is done for you. You save yourselves a lot of time and stress by going through an Umbrella as the contract is actually held by the umbrella company and the employer. You don’t get paid by the employer, they pay your umbrella company and then the umbrella company pays you.

The IR35 ruling is less important here because as far as I’m aware if you’re going through an umbrella, you’re going to be paying the full amount of national insurance (NI) tax so it’s pretty much irrelevant. This does open your options up a lot more though as almost all public sector contracts fall within IR35.

The main reason a lot of people start contracting in the first place is to make as much money as possible. It’s for this reason that most choose to go through a Limited Company vs Umbrella.

PAYE

It’s possible to become PAYE through an agencies payroll (if they offer it).

This option is the most inefficient (in terms of tax minimisation) of the three because you will have to pay full tax and NI contributions on all your earns and you won’t be able to claim valid business expenses.

Finding contracts

There’s a lot of different ways to skin a cat but I’ll cover what worked for me.

I used a website called Job Serve to find contracts but there are soooooooooo many places to find jobs it can be overwhelming. I wouldn’t recommend signing up to a whole bunch of alerts on various sites because the same job gets advertised across many platforms and your inbox will become unmanageable really quick.

There are a few niche websites that you need to pay to see ‘private listings’ but I never used them so I can’t comment.

I’m not sure if Melbourne or Sydney are the same but be prepared to deal with recruitment companies in London. It’s almost unheard of that a company will advertise a contract directly. 99% of the time it will go through a recruitment company and I have no idea why. The amount of people that are in recruitment in London is insane. Really high turn over rate too but I have heard you can make bank if you hustle hard without any quals or experience so it’s appealing to a lot of young people. It can be really frustrating dealing with a middle man that doesn’t know the requirements half the time and they never call you back to say if you didn’t get the gig 🙄. If you don’t hear from them within a week, it’s safe to assume that you weren’t shortlisted.

Here’s how the game is played:

  • A company decides they need a contractor for X amount of time and are willing to pay £Y per day
  • More often than not, a specific skill is required in a project that the company either doesn’t have in-house, or they need more of ASAP. It’s partly because of this urgency that contractors are paid as much as they are
  • The job description with requirements and nice to haves are prepared (half the time by just copying a template or another listing). Handy tip: don’t be discouraged by how much experience and skills are in these job descriptions. They are so over the top and don’t reflect what you’ll be doing 90% of the time. I once came across a listing that said you needed 3 years experience in a technology called Dataflows which would have been fine… except Dataflows was invented in 2018 😂
  • The new contract hits the recruitment market like a fresh shipment of crack to LA in the ’80s. An ungodly amount of recruitment agencies all rush out to and try to find a suitable candidate as they take a cut from your daily rate for however long the contract goes for. They will usually advertise the day rate with their cut already factored in (but always ask!). So if you see a contract for £450/d, the company that needs a contractor is probably actually paying something like £650/d but £200 of that goes to the recruitment company
  • If it’s at a good rate within the city, the candidates are usually shortlisted within a few hours (that’s been my experience anyway). Handy tip: When I was ready to land a new contract I would basically refresh the Job Serve page (with my keywords) every 15 minutes. As soon as a contract pops up that you’re interested in, call the recruiter to touch base with them which will do three things:
    1. It shows that you’re really interested in this contract. Recruiters want candidates to be able to go to interviews that same day sometimes (happen to me once). Make sure you get their actual email address so you can send your resume to them directly
    2. You have a chance to ask a bit more about the contract that may not have been in the listing. You can confirm that it’s outside of IR35, open to someone on a tier 5 visa, located within London etc. Sometimes you can get a bit more out of them in terms of what the project is about and this will help you decide on whether you do in fact have the skills to perform what’s required.
    3. You will prioritise your resume over others and the recruiter will actively look out for yours in their inbox if the phone call has been successful
  • If you’re still keen to get the gig, tweak your resume to make sure you cover all the key requirements (don’t stress if you’re not proficient in everything, just say you have some skills and back yourself to learn on the fly if needed. The goal here is to make it to the interview) and update your LinkedIn page to make sure it matches (yes, some people do check to make sure it matches your resume). This was one of my resume’s I used when I was applying for contracts last year.
  • If everything has gone right, you should be getting a call from a recruiter pretty soon (within a week) to set up your interview. Go in with confidence and crush it to secure the contract 👊
  • Once you win the gig, you’ll be sent a formal contract that lists a whole bunch of crap but you’re probably only really interested in making sure that the day rate is what was agreed upon and the details for your first day.
  • Rock up on the first day and go from there… your boss for the engagement will tell you who you need to send the invoice to and how accounts payable works etc. etc.

And there you have it, you’re officially a contractor in the big city 😊

The above is my experience but it may be different for you. I’d love to hear from an actual London recruiter in the comment section and get their take on the whole situation.

Mistakes

The two biggest mistakes I made when I was first looking for contracts were:

  1. Applying for contracts that were over a week old. Recruiters will always tell you that the contract hasn’t been filled yet but what they’re really doing is just hedging their bets if something happens to their current candidate. There’s no harm in applying for old contracts but all three of my gigs in London came from freshies and after speaking to a few recruiters at the pub, it’s really a game of first in best dressed with this type of work. I mean think about it, if the company really wanted to take the time and invest in finding the right person, they would probably just create a permanent position. Contractors are hired guns!
  2. Not jazzing up my LinkedIn for the first two weeks 😅. I cannot stress this enough, LinkedIn is really, really important in London for some reason. I did have a LinkedIn profile before I came to London but I hadn’t updated it in years. A big reason my phone was dead quiet during the first few weeks was because of how bad my LinkedIn profile was. No previous experience, no updated profile pic, no quals or skills.

Paperwork

I used a company called SJD as my accountant for both my personal and companies tax returns. If I could do it again, I’d just create an account with Free Agent and pay to use that product. It’s the cheaper option but it’s also the easier one IMO. My accountant didn’t do a whole lot TBH and it sort of annoyed my every time I saw the £110 go out of my business account each month. Their software was crap too. I would hire an accountant to help with the closure of the company and that’s about it.

It doesn’t take much to learn the ins and outs of using HMRC website and the Free Agent software really covers everything you need to run a small Limited Company used for contracting. The hardest part of contracting is raising invoices and chasing them for payment. But if you work for a good company that pays on time, it’s super easy.

You’ll also need to pay for public liability and indemnity insurance to cover your ass in case something goes horribly wrong. This usually costs < £1,000 depending on how much coverage you get.

Salary/Dividends

What many contractors do is pay themselves a small salary and then pay the rest of the money they made through dividends which have a much lower tax rate. This does depend on a number of things, IR35 being on the most important ones.

Resources

The best resource I can recommend hands down has to be Contractor UK. It’s predominately a forum board but it also has some really well-written articles that cover everything you’ll need to know about contracting in the UK.

It covers the entire UK but the community seems to be heavily London based and leans towards Tech jobs. I asked many questions on that forum and it helped me out a lot.

Tax/Investing whilst overseas

I’ve had a tonne of questions over the last two years about these two topics.

They usually go something like…

“AFB, how do you invest back in Australia when you’re in London” & “How does it affect your tax return”?

This is such a hard area to get good solid info on because of how different the rules can be for different circumstances.

Take our situation for example. We have been able to continually invest without much hassle whilst being overseas because all of our wealth is held in a discretionary trust fund with a corporate trustee. What I did before we left Australia was cease control of the company that was the corporate trustee of the trust and have my mum step in to run it while we were away. That meant that she had 100% control of our assets and technically could have gone on a YOLO trip of her own (plz no mum). The advantages of being able to distribute income from the trust to other people worked perfectly for our situation even though I had no intention of utilising the trust this way when I first set it up. When we return in a few weeks, I will retake ownership of the company and be back in control.

In hindsight, would I set up a trust just to make it easier if/when I moved overseas? No, I wouldn’t. Investing through a trust overcomplicates things and you can FIRE without one.

There are different strategies for utilising retirement accounts in the UK but it’s just so circumstantial with too much to cover. I never went on a deep dive into these strategies either because I was a contractor. Mrs. FB opted out of her pension scheme so she receives more £££ but paid more tax. This works for us because Super isn’t a part of our financial independence strategy.

International tax law is an insanely complicated and circumstantial topic and I’ve got no hope in hell trying to explain 1% of it in a blog post. So what I’ve done is invite Evan Beissel, a Tax Partner at Mazars to create a guest post (below) that will cover the basics.

Please let me know in the comment section below what specific questions you want answered. I’m going to get Evan on the podcast in 2021 to flesh out other topics we no doubt missed in this brief overview.

*FYI this isn’t a paid guest post. Evan reads the blog and offered his services and expertise for this article for free and AFB gets no kickbacks. I’m sure Mazars will get some traffic but the content below is of mutual benefit to both the AFB audience and Mazars.

Moving overseas and Tax, A short guide for Firebug’s

By Evan Beissel, Tax Partner, Mazars

Whilst tax law is an immensely complex topic, many of us can get away with only interacting with a small number of rules that are relatively easy to understand. For example, most working Australians
would know that when they prepare their tax return that their salary is included in their income and that certain work-related expenses and charitable donations may be deducted from their income to
calculate their taxable income.

However, one way that you can make your tax affairs substantially more complex is to move
overseas. Not only do you need to now understand the tax rules of another country where you are
living and earning income, but you may also still be subject Australian tax to some extent. You have
now entered the mysterious and wonderful world of international tax.

Whilst there is no one-size-fits-all playbook to these tax rules, there are some key concepts and topics that are common to many, which I will try and explore here and hopefully leave you with a bit more knowledge than you started with.

Tax residency 101

Tax residency is a huge topic and too big a topic to cover in detail here, but it is well worth covering
the basics.

Firstly, tax residency is a concept that exists separate from residency for immigration purposes. For
simplicity, for the rest of this article, I will simply refer to residents and non-residents as meaning in
relation to tax residency. Most developed countries (Australia included) tax their residents on
worldwide income whilst non-residents are generally only taxed on income sourced in that country.

Source is another topic that can get quite complicated, but as a simple example, salary
income from working in an overseas country would generally be sourced in that country, and
investment income such as dividends received from a foreign company is generally sourced where the company is based.

Another key issue to understand is that tax residency is not exclusive, and every country has different rules. So you can, for example, remain a tax resident of Australia whilst living in the UK, but also be a tax resident of the UK. In this case, double taxation agreements become critical – these are agreements between two countries on which country has priority of taxing rights in various
circumstances. Not all countries have a DTA with Australia, however, these are in place for most
developed countries including the UK.

In Australia, there are a number of residency tests that can cause you to be a resident for tax
purposes. The most relevant of these is the ‘ordinary resides test’ and the ‘domicile test’.

Under the ordinary resides test, you are a resident of Australia if you ordinarily reside in Australia.
Generally, this is not difficult to establish –for example, if you are living permanently in Australian do
not have a home in any other country. However, it can get difficult to establish where someone
ordinarily resides if they spend time in multiple countries and have multiple residences where they
regularly reside. There is a body of legal precedent to assist in these greyer areas, but for most
people, this is not an issue and it doesn’t warrant further discussion here. Suffice to say, if you move
overseas for an extended period and don’t retain a home in Australia usually you would be considered to no longer ordinarily reside in Australia.

The domicile test relies on the legal concept of domicile which in broad terms refers to a person’s
legal ‘home country’. Without going down a rabbit hole on domicile rules, as a starting point if you and your parents live permanently in Australia then it is likely you have an Australian domicile. However, if you or your parents immigrated to Australia, then it is possible you may not have an Australian domicile. This distinction is critical as someone with an Australian domicile is much more likely to remain an Australian resident when they move overseas.

Under the domicile test, someone who has Australian domicile is a resident of Australia unless they have established a permanent place of abode outside Australia. A permanent place of abode refers to a locality rather than a dwelling (e.g. you might establish London as your permanent place of abode, rather than a particular house or flat that you live in whilst you are residing there). Permanent does not mean indefinite but does require an intention to reside on a ‘permanent’ basis. There is no minimum time period that is considered to indicate permanency and this is an area of residency rules that can be quite difficult to establish with certainty.

Whilst the ATO have sometimes used a two year period as a rule-of-thumb, this is not based in legal precedent. Ultimately, whether you have established a permanent place of abode outside Australia will depend on the specifics of your own circumstances.

Tax issues for Aussies moving to London

So you’ve decided you want to move to London for a couple of years. What does this mean tax-wise?

Firstly, tax residence becomes important here:

  • Depending on your individual circumstances you may or may not cease to be an Australian
    tax resident. If you do remain an Australian tax resident, you would be liable for tax in
    Australia on income earnt in the UK
  • If you are living in the UK for an extended period you are likely to become a UK tax resident
    during your stay, and so will also be taxed in the UK.

To illustrate, let’s consider a couple of examples. For both examples, let’s assume you have the following income sources whilst living in the UK:

  • Salary income from a job in the UK
  • Rental income from an Australian property
  • Dividend income from Australian shares
  1. Retaining Australian residency

    In this case, it is likely you would also be treated as a UK tax resident whilst living there so you would be a dual resident for tax purposes. In broad terms, both countries will therefore tax all your worldwide income (note this is a simplistic summary but should be the case for most ordinary salary-earners with modest investment income). However, the country where the income arises (i.e. where it is sourced) would have priority of taxing rights, and the other country should provide a credit for tax paid in the other country subject to rules in each country which may limit the tax credit allowed. The tax paid on each type of income is summarised below.

    Australia UK
    First taxing rights Australian rental income Australian dividend income UK salary
    Second taxing rights (with credit for tax paid in first country) UK salary Australian rental income
    Australian dividend income
  2. Ceasing Australian residency
    If you cease to be an Australian resident when you move overseas, then Australia would only tax income sourced in Australia whilst overseas. However, for a non-resident of Australia, the mechanism for paying tax changes for certain types of income. Dividends, interest, and royalties (usually payments for use of intangible property) are no longer included in taxable income and taxed at marginal rates but are instead subject to withholding tax at a flat rate (subject to reduced rates under some DTAs).The common rates for interest and dividends are shown in the table below:

    Income type Withholding rate
    Interest 10%
    Dividends (unfranked) 30% (default rate) / 15% (treaty rate)
    Dividends (franked) 0%

    In the UK, as a UK resident, you would be taxed on your worldwide income with credits for Australian tax paid on your Australian income.


Investing whilst living overseas

So, can you continue to invest whilst living overseas? The short answer is a definite yes, but the tax
can certainly get more complicated than simply investing as an Australian resident. This applies both if you invest in Australia, of if you invest overseas.

Dividends

One important example is franked dividends. Our franking credit system is almost unique to Australia and does not operate well across borders. From an Australian perspective, both resident and non-resident investors receive favourable tax treatment of dividends that have been ‘franked’ with credits generated from tax paid by the company. Australian residents receive this benefit in the form of a tax credit that reduces the tax they pay (and may even be refunded if their marginal rate is less than the company rate), whilst non-residents do not pay withholding tax on franked dividends. However, foreign tax rules (including the UK) generally do not recognise franking credits and therefore the dividends are taxed without regard to the franking credit, this can produce a high effective rate of tax on the underlying company profits that have been paid out to shareholders.

Investing in overseas shares may not produce a much better outcome – dividends paid by these
companies would also be subject to tax without credit for company tax paid. Further, once you return to Australia, you do not have access to the franking credits you would have had if you had purchased Australian shares. The one possible advantage here is that foreign companies on average may pay less of their profits in dividends and therefore reduce the component of dividends in their long-term returns.

Ultimately, in many cases, it is necessary to accept some increase in tax paid on dividends whilst
living overseas.

Capital gains

Capital gains is another area where moving overseas can add significant complexity to your tax
affairs.

If you retain Australian residency whilst living overseas, then all your worldwide assets remain subject to Australian CGT under the same rules as if you remained in Australia. However, you may also be subject to capital gains taxes in the country you are living in.

Foreign residents are generally only subject to Australian CGT on Australian real property and certain similar assets. However, if you cease to be an Australian resident, you are faced with a choice for your non-Australian real property assets. You can choose to either:

  • Have a deemed disposal of all these assets for their market value, such that any capital gains
    or losses would be realised for Australian tax purposes; or
  • Elect to keep these assets as subject to Australia CGT until they are sold.

The best choice will depend on your particular assets and circumstances. However, if you choose the second option, that you will lose the 50% CGT discount in proportion to the number of days you are a non-resident of Australia. This reduction in the CGT discount also applies to real property that
remains subject to Australian CGT.

Any of these assets you hold when your resume Australian residency in the future (except assets that have remained subject to Australian CGT such as Australian real property and assets elected as described above) are deemed to be acquired for their market value at that time. This becomes the cost base that is used to calculate a capital gain or loss when you sell these assets.

If you sell assets that are subject to CGT in both a foreign country and in Australia, you should be
able to claim a tax credit in Australia for the foreign tax paid. However, to the extent you can claim the 50% CGT discount in Australia, you may only get a 50% credit for tax paid overseas which can result in a higher overall tax rate than if you were only subject to CGT in either country. Also, when you cease to be a resident of the country where you have been living you may have a deemed disposal under the local tax rules. In this case, you would usually not get any credit in Australia, as you do not realise a capital gain in Australia at that time.

At this point, you will hopefully have gained some understanding, whilst also understanding that this is a complex topic that can’t be addressed in full in one blog post. Unless your circumstances are very straightforward, I would strongly recommend obtaining professional advice that is specific to your own circumstances.

This publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.

Summing Up

London… what a city!

It’s almost a right of passage these days for young Aussies to make the pilgrimage across the Indian ocean and explore all the wonders of Europe. Now given you’re reading a FIRE blog, it may not come as a shock to you that there was a brief moment before we embarked on our YOLO trip two years ago where I considered not going because of the financial consequences. Nothing is truly free and this trip of a lifetime was not an exception. Quitting my job to travel the globe meant that we would have to delay our freedom, hopefully in exchange for some lifetime memories. And with the power of hindsight, I can honestly say that…

This trip has been one of the best things I’ve ever done in my life!

Do I still want financial freedom and only do meaningful work (FIRE)?

(Stone Cold voice) OH HELL YEAH!

But holy mackerel, I’m telling ya guys, the levels I’ve climbed on the life experience ladder over the past 24 months has just about eclipsed the previous 10 years.

And it’s not just about the travel. The work-related opportunities in London were one of the biggest surprises I had and it was almost better than the sightseeing. It’s so different from where I’m from and the city is just brimming with an entrepreneur spirit and outside the box mentality. Contracting can be tough but there’s nothing better than being apart of a really bright and diverse team and working together to build a solution.

London has not only broadened my horizons but the experiences I’ve had whilst being there has altered what I want to do once I reach financial independence (but that’s for another article). It’s an incredible city that will always be our second home.

Wrapping up now I’ll leave you with this…

I wish I did this trip earlier in life and really want to send a message of caution to any aspiring young Firebug’s reading this. Getting your shit together financially is really important and reaching financial independence is the ultimate money destination. But do not let an obsession with reaching this goal rob you of something you can never, ever get back… exploring this big beautiful planet when you’re young and growing. There’s a world of difference between travelling in your 20’s vs coming to see Europe later in life at 50…

 

Spark that 🔥

DEC20 Net Worth $859,482 (+$30,096)

NOV20 Net Worth $829,386 (+$31,586)

Ahhh 2020… the gift that just keeps on giving…

London went back into lockdown at the start of November, which to be fair, a lot of people were predicting. So it didn’t come as much of shock to most people but it still sucked. But what really felt like a Tyson uppercut was when one of our flatmates came home saying she had tested positive for Covid … 😱

She’s a Covid nurse who has to get tested multiple times a week but the funny thing is that she’s already had Covid before (she’s had the antibody test) and was certain she didn’t actually have it this time. Apparently false positives are not uncommon and it’s what most likely happened. Regardless, as a result, the whole household had to stay inside for two weeks straight without leaving the flat 🤪🤪🤪

The obvious question I had straight away was couldn’t she get tested again to make sure she actually has it? But the protocol states that even if she gets tested 100 more times and they all show up as negative, that one positive overrules everything and we all need to self isolate for two weeks inside without leaving… 🙃…goooooooood

I was already mentally preparing for the two weeks quarantine we are still going to have to do next month when we return home but this really took us by surprise and I was not ready for it at all! I’ve got a skipping rope and was still able to do bodyweight exercises but the lack of sunshine and fresh air really got me down towards the end there.

Because we were locked inside for two weeks, I started to look at gaming systems on Gumtree and thought maybe we can pick one up pretty cheap to help get us through the lockdown. After a bit of research, I decided to get a subscription to a cloud gaming service by Google called Stadia. Hopefully, there are some gamers who read this blog because let me tell you, as a former relatively hardcore gamer, I couldn’t believe that this tech even exists and works so well.

I’ve been eyeing off the new PS5 for a while and there was a pretty good chance I was going to buy one next year but after trying this cloud gaming stuff out… I’m almost certain these latest consoles will be the last ever made. Maybe this is a bold statement but I can’t see how all gaming doesn’t move to the cloud over the next few years.

When you sign up to Stadia, you get given a controller and chrome cast. That’s it. No console!

The controller connects directly to your WiFi and the chrome cast enables your TV to stream the game video. But because the computing and graphic rendering are done in the cloud, the screen that you actually game on can change. It’s so cool and works so well! I can play Red Dead Redemption 2 in the living room (small flex for London that we have a living room ps 😜) but move upstairs to my computer’s 27 inch if the girls want to watch a movie. It even works on your phone/iPad. Because the controller is connected to the net and not a console, you just have to pair the controller with your screen and boom, off you go!

I was also really attracted to fact that you don’t need a subscription to play Stadia games online (unlike Xbox and Playstation) and no big outlay to buy a physical console, the only cost is buying the controller and games.

I promise you I’m not an undercover Google employee because it probably sounds like I’m trying to sell the system. I’m just a tech nerd at heart who works with a lot of cloud technologies and was really impressed at an engineering level that something like this can even exist. Absolute madness!

Stadia just needs to get COD on their system as the lack of zombies was my only gripe 🧟‍♂️🔫

Net Worth Update

Ho ho ho, did Christmas come early this year 🎅?

Over $50K in gainz from shares and Super which hid an otherwise extremely expensive month since we booked our last holiday and flights back home for next year. I know there was some really positive news on the Covid vaccine front but it’s pretty insane how much the share market went up in November. It’s funny to look at some of the comments that were flying around in March/April. Covid is just another nail in the coffin for trying to time the market.

How many of you guys out there are still on the sidelines waiting for the next drop? What happens if the markets never drop below what they are at right now huh? We all know that eventually, they’re going to reach new heights, but new bottoms are never guaranteed.

All this printing of money does make me wonder about the long term outlook for fiat currencies around the world. I sleep so much better at night knowing the majority of our wealth is stored in businesses and real estate. Don’t get me wrong, having cash on hand is handy. But I can’t help but feel the purchasing power of my emergency account is copping a flogging every time the government drops some sort of stimulus.

Properties

Since it is related to property (just not in the investment sense) I’ll add it in this part…

I’ve been looking at home loans recently and have been blown away at how low an interest rate you can get on a fixed mortgage. We have been looking at houses since the start of the year because we want kids one day and I’ve been crunching the numbers on renting vs buying for our area and the results are leaning towards buying which shocked me a bit. Much of this has been driven by low-interest rates though. I’d love to know who you guys are with and what rate your paying (also if it’s fixed or variable) in the comment section, please 🙂

 

Property 1 was sold in August 2018

*DISCLAIMER*
The current value of our properties is a rough guesstimation based on similar surrounding properties. I only really update these when we get an official bank valuation

ETFs/LICs

The above graph is created by Sharesight

Wowzers!

The ASX goes bang in November.

I was thinking about this the other day. An investor’s reaction to sharemarket movements can be a reflection of their personality in many ways. You see, it doesn’t matter what the sharemarket does, I always find a reason to be happy about the result.

If it drops, that’s awesome! I can now pick up great companies at a reduced price. If it rockets upwards, that’s also great, look at how much wealthier we just became. Even if it goes sideways I usually can pick out some positive in the markets low volatility and how good it is 😅

I’m an optimist at heart and investing/life is a lot easier if you have a positive mindset. I truly believe that!

 

Networth

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