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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 🔥

Australia FIRE Survey Results 2020

Australia FIRE Survey Results 2020

Welcome to the very first Aussie FIRE Survey results!

Firstly, I know that half you guys read this blog on your phone but if you can, please come back to this post on a desktop or something with a bigger screen because the visuals look so much better and the dashboard was designed to be viewed on a desktop.

I’m really keen to run this at the start of every year and release the results along with the dataset for the wider community. I was inspired by the extremely popular Stack Overflow Annual Developer Survey Results that they publish each year for developers. Essentially, you can read where people are from, what technology is used the most in the community, what coding languages are hated the most and a whole bunch of generally interesting tidbits.

I had this idea mulling in the back of my head for years and thought wouldn’t it be cool to run an Aussie FIRE Survey each year and share the results! One of the greatest strengths of this community is that we are willing to share and talk about what is normally considered taboo subjects. I’m probably on the extreme end of the scale of what people are willing to share but the beauty of the survey is that anyone can fill it in completely anonymously.

The results below are both extremely fascinating and interesting. What I also hope that this annual survey can achieve is to give a little bit more help to would-be Firebugs who are trying to start their journey but don’t have a measuring stick.

Think about it, if you read something online about person X saving $30K a year and investing in VTS without any context, you don’t really know if that’s a lot of money for them (they could be earning $250k per annum) and what their circumstances are that made them choose that ETF.

At the bottom of this page is the FIRE survey dashboard where you can slice and dice the data to suit your needs. The richer this dataset gets, the more specific you guys will be able to drill down to your situations and get a feel as to where the rest of the community is at. You might be a 28-year-old single lad from Melbourne that’s earning between $80K-$100K. It might be of great interest to know what others in your situation are doing/are at with their journey.

That’s the idea anyway. I sorta stuffed up the survey when I ran it in March because I forgot to include some key questions (like super 🙈) but I already have a heap of improvements I will make when I open up the survey again at the end of this year.

The survey had 654 submissions across 9 countries and the results are broken up into four sections:

  1. Firebug Profile
  2. Investing
  3. Miscellaneous
  4. FIRE Dashboard (interactive dashboard using the data from the survey)
  5. Methodology

Feel free to download the raw data from here (Open Database License (ODbL)).

Please tell me what questions you’d like to see in the future version of the survey and just general tips or recommendations for me 👍

Enjoy!

 

Firebug Profile


Geography

 


*This map may not rendering on mobile phone screens

There was no surprise that the majority (621) of submissions came from Australia. I was actually shocked that 8 other countries contributed. I’d love for this survey and the results to become more global in the future.

I was pleased to see my home state of Victoria coming though with the most submissions for the Aussies 🤘
 
 
Age Range

No surprises here. I knew from my Google analytics that the majority of my audience fell between 20-40 years of age.

 
 
Sex

I'm currently working on some content that's more female focussed because finance and investing seem to be heavily skewed towards a male audience.

 
 
Relationship Status

I was thinking about FIRE for singles just the other day. It's definitely possible but a lot harder to do. Take our situation living in London for example. We pay £900 a month in rent that gets us a bedroom with an ensuite. Everyone else in the house pays around £700 and they have to share the downstairs communal shower. All the big-ticket items like living, food and transport costs can be shared between a couple whereas you're paying for everything if you're single.

 
 
Kids

Considering the age range that filled out this survey this result doesn't surprise me too much.

Was a bit surprised to see so many maybes tbh.

 
 
Education

Close to 70% of the respondents are university-educated 🎓. No wonder so many smart people live in the comment section!

 
 
Employment Status

 
 
What industry do you work in?

This one is super interesting because there seems to be a lot of people in the tech industry that are drawn to the concept of FIRE (I fall into that stereotype 🙋‍♂️). But the data is showing a lot of diversity! I probably could have guessed the top two categories but the rest was very interesting to see.

 
 
Annual Household Income (after-tax)

Holy moly some of you guys are earning a mint! I'll have to add more upper tiers in income for the next survey since the highest submission was for $195K+ 🤑

 
 
Net worth (excluding your home equity)

So the way I interpret the above data is that there must be a lot of people either at the start of their journey building up a solid snowball of around $50K-$200K and also a lot close to the end in the $1M+ range.

 
 
Living Status


I would have guessed the renters were going to take out 🥇 place here actually.

 

Investing


Have you reached FIRE?

 
 
How many years have you been investing for?

 
 
Financial Planner?
 

 
 
Top 10 ASX listed products owned

 
 
DRP/DSSP
 


I was a little surprised at how many people use DSSP actually.

 
 
How do you own your investments

 

Miscellaneous


Top 10 banks respondents hold their mortgages with

 
 
Side Hustles
 

Please note that the below figures are the annual median income after tax and not the averages. There were a few massive submissions that would have blown out the average completely so median seemed to be more appropriate.


hmmmm I think I need to get into Amazon FBA 😂

FIRE Dashboard


Here is what I believe to be the very first interactive FIRE dashboard generated from user data... ever!

There's probably someone out there that's already made one but I've never seen it. I'm really happy how the dashboard turned out and it's only going to get better each year as I add enhancements and features. The more people fill out the survey the richer the dataset will become which will make the insights and analysis more accurate.

Most things in the dashboard are interactive. You have the filters at the top but you can also click on each visual and it will affect the others.

Here's a quick little video explaining how it works.

I'd highly recommend viewing the dashboard in it's fullscreen mode. If you're on your mobile, please come back to this bad boy on a desktop. Trust me... it's worth it 😁

Feel free to have play with the PowerBI file here. There were some assumptions made in the dashboard but if you're interested in how the data was put together, the PowerBI file has everything you need.

Methodology


This report is based on a survey of 654 Firebugs from 9 countries around the world.
 

    • The survey was fielded from the April 5 to May 1 2020.
    • Unfortunately there wasn't a timed component in the dataset which means I could not qualify responses. I plan to add a timer for the next survey to fix this.
    • Respondents were recruited primarily through channels owned/ran by aussiefirebug.com which included: Aussie FIRE Discussion Facebook group, Aussie Firebug Twitter Account and Aussie Firebug Blog
    • All income figures are based on AUD. There will be changes to this in future surveys as I'm aware international salaries should ideally be converted to a base currency
    • Net worth figures are in AUD
    • Some visuals do not always take into consideration all the answers due to visual issues. There were 87 distinct values for banks for example. Reducing that to a top 10 is more visually appealing. You can always download the entire dataset if you want to know all the submissions.
What Is ‘Retire Early’ And Why It’s The Most Important Part

What Is ‘Retire Early’ And Why It’s The Most Important Part

FIRE to me is broken up into two parts.

Firstly, you must reach financial independence (FI) where you’ll need to have enough assets generating enough money to cover your expenses forever.

This is pretty straight forward and whilst there are different variations of what people consider financial independence it’s much less convoluted then early retirement (ER).

Which is the second part to the FIRE equation and by far the most important.

I’ve done my fair share interviews for media outlets reaching out to me because they wanted to know more about the FIRE movement and what it’s all about. For some reason, I had quite a few in the last few weeks which you can listen to here, here and here.

These interviews prompted me to make this post because the question that ALWAYS comes up is why would a bloke who has 50+ (hopefully) years left in the tank want to retire?

Wouldn’t it be boring?

So I’m here to set the record straight as to what I consider ER is and why it’s the more important step!

 

What Is Early Retirement?

 

The most misunderstood and important part about FIRE has to be ER.

It’s mostly because the word ‘retire’ has a certain connotation with most people. If you actually look up the definition of retirement you will get different answers depending on which dictionary you are reading.

Retire Early in a FIRE context does not mean you stop working!

I honestly could think of nothing worse than to sit around all day doing nothing for 50+ years and I’ve yet to hear about anyone who achieves FIRE handing in their resignation letter only to sip Pina Coladas by the pool and play golf all day until they die.

Meaningful work that ignites a passion is awesome. I want to do work that brings purpose and meaning to my life forever. But unfortunately, the fact of the matter is the majority of today’s society (myself included) sets an alarm to go to their place of employment to earn money.

We trade time for money.

Are there people out there that would do their job for free?

Sure.

Are there many?

Doubt it.

You cannot do some forms of meaningful work without first having achieved financial independence. Volunteering full time is one example.

Other forms of meaningful work may actually turn a profit. Maybe you always wanted to have a go at that coffee business but could not afford the risk financially. FIRE opens up these doors and allows you to pursue your dreams that you wouldn’t have otherwise had the money to take on.

If you think that people who have achieved FIRE are phonies because they still do paid work I have great news for you! Turns out there is an entire group of you guys dedicated to upholding the semantics of the word retirement called the internet retirement police! At least you’re not the only one…

My interpretation of retire early was never about not working. It was always about retiring from the rat race and having the freedom to pursue meaningful work of my choice whether that is paid or unpaid doesn’t matter.

Retire is probably not the best word but FIRE is a catchy acronym and it’s stuck so just deal with it.

If you don’t like using the word retire that’s understandable. I myself have often thought that it doesn’t quite describe what FIRE is all about.

But what I think we can all agree on is that simply reaching FI should not be the end goal which brings me to discuss…

 

Why ER Is The Important Part

Think back to when you first discovered FIRE, or even just the concept of financial independence.

If you’re anything like me, the thought of having all the money in the world was not the exciting part. It’s what having that money could do for your life. The freedom that financial independence can grant is something that has never left my mind since I stumbled across it ~6 years ago.

Is there any point in reaching FI without using that freedom to live your dream life?

I know plenty of people at my old job who have reached FI but are still miserable in a job they don’t particularly enjoy!

You know the type.

Been at the same steady job with great benefits for 35+ years. Pretty conservative type operator who has tucked away enough Super to comfortably fund 4 retirements yet has lost all enthusiasm, motivation and what seems to be general happiness in the last few decades but still rocks up every Monday and complains the whole time.

oldman

You often wonder to yourself, why the f is old mate still working if he clearly isn’t happy here and has enough money to retire…?

That’s a very good question.

Maybe they are a creature of habit. Maybe they don’t know they are FI yet and think they still need to work. Maybe they are super conservative and are worried they will run out of money.

Or maybe they just don’t know anything else and are scared that they will lose purpose in life.

I have no idea about other peoples situation but if someone was truly FI and too scared to quit their job because they feared the unknown… they have missed the entire point of financial independence and FIRE in my opinion.

Everyone who reaches the end goal will always have to take a leap of faith of some sort. Maybe you have crunched the number for a standard 4% withdrawal rate or maybe you are a little more conservative and have opted for a 3% rate.

Regardless, all of us will reach the point where we will have to make the decision and hand in our resignation letter to start our new careers in the exclusive and more exciting field of ‘whatever makes me happy’. This career is not fueled by monetary gains, status symbols or power but rather what brings the most happiness to your life. If you get paid for this passion, sweet! Maybe you can donate this extra money to a charity which will almost certainly bring you even more happiness.

If you’re one of those lucky ones who thoroughly enjoys their current job and would happily work it for free then hats off to ya, you’ve already reached the end goal in terms of ER! I really wish everyone was in that position but the truth of the matter is they aren’t. And failing to RE to move onto more fulfilling, meaningful and enjoyable work is such a tragedy.

If you reach FI but continue working a job you don’t like and fail to RE, what’s the point?

 

Don’t Wait Until It’s Too Late

Just one more year…

Let’s tuck away just a little bit more so we definitely won’t run out of money in retirement…

This is a dangerous game to play but completely understandable and something that I’ll almost certainly do as well. But at some point we must trust our planning, numbers, and ability to adapt to the situation should something disastrous happen post rat race.

The biggest risk in life is not taking one!

Once you have reached FI, complete the journey, pull the trigger and RE to start the new chapter in your life.

I’ve haven’t heard too many people ever regretting pulling the trigger early, in fact, most say they should have done it earlier!

Have you retired yet? Did you wish you did it earlier or was it something you regretted? I’d love to know in the comment section below.

 

Oh and I’ve now decided that every good blog should have a sign-off.

So until next time…

Spark that 🔥

Our Investing Strategy Explained

Our Investing Strategy Explained

If you follow any online FIRE blogger whether it be an Aussie or international, you might start to see a pattern that emerges more often than not.

The majority of these early retirees are living off an income stream generated by returns from Index Investing. 

In this post, I’m going to go into detail about how I first started investing for financial independence and how my strategy evolved over the years.

 

In the Beginning

InTheBeginning3

I first came across the term and concept of financial independence in a book called ‘Rich Dad Poor Dad’ by Robert Kiyosaki. It really struck a chord with me because it was so simple. You buy assets that make you money and eventually you will get to a point where you have so many assets that make so much money that you don’t have to work to live.

Mind = blown.

Now I was already pretty good at the saving and frugal part. But I had never invested in anything outside of a savings account. This leads me to pick up my next book in my quest towards FIRE, ‘From 0 To 130 Properties In 3.5 Years’ By Steve McKnight. Because if you live in Australia the most popular investing class by a country mile is without a doubt, Real Estate. 

It makes sense too, most of our parents have seen/experienced incredible real estate booms without any real crashes in the last 25 years. My parents also invested in real estate so there was a comforting sense of guidance I could draw from when choosing this asset class. Mum and dad had been through it before and could mentor me.

Real estate is easy to grasp too. You buy a house, you rent it out and collect rent, the rent covers the expenses (hopefully), you sell it later at a higher price and make a profit. The other popular strategy with real estate is that you buy strong cash flow properties (where there is a surplus of rent after all expenses) and live off the rent, but this strategy is very hard to do in today’s market because of the low rental yields in Australia.

With time on my side for letting my investments grow for decades, my first investing strategy was to create an income stream through real estate.

 

Strategy 1 – Real Estate

The very first investing strategy I had, went something like this.

If I could buy 10 investment properties (IP) and hold them for 10 years, I could sell half of them and pay off all my debts. I would then have 5 houses pulling in rent with no interest repayments which would mean the majority would come to me.

The maths roughly looked like this:

Equity Loans Rent @ 5.2 Yield Expenses
10 X IP $3M $2.4 $156K $175K

 

And after 10 years, assuming that rent and expenses (but not interest repayments) have increased with inflation @ 2.5%

Equity Loans Rent Expenses
10 X IP $6M $2.4 $200K $180K

 

It’s important to note that while some expenses like rates, maintenance, water bills etc. would increase with inflation, the loan amount never changes. This is actually an advantage of leveraging your investments. You take out a loan in today’s dollars but can pay them off years later after inflation has eroded them. Which is often why you hear people say that debt is a good hedge against inflation.

And then I would sell 5 IPs and it would look like this

Equity Loans Rent Expenses
5 X IP $3M $0 $100K $15K

 

I was well on my way with this strategy and bought my third IP in 2015 which was around the same time as I discovered MMM and index investing which I will go into later.

This strategy has worked for thousands of Aussie and isn’t anything new.

So why did I decide to change my strategy?

  1. Strategy 1 relies on capital growth.
    • You can see in the first table that there is nearly a $20K difference between the rent and expenses. What is not factored in here is negative gearing. All my properties right now are negatively geared but cash flow positive. Because of the tax refund I receive, the properties pay for themselves. But I could never actually retire off this cash flow which is why the capital gains are imperative. Without it, the strategy simply doesn’t work. And capital gains only works if someone buys your assets at a higher price than what you paid for it. I never felt comfortable breaking even or making a tiny profit each year with the hopes that 10 years down the track it would all pay off. I felt that investing should be a snowball approach where you start with a small trickle of passive income and see it grow into a raging torrent over the years.
  2. Active Investment
    • There’s no way around it. Managing property requires time and effort. When I first started I had all the enthusiasm and motivation in the world and wanted to do everything I could to reach FIRE as quickly as possible. If that meant some sweat equity then I was all for it. But roughly 5 years later my motivation for doing all the extra stuff has fallen off a cliff. I would much rather focus on other things than worrying about and managing my investments. To be fair, my properties aren’t too much of a hassle, but getting to 10 IPs would be a lot.
  3. Lending conditions changed
    • It was around about 2016 when the APRA (Australian Prudential Regulation Authority) really made it hard for investors to withdraw equity and refinance their loans. This was to try and curb risky lending and make it harder for property investors. Interest rates were raised on all of my loans and the number of hoops I had to jump through for my last equity withdrawal was 10 times harder than in 2014 and 2015. Looking back now, I was very fortunate to get into property when I did. Interest rates were being cut and banks were financing loans a lot easier. In mid-2016 I could not get another loan for a 4th property which meant my dream of 10 properties was out of reach.

But if I’m not going to reach financial independence through real estate, then how else am I going to create a passive income stream?

 

Strategy 2 – Index Investing

I think I can speak for a lot of people when I say Mr. Money Mustache has a way of writing that people relate to. I guess it’s why he is so popular. When I read The Shockingly Simple Math Behind Early Retirement it just made sense. And his article about Index Investing really clicked with me and would be what I consider the catalyst for my desire to learn more about the stock market.

It’s quite funny to see peoples reactions when they discover you have 6 figure sums invested in the stock market.

“That’s so risky though. Don’t you ever get scared you’re going to lose it all? One minute it’s there, next it just vanishes. I wouldn’t feel safe having so much money in the stock market, I only invest in things I can see and touch.”

I too once thought like this because of the constant news outlets reporting on the stock market crashes and how billions were wiped out in mere hours. Scary stuff.

But if you actually take the time to understand how the stock market works and what index investing is, I think you would be pleasantly surprised to find out all the positives that come with this investing approach.

 

What is an Index?

Indices cover almost every industry sector and asset class, including Australian and international shares, property, bonds, and cash. There are companies that conduct and publish financial research and analysis on stocks, bonds, and commodities to create indices. One of the more popular companies that publish these indices is Standard & Poor’s (S&P).

Have you ever listened to the news and heard them talk about the All Ordinaries (also know as All Ords) and wondered what it is? The All Ords is Australia’s oldest index of shares and consist of the 500 largest companies by market capitalization.

Let’s take a look at the S&P/ASX 200 (top 200 companies trading on the ASX by market cap) historic data since 1992:

ASX200

Here is the Dow Jones (US index) for around the last 60 years.

DowJones2

And lastly, here is the Financial Times Stock Exchange (FTSE) 100 Index which is the top 100 companies listed on the London Stock Exchange by market cap.

UK FTSE 100

 

What is Index Investing?

You might notice a few trends from the above graphs like the dot-com crash around 1999 to 2003, or the GFC in 2008 or the constant peaks and troughs through the years.

But what is glaringly obvious is the overall trend in each countries index is up.

And these graphs don’t include the most important part. The entire time throughout these decades, those companies that are trending up or down, are paying dividends (or reinvesting them) each year! So combine the capital growth from the above graphs with dividends and you get the idea. The overall markets, given enough time, trend upwards!

This is a fundamental principle of index investing.

It’s hard to predict which companies are going to do well over the next 20-30 years. In fact, it’s almost impossible. A lot of active fund managers try to outperform the index and charge you exuberant management fees with the promise of higher returns. The thinking behind this makes enough sense. The fund managers have an army of analysts working 12 hour days using the latest analytical tools and datasets to ensure that they only choose the ‘best’ companies to invest your money in. But as history has shown, only a very small % of investors/fund managers are able to consistently over a long period of time (20 years+) beat the index.

Rather than trying to guess which investments will outperform in the future, index managers replicate a particular market or sector. This means they invest in all or most of the securities in the index.

Indexing is based on the theory that investors as a group cannot beat the market – because they are the market.

 

ETFs/Vanguard

So how do you invest in an entire index?

You could, in theory, buy all the companies within an index at the appropriate weightings. You would get killed in brokerage fees but I guess technically you could do it. But luckily there’s a much easier way.

There exists investment companies that cater to the index investing style and offer investment products that mimic an index with rock-bottom management fees. One of the biggest investment companies that offer these products is Vanguard.

The reason Vanguard and other companies can offer these products at such a low cost is that there is no money spent researching and analyzing which stocks to invest in. Index investing companies simply look at the index data provided by companies such as S&P and remove or add companies from the index plus a bit of paperwork. That’s it!

To put the management fees into perspective, a hedge fund’s fees might be as high as 2.00%. Vanguard charges me 0.04% for my US index ETF that I invest in.

To put it another way, if I had $1M in the hedge fund. They would charge me $20K a year for management fees. Vanguard would charge me $400 bucks. The difference of $19,600 reinvested at 8% over 30 years is $2.4 Million!!!

You can either invest directly with the Vanguards fund or you can buy ETFs which are exactly the same investment products but traded on the stock exchange. There is also a difference in management fees. You can read up a bit more about the difference in this article How To Buy ETFs.

 

Why We Decided To Move To Index Investing 

I joined finances with my partner in 2016 and we made the decision to start investing in ETFs (index investing). After reviewing the two asset classes a year later, we knew that we wanted to continue to go down the path of index investing. Here are the reasons why we decided to move away from real estate:

  1. Diversification
    • With our current three fund portfolio, we have exposure to over 6,000 companies in over 30 different countries. Our three properties are all located within Australia (different states mind you) and while I think it’s unlikely that they would all tank at the same time there is the possibility of a recession to hit Australia. If that were the case, those properties would almost certainly drop in value. And Investing Strategy 1 relies on capital gains to work. If something like that did happen, they have enough cash flow to make it through but who knows how long it might take for them to recover and ultimately gain enough value for the strategy to work. I might be waiting for decades.
      The odds of the entire world tanking over a long period of time is not completely out of the realms of possibilities, but it’s a lot less likely than one country going into recession.
  2. Liquidity
    • If we ever needed the money that was locked in the properties. It might take 6+ months to sell them and go through the whole process. With ETFs, I can put in a sell order and literally have the money in my account within 3 days. This means that selling off parts of your portfolio to fund your retirement is possible.
  3. Cash flow
    • This is probably the biggest reason why we made the move. The path towards freedom is a lot clearer with ETFs. We know that we will need roughly $1 million in the market to generate enough returns each year to live off forever. The high cash flow/liquidity makes index investing a popular choice for FIRE chasers.
  4. No more banks
    • Investing in ETFs does not require lengthy loaning processes. Leverage can have its place but it’s not required.
  5. Passive income
    • Some may argue that real estate can be passive, and to some degree, I guess it is. But from my experiences with real estate, such jobs as collecting rent, doing paperwork, dealing with tenants, responding to emails, maintaining the properties etc. can add up to be a part-time job. You will not find a more passive income stream with the same returns as what ETFs offer. And I also love the fact that the more ETFs you have does not mean more work. More properties  = more work. But you will do the same amount of paperwork come tax time on a $50K portfolio vs a $3M one.
  6. I don’t have to be an expert
    • I believe that you need to know your shit when investing in real estate. I wouldn’t be comfortable investing in a property unless I knew the ins and outs of the area like the back of my hand. Where are the jobs coming from? What’s the population growth like? What’s the unemployment rate like? And on and on I could go.
      The only thing I have to work out each time I buy ETFs is what I need to buy to rebalance my portfolio. That’s it! I don’t need to keep up to date with the latest trends or what’s the hot stock right now or any of that crap.

 

Our Plan Detailed

If you read my monthly net worth posts you can see that we invest in a three-fund portfolio. I’m going to go into details about why we invest in each fund and how ultimately they will enable us to reach FIRE.

Management Fees: I prioritize a low MER (Management Expense Ratio aka management fees) above almost everything else because paying less in management fees is a guaranteed returned and when it comes to investing in general, almost everything else is speculation to a certain degree.

Given my obsession with management fees, you can understand that Vanguard was an easy choice as an ETF provider since they offer some of the lowest MERs in Australia.

This is what our Strategy 2 looks like in pie form

Strat2Pie

Let me explain each fund and why it’s in our portfolio

VAS
MER: 0.14%
Benchmark: S&P/ASX 300 Index

Why it’s in our portfolio:
Some people will argue that Australia is such a small percentage of the world’s markets (around 2% last time I checked) that it’s not diversified enough and you’re better off going global for that diversification. I generally agree with that and what’s even worse is that out of my three funds, VAS has the highest MER at 0.14%.

So why do I invest in it?

Two words… Franking credits.

I’m not going to go into the technical details of how they work (Pat wrote a great article about that if you’re interested) but essentially they are an advantage that Australian companies can give Australia investors.

Australian companies for whatever reason emphasize higher dividends vs capital growth. I’m not 100% sure why this is, but please feel free to let me know in the comments for all those smarty pants out there.  Anyway, this high dividends plus franking credits means that VAS pumps out a solid stream of dividends each year. The franking credits are too good of an opportunity to pass upon and are why VAS takes up 40% of our portfolio.

**A200**

A few months ago BetaShares released the A200 ETF.

It is essentially the same product as Vanguards VAS ETF except the A200 invests in the top 200 companies of the ASX instead of the top 300. Something to note is that the bottom 100 companies in VAS only make up 2.5% of the total in terms of market cap. So while the A200 is less diversified than VAS, it’s not as bad as it sounds.

The A200 boasts a MER of just 0.07%.

That’s half the price in management fees vs VAS!

I will be moving to the A200 if Vanguard does not respond with a lower MER next time we buy.

No one knows if VAS is going to outperform A200 moving forward. But what we all know, is that right now you will be paying double the price in management fees if you invest with VAS.

I won’t sell VAS moving forward, but I will be buying A200 instead.

VTS
MER: 0.04%
Benchmark: CRSP US Total Market Index

Why it’s in our portfolio:
Diversification? Tick (the US make up around 40% of the entire world market)
Good Returns? Tick
Rock bottom MER? Tick!

How can you possibly go past this ETF if you’re looking for a low-cost diversified ETF? At 0.04%, that’s the lowest management fee of any ASX ETF I can think of off the top of my head. I have often thought about going 100% VTS because I value a low MER with the highest regard. But the franking credits keep pulling me back to VAS and complete world exposure is why we finish with VEU.

VEU
MER: 0.11%
Benchmark: FTSE All-World ex US Index

Why it’s in our portfolio:
VEU rounds off our diversification by giving us the entire world minus the US at a very reasonable MER of 0.11%. And since we also invest in VTS, this means that with just three funds, we have exposure to the largest companies on planet earth.

 

Think about what would need to happen for us to lose all our money. Companies like Apple, Microsoft, Google, Exxon, Facebook, Commonwealth Bank, ANZ, Westpac, Shell, Samsung, Toyota, GM Motors, Telstra, Johnson & Johnson etc. would all have to go bust. All of them! I just can’t see that happening. And if some of those companies do go down the drain, they are simply replaced in the index by the next company with the highest market cap. And because the index is only giving a small weighting to individual companies (less than 1%), you won’t see it affect your portfolio. The only time a significant drop occurs is when the entire market as a whole is down (like what happened in 2008).

 

The 4% rule

 

The 4% rule is based on the 1998 paper called the Trinity Study and to put it simply, it means you should, in theory, be able to live off 4% of your portfolio. It’s an American study and is meant to last for 30 years so it’s not full proof by any means. But this is what we are using when calculating ‘our’ financial independence number.

So if we have a portfolio of $1M, we could live on $40K a year and never run out of money (it also factors in inflation).

 

How Much Do We Need?

 

We are currently on track for this F/Y to have spent a touch under $50K. That’s absolutely everything we spend to live our current life. It also factors in rent.

We do plan to own our own home one day which means that factoring in a fully paid off house, we spend about $38K a year.

Which would mean that we need a fully paid off house plus $950,000 in ETFs to generate enough income each year (factoring in inflation) to become financially independent! But being on the conservative side of things, I think a cool one million will be the target.

 

How It’s Going To Work

 

Let’s imagine, for argument’s sake, that we had reached our $1M portfolio goal with all the appropriate weightings for VAS (40%), VTS (30%), and VEU (30%) exactly one year ago (19/06/2017).

After one year, this is what the performance of that portfolio would look like thanks to ShareSights amazing ability to create dummy portfolios with historical data.

 

Strat1sharesights

And if we look at how each fund performed for the last 12 months we get this.

Strat2Sharesight2

Total Return for the 3 funds was $131,276 for the last 12 months!!!

A few things to remember though:

  • We need to factor in inflation. If we assume 2.5%, that means that our real return was $127,964.
  • The last few years have basically been a bull run for the whole world. This portfolio is not going to return these numbers every year. But that’s ok, what we need to do in the good years is not spend extra, but keep that surplus in the portfolio so when the bear market does come (and it will) there is enough to carry us through to the next bull.
  • By looking at the total return, it would appear that VEU did really bad and VTS did really well. But how we actually should measure the returns is in percentage. Which looks like this
    Strat2Sharesight3
    VAS and VEU are a lot closer when comparing % returns. VAS has a higher weighting which is why it returns more dollars when it’s very close in percentage terms.
  • We are aiming to achieve around an 8% return on average from the stock market. So 13.13% is a fantastic year!

 

The Dividend Part

 

You can see from the above graph that we received $34,265 from dividends in 12 months… Notbad This is pretty good but you can clearly see from the fund breakdown where the majority of the dividends came from. VAS of course. Australian shares just pump out those juicy franked dividends like no other which is great.

But what’s probably even more important to note, is how low the dividends were for VEU and especially VTS considering VTS made an overall gain of 18.92%! You won’t get much better than that and it still only paid out a lousy 1.83% yield.

We needed $38K last year. But this year inflation (2.5%) adds another $950 dollars. So we now need $38,950 to maintain our lifestyle.

The dividends cover $34,265, which means we’re short $4,685.

 

The Captial Gains Part

 

You know how I was just bagging out VTS because of its putrid dividend yield? Well, boy does it make up for it in the capital gains department!

VTS alone smashed our FIRE number of $38,950 and returned a whopping $51,295 (17.09% Gain!!!). Combine the other two funds and last year well and truly exceeded the 4% rule.

But how do we harvest these capital gains to actually live? The dividends are straightforward because they are paid directly into your account without you having to do anything. The capital gains part is a tad different.

We need to sell off units from our portfolio and realize a capital gain.

WaitWhat

This is the part where a lot of people either don’t fully understand or are not comfortable with.

“Wait, I thought we reach a certain size portfolio and it pumps out a passive income stream we can live off? I don’t want to sell part of my portfolio. What happens if I have to sell it all”

It’s perfectly fine to sell off parts of your portfolio as long as it has the time to recover those losses.

For example, in the above scenario, I need an extra $4,685 which I must get from selling some units from one of the three funds or parts of all of them.

The most obvious fund to sell some units is VTS because it had the best return in the capital gains department and we can lock in those profits by selling. Each unit is now worth $193.190. So a bit of quick maths means I need to sell 24.25 units. Rounding it off and factoring in brokerage fees lets just say we sell 25 units.

$193.19 X 25 = $4,829

We have now made up what we needed to live for that year.

“But we are now down 25 units right?”… Technically right, but the wrong way to look at it.

Firstly, the portfolio grew by $131,276 dollars. We took $38,950 out of that growth to live on which leaves us still up $92,326. When next year rolls around, because of the power of compound interest, it doesn’t matter that we are 25 units down. Assuming we get the exact same returns in percentage terms, we will make more money next year because the starting value of our portfolio is higher than last year even factoring in 25 fewer units.

“But what if I run out of units?”

Highly unlikely. Each year you will have less and less units, but those units should be worth more unless it’s a bad bear market. Even so, we will have over 11,000 units spread across the 3 funds. Every few years they will be worth more and more meaning we will have to sell fewer units each time to make up the difference.

 

What Happens If We Retire And Another GFC Hits

 

This is the worst case scenario for our plan. Because it relies partly on capital gains, a huge downturn in the market straight after we pull the pin would mean we potentially would have to sell units at a rock bottom prices. And it’s possible that our portfolio might shrink too much in the early years and never make a full recovery when the bull markets come back around.

In this situation, I think the answer is pretty obvious.

At absolute worst, I’ll pick up some part-time work. Shit, even 200-300 bucks extra a week would dramatically reduce our reliance on ETFs. $300 a week for a year is over $15K which is 40% of our expenses!

 

Retirement

 

When our portfolio reaches $1M and we have the house fully paid off, I will at that point, declare financial independence.

But what will we then do?

If we are enjoying our lives to the fullest, then there would be no reason to change anything. But what I most likely will do immediately is drop my working days down to 2-3 days a week. From there the possibilities are really endless. Do I want to continue working at my current job? Maybe I only want to do part of my job 2 days a week? Maybe my boss won’t like that, but since I have reached FIRE I will have the power to quit my job without worrying at all.

I don’t plan to ever stop working, to be honest. It will just be 100% enjoyable work and probably not full time unless it’s a passion project. So the odds of neither Mrs. Firebug or I receiving some form of income post retirement is extremely low. This blog is even pulling in some $$$ now and I absolutely love working on it. I couldn’t imagine where it could go if I worked full time on it!

We will always have the portfolio there knowing we are financially independent, but there’s a good chance we will still earn some form of income from something fun 🙂

 

Strategy 3..?

Ok, long read so far I know. But we’re nearly there.

I’m a big believer in the following quote:

Albert

I’m constantly looking for new ways to invest, reduce our spendings, find tax efficient methods etc. It’s half the reason I started this blog. So a whole bunch of people way smarter than me could critique my strategies and explain better ways to do things. And it’s worked an absolute treat so far. The Australian FIRE community is the best for sharing information that will help you get wealthy a lot quicker than if you had gone at it alone.

So when I come across something that makes sense to me and is even better than what I’m currently doing. Why wouldn’t I adopt it?

 

Enter Thornhill

 

The entire reason I invest money is to reach the end goal of financial independence.

To have my assets generate enough income for my partner and I to live off forever.

The key word here is income. In Strategy 2, capital gains are still required because VTS and VEU predominately return capital gains vs dividends. VAS is the cash flow king out of the three because that’s the Australian index and Australia has a high rate of dividends.

Peter Thornhill is the author of the best seller ‘Motivated Money’ which details his investment approach to investing for dividends (mainly in the industrial sector) and not for capital growth.

He explains in his book that dividends are a lot more stable and less impacted by market swings as opposed to the share price. Something that really struck a chord with me is the way he explains intrinsic value. In a nutshell, the real value of a company or any investment, in general, should be determined by how much income it is able to produce over a long period of time. It’s the income that is key. And it’s the income that will either pay the investor (you) the dividend or be retained by the company and consequently have the share prices go up.

This is how it should work, but as we all know. Humans tend to speculate a lot and you end up with assets that have potential but no solid foundation of cash flow being traded for ludicrous amounts of money (BitCoin, Sydney Real Estate etc.).

I’m not saying these assets don’t have value, but the only way that an investor can make a decent return is if they find someone that is willing to buy it at a higher price than what they paid for it.

If the goal is income, why don’t we focus only on investments that yield the best dividends?

Why not go 100% Australian stocks?

Australian shares yield the best dividends AND they give you the bonus of franking credits. These two reasons make a very appealing case for any Aussie investor.

I encourage everyone to read Thornhill’s book ‘Motivated Money’ because he explains the dividend approach a lot better than I can.

Here is a little video of Peter explaining why he looks forward to a GFC event.

 

The more I listen to this guy, the more convinced I am with his approach to investing in Australia.

“Watching the share prices drop is a totally different thing to the cash flow that’s coming out of the portfolio. That is what we are living on, we are not living using the capital as the source of income, it’s generating the income for us” -Peter Thornhill

UPDATE: We have since officially moved to strategy 3 a few months after this article was published.

 

Conclusion

Hopefully, you can come away from this post with a much clearer understanding of how we are planning to reach FIRE in the next coming years. I really wanted to include as much detail in this as possible and try to convey our thoughts behind the investment decisions we are making.

I think it’s common for a lot of Australians to start with real estate but finish with shares. I feel like that is the natural progression that as we get older and don’t have the time or energy required for active investing, the share markets offer a fantastic passive alternative with many other benefits. We are on track with strategy 2 at the moment. But the more I think about strategy 3, the more I’m liking it.

$1M is our official FIRE number. When we reach that plus a house paid off, the goal will be reached. It’s still a few years away no doubt, but we are enjoying the journey and each month we move closer to our destination.

What about your strategy? Are you on a similar path? I would love to hear about how you’re going to reach financial independence in the comment section below.

Financial Goals 2018

Financial Goals 2018

 

 

Before I get into the 2018 goals, I want to go over my 2017 financial goals and see how I did.

 

 

 

2017 GOALS  

 

Obtain a savings rate of 65% or better

Achieved = No ❌


I usually do EOFY write-ups that go into details how much we spent and what we spent it on. But just quickly crunching the numbers to give an EOCY savings rate came out as follows:

 

Total expenses for 2017 (give a day or two): $47,371

Total money made (post-tax): $130,716

 

Savings rate for 2017 = 64% 😫😫😫

 

C’mon!

 

We missed our goal by 1%! 😭😭😡😡

 

Ahh well. We are still fine tuning as much as possible and finding new ways to save money.

 

There’s always next year right?

 

 

 

Reach $100K in ETFs

 

Achieved = Yes ✅

 

We finished 2017 with over $125K in ETFs with plans to keep adding to that pile in 2018!

 

 

 

Release a Podcast Monthly

 

Achieved = No ❌

 

2017 has been the biggest year yet for the podcast. I missed three months (May, June, and November) where I didn’t release a podcast/audio post. 9/12 ain’t so bad. I’ll try to get one out each month in 2018 👊

 

 

 

 

Revamp Homepage

 

Achieved = No ❌

 

Really angry with myself for this one. I redesigned the homepage at the start of the year but I kept on putting it off because it wasn’t ‘perfect’. There are a few days left in 2017 whilst writing this. So I may publish it, but I most likely will have to do it next month. I wanted to make the homepage more user-friendly with a logic flow of what articles to read and a bit more direction.

 

 

 

 

Write More About Super

 

Achieved = No ❌

 

Wow, I’m doing terrible with these goals so far lol. Super was something requested a lot. I’m actually looking for some Super experts out there to come onto the podcast. So if you know of anyone please shoot me a message or leave a comment below.

 

 

2018 GOALS

 

 

The big financial goals are similar to last year

  • Obtain a savings rate of 65% or better
  • Reach $200K in ETFs
  • Get to $550K+ in net worth
  • Make monthly checks to the above goals as part of my monthly net worth posts

As far as website goals:

  • Redesign homepage and whole site
  • Find a Super expert to interview on the podcast
  • Update the Australian FIRE Calculator
  • Get to 500 Facebook likes

 

That should keep me pretty busy this year.

 

 

What about you? How did you go with your financial goals in 2017? And what goals are you setting for the next 12 months?

 

 

Financial Goals 2017

Financial Goals 2017

As 2016 comes to an end I’d like to reflect back on what was achieved and set new goals for the coming year.

I’m a big believer in setting goals and making deadlines for them.

One of my favourite quotes:

a-goal-without-a-plan-is-just-a-wish

I really like it because everyone has dreams, but very few actually put in the work required to realise those dreams. Too many people (myself included) think of doing something great but it just never happens because you don’t put any pressure on yourself and rely purely on motivation.

Motivation only lasts so long and when it runs out you should be relying on habit/routine to get the job done. “I’m just not motivated today” is the wrong attitude. Everyone starts the project with motivation, but it’s the habits formed that will see the project completed.

It’s so important to actually map out a plan of attack for your dream no matter how small it is and say to yourself:

“I’m going to have X done by this time next week/month/year”

And then break the task up into smaller sub tasks if it’s a big project. But make sure you set a time and date that you want it completed by or else it will get pushed to the side every time.

I have a rule with this blog that I MUST write a minimum of two posts per month no matter what! No excuses!

This has led to me publishing a new post at 11:30PM once with work on the next day. That’s the price I pay for not being more organised.
 

What Did I Achieve In 2016?

2016 was a huge year for me personally and financially.

I

  • Moved into a share house
  • Watched as the RBA cut the cash rate twice to 1.5%
  • Watched Malcolm Turnbull and the Liberal party get elected
  • Had 2 properties gain and one lose value over the course of the year
  • Joined financial forces with my partner
  • Bought around $50K worth of ETFs
  • Moved in with my partner
  • Broke into the $200K net worth club (so close to the $250K damit!)

I originally wanted to buy another investment property and dip my toes into ETFs for 2016. But the more I thought about it, the more I was leaning towards ETFS.
 

2017 Financial Goals

setandreachgoals

My big financial goals that I want to achieve by the end of the year are

  • Obtain a savings rate of 65% or better
  • Reach $100K in ETFs

They are both very measurable goals and are something I can review monthly to track how I’m going.

My big goals for the blog are:

  • Try to release a podcast every month. It’s the number one thing I get requests for. I love doing them too I just find it hard to find guests
  • Revamp the home page
  • Write more about Super

 

What Are Your Goals?

What do you hope to achieve financially on your way towards FIRE in 2017?

 

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