Savings/Income Review 19/20

by Aussie Firebug | Aug 30, 2020 | Investing, Mindset, Saving

This years review is a bit tricky once again because we (Mrs. FB and I) earnt money in two different countries so some of the tax stuff has not been accounted for (yet).

You can check out last years review here where we achieved a savings rate of 56%.

So how did we do this year?

Let’s get into the numbers.

Savings Rate For 19/20 Financial Year

Our savings rate for last financial year was… 61% (▲+5% from last year)

We earned $200,919 (▲+$15,478…mostly after-tax*)

And spent $79,182 (▼+$1,635)

I’m honestly shocked that we ended up with 61% as our savings rate. I think a lot of that had to do with COVID hitting which essentially stopped us (and most of the world) from spending money on anything other than the essentials. The only way I can explain how we managed to spend less than the previous FY (other than COVID) is that we pre-paid for a shit load of travelling in May 2019 that obviously is not included in this year’s report. That travelling lasted all the way up until the end up September so even though we have been technically paying for London’s notoriously high living costs, 3 months of this years review was pre-paid for from the previous year which makes it appear that the last 12 months were cheaper than they really were.

*This year’s update does account for AFB tax obligations since I was required to pay them during the year but the dividend components are not finished yet. I’ll update this article once it’s done

Breakdown Of Spending

Because we use two different pieces of software (pocketbook for Oz and money dashboard for UK) to track expenses, they are broken down into two categories.

Australian expenses = AUD $8,328

UK expenses = AUD $70,854 

Below is our Australian expenses for the last FY.

There were a few expenses we still needed to take care of back home like car rego (Mrs. FB’s mum is currently driving her car), insurances and some odd bits and bobs. The biggest expense above is Holiday & Travel because there were occasions where we used our Australian Citibank card instead of our UK card and hence those expenses showed up in our Aussie accounts.

And here is a high-level breakdown of our UK expenses

And here are all of those categories broken down again so you can get a better idea of where we spend our money.

It’s no surprise that for the second year running our Holidays category is right at the top. The Cash category is hard to group because we went to a lot of countries where we would have to withdraw a heap of cash to spend whilst we were there. Egypt was a good example of a country that still predominately uses cash as opposed to EFTPOS. So you could almost certainly group up to 90% of the Cash category into the Holidays too which would make it number one. We try a new restaurant in London every single week and dined out a hell of a lot during our travels so I’m not surprised to see Dining and Going Out up so high. It’s one category that will plummet once we get home back to our country town purely because there are not that many options where we’re from 😅.

Anyone who has lived in London can back me up when I say that the cost of living here is insanity! I mean honestly, unless you have a decent-paying job (>£50K) you’re much better off moving to Liverpool or Manchester. Rent will be halved and the general cost of most things will be down too but you’ll still get the benefit of being on Europe’s doorstep for travelling. One thing to take into consideration with the above number is that we only paid 8 months worth of rent for the last financial year because 4 of those months we were travelling and had sub-letted our room.

Food and Groceries is one area that we have been really lazy with. Unfortunately, overpaying for the sake of convenience is a common occurrence when we shop at the moment. We’re not set up to succeed with this category in London. I’m missing a few key kitchen utensils that I can’t justify buying because we’re leaving this year plus the freezer is not that big which makes it hard when you have to share it with 4 other people and It’s just generally harder to meal prep without spare time. We still do meal prep a bit but I’ve often found myself asking Mrs. FB if she wants to go out for dinner because it’s an amazing night in the city and I’m exhausted from work and don’t want to deal with the messy kitchen back home.

These are all excuses but the difference really can be night and day when you create an environment to be successful with anything in life vs trying to push a rock uphill. If you study in a quiet library you’re probably going to have a better chance of retaining the information vs trying to study whilst watching Netflix. If it takes you 30 minutes to get to your gym, you’re probably less likely to keep a consistent training schedule because it will be easy to justify not going etc. etc.

This is one area I can’t wait to improve on when we’re back home. A veggie garden will be built asap when we finally have a backyard again 🍅🥕🥒😁

I’m gonna go out on a limb here and say that 80% of this category can be attributed to Mrs. FB 😜

Buying a bike and COVID hitting has reduced our transportation costs enormously.

Breakdown Of Income

All numbers are in AUD

* There were a few big expenses for the properties during the last FY and it resulted in them actually costing us $2,776 🤦‍♂️ which is why you don’t see rental income in the above pie

It’s absolutely insane that we managed to earn $200K mostly after-tax considering how much travelling we have done during the last financial year.

When we decided to YOLO at the start of 2019 to live out a life long dream travelling Europe, I was convinced that my dream of FIRE would have to be put on hold and this once in a lifetime trip would delay our financial independence for a few years. What I honestly didn’t expect to have happened was the dramatic increase in income. I work in data (currently a BI Dev) and always knew that Melbourne and Sydney offered a higher paycheck for the work I do but those cities have a much higher cost of living than the country so I never really bothered pursuing it figuring the net gain might be a little bit more but not that much.

Well, let me tell you right now that London contract rates for tech workers are insane!

Before I get into exactly what I was paid I want to remind everyone (especially any newcomers to this blog) that my average wage, previous to moving to London, hovered around $90K for 8 years. My first job out of uni was around $72K in 2011 and it peaked at $110K before I left Australia which I understand is still high (especially for the country). I really want to emphasise that FIRE is possible without a high salary. It might take you longer, but almost every Australian can realistically reach financial independence with the right lifestyle.

With that being said, my first two contracts were at £500 a day and the one I’m on now is a fixed-term contract for 10 months with a base of £80K plus a £20K bonus.

That’s a lot of money, to begin with. But what makes the contracts outrageously lucrative is the way that limited companies are taxed in the UK (you need to be a resident of the UK for tax purposes to take advantage of it). I’m not a tax expert and I don’t know why they even do it the way they do, but for whatever reason, you essentially get taxed bugger all if you operate outside of a ruling called IR35.

Let’s assume that I worked for 12 months with a £ 500-day rate (I was actually asked to extend one of my contracts but had to turn it down because we were travelling during the European summer and the amount of money I was passing up did kill me inside a little bit 😂) which works out to be £130,000 a year. Here is roughly how it breaks down according to the laws currently using a UK Contractors calculator.

So you can take a £9K salary from the company which is like the minimum wage which means you won’t have to pay any tax on that part. The rest can be taken from the company as a dividend which is where the tax rates are insanely low.

So taking £97,986 as a dividend with the current tax rates looks like this.

Those rates are crazy low! If we double the £ to make the conversion easy that essentially means that someone who received AUD $188,972 (£94,486 * 2) as a dividend only paid $43,664 in taxes. The equivalent for a salaried worker in Australia earning $188,972 is ~$62K in taxes and that’s including with the $18K tax-free allowance!!!

So if we wrap up everything here and assume I did accept my contract extension that lasted 12 months. I would have ended up with:

£130,000 (annual revenue) – £22,984 (corporation tax) – £21,832 (taxed owed for dividends) = £85,181 after-tax income

If we double that number we get AUD $170,362.

I would have to be earning ~$280K AUD as a salaried worker to get the equivalent after-tax income 🤯🤯🤯

https://www.paycalculator.com.au/

I mean… that’s more than some CEOs right. I would never, ever, ever have thought that this earning potential was out there.

I can only really speak for tech jobs (mainly in data) because I’m not too sure what the difference is like for other fields. Mrs. FB, for example, makes almost the same here and when you factor in the difference in living costs it was definitely a net negative for her to move across.

If you’re in one of the following (there’s a lot more but these spring to mind):

• Data Analyst
• Data Scientist
• BI Developer (Power BI, Tableau, Qlik)
• Data Analytics
• Data Engineer
• Data Warehouse Architect
• Data Pipeline Developer (SSIS, Data Factory, Alteryx)
• Software developer
• ML/AI specialist
• Dev Ops
• Cloud Architect (AWS, Aszure, GCP)

There’s a lot of money to be made out there (assuming you’re willing to move).

Unfortunately, the crazy low tax rates for contractors are coming to an abrupt end next year. It was actually meant to end this year but COVID hit and they postponed it another year. I don’t know what things will look like after they make the changes but I’m glad I was around before they did.

I have to admit that my eyes have been opened after working these contracts in London. Sometimes I feel like we, in the FIRE community focus too much on reducing expenses and investing but nowhere near enough on trying to earn more money. I recently wrote a bit more about this subject in Pearler’s ebook project actually. And low tax rates are not something that’s unique to the UK. I’m pretty sure Singapore has a really low-income tax rate and Dubai has no income tax at all!

Reducing expenses is still 👑 but I’m convinced that so many people reach a point where they would be served much better investing in themselves and trying to find a higher-paying job. It can really help the process!

This blog had another amazing year generating an after-tax income of ~$24K. The taxes were brutal for me this year because I’m a UK resident for tax purposes (to take advantage of the crazy tax rates) which means I pay a high rate straight out the gate for all income made from AFB.

The craziest thing about this site still being able to generate some serious cashola is how little time I have spent on it during the last financial year. I’ve spoken about this before but I put a crazy amount of hours into this passion project for the first three years. And it didn’t flip a cent because I never cared if it made money or not. There’s no way you’re going to work on a project for 3 years without making any money if you don’t love it! But all that hard work is still paying dividends today because a lot of my traffic is still generated from some high ranking articles/podcast there were made all those years ago.

We’ve just been so busy during the last year that I haven’t been able to make as much content as I would have liked. Shit, I haven’t released a podcast in three months but I’m still ranked at 38 (humble brag 😜) for Aussie Business Podcasts according to Chartable. I guess my point is that even though I’ve really been slipping with AFB stuff, the site/podcast continues to churn away even when I’m sleeping. The internet is an insane bit of technology!

Dividends were broken down like so:

Nearly $16K even with the effects of COVID! Pretty pumped with that tbh. It’s just shy of double what we received last year ($8,057) so I’m really happy with how things are progressing. It’s going to be interesting to see the results for these next coming 12 months but after a few years (hopefully), if the payouts are similar to what they have previously been, we should see a strong uptick in dividend income which is really exciting!

What About You?

That’s it for another year!

Tracking your expenses is a must if you’re serious about financial independence because unless you know how much you spend, you’ll never know how much passive income you’ll need to FIRE. I’ve been blown away with the job market in London for my field and it’s opened my eyes to what’s possible earnings wise. This has been an unexpected benefit of moving to another country but a welcomed one at that.

So how did you go the last time you checked your expenses? Is there an area you’d like to rope in? Or maybe investing a bit of time and energy into your earning capacity would pay even higher dividends.

Let me know what you think in the comment section below 🙂

Spark that 🔥

-AFB

Savings/Income Review 18/19

by Aussie Firebug | Oct 22, 2019 | Investing, Mindset, Saving

This years review was a lot more complicated to calculate because we earned and spent money in two different countries which meant keeping track in two different systems. The tax was a bit tricky too and it has taken a lot longer than I would have hoped but better late than never!

You can check out last years review here where we achieved a savings rate of 66%.

So how did we do this year?

Let’s get into the numbers.

Savings Rate For 18/19 Financial Year

Our savings rate for last financial year was… 56% (▼-10% from last year)

We earned $185,441 (▲+$43,944…mostly after-tax*)

And spent $80,817 (▲+$32,818)

Compared to last year we increased our income by $44K, which is great but unfortunately, that was accompanied by a record-breaking amount of expenses which was mostly due to our travels. We spent more than $32K compared to the previous year which decreased our savings rate by a whopping 10%. This further illustrates that it’s the expenses that are a lot more important vs how much you earn when it comes to your savings rate!

I’m pretty stoked about 56% tbh. It’s a fair dip down from 66% but considering our travels this year, we can’t complain at all.

I’ve included a breakdown of our income for this years update too so you can get an idea of where our $$$ come from. But the really important part is still the expenses.

*I’m still in the process of completing the tax obligations for the trust and AFB. I’ll update this article when it’s done

Breakdown Of Spending

Below is our Australian expenses for the last FY.

And in pie form

Holy Mackerel our ‘Holiday and Travel’ category exploded into our number 1 expense which isn’t all too surprising really. Majority of that $23K was the costs of flights, accommodation, food/drink and cash out for activities. It also covers some of our London setup costs when we were still using our Australian Money to pay for things before we set up our UK account. It’s a lot of money and it’s crazy how it all adds up but this trip (that we’re still on) was never about saving money. It’s not something we plan to have in our yearly budget once we FIRE though.

Not surprisingly, rent and groceries come in next which was our number 1 and 2 expense for last year.

‘Health & Beauty’ came in 4th because Mrs. FB had a toothache about 4 months before our trip which resulted in an operation to remove her wisdom teeth. We went private because we needed it done ASAP but it cost around $3,500 💸. If we had more time to plan properly, I would have liked to research how much it would have cost in Maylasia or somewhere similar. I’ve heard stories about how dental care there is just as good as in Australia but 1/5 the price.

‘Transport’ was the new category instead of our ‘Car’ one for last year. It went down a little because we left Australia in January and only had ~7 months of Car expenses instead of 12.

‘Food & Drink replaced ‘Entertainment’ and went slightly up.

Our ‘Gym membership’ went way up because I started to train Brazilian jiu-jitsu twice a week but I absolutely love it! I’m still a white belt and haven’t found a gym to train in London unfortunately.

Those were the main ones with the rest of the expenses being pretty similar to last year. Nothing else really jumps out at me.

And here is our break down for the UK

We use an awesome money management tool here in the UK called Money Dashboard which works very similar to Pocketbook but it’s actually a lot better. For one, you can split transactions! This has been a feature request I’ve wanted pocketbook to do for like 3 years but they just won’t bloody do it!

Anyway, our ‘Enjoyment’ category has been our biggest expense while being in London and it drills down to look like this.

To say we have been ‘treatin’ in London when it comes to our ‘enjoyment’ category would be an understatement. Part of experiencing our new city has been taking advantage of what it offers in terms of sporting events, restaurants, concerts, activities and nightlife. The funny thing is, we don’t actually spend that much compared to our friends over here. We still take a packed lunch, get the bus/train, look for things second hand on GumTree etc. It’s just that if I compare how much we spend on doing ‘stuff’ in London vs back home in country Victoria, it’s been a blowout!

‘Bills’ has been mostly made up of our £900/m rent costs and ‘Home’ covers all our groceries home set-up costs.

Breakdown Of Income

A new addition to the yearly update. I thought it might be helpful for people to see where we earn our money and how we have built multiple streams of income that contribute to growing our snowball.

No surprise that exchanging our time for money (a job) generates the bulk of our income. A combination of our Australian and UK salaries equate to over 70% of our income. But the remaining 30% is a little bit more interesting and is part of the pie that we are aiming to grow over time.

This blog generated an astonishing ~$33K during the last F/Y (excluding taxes). That was through a combination of sponsorships on the Podcast and affiliates. I only started to seriously monetise this site last year with companies I was already using. I actually pioneered a few affiliate programs that you now see being used by a lot of other bloggers/authority figures. It’s amazing what a simple conversation can do.

I approached some of my affiliates with something along the lines of

‘Hey, I use your service and love it. I often recommend your product on my website if people ask. Would you be interested in buying some adverting space on my podcast or maybe an affiliate where my audience gets something that’s not available to them now? What do you think?‘

Sometimes I don’t hear back from them, but other times it works out better for everyone. I end up getting paid for my work, my audience gets a better way to sign up with a company I use and recommend, and that great company gets a new customer!

A lot of people have mixed feelings about monetising a blog. I’m a huge sceptic myself whenever anyone receives a financial incentive for recommending a product and there’s really nothing I can say or write that will convince some people otherwise. I’m pretty transparent on this website and I would like to think that I’ve built up a certain level of trust amongst you all, but I understand that there’s always going to be people who don’t dig it.

Having a side hustle can be a huge accelerator towards FIRE. But let me tell you straight up, if you’re thinking of starting a blog with an intent to monetise it later, you’re probably not going to get far. And even if you do, I’d doubt you’d make anything worth your while if money was the sole intent. If I was to divide the money made from this blog by all the hours I’ve put in, I’d be much better off working at Hungry Jack’s on minimum wage. This site is about money but was never intended to make any, I simply love creating FIRE content for Aussies and will continue to do so with or without the sponsors/affiliates.

You can see every company I’m affiliated with on the resources page.

Dividends were broken down like so

I’m stoked with $8K but am really looking forward to seeing the results of this report next year. A200 only returned $857 mostly because it was a new fund. Considering we currently have over $150K in that ETF as I write this now, the dividends should be closer to $5K-$6K assuming there’s not a crash or bear market. This is the slice of the pie that we want to grow as much as possible and will become the foundation for our financial freedom. It’s so exciting seeing the income grow each year especially now it’s starting to add up to a considerable amount.

I mean shit, even at $8K a year, that’s a kick-ass yearly holiday for the rest of our lives! Not to mention that even if we never added another dollar to the snowball, it would continue to grow faster than inflation and consequently raise the income without us having to do anything!

We ended up making just over $2K from matched betting which came mainly from the signup bonuses of the bookies. While it is possible to continue making money through matched betting, it takes time which I didn’t think was worth it for me personally after we had exhausted the sign-up bonuses. A Family On FIRE documented her experience using matched betting as a side hustle which is a fantastic case study and well worth reading if you’re considering trying it.

And last but not least we have the good old rental properties generating us a measly $2K. I’ve said it before but I’ll say it again, Australian residential property absolutely sucks at cashflow. The amount of time and effort I put into our two remaining properties with all the banks, conveyancing, tenant issues, chasing rent etc. makes it laughable that they only returned ~$2K cash last year. Now we all know that the real reason most people invest in Aussie property is for that sweet, sweet capital gainz gravy but eh… I won’t know how much that turns out to be until I sell and it doesn’t help me until then.

What About You?

That’s it for another year!

My number one tip has always been to track your expenses. You won’t ever know how much passive income you’ll need to FIRE unless you do and it creates good financial habits. I hope this post was helpful to you as it’s always interesting to see what people spend their hard-earned dollars on.

What about you? Do you have a category you really need to rope in? Or maybe it’s time to look into a side hustle to boost your income?

Let me know in the comment section below.

Savings Review 17/18

by Aussie Firebug | Jul 29, 2018 | Investing, Mindset, Saving

Since we do all of our accounting at the end of the financial year it only makes sense to see how we did in terms of savings in July.

You can check out last years review here, but to sum up 16/17, we achieved a savings rate of 63%.

So how did we do this year?

Let’s get into the numbers.

Savings Rate For 17/18 Financial Year

Our savings rate for last financial year was… 66%

We earned $141,497 (after tax)

And spent $47,999

Sooooo happy with 66%! At the end of 2017, I posted our financial goals for 2018 and one of those goals was to achieve a savings rate of 65% or above. We ended up coming in last year at 64% 😭 haha, so I’m very pleased for us to reach 66% at the end of this financial year. Hopefully, we can carry it through until the end of the calendar year 🙏.

Breakdown Of Spending

So what did our precious $$$’s go?

And in pie form

There are a few little issues with the tracking categories for this year because Pocketbook had a major revision of their categories and it resulted in a few double ups and what Pocketbook thought something should have been categorized as and my interpretation. For example ‘Car’ was a major category for me using this software, but Pocketbook replaced a lot of my ‘Car’ transactions as the new category ‘Transport’. There’s also ‘Holiday and Travel’ and ‘Holidays’. The overall numbers are correct just some of the categories might not make much sense.

A few interesting things to note about this year’s breakdown compared to last years.

Rent and groceries still dominate the top spots so no changes there.

Interestingly ‘Food and Drinks’ came in at number 3. This category includes alcohol and going out for breakfast and dinners. It’s really no surprise that it’s number 3 for the last 12 months. Since I changed jobs at the start of 2017, we made the move back to our hometown which has resulted in us being a lot more social. We go out for drinks on Friday nights (in Summer) and get to hang out with friends a lot more. This has resulted in a lot more money being spent on social things but I have to admit, it’s been absolutely fantastic and well worth the extra spending.

A positive from the move was that we are now driving on average, less than 400km a week compared to our old commute to work. This has resulted in us being home a lot earlier, generally feeling a lot better because we’re not stuck in our cars so much and $1,523 difference in fuel mainly from our shorter work commute.

Amazingly we spent nearly the exact amount on groceries which is very interesting.

The lack of weddings certainly helped our savings rate. But interestingly enough, we have booked a lot more holidays than the previous financial year. I have a feeling that’s because we went to so many weddings in 16/17, it scratched that holiday ich that usually starts pestering in the colder months.

We spent nearly $2k less on presents which makes sense due to the lack of weddings.

And all the other stuff is pretty much on par.

What About You?

It’s so important to track your spendings. It’s always my number tip for people to reach FIRE quicker. I’m stoked with a savings rate of 66%! But it can always be better.

How do you stack up? Maybe 66% is easy street for you or near impossible for others. Remeber, it’s not so much about killing yourself to achieve a higher savings rate, rather acknowledging where your dollars go each month and being at peace with that or changing it up if you’re not happy with the current status quo. But you’ll never know unless your start tracking 📈

So what’s your savings rate?