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
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
* There were a few big expenses for the properties during the last FY and it resulted in them actually costing us $2,776 🤦♂️ which is why you don’t see rental income in the above pie
It’s absolutely insane that we managed to earn $200K mostly after-tax considering how much travelling we have done during the last financial year.
When we decided to YOLO at the start of 2019 to live out a life long dream travelling Europe, I was convinced that my dream of FIRE would have to be put on hold and this once in a lifetime trip would delay our financial independence for a few years. What I honestly didn’t expect to have happened was the dramatic increase in income. I work in data (currently a BI Dev) and always knew that Melbourne and Sydney offered a higher paycheck for the work I do but those cities have a much higher cost of living than the country so I never really bothered pursuing it figuring the net gain might be a little bit more but not that much.
Well, let me tell you right now that London contract rates for tech workers are insane!
Before I get into exactly what I was paid I want to remind everyone (especially any newcomers to this blog) that my average wage, previous to moving to London, hovered around $90K for 8 years. My first job out of uni was around $72K in 2011 and it peaked at $110K before I left Australia which I understand is still high (especially for the country). I really want to emphasise that FIRE is possible without a high salary. It might take you longer, but almost every Australian can realistically reach financial independence with the right lifestyle.
With that being said, my first two contracts were at £500 a day and the one I’m on now is a fixed-term contract for 10 months with a base of £80K plus a £20K bonus.
That’s a lot of money, to begin with. But what makes the contracts outrageously lucrative is the way that limited companies are taxed in the UK (you need to be a resident of the UK for tax purposes to take advantage of it). I’m not a tax expert and I don’t know why they even do it the way they do, but for whatever reason, you essentially get taxed bugger all if you operate outside of a ruling called IR35.
Let’s assume that I worked for 12 months with a £ 500-day rate (I was actually asked to extend one of my contracts but had to turn it down because we were travelling during the European summer and the amount of money I was passing up did kill me inside a little bit 😂) which works out to be £130,000 a year. Here is roughly how it breaks down according to the laws currently using a UK Contractors calculator.
So you can take a £9K salary from the company which is like the minimum wage which means you won’t have to pay any tax on that part. The rest can be taken from the company as a dividend which is where the tax rates are insanely low.
So taking £97,986 as a dividend with the current tax rates looks like this.
Those rates are crazy low! If we double the £ to make the conversion easy that essentially means that someone who received AUD $188,972 (£94,486 * 2) as a dividend only paid $43,664 in taxes. The equivalent for a salaried worker in Australia earning $188,972 is ~$62K in taxes and that’s including with the $18K tax-free allowance!!!
So if we wrap up everything here and assume I did accept my contract extension that lasted 12 months. I would have ended up with:
£130,000 (annual revenue) – £22,984 (corporation tax) – £21,832 (taxed owed for dividends) = £85,181 after-tax income
If we double that number we get AUD $170,362.
I would have to be earning ~$280K AUD as a salaried worker to get the equivalent after-tax income 🤯🤯🤯
I mean… that’s more than some CEOs right. I would never, ever, ever have thought that this earning potential was out there.
I can only really speak for tech jobs (mainly in data) because I’m not too sure what the difference is like for other fields. Mrs. FB, for example, makes almost the same here and when you factor in the difference in living costs it was definitely a net negative for her to move across.
If you’re in one of the following (there’s a lot more but these spring to mind):
- Data Analyst
- Data Scientist
- BI Developer (Power BI, Tableau, Qlik)
- Data Analytics
- Data Engineer
- Data Warehouse Architect
- Data Pipeline Developer (SSIS, Data Factory, Alteryx)
- Software developer
- ML/AI specialist
- Dev Ops
- Cloud Architect (AWS, Aszure, GCP)
There’s a lot of money to be made out there (assuming you’re willing to move).
Unfortunately, the crazy low tax rates for contractors are coming to an abrupt end next year. It was actually meant to end this year but COVID hit and they postponed it another year. I don’t know what things will look like after they make the changes but I’m glad I was around before they did.
I have to admit that my eyes have been opened after working these contracts in London. Sometimes I feel like we, in the FIRE community focus too much on reducing expenses and investing but nowhere near enough on trying to earn more money. I recently wrote a bit more about this subject in Pearler’s ebook project actually. And low tax rates are not something that’s unique to the UK. I’m pretty sure Singapore has a really low-income tax rate and Dubai has no income tax at all!
Reducing expenses is still 👑 but I’m convinced that so many people reach a point where they would be served much better investing in themselves and trying to find a higher-paying job. It can really help the process!
This blog had another amazing year generating an after-tax income of ~$24K. The taxes were brutal for me this year because I’m a UK resident for tax purposes (to take advantage of the crazy tax rates) which means I pay a high rate straight out the gate for all income made from AFB.
The craziest thing about this site still being able to generate some serious cashola is how little time I have spent on it during the last financial year. I’ve spoken about this before but I put a crazy amount of hours into this passion project for the first three years. And it didn’t flip a cent because I never cared if it made money or not. There’s no way you’re going to work on a project for 3 years without making any money if you don’t love it! But all that hard work is still paying dividends today because a lot of my traffic is still generated from some high ranking articles/podcast there were made all those years ago.
We’ve just been so busy during the last year that I haven’t been able to make as much content as I would have liked. Shit, I haven’t released a podcast in three months but I’m still ranked at 38 (humble brag 😜) for Aussie Business Podcasts according to Chartable. I guess my point is that even though I’ve really been slipping with AFB stuff, the site/podcast continues to churn away even when I’m sleeping. The internet is an insane bit of technology!
Dividends were broken down like so:
Nearly $16K even with the effects of COVID! Pretty pumped with that tbh. It’s just shy of double what we received last year ($8,057) so I’m really happy with how things are progressing. It’s going to be interesting to see the results for these next coming 12 months but after a few years (hopefully), if the payouts are similar to what they have previously been, we should see a strong uptick in dividend income which is really exciting!
What About You?
That’s it for another year!
Tracking your expenses is a must if you’re serious about financial independence because unless you know how much you spend, you’ll never know how much passive income you’ll need to FIRE. I’ve been blown away with the job market in London for my field and it’s opened my eyes to what’s possible earnings wise. This has been an unexpected benefit of moving to another country but a welcomed one at that.
So how did you go the last time you checked your expenses? Is there an area you’d like to rope in? Or maybe investing a bit of time and energy into your earning capacity would pay even higher dividends.
Let me know what you think in the comment section below 🙂
Spark that 🔥