The 4% Rule for people who are scared of Maths.

I’m sure that I’m not alone in coming relatively late to this whole FIRE thing. Surely not everyone who latches onto this idea of financial freedom is a bright-eyed twenty or thirty-something who has all the time in the world to get their financial act together and then spend untold decades doing exactly whatever they want to do.

Some of us must surely be like me. I spent my twenties beginning my career, breeding and showing dogs as a hobby, getting married and starting a family. You know… the usual. My thirties were spent raising my boys, divorcing my husband and then re-establishing myself back into my career field. I was paying my bills, supporting my family and doing all the right things that were expected of me. I focused on becoming debt-free and paying off my mortgage, which I did just before I turned 50. I knew dimly that it wasn’t the best decision in a mathematical sense, but security was extremely important to me, so it was the right decision for me. I paid off the house.

But what then? I looked ahead and saw that unless I started getting serious about investing, I’d be doomed to confiscating mobile phones, trotting around on yard duty and marking essays until I was 70. I love teaching, but I don’t think it’d be much fun doing it in a zimmer frame. But I knew absolutely nothing about investing, aside from vague references to “blue chip shares” and seeing the 10 seconds worth of financial stock market stuff on the news every night.

I was scared. Literally scared.

I’m sure I can’t be the only person who has felt this.

I joined an investment group with the Barefoot Investor, which back then was wonderful… but has since devolved into a product that isn’t as good as it once was. But at the time it was great. I started a small share portfolio, made some very savvy friends and felt a little better. I was doing something, and action always feels better than inaction.

But then I started wondering. How much is enough? How do you know when you have enough to retire? I come from fairly long-lived stock. Two of my grandparents lived till their mid-90’s. Grandma was left in a comfortable financial situation by her husband, but my Grandad on the other side of the family ran out of money in his late 80’s and had to rely on my parents to prop him up when he needed more than the pension. He retired when he was 59 and I’m positive that he would’ve thought that he’d be fine. Looking at the two different scenarios, I know which one I’d rather be living when Old Lady Frogdancer hits 110 and is planning her next trip overseas…

But given all this, how do you know what amount of money to aim for?

Soon after joining the Barefoot Blueprint, I stumbled across the world of personal finance blogs. I’ve been blogging since 2008, but I was primarily in the crafts and permaculture world. The personal finance area was a revelation of education and paradigm-widening information.  The very first blog I found was Go Curry Cracker – in fact, I asked him in a comment what FIRE meant. Talk about coming late to the party! One of the first posts I read was about this thing called the 4% Rule. I was intrigued but didn’t fully understand, as Jeremy went into a lot of advanced graphs and Maths, which wasn’t great for someone like me who didn’t have their head around the concept and was scared of Maths. (Still am.)

Then shortly afterwards, I found the blog post that so many people reference and point to as the one that explains it all. Mr Money Mustache’s post about the shockingly simple Maths about retirement. (I’ve included a link at the end of this post.)

It blew my mind.

The 4% Rule is based on a massive mathematical study that some uni guys did in Trinity University, where they studied how many portfolios would last over a 30-year span, based on differing rates of spending over that time. They studied what would happen if people started their retirements in every year, starting from 1926 in rolling 30 year periods. They demonstrated that in a portfolio of 50% shares and 50% bonds, (which is WAY conservative), you’d end up with money still in the kitty in 96% of cases if you kept your spending to 4% of your portfolio. Many times, you would have ended up with MORE money in your portfolio than when you started. Not bad odds…

I’ve included the links with all the Maths at the bottom of the post. No way am I going to try and explain all of that when others have already done it so clearly. Plus, you know… Maths. *shudder*

But the crux of the matter is that if you take your anticipated annual spend and multiply it by 25, you get the number that you need to stash into your portfolio to be able to support yourself in retirement. I have no idea how or why it works; I think it’s magic or something. But this is the way to find your number.

Now THAT gives you something to aim for. I dare you… think of a figure you think you’d need to live on and times it by 25. That’s how much you need to have amassed in savings/investments before you should think of retiring if you want to be a self-funded retiree and not totally rely on the old-age pension. As long as I have a calculator handy, even I can do that. I can tell you, I was dancing the fandango when I realised that I finally had something concrete to aim for.

The amount of money will be large. For example, if you think you could live comfortably on 40K/year, you need a cool million.  50K? that’d be 1.25 million. 60K? 1.5 million. At first sight that’s intimidating, especially if, like me, you’re starting a little later than some.

The beauty of it is that we have a lot of control over most of it.

Here in Australia we have a pretty good system with regards to superannuation. Every employer has to pay 9.5% of your wage into a super account that YOU can choose. Most people passively go into the one that the employer selects for them, but with a bit of homework on some comparison sites, you can work out pretty quickly if this option is the best one for you. If you decide you’d prefer to have your money work harder for you in a different fund, it’s extremely easy to change.

So you already have nearly 10% of your wage going into super. You may choose to let this bubble along if you’re young and have plenty of time on your side while making other investments along the way. If, however, you’re like me on the shady side of 50, super is an excellent way to accelerate your savings for retirement. The tax advantages are huge.

I’ve had a couple of conversations lately with people who still don’t salary sacrifice. It’s scary to think of how many people there are who don’t take advantage of this excellent way to get more bang for your buck while saving for Old Lady/Man……..(insert your own name here) …’s quality of life. If you choose to salary sacrifice, every dollar of your wage that gets taken out and put into super is taken out FIRST. It’s taxed at only 15%… then the rest of your wage is then taxed at your normal amount. This means that even though you may choose to salary sacrifice $600/pay like I do, you get more money in your pay than you’d initially think. My wage didn’t drop by $600. It only dropped by $450 or so, which means that I have an ‘extra’ $150 to play with. Again, it’s some magical incomprehensible Maths thing. But without a word of a lie, every single person I’ve persuaded to start salary sacrificing comes up to me after their first payroll deduction and says something like, “I can’t believe how much money I’ve still got!” It’s true – you steel yourself for your pay to drop by the amount you’ve nominated, so it feels like you’ve received a pay rise when you get more back than you were expecting. You can put in up to 25K a year, including what your employer puts in. It’s brilliant.

We also have a HUGE amount of control over our annual expenses. After all, this is the figure that will determine the ‘times 25’ of the 4% Rule. If you have a burn to retire earlier than age 67, then if you reduce the amount you need to live on, your magic retirement goal number will be less. This is why I call myself a value-ist. I’ll spend big bucks if I have to on the things I think bring joy and value to my life, (hello $2,000 miniature wire-haired dachshund!), but I’ll either drastically reduce or eliminate the things I feel that don’t.

For example, everyone talks about the latte factor – how if you stop buying that $3.50 cup of coffee every day when you go to work you’ll save $840/year. We’ve all heard it. My sister Kate and I have vastly different attitudes to buying a daily coffee. To be frank, I think it’s a waste of money. My school actually supplies plunger coffee, tea and instant coffee for free. My attitude is, ‘Thanks very much!’ Do you know how many people in my staffroom walk up to 711 to buy a coffee every morning? Then during the day, someone will say, “I’m just popping up to AJ’s for a coffee. Anyone want one?” and the hands go up. I don’t get it. They have the common room to sit and socialise, just like in a café, and they can get their coffee for free. My sister, on the other hand, derives immense joy from her daily coffee. She loves trying out different places, the different tastes of coffee beans, the social aspect of a busy café… for her it’s an expense she feels adds a huge amount of enjoyment to her life. You’d have to prise that coffee out of her cold, dead hands before she’d give it up, so she continues to spend money on this, whereas I have almost totally eliminated it from my life.

When you get the bug for organising yourself towards retirement, one of the most useful things you can do is to track your spending. Over time, you can see where the necessary spending is and, most importantly, where the wasteful spending comes in. Then it’s a simple matter to plug the holes and bring your annual expenses down. When we become aware of those little day-to-day purchases that are so small that we disregard them at the time we make them but which can add up over time to be almost frightening… this is definitely an empowering thing to do in life. Once you’re aware, you have the choice to continue along the same path or to change. If you’re never aware; you can never have the choice.

I guess what I’m saying is that conscious frugality in the areas that suit your life is a cornerstone of the FIRE life. That’s why I’ve decided to include “Frugal Friday” into this blog.

Another way to accelerate your savings towards your magic number is to increase your income. I have no useful input with regard to getting promotions and pay rises from your job. I work in the public sector in the education field, where pay rises are automatic each year and promotions are limited in the school I’m in, so I have no real experience. But a side hustle? THAT I know about.

Sacrificing a little bit of tv watching time to bring in more dollars is the classic short-term pain for long-term gain thinking. I did this for years, searching for a solid money-making opportunity that would be worth my while. My last side hustle enabled me to pay off my house years earlier, then to save and pay cash for a 30K trip around the UK and Europe. Then I funnelled the cash I earned into investments. Was it worth my while? If you’d asked me that when I was swanning around Hampton Court Palace in a red velvet cloak, I would have laughed in your face. My side hustle was tiring and made my life much busier, but it enabled me to get out of debt which then freed up a large amount of money that I could direct into investments and an extravagant trip of a lifetime without sacrificing my savings towards super and shares. If you eliminate debt it enables you to turbocharge your path to your magic number.

IMG_0604.jpg One of the best days of my life! Thank-you, side-hustle.

A wonderful thing to keep in mind is that you have control over the magic number you aim for. Personally, I’m keeping current annual costs as low as I can, while working towards an annual figure far larger than I need to live on to survive. My magic number is designed to let Old Lady Frogdancer thrive! Therefore, my personal 4% Rule number is inflated beyond my current spending, to take into account all the travel I intend to do. This is an easy decision for me to make as I still enjoy my job and don’t mind working a few extra years to build up some more money. Someone else may be in a different position, where they hate their job and by cutting unnecessary expenses they can bring forward retirement and they can start enjoying the freedom of that lifestyle. We all have great control of our own paths – if we make conscious decisions.

I’m a big fan of the 4% Rule as it’s an easy formula to get your head around. For someone just starting to grapple with these ideas, it gives you a giant bulls-eye to aim at, which is incredibly empowering. Later, as people get closer to the time they decide to pull the pin, their investment decisions can be modified to their individual requirements. Who says you HAVE to pull out 4% every year? You may decide to go more conservative with a 3.5%, or more aggressive with a 5% rate of withdrawal. You may choose to factor in a part-pension, or to remain totally self-funded. You may want to leave a legacy to family or charity or go screaming to the finish line of life clutching your last dollar in one hand and a martini in the other. Those more detailed plans can come later, as you become more educated and you start fine-tuning your investment plans. But for broad-brushstroke planning, the 4% Rule offers as much certainty for forward planning as you’re likely to get.

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Here are the two articles that sent me on this path. I’ve included the simpler one first, with the more detailed one following for those who want to go deeper into the concepts. The comments are well worth reading too, as people query and discuss things. They bring up points and debate them, which deepens the knowledge, which is a pretty good thing.

Mr Money Mustache’s post on “The Shockingly Simple Math Behind Early Retirement” is HERE.

Go Curry Cracker’s post on “What is Your Retirement Number – the 4% Rule” is HERE.

Enjoy!

Frugal Friday: garlic and ginger

Just after Christmas I realised we were running out of garlic, which is a situation that, in anybody’s book, would be an intolerable deprivation. The next time I went to Costco I bought 3 bags of it. Now, this would be Frugal Friday foolhardiness in the extreme if I was planning on leaving it in the cupboard. It’d go off before I’d even opened the second bag. But a couple of years ago I went to a friend’s place while she was cooking and she casually opened her freezer door, took out some already peeled garlic cloves and threw them into her thermomix and chopped them up, then continued on with her cooking. The whole thing took 2 seconds. How quick and easy was that?!?

It changed my life. Really.

In my defence: sometimes little things can change your life. It doesn’t always have to be earth-shattering events!

Don’t cook with a thermomix? Doesn’t matter. You’d just get the ingredients out from the freezer a few minutes before you needed them, let them thaw slightly on the chopping board and then chop them up yourself. It’s still a huge time and convenience saver. I hate throwing food out and this is an easy way to make sure that expensive ingredients like garlic and ginger aren’t wasted. You don’t think they’re that expensive? Check the price per kilo the next time you shop. Yikes!

To be fair, the preparation isn’t all that exciting. I set aside an hour or so, start a podcast running on the iPad and then set to work. The time passes quickly, I think because it’s one of those mindless repetitive tasks that let your mind free to wander while your hands are busy. I’ve seen that you can buy cryovac-packed peeled garlic from China, but I haven’t heard good things about the quality. I’d rather stick to the fresh stuff I can choose myself. (It was even better when I grew my own, but those days have gone… for now.)

Once I have a goodly amount peeled, I grab a container and pop them in the fridge. Since doing this I’ve never had to throw out any sad garlic. It’s a terrific way to still use fresh garlic in my cooking without the waste, while an added bonus is that I don’t have the garlic smell on my hands every time I need to cook with it. I get all of that over in one fell swoop.

I do the same with fresh ginger. I bring it home, chop it into coins and then freeze. On the shelf next to the garlic I have whole red chillies that a friend from work supplies me with. They last for months.

Doing this saves on food waste, but primarily it saves time. I know I have these staples on hand, so throwing together a quick curry or bolognaise is a no-brainer on those nights when you really don’t feel like cooking. It’s worth the short-term boredom of peeling for the long-term gain of the convenience.

Anyone have any other ideas for quick, easy and seasonal ingredients to use the freezer for? I’m sure there’d be more great ideas out there…?

 

 

 

 

We all have to spend – just make it intentional.

 

I firmly believe that one of the cornerstones of Financial Independence is frugality. But ‘frugality’ is a funny concept. One man’s latte is another man’s wild extravagance. I’ll come clean right now and confess that I consider myself to be an extremely frugal person. After all, any single person who’s brought up 4 kids and paid off a mortgage on their own hasn’t exactly been throwing the avocados on toast around. However, my frugality has certain limits. There’s a fine line between frugal and stingy. The annoying thing about any discussion about frugality is that every person seems to draw the line in the sand between the two concepts in a different place.

The kids and I have been on our own – if you can call 5 people being “on our own”! – for 20 years. When my marriage hit the skids I’d been a stay-at-home-Mum for nearly 6 years. I had 4 years to go before my youngest was due to start primary school. My goal as a parent was always to stay at home with my kids until they were all at school, so when their world turned upside-down with the divorce I vowed to stick to that plan, to give them a rock-solid foundation upon which to build their worlds. This meant tightening the belt.

I had a couple of advantages to start off with. The first was that my ex-husband was never what you’d call a wildly successful businessman, so for a fair few years I’d been watching the household finances and being reasonably careful. The other was my upbringing. My Dad watched every penny, so unbeknownst to me, I had excellent training in making every penny count. Those lessons have stood us in good stead over the last couple of decades. But the most useful tool I’ve come up with is something I only started using in the last 20 months when frugality became a necessity again.

Ever tried living on 27% of your take-home pay for month after month? That’s what we were doing while I was paying bridging finance for The Best House In Melbourne while getting all the plans and permits to develop our old property. What should have taken 6 months took 17 months, thanks to the local council and various tradies dragging their heels. That’s a long time to be living off the smell of an oily rag. I had an emergency fund in place, just in case something awful happened, but the rest of our lives was cash-flowed. I had to watch every cent that came in and out of the house.

I’ve never had a ‘budget’ as such, but I’ve always spent less than I earned. I heard someone say somewhere that “if you can’t measure it, you can’t manage it.” That made sense to me, as nit-picky as it appeared. You can’t steer a car in the right direction if you don’t know which road you’re on to start with.

So why not measure my spending? Why not rig up a basic chart on my computer that documents every amount I spend? The challenge, because you’ve got to make it fun, is obviously to spend as little as possible on non-essentials.

Have a look at the chart. I made a few rules to start with. After all, if I didn’t it would be anarchy and we simply can’t have spendings and savings running amock all over the place. That way madness lies.

I direct debit my bills, so I couldn’t choose which day of the week they’d be paid. So rule 1 was that they were excluded from the table. Imagine my agonised expression if I’d thought I earned a silver square and then Telstra took the money from my credit card on a Tuesday instead of a Friday. It just doesn’t bear thinking of.  Next rule: even one dollar is to be counted. Our money situation was so tight that I had to be conscious of everything. Third rule: no cheating the table, no matter how tempting.

But the best thing I did, a few weeks into it, was to put the last column in – where I can colour in the square if I have 3 or fewer days that I spend in a week. Now this suddenly made the whole exercise INTENTIONAL. And that’s when it really took off.

It’s crazy the way the human mind works. I really wanted to colour in a silver square at the end of each week, so I started grouping my spending together. We live around the corner from an Aldi. Before the chart, if I was getting low on one ingredient for dinner, it was too easy to send one of the boys galloping to get it. But now, the game had changed. Was this ingredient important enough to use up one of my spending squares? If so, I’d send them to Aldi with a shopping list, to avoid this happening again with other things that might be running out in the pantry. But if it was something that I could leave out of the dish altogether, or I had a substitute I could use if I thought for 2 seconds about what else I had in the pantry, then the boys stayed home and I could triumphantly colour in a square that night.

If I knew I was going to go to Costco on the weekend, I’d schedule other shopping trips at the same time. If I needed some wine, (always a staple in the Frogdancer house), I’d swing by Dan Murphy’s on the way home. Aldi doesn’t sell everything we use, so the Coles or Woolworths might also get a look-in on the same day. I always buy my petrol at Costco, so there was another stop on the same day. I would consciously try and spend only on the one day so that I wasn’t using up my squares willy-nilly.

This had another additional saving that I wasn’t consciously aiming for when I started it, but it soon became evident that I was using less petrol. The car wasn’t being dragged out for ‘one-off’ trips to the shops but was being used for multiple things. The saving was significant enough for me to notice that an extra week was being added before I had to refill the car – obviously not enough to pay for a trip to Europe or something. Still, every little bit helps.

I believe that we all have a couple of little things that we spend money on. Things that are so cheap that we buy them without really thinking about it, because “it’s only $2”, or “it’s just a coffee.” Mine isn’t coffee. It’s so stupid that I feel a bit embarrassed even writing about it. Mine is $1 Caramello Koalas/Summer Rolls/Honey Nougat logs from the staff common room when I ‘m correcting essays.

The school I teach at is incredibly popular. We’re one of the top non-selective government schools in the state, which basically means that if any child lives in our zone, we have to take them, regardless of gender, religious views, sexual orientation or intelligence. The kid could be a certified genius or a dribbling idiot and if they live in our designated area, we have to take them. Our VCE results each year are so high that people literally pay thousands more per house or apartment to move into our area, which leads to a lot of kids lining up to be taught each year.

Our school currently has over 2,000 students.  Our 3 youngest levels have around 14 classes of 28 students each. With 4 or 5 classes in a regular teaching allotment, that’s a lot of essays to mark. Sadly, once the chart was in operation for a while, it became clear that I’d become dependent upon the sweet sweet taste of chocolate and caramel to get me through the hard yards.

The really good essays are easy. No problem. You zoom through them, scattering ticks and the occasional minor suggestion or correction here and there. No need for chocolate here… in fact you almost feel like doing a lap of honour around the staffroom because you clearly taught these kids so well. But then you get to the strugglers and the lazy ones. The kids who are genuinely trying hard aren’t so bad. You want to knuckle down and help them. But their essays take a lot more time to mark because there are so many grammatical errors, spelling mistakes and flaws in the structure of the essays. But then you get the doozies – the ones who couldn’t be bothered reading the novel. They watched the movie instead. Some of them even absent-mindedly write “the movie” instead of “the novel”. One boy in year 12 a few years ago was meant to be writing about Shakespeare’s play “Richard III” and he began his essay talking about the tank that crashed through into the bunker of the Lancasters and how the gas mask made Richard seem evil. I agree, it was a wonderful movie adaptation of Shakespeare’s play but it wasn’t what we’d actually studied. Shakespeare isn’t terribly well-known for his twentieth-century modes of warfare and transport in his plays. To his credit, the student and I both had a good laugh when I tackled him over it. But when things like that happen… it’s a blow to a teacher’s fortitude. These essays are definitely not a pleasure to read and there seems to be a lot more of them than the excellent ones. Unfortunately, it’s unprofessional to turn to hard liquor. For some reason, the school frowns upon alcohol being consumed while correcting. The next resort is chocolate.

Having the chart definitely cut down on that mindless spending of, “Dammit, I’m working hard and I deserve it!” I’m not saying that it stopped it altogether… there’s a square that is clearly marked “$4 marking”. I must have had 2 classes worth of essays to mark at the same time, which is a stupid move on my part. Or else I had a class of remarkably stupid kids! However, the chart tended to make me stop and think.

When I first started using the chart, I tried to push on through, but that sugar rush was hard to ignore. Then I had a brilliant idea. What if I substituted nuts and dried fruit for the chocolate bars? I started buying the ingredients for trail mix from Aldi, then making up bags of it and making sure I had some in my desk, particularly at the end of term, always a peak marking time. I was still able to have the sugar rush from the dried fruit, while the nuts and seeds satisfied the ‘junk food’ comfort nibbling. It’s probably cheaper, but the main advantage is that the ingredients are bought during normal grocery shopping and I don’t have to make the dash to the common room and wilfully squander a square.

It’s stupid, but the chart works. You get to Thursday and you could pop into the supermarket on the way home, but you only have one square left. Better leave off going till Friday in case something comes up… or even Saturday. It stops a lot of impulse buys, because you’ve got Rule 3… don’t cheat the table… and you really want the reward of that silver square. It’s totally individual, with no-one but yourself accounting for what you spend. Which is brilliant, because then you can then tailor your week to when you need or want to spend money.

I’ve been doing this for nearly 18 months now. I have control over what I spend my income on. It takes less than 2 minutes a day to do, and if you’re like me and use a credit or debit card for all your spending, it’s so easy to jot things down on the chart because you have the record there. For me, the secret sauce to this is obvious.

It’s the final column that has made me stick with it because my spending is now totally deliberate and INTENTIONAL. I consciously choose what I want to buy and what I choose to avoid. That accelerates my progress towards the things I truly value.

At the end of the day, I’m a valuist. I put my money towards things I think are important and I bypass the things that aren’t. And these are the things that are different for everyone – the line in the sand that we all have with frugality. When you measure this, you can absolutely manage it and get to where you really want to go.

 

 

 

 

Frugal Friday: Entertain yourself by using what you’ve got.

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Here at the Frogdancer house, we’re well into the summer holidays. The days are balmy and sunny, the hours are slipping past slowly and sweetly, while the nanna naps and long conversations are a highlight. At the moment we have our houseguests here. As anyone knows, holidays and guests are a recipe for endless spending, because your days are open and the hours need to be filled somehow. After all, when you’re at work for many hours a day, your time is taken up with things other than looking for entertainment, so expenses in this area tend to be lower.

I know for me, I always spend more money during the breaks, because this is the time when I can run around and Get Things Done. On Tuesday I bought a replacement dryer for the useless one that broke 3 months after I bought it last year. There went $380. I’m going to be booking a landscaper, to make the Best House in Melbourne even better. I’m pretty sure he won’t do the work for free, so that’ll be extra dollars out the door. I also stock up the zombie apocalypse cupboard, so that during term time I’ll always have food staples on hand to feed us. This means that the food bills go through the roof in January, April, July and September. But what about entertainment? How do I fill in the hours when I’d normally be working?

The picture at the top of the post is one way. I’m a firm believer in utilising any perks you can get at work.  You’re putting in your hours there anyway, so anything you can use to your benefit is a good way to leverage your time.

Working in a school as I do, one really good way to get more bang for my buck is to use the school library. The books we have access to are predominately Young Adult or Adult, with teachers as well as students encouraged to make requests which the library buys. There’s also an eBook section that I’ve used quite a lot this year. A few days before the end of term I wandered down to the library to return some textbooks that I won’t be needing in 2018. When I left the library about half an hour later, I was probably staggering slightly under the weight of 13 books that I’d selected for my holiday reading.

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All for free! Assuming that a new book costs $30, then that’s $390 worth of reading I was walking away with. That’s not a bad perk from being at the school. The small pile to the right are the books I’ve already finished. Being a quick reader, I gallop through books, which is yet another reason not to buy every book I read. A book usually takes me a day to finish, so I’d go broke if I bought brand new books every time.

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I’m an avid podcast listener, particularly on my commute to and from work. I have a mix of financial, funny, informative and crime podcasts that I listen to, depending on my mood. How lucky are we to live in a time when all this entertainment is literally at our fingertips… for FREE? For the first couple of weeks of the holidays I left my iPad alone. I needed the peace and quiet to decompress from the year and so when I was on my own with the dogs there was just the golden sound of silence, (except when a dog had the temerity to blatantly walk past our house, inciting my dogs to protect the perimeter.) But over the last couple of days I’ve been working on a project here and I’ve been playing the podcasts in the background as I work.

Did I mention that this entertainment was for free?

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Here’s the project I mentioned. Readers of my other blog would know that a few weeks ago I went away for the weekend to a Craft Camp and rekindled my quilting hobby. That sounds like I set it alight, doesn’t it? Six years ago, when I started my side hustle of Thermomixing, I dropped my quilting like a bad habit. Do you know how much fabric, batting and thread I have stowed away in my stash??? HEAPS! It all came to the new house when we moved, and on the weekend away I dragged the stash up with me, spent about 3 hours going through it all, keeping most but also giving heaps away to people who liked what I didn’t.

Then I started a quilt. In my infinite wisdom, I started cutting out 2.5″ squares to make a quilt for Tom25. Putting squares together is an easy way to get back into the swing, I thought.

Of course, I didn’t stop to think just how many 2.5″ squares would be needed to cover a double bed. This is a project that will take a fair bit of time to assemble. But what a perfect way to spend holiday time! I already have all of the materials I need to make it – so I’ll be utilising things I already have and not letting them go to waste. Quilting takes up time, but it’s enjoyable because while you’re doing it your thoughts are free to wander. I’m being productive, making something useful, decorative and warm for someone I love, while I’m using things I have on hand, listening to podcasts and being so thoroughly entertained that there’s no need to scamper off to Southland or Chadstone and spend money in the shops there.

I’m positive that this is something that absolutely everyone can do. Well ok; maybe not the quilting part. But who among us doesn’t have things that we’ve accumulated over the years that we’ve never fully used? Imagine if, instead of going out and spending money on the next new thing, we actually sat down and read those books; learned how to play that guitar; actually finished those computer games; cooked some recipes from all of those cookbooks; threw those golf clubs in the car and went and played a game or two; rode that bike… you get the idea. I was going to include something about using a gym membership that you’ve bought, but let’s be honest – that hardly ever happens.

I know that some things we’ve bought and tried just don’t float our boats anymore. That’s ok – what would life be if we didn’t try on a few different activities for size? But if you look at them and find yourself going, “meh!”, then don’t continue to let whatever-it-is sit there gathering dust. Sell it on Gumtree or give it away. The empty space it once occupied is worth more than the clutter of having it still there.

I think that if you’ve spent your hard-earned on an item, you owe it to yourself and the hours of your life you traded to earn that money to use that item to its fullest potential. In my case, I made 24 quilts before I gave it up to go and earn money with Thermomix to pay off my mortgage and to go to Europe. But now I’m back, quietly picking up where I left off and enjoying the process all over again. I may have spent the money on quilting supplies 6 years ago, but it was still money well spent because I’m actually using the things I bought. And the added bonus is that I can keep more of my current earnings in my pocket.

Better in my pocket than in Mr and Mrs Southland’s or Chadstone’s! 🙂

The house of bruised dreams.

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There’s a house being built next door to the Best House in Melbourne. We moved into the Best House in Melbourne 20 months ago when there was a derelict old cottage on the block next door. Within a couple of months, it was demolished and about 15 months ago building commenced. I met the young couple who owned it and the husband said that they’d be in by Christmas 2017. That seemed a long time to me, but he said that they’d factored in the delays that every building job seems to have and so that was the date they’d set themselves to.

At first, work went hammer and tongs. There were people there every day and the place grew quickly. Not the most attractive house, just between you and me, but at least it wasn’t an apartment block looming over us, which is the sort of thing that’s getting built in our old neighbourhood.

Then all work fell silent. At first, we thought that maybe the builder was juggling jobs and they’d soon be back. But month after month went by with any workmen on the property becoming a rarity, something the boys would tell me when I got home as a thing that made the day a little different.

Over winter, the house appeared to deteriorate a little. The black paint they’d used on the top storey started to look as though it needed to have another couple of coats. There were windows on the upper floor that flapped open and shut if the wind was in a certain direction and nobody ever came to fasten them. There was blue plastic that appeared between the bricks and the deck at the front and flapped in the wind and it was never tidied up. There was clearly a story there, but nobody knew what it was.

A couple of days before Christmas day, I opened my ensuite window and saw that the makeshift wooden front door was hanging off its hinges. ‘Oh no’, I thought, also thinking (because I have an enormous brain that can think many things at once) that maybe some local yokels had broken in for kicks the night before. If so, they were remarkably quiet, because my room is on that side and I hadn’t heard a thing. If I could’ve notified the owners I would have, but without any way to contact them I thought I’d just keep an eye on the place. Maybe now it was holidays the owners would come down to have a look at the place and fix the door.

Christmas came and went. The door looked as if someone maybe propped it shut but a day later it was wide open again. Yesterday my sister and her husband came to spend a couple of weeks at our place while they rented their house out to holidaymakers. My brother-in-law is a chippie (‘carpenter’ for Americans) and he suggested that we go in and see if we can secure the door, while having a little sticky-beak at the same time. I love looking at houses and house plans, so I was in.

We untied the wire at the front that was holding the mesh fence together and we walked up to the house.

“That’s odd,” said Francis. “Have a look at this. This deck’s been screwed together, but they’ve pulled up this patch of it.” Right beside the front door was a hole in the timber deck. He was right, you could see where the support beams had been screwed into, yet quite a big patch of the decking was now gone. We then turned our attention to the front door.

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All it was was 2 big bits of flat timber, with round door holes that were clearly meant to have a chain and padlock through them. A length of chain with a closed padlock lay on the deck. Francis wrestled with the left hand one and we stepped inside.

It was one long room. The strange thing about it, as we soon worked out by the gas and plumbing fixings sticking out of the walls, was that when you open the front door you step straight into the kitchen. The island bench separating the kitchen from the lounge room was right in front of the door. Not sure that’d be my cup of tea, but I suppose it’d make unloading the groceries from the car a bit quicker!

We started walking around the place. There was a ladder so we went up it to the second storey. It soon became very obvious that there were major things wrong. The shower recesses both had floor to ceiling windows with timber frames in them. How would you be able to waterproof them? The places where the shower heads would go were nowhere near the middle of the lowered floor for the shower recesses. You have to shower with your body glued up to the glass of the shower. There were airconditioning systems installed with the outlets smashed up against bulkheads, which would have to be cut through if any cool air would ever reach the bedrooms. There were notes scrawled on the walls from (presumably) the builder to his workers, telling them off for doing things wrong and telling them to fix things. Windows were put in crooked and then the outer walls have been bricked up, leaving them there permanently on an angle, sometimes with gaps beside them to the outside world.

The design was also a little different. The position of the kitchen was the first thing we noticed. The staircase would have to go directly in front of a massive floor to ceiling window. The 3 balconies on the top floor are too narrow to fit a chair on. Why bother having them? The side deck between my house and theirs is lovely, but the back deck has 4 brick pillars that hold up the back bedroom upstairs going right through the middle of the deck. There’s no room for a table and chairs. Apparently their fridge is going into the laundry at the back of the house. The master suite has a huge walk-in wardrobe, but the actual bedroom has hardly enough space to sidle around the end of a bed.

As we wandered through, Francis was focussed on the building job, whereas I started to get sorrier by the minute for the young couple who were the owners. Ok, so the design was definitely not something I would have picked, but that’s their decision and they obviously liked it. But the workmanship! David24 said to me that there were a lot of young boys working on it, so I guess the builder was trying to cut costs by using kids who really didn’t know what they were doing.

I pictured the owners, all excited about building their dream home, telling their little children that they’d be in their brand-new bedrooms in time for Christmas, planning the barbeques and beach walks they’d be having … and then slowly having their dream turn to ashes. Francis said as we were on our way out that it looked to him as if the owner maybe called in an independent building inspector who marked down all the things that were substandard and then work ground to a halt. Imagine how disappointing.

This morning, as I was typing this, I heard the fence rattle at the front of next door and the dogs started barking at the fence. I went out onto the verandah, fetchingly attired in my bathrobe and pyjamas, and the owner was there showing a friend around. He heard me talking to the dogs and called out to me.

I told him that Francis and I had gone in there only yesterday and secured the door as much as we were able and we swapped phone numbers just in case anything like that happened again. I then asked, “So what’s the story? Why haven’t you been able to move in yet?”

He shot a look at his friend and said, “That’s a story for another time.”

Damn! I thought.

“Ok,” I said. “We’ll have a glass of wine once you’re in and you can tell me then.”

“I’m a nurse,” he said. “So if your heart stops while I’m telling you what happened I’ll know how to keep you alive.”

That doesn’t sound good, I thought.

I laughed and said, “My brother-in-law’s a chippie and he had a quick look around.”

He nodded and said, “Yeah. When a job’s not done the way it was promised, then work stops.” He nodded back towards the house and said,” The plaster’s been delivered. Work’ll start in January sometime, but we won’t put anything valuable in until after school goes back, just in case. It’ll move quick once things get started. They’ve even smashed the front door.”

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They say that your home is probably the most expensive thing you’ll ever purchase. I really feel for them as they pay more rent than they would have budgeted for while their build drags on. With anyone even contemplating building their own house, it’s so important to keep your finger on the pulse and check all along the way if things are compliant with the appropriate building code for your area. This young couple will more than likely move into their house sometime next year. But I can’t help but feel that the shine has been taken off it a bit.

I suppose that the moral of the story is: Do your research… and then keep looking over their shoulders! Nobody cares more for your money and your time than you do.

 

 

 

Frugal Friday: Fertilise your garden for (almost) free.

Before I geoarbitrarged my family and moved to the beach, I had a pretty sweet urban food forest going in Bentleigh. We had chooks, over 30 fruit trees, 15m of veggie gardens and it was all run on organic, permaculture principles. A huge proportion of our food came from the garden and life was sweet.

Then I looked at property values in the area, (thanks, local secondary school!) and decided to develop the block. The thing that most people do when this is their course of action is to rent somewhere until the units are sold… however at the time we had 2 cats and 2 dogs. Good luck finding a rental! So I decided to bite the bullet and get bridging finance and look for a house early. I admit, not the smartest financial move on the face of it but when you love your dogs more than your children then what can you do?

It worked out ok. For 10 months I was paying 73% of my take-home pay in bridging finance (you want frugality? I’m your woman!), which went down to only 57% when I went back to working full-time… but when I eventually sold the property, my house by the beach had gone up in value 100K, which was 34K more than I’d paid in the finance. Anyway, this isn’t the point of the post.

The house we live in now has no garden to speak of. It has a patch of lawn in the front with a few scrabbly fruit trees edged in at the sides, while the backyard is paved. I was able to bring my old herb garden with me, as I’d planted them in wicking boxes, so they live on the deck just outside the back door. We have an Aldi supermarket literally around the corner, so I’ve resigned myself to buying our fresh produce again, at least until I landscape the place and retire.

BUT… you can take the girl out of permaculture, but you can’t take permaculture out of the girl.

It started to KILL me that we were throwing away perfectly good veggie scraps and peelings. For years, we never wasted a scrap of food. The food line went as follows:  humans- dogs-chooks- worms- compost. Even if the humans let some lettuce go slimy in the fridge, at least the money spent on it wasn’t just thrown in the bin. It was going back to nourish something on the property, which would, in turn, give back and nourish us in the future, whether by affection (dogs and chooks), eggs (chooks), pest control (chooks) or fertiliser (worms, compost and chooks).

So I did what any sensible person would do. I bought a worm farm.

My previous worm farm was an old freezer that my dad adapted. It was far too big and heavy to move, so I left it at the old place. This time, I have a suburban, civilised one. It lives in a shady part of the deck, though I’ll have to keep an eye on it when temperatures get above 35C/95F. Under the spout I have my old Ikea watering can, to catch the worm wee. It’s excellent for natural fertiliser.

For much of the year last year I only had one son living with me, so we were able to use every veggie scrap we generated to feed the worms. Since then, I’ve had 2 Boomerang kids come back and the leftovers are too much for the farm to cope with, especially as one son left a carnivore but returned as a vegetarian. So we now start each Wednesday. We save our scraps in a bowl with a lid. (Ours is just a dinner plate perched on top.) We save all egg shells, veggie and fruit scraps except for onion and citrus. The worms don’t like these. Then, on Saturday, I tip the scraps into the thermomix, add water and blend on speed 10. I spoil my little slimy friends with nice easy food for them to digest.

The worm farm has been going for nearly a year now. I get at least one watering can full of fertiliser a week, sometimes two, and I spread it out between the herbs on the side deck and the pretty plants on the front deck. The plants absolutely love it. And I love that we’re wasting far less and we’re utilising the resources we have far more wisely.

This is something that pretty much everyone can do. It takes very little to set up, with the only expense being the cost of the worm farm. If you’re lucky, you may be able to score free worms from a friend’s worm farm if they’re happy to share. Then you can just feed them sparingly until the numbers catch up with the amounts of scraps you want to feed them. Me? I just bought a box of worms when I bought my farm. The smallest box, but I knew the worms would get frisky and they’d increase their numbers for free, so why spend the extra?

Speaking of which, it’s time to wander out and give the pots a watering. Summer holidays are the best! I’d normally be in front of my year 8 English class right now.

 

 

 

 

My second-biggest financial mistake – and what I did to try and educate my kids about it.

(This is one of my Christmas presents. My youngest son Evan21 took the photo and then blew it up – we now have a picture of the whole family. )

When I was married, waaay back in the day, I was working as a teacher in a suburb on the outskirts of Melbourne in the west. It wasn’t where I grew up, (I’m a Bayside girl from the other side of town), but it was where my husband had his business and love makes you do crazy things like move across the other side of the city to live. We delayed starting a family, so in the meantime I discovered dog breeding and showing. Poppy and Jeff, in the photo above, are descendants of the dogs I bred at that time.

For 6 years dog breeding was my passion. I wanted to have a place where I could build proper kennels and give them space to run. My husband was a country boy and he wanted space around him, so we started looking for a block of land. We found one on the outskirts of Bacchus Marsh. 6 acres, already fenced. I can’t remember what the asking price was, but I know that we didn’t have the money up front for a deposit. My husband used to spend everything he made…. but that’s a topic for another blog post. The only way we could come up with the money was if I cashed in my superannuation.

At that time I was about 27, I think. I had 30K in super that was ticking along quite nicely. In those days if you wanted to withdraw your super it was really easy, so that’s what we did.

Argh!!! I can’t believe I was that stupid! I had no idea of how compound interest worked, or of the importance of letting funds deposited while you’re young in an account like super being left to slowly compound and grow while time is on your side. Nup! We wanted that block so we took the money out. A classic case of short-term thinking.

While I was sitting here I just plugged the figures into a compound interest calculator. $30,000 for 30 years at 7% interest, with no further contributions being made. That $30,000 would have been worth $243,495 to me in another 4 years. Do you think that would make a difference to the when and how of my retirement plans if that tidy sum was added to my super? Do you think I’d still be working full-time, or would I have eased back to working 3 or 4 days a week if my super had an extra quarter of a million dollars?

That block in Bacchus Marsh cost me around a quarter of a million dollars.

Do you want to know the kicker? When I got pregnant with Tom25, we decided to sell the block and an investment property we had. My husband was suddenly nervous about servicing those debts on just one wage. Property values had fallen… we ended up selling the block at Bacchus Marsh for 30K LESS than we paid for it.

Yep.

At the time I was blissfully unaware of how costly those two decisions were. But now I know that if I’d understood the power of compounding, I would never have released the funds from my super. So I look now to my boys – those giants in the photo at the top of the page. I left the marriage when Tom25 was 5, Evan 21 was 11 months old and the other two were somewhere in between. I’ve raised them on my own and it’s up to me to teach them what I can about life, including their financial lives. If they can get their heads around compounding, they may be intelligent enough to not only avoid making the same mistake I did, but to actually turn it on its head and start actively harnessing that power.

Earlier this year I sold our property and made a profit. I’ll discuss this at some stage later on on the blog. With Christmas coming up, and with the knowledge that I’d have not only my boys but also my nieces here, I decided to be a little theatrical and give them a gift with a string attached.

I handed out these ‘certificates’ at the end of when we were handing out the presents, when I had everyone’s attention. The accompanying documents were two tables I’d printed out from a compound interest calculator site. I wanted to make it crystal-clear what I was actually giving them.

The first table shows what they’d end up with if they deposited the 1K and then never added another penny to it. I chose 40 years @7% interest (which is a conservative estimate for the interest rate. The Australian stock market averages just under 10% per annum.) 

Now of course this table is totally unrealistic unless they choose to live off Centrelink benefits and never work a day in their lives. They’ll be adding to this amount every time they work and get paid. So I added another table – this time what would happen if they only seeded this account with another $1,000 each year.

Apart from Tom25, who’s an accountant and already has his head around this stuff, their minds were BLOWN. My nieces come from a family where money isn’t a topic of conversation and so they’re not exposed to these ideas at home. I was especially pleased that Jay18, my youngest niece, quietly came up to talk with me afterward, saying that she’d be interested in finding out more.

I also gave them all a copy of ‘The Richest Man in Babylon“. It’s a slim volume and I remember reading it when I was around their age and the lessons stuck. It’s up to them if they read it or not; I won’t be following up and nagging. I figure I’ll just present the information to them and they’ll access it when it becomes relevant to them.

The funny thing is, Tom25 said to me the next morning, “One of the books Dad’s been hassling me to read is ‘The Richest Man in Babylon’!” I laughed and said, “I’m not surprised. It’s a good book.”

I guess what this story proves is that even in the holidays, you can’t stop a teacher from teaching. I’ve put the information in front of all 6 of them and now it’s up to them how it percolates in their brains. It’ll be interesting to see how many of them, in a couple of decades or so, have taken the information and run with it. It’ll be my own little social experiment.  🙂