I am your shield, I am your sword – Everything you wanted to know about emergency funds

Posted on August 2, 2019 by Aussie HIFIRE

One of the first things that new members of the FIRE community get told is that they should have an emergency fund, also known as a rainy day fund.  Usually a figure of 3-6 months of living expenses gets used as a rough guide as to how much you should have saved. 

Unfortunately there are plenty of people who either can’t or don’t do this, as shown by the fact that over a quarter of the population either wouldn’t be able to raise $3,000 for an emergency or would have to do something drastic to raise the money as per this ME Bank Report.

So what is an emergency fund, what should it cover, how much should you have in it etc?  Read on for all the answers to your burning (dad joke intended) questions. 

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A Monument To All Your Sins – Actual vs Expected spending for the year so far

Posted on July 5, 2019 by Aussie HIFIRE
Notebook, Typing, Coffee, Computer

Back at the start of the year I wrote a post about your budget vs your actual spending, where I said that our budget was based on what we actually spend instead of what we think we spend.

The reason for doing it this way is to have a realistic idea of what we will likely spend as opposed to some ideal scenario with minimal spending based on the things that I could actually think of at the time of doing up the budget. 

This way I can see what we’re spending money on and decide whether or not we should be spending that much or any at all.  Damn you occasional trip to Krispy Kreme, alas a sweet tooth (gluttony) is one of my many sins.  

Donuts, Fun, Sugar, Food, Doughnut

We’re now halfway through the year so it’s a good time to have a look at how we’re going so far!

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Firestarter – Playing with FIRE documentary

Posted on June 20, 2019 by Aussie HIFIRE

As you may be aware a documentary about FIRE has been made and is coming to the big(gish) screen and then presumably the small screen at some point in the future.  In some exciting news it will be coming to Australia in August.

Obviously I haven’t seen it yet but Aussie Firebug saw it in London and did a podcast on it.  On the recommendation of a good friend I actually broke my rule about not listening to podcasts (they just don’t work for me as a medium, although I was recently told if I try it on 1.5x speed it might be better) and played the whole thing.  

From the discussion on the podcast it seems like the documentary has been aimed at the masses who are currently living beyond their means and not giving a thought to FI, let alone RE, rather than those who are already hardcore into FIRE.  So if you’re looking for an opportunity to introduce the concept to friends or family this may be an ideal conversation starter.

The only Australian events that I know of so far are in Sydney and Melbourne, but hopefully it will be coming to other capitals and major cities as well.  It looks like there is an option to host a screening so for those who live somewhere else if you’re keen on seeing it then get involved!

If there are other cities hosting screenings then please let me know, I’d be more than happy to update this post to add on any new events.

Will you be going along to the Playing with FIRE documentary?

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They’ve Always Been Faster – why it’s hard to compare your savings rate to someone else’s

Posted on June 8, 2019 by Aussie HIFIRE

One of the more talked about issues in the FIRE movement is what your savings rate is.  If you’re not familiar with the term savings rate, it’s usually worked out by taking the savings/investments you made this year, dividing it by your after tax income, multiplying by 100 to get a percentage figure, and voila there is your savings rate.  So if you make say $80k after tax, spend $30k and save $50k then your savings rate is 62.5%.

Pretty obviously a high savings rate is better than a lower one.  This is because it means you’re saving more money, and also because it means you are living off a smaller portion of your income so will need to have less invested to retire early and can get there quicker.  So working out your savings rate should give you a nice easy to compare number vs how everyone else is doing. 

Except actually it doesn’t.

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Folks Need Heroes

Posted on May 20, 2019 by Aussie HIFIRE

Regular readers of this blog will no doubt have figured out that I’m a pretty numbers and data oriented guy.  I like thinking about things like sequencing risk and safe withdrawal rates and budgets and the impact of various tax changes and other fun stuff like that.The fact is though that a lot of people don’t actually like numbers or math. 

As shocking and disturbing as that is to a guy who was on all the math teams in school and will happily play with spreadsheets all day long, it’s the reality of life.  And as mentioned once or twice before, this blog is all about reality.

So what do most people actually like?  They like heroes, and they like the stories of those heroes.

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Why I don’t automate my finances and pay myself first

Posted on May 4, 2019 by Aussie HIFIRE
City, Panorama, Tablet, Control, Board

Two of the big rules of personal finance are to automate your finances and pay yourself first.  They go hand in hand to a large extent, you figure out a budget and what your regular bills are and get direct debits setup, then you decide what you want to save and have that money go directly into a savings account for share purchases or a regular investment plan with a managed fund.  If you don’t see the money that you’ve saved then you won’t be tempted to spend it is the thinking and for the most part it works pretty well. 

So why don’t I do it?

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How would the proposed Labor policy changes affect me?

Posted on April 3, 2019 by Aussie HIFIRE

I wrote in my last post about the changes that Labor is proposing to make to the tax system, assuming of course that they get elected and get all their “policies” legislated.  Suffice it to say I wasn’t a fan of the changes as I think they will make it harder to reach FIRE, and policies is a bit of stretch given most of them are little more than soundbites at the moment.  So how will all of this affect my plans assuming it all goes through?

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How the other proposed Labor tax changes would affect FIRE

Posted on March 1, 2019 by Aussie HIFIRE

Most of the articles that the FIRE blogging community has produced about the proposed Labor tax changes has focussed primarily on the removal of cash refunds for franking credits, presumably because there is a heavy focus on Australian shares and living off the dividends.

It’s fair to say that this is a pretty contentious issue but given that there is no shortage of posts on this subject already including my own work, I want to talk some of the other proposed changes which haven’t received as much attention. 

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Making a bigger safety net – how much longer does it take to get to a 3% withdrawal rate

Posted on February 1, 2019 by Aussie HIFIRE

There’s been a lot of work done recently on sequencing risk and safe withdrawal rates for Australian investors.  Dan over at Ordinary Dollar has done some fantastic work with his series and I’d like to think that I’ve contributed something to the FIRE community with my work as well. 

One thing that has come out of this is that the magical 4% withdrawal rate using only Australian investments has not historically been 100% safe.  I talked about it in this post here and Dan covered it in this post.  What we both find is that if you are only looking at Australian investments then you need to be more conservative with your withdrawal rate.

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The reality of tightening your belt – why there’s only so much you can cut your living costs

Posted on January 22, 2019 by Aussie HIFIRE

The question of what people would do if their income in retirement declined significantly comes up quite a bit, and the generic answer seems to be that everyone would just tighten their belt a bit ie cut their living costs.  Which sounds great and sensible and all that wonderful stuff, but the reality is that it probably wouldn’t be quite that easy.

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