We are home! Slow travel lessons

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Hello everyone we are back and alive! After a month of being in Italy, Switzerland, Paris and Singapore we are back into reality.

It was such an experience and everyone was definitely fabulous. We didn’t miss a bus or train or subway thanks to my detail-oriented husband, and we didn’t lose anyone.

So as for the slow travel/minimal suitcases – I have to say that I am hooked. Taking cabin luggage only meant that:

  • We did not over pack. I packed:
    • Three pairs of pants
    • Two pairs of shoes
    • Three t-shirts
    • A coat
    • Two jumpers
    • Underwear and light pjs
    • Minimal makeup – eyeliner, mascara, bb cream, two lipsticks. We took a risk that in most places we would have access to a hair dryer and otherwise we would tolerate holiday hair.

* Reality test: we are wearing the same clothes in most photos. We didn’t mind. We also took a small portable washing line and hand washed underwear when we could not find a local laundromat.

It also meant that we did not buy a heap of things that we would not really need at home. You know that feeling – I must be this leather jacket/piece of jewellery/touristy ornament because I am never going to be back – is such a holiday spending trap. My husband brought a small foldup light bag that we put extra purchases in, but it was across the seven of us, so really we couldn’t buy much. The photos and memories have been the things that we have come back to the most, since being at home, not the things that we bought.

  • We had accommodation in apartments where we could cook our own food for breakfast and sometimes lunch/dinner. We could buy and store snacks and fill up our water bottles.
  • We did not try to do everything. We visited a major attraction each day (Roman ruins, Eiffel Tower etc) but also had plenty of down time in cafes or in apartments reading and watching the world go buy. It was such an exercise in people watching.
  • Two other slow travel tips – for the foodies, a food tour in each new city is a must. You get to learn about the local places to pick up the best cheese, baguettes, charcuterie and wine. Then for the rest of the stay, those places become your favourite local haunts and you avoid hit-and-miss food experiences.
  • Secondly – we had eight busy days in Rome and Florence and headed to Lake Como. Nothing to do there but relax, look at the lake, go for a boat trip, drink cocktails and read books. It was such a great “down time” part of the trip in an absolutely stunning location (see view from our hotel – you get what I am saying).

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It would be remiss of me to say that yes, we were fleeced on this trip. Our accommodation was sub-standard, over-priced and next time I would not use a travel agent to make the accommodation bookings. I was nervous taking seven people over and just wanted the certainty of a travel agent booking.

Next time, I will have the confidence to do it myself, and save quite a bit of money. I will still look for apartments in the hearts of the cities we visit, but will do a lot more research on Trip Advisor and make the bookings myself.

We also have a funny Trevi fountain story – we came up from under the subway, saw a small, understated fountain and thought – hey there is a self-stick seller lurking around – this must be it! Kids crammed into a photo and threw coins over their shoulder, made a wish, and we went off on our merry way.

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Until we found this:

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We just laughed so hard I thought I was going to wet myself. Ohhh the joys of being one of those stupid, uncultured travellers that I’m always complaining about at home….

Now that we are back, my husband and I are in the process of making some exciting lifestyle choices about work, our family and projects that we want to complete here around our home. I’ll write more about that next time. Hope you are all well and taking steps towards your slower paced life.

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Transition to zero waste part 2

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Today in the Low waste series I wanted to talk about being low waste in the work place.

For a typical worker, this usually comes down to three things:

What you wear to work

What you eat at work

How you manage your work flow

For today’s post I will focus on what to wear. Like many of us I have struggled with a wardrobe full of clothes and nothing to wear. Prior to adopting a simple lifestyle I’d hazard a guess that nearly 80% of my disposable budget went into clothing, shoes and handbags. My habit was shopping. I shopped if I was sad, bored or needed a pick me up. I shopped to celebrate and to spend time with friends. My kids knew that on the weekends they were with me, we shopped for fun. We joked about how many bags we bought home. Looking back I’m pretty ashamed. I’m also ashamed at the opportunity cost of buying all those clothes the time and the wasted money. Money that could have been devoted to financial freedom. Anyways, onwards and upwards from here

So my approach to my work wardrobe is very different these days. Now I look at clothes as a means to an end. I need to look professional at work, but really every dollar I spend on having multiple wardrobe options is another two dollars that I have to work, and it stands between me and not having to work for an income at all!!

If that’s not motivation, I don’t know what is.

So I know approach my work wardrobe using Courtney Carver’s Project 333. I raise eyebrows at work when I mention it, usually followed by a comment that people haven’t realised that I have worn the same thing twice.

The approach is simple. Thirty three items for three months. It involves sitting down and being really deliberate about your wardrobe for a few days. It starts with:

What are the basics that I need in my work wardrobe? For me its ten dresses, two suits that have skirts and shirts. To keep things matching, I usually chose complementary colour schemes. This summer it’s been black, navy and grey.

Then I need a couple of layer pieces like some cardigans and perhaps a scarf or two.

I then turn to mind to what is going to delight me this season – thinking about your fashion interests that season what are a few nice pieces to update my wardrobe and make me feel contemporary

Finally a couple of statement jewellery pieces and a great bag

I have to admit that I am not an op-shopper, but to keep my waste low, I limit the clothes that I buy, and then donate clothes once I have finished with them so that other people can enjoy these pieces that I have enjoyed.

Do I get sick of the same old same old? Sure I do. But I also think about whether it’s worth me having multiple work looks, compared to a life of no work and independent income streams. That keeps me satisfied with wearing similar clothes over and over again for sure.

 

Part 5: Retirement planning (or for younger people – financial independence planning!)

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Last financial post for a little while. Well – just for a few weeks…

This week I’m thinking about retirement. I’m really thinking about it because I am having a little mid-life retirement right now, and I’m on the other side of forty.

A couple of things have happened to spur me into action to think about retirement planning at the wee age of 42.

  1. When I was on the treadmill of full time work, I had no idea of how much money I was aiming for, to save for our retirement. If you find yourself in a job that doesn’t thrill you each day, this question about how much money you need in retirement comes into sharper focus (when can you get the hell out of your work place).
  2. At 42, I also had more of an idea of the type of lifestyle I want to live in the second half of my life. And for us, the second half of our lives is less about career and more about fulfilment. It’s less about keeping up with the soccer mums and more about spending time with my family. Being clear on the type of life we want to live means that I can be more realistic about what living expenses I will need

I will ‘fess up. I spreadsheeted our life in excel right out to my husband’s death. I thought about a comfortable retirement where we owned our own house, travelled once a year internationally and pottered about Australia every now and then. I made provisions for:

  • A contribution to either the children’s education or a deposit on a home, given how difficult that is. To do that, I have planned to lock away $20k per child in a growth account until they require it
  • An upgrade to our existing house – it needs a new kitchen, bathroom and ensuite need an update, and possibly the exterior verandah and steps. It’s a 25 year old house and things are starting to peel/chip/rust/corrode/rot – you get the picture
  • $200k to down size and upgrade our house as our birds leave the nest – not sure when this will be, to be honest. But when it happens, I’m keen to live in a house that is consistent with our values like minimalism, leaving a minimal environment footprint and self-sufficiency.
  • We will need to get cars at some point in the future. I’ve budgeted $50k for that, because I know that we will get something second hand or an electric car.

So all up, we need an extra $500k on top of what we need to live on, to meet our anticipated living expenses between now and retirement.

Following these calculations, we went to see a trusted financial planner (word of mouth).

We looked intently at our superannuation pensions and realised that my husband (who I now love a little bit more) has a great pension that he can start to access in five years that will meet our living expenses.

We already have savings. In summary, this means is that we need to save another $440k to meet our anticipated capital or lump sum expenses, maintain our private health insurance and combined with the pensions we will have a standard of living that is equivalent to $100k per annum in five years’ time – and for now, it’s tax free income.

So let’s work backwards. If my husband and I continue to work full time/part time over the next five years, we should be able to save approximately $50-$70k per annum. That will mean that by my husband’s pension age, we will have between $250k – $350k in the bank towards those capital outlays, sans any interest that we have earned.

Come early retirement time, we will need to earn between us around $50k extra per year for 3-5 years to make sure our capital lump sums are taken care of. That’s a very part time job for me at the ripe old age of 48. My husband will be 55.

Prior to completing these calculations, I felt like I was on a working full time treadmill until the ripe old age of 65 at least. The purpose of completing these calculations was to see whether or not that treadmill for life was actually necessary – and guess what – it’s not.

By gritting your teeth through the boring bit of looking at the figures, and getting some advice, you can predict to the greatest extent that’s possible in this uncertain world – what the second half of your life can look like. A part time job for both of us enables us to pursue our passions (volunteering, travel, music, doing up old cars, growing veggies) and taking the slow road in life. It was this calculation that enabled me to take this recent career break and reassess the way we want to live.

Here is the calculation in summary:

  • Current expenses, and then add an inflationary multiplier each year (I chose 3%). Extrapolate out to the time that these expenses are relevant and then reassess. For example, I calculated that we will have kids requiring full care for the next eight years and after that, they will be making some contribution to their own living expenses, therefore our overall expenses will be less. Extrapolate that new figure out until the average survival rates for men and women in your country.
  • Think about the big lump sums that are coming your way in the future. Home upgrade? Medical procedures? Big travel plans? Replacing cars? Home renovations? Contribution to children education expenses? Still paying off the mortgage? When will that be complete? Total this amount.
  • Now add in current income with a wage increase (I used 2% to be conservative)

If you set up the spreadsheet horizontally, and add in when lump sums will occur, you can actually forecast when your cash will be called upon, and the cumulative cash flow position of your family.

Add in when you will start receiving superannuation pensions and there you have the best prediction of your family cash flow. Here’s a blank version of how I set up this sexy spreadsheet:

retirement calcs post tax
Kirsti 43 44 45 46
Husband 50 51 52 53
CPI 0.03
2016 2017 2018 2019
Expense
Capital exp
Extra travel
Kids savings
Renovations
Replacement cars
Total capital
Income required
Salaries
Husband   current income
Kirsti’s current income
Income total
Pensions
Husband pension
Lump sums
Kirsti’s pension
Total pensions
Surplus/shortfall
Carry forward (savings)
Return on savings

I’ve extrapolated this out until my husband’s death at 87…. (cheeky!)

I cannot stress the importance of getting good financial advice. Without ours, we would not have realised how good my husband’s superannuation fund was and how early it was going to enable us to retire.

Now to be clear, retirement for me isn’t about heading off to the golf course and playing bowls at the age of 48 (although if you love golf and bowls, go for it). Retirement for me is retiring from the ball and chain of full time work that I am resentful of. Retirement for me is financial freedom, part time work and the time, space and money to focus on the things that truly bring me joy and fun.

Perhaps this position is best summed up as financial independence and the freedom to live your life as you choose.

Part 4 – net worth tracking (stop yawning)

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As part of my five part series on family financial management, today’s post is about net worth tracking.

One of the biggest questions that I have turned my mind to over the past eighteen months or so is our family’s net worth – that is – our family balance sheet. It’s a bit like putting a business lens over your family finances and seeing whether the family company is actually growing its asset base.

So net worth tracking – what is it, and how do you do it?

It sounds so fancy, but simply put, your family net worth is calculated by deducting your liabilities from your assets, and bingo – that is your family net worth.

So, why should I go to the trouble of working out what our net worth value is? Five simple reasons:

  1. At any given point in time, you can see whether you are growing your family assets and achieving your financial goals. You can also critically examine composition of your assets, for example and see whether you have any over exposure in terms of risk that you may want to readjust.
  2. You can also see whether you are financially going backwards. For example if property values are falling and you are only making interest only payments on your mortgage (the principal is not reducing) you are going backwards, financially. If you want to change the situation, by tracking your net worth, you will be alerted to this situation and will be able to re-jig your finances accordingly.
  3. Net worth calculations will keep you honest and real about your financial situation if you track it over time. It’s easy to redraw cash on the mortgage to pay for an overseas holiday or put a pool in (we have done this one!) and continue to dip into your redraw facility like it is free cash without any consideration of the long term financial impacts for you and your family. Watching your net worth stagnant over time as a result is an eye opener. We did this for about three years. A combination of seeing our static family balance sheet and a strong urge to spend more quality time with family and less time at work propelled us into action (the Year of Austerity) and beyond.
  4. Net worth calculations are super important in retirement planning. I’ve found that being on this side of 40 has really sharpened my interest in knowing whether I will have enough money to seriously retire and focus on projects that I am actually interested in.
  5. It’s important for estate planning. Perhaps for my generation, intergenerational wealth has not seemed as necessary (I’m a self-starter and have made my own way in this world financially) but for our children, market predictions on employment prospects and economic growth generally are looking a bit bleak. I’d like to think that I will have some $$ to leave all of our five kids as a back-up fund for them and their future families in times of hardship.

For the purposes of being a useful calculation, you want to not include the short term, small assets that can seriously fluctuate at any given point in time. For example, our “trading” account, where our salaries are paid into and our credit card is paid out of, can wildly fluctuate between $12k and $50 depending on what time of the month it is, and whether we have paid our credit card recently. Because this could overstate or understate our net worth position at any time, I leave it out of our calculations.

Similarly, on the liabilities side, we pay off our credit card in full every month and it could have either $2k on it, or $9k, so again, I leave it out of our net worth calculation.

If, on the other hand, the credit card was not being paid off each and every month, and had become core debt – a long standing liability – then I would definitely deduct it off the family asset balance, because by not including it, I would not be viewing the true family financial position.

So, again, in the interests of being open and transparent, for our family, I’ll share our net worth position as at today.

Six monthly I usually do a little bit of my own real estate research to estimate the value of our family home and I use our six monthly superannuation balances to calculate super. I have to say, since the Year of Austerity and paying off our mortgage, we look financially under control and I like that.

Our net worth looks something like this:

Assets

Family home                                                      $700k

Savings account                                                $ 61K

Superannuation                                               $556k

Shares                                                                  $   5k

Total                                                                      $1.322m

Minus Liabilities

Core credit card debt                                     $0

Mortgage                                                            $0

Net worth                                                           $1.322m

 

Now I realise for some this is as boring as bat shit. But for me, it completely motivated me to think about running our family like a business so I could absolutely understand the goal posts of what we needed to save to retire (see next fortnight’s post); what we needed to budget for in the short term and therefore how much I needed to work and most importantly HOW MUCH TIME I COULD ACTUALLY SPEND WITH MY BEAUTIFUL FAMILY and not feel guilty about whether I had planned financially for the future.

I was easily prepared to be very bored to work that all out!

Give it a go, and tell me what you think. For some it will be facing the music but the music won’t go away by ignoring it.  For others, it might be quite surprising and liberating….

Part 3 – Where to from here now that our income has been halved

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Where has the time gone! The first three weeks of not working have been really busy – in a productive way. I’ll write about that later.

But for now, I wanted to update you on the family budget now that our income has been halved and I am not working – part 3 of my financial series.

As I mentioned, we have been to see a financial advisor on our superannuation and retirement needs, particularly now that David is nearly 50 and I am nearly 43. It’s important to understand the long game, and to understand how hard we have to work (or not work!) to ensure that we have both a reasonable standard of living now and in our retirement.

Main changes: I have reduced our food budget, and my mobile plan. There is not a lot of wriggle room in this budget – by the time we also get our allowances (which have also reduced) we have about $1000 spare per month. I intend to build this as a bit of a cash flow to help us on the heavier months when we have more expenses.

So our one income budget looks like this:

Expenses   yearly monthly fortnightly
26 2
Car rego $ 2,200.00 $       84.62
Car insurance $ 1,100.00 $       42.31
House ins $ 1,100.00 $       42.31
car services $ 1,000.00 $       38.46
petrol $     120.00
Sundry $     300.00
fernwood $       24.00
internode $   75.00 $       37.50
mobile $   35.00 $       17.50
pocket money $       25.00
cleaning $       65.00
food $     400.00
electricity $ 1,200.00 $       46.15
gas $ 1,782.00 $       68.54
water $ 1,000.00 $       38.46
rates $ 1,300.00 $       50.00
primary school fees $ 100.00 $       50.00
piano $     600.00 $       23.08
netball $     350.00 $       26.00
health insurance $ 1,600.00 $       61.54
girls clothing $ 1,500.00 $       57.69
movies $     100.00
red cross $   25.00 $       12.50
guitar $     600.00 $       23.08
dancing $     400.00 $       15.38
oxfam $   25.00 $       12.50
Boys school fees $ 4,624.00 $     177.85
Girls school fees $ 550.00 $     275.00
Girls mobile $   30.00 $       15.00
foxtel $   50.00 $       25.00
gifts $ 3,000.00 $     115.38
boys expenses $ 200.00 $     100.00
total       $ 2,489.85

The main thing that I will focus on to reduce our food bill is to really cook from scratch. I like the health benefits of this as well, as I am really keen on reducing the amount of processed food that we buy. Things that I already cook from scratch include:

  • Bread – sour dough is may favourite
  • Yoghurt – greek and vanilla
  • Mozzarella
  • Pancetta
  • Biscuits and cakes for the children
  • Hommus (Yotam Ottolenghi’s  recipe is so yummy)
  • Preserves  – I preserve food when it is particularly season and tasty – like mangoes, apricots, peaches, tomatoes

The second way I will reduce the food budget is by buying in bulk from our local Food Co-operative. The food is organic and not packaged, which I really subscribe to. I take in my own jars and produce bags so there is no plastic packaging.

Finally, I will grow up to 50% of our fresh produce. My husband and I have just spent the weekend building three new vegetable beds. This weekend’s outlay has been around $1000 – I have spent all up around $2500 on the veggies beds – but they will pay themselves off in no time.

My job is to keep an eye on the family budget and to make sure that we are on track. Bottom line is if I don’t keep track of it, I am back to work so of course, keeping expenditure within budget is my number 1 priority! I am loving not working and providing really healthy produce for my family.

Part 2 – The year of austerity budget and the new normal

So following on from part 1 Financial Psychology, today’s post is about the actual numbers during the year of austerity and how we determined the family budget.

We did it using a principle called zero-based budgeting. Zero-based budgeting is very different to shaving your existing expenses, like reducing your fortnightly food bill from $500 to $450.

Zero based budgeting works on the principle that every line item in your budget needs to be challenged. Only after every budget line item is challenged with a logical argument, then an appropriate amount can be determined for that line item.

I’ll give you an example of our own home budget. And don’t judge here – I’m openly sharing the budget for the purposes of illustrating an example that works for us. I completely understand that everyone’s financial situation is different and people place different values on certain types of expenditure. This was our budget before we went through our zero-based budgeting exercise nearly a year ago. It was excessive. It was absolutely a budget for the 21st century busy family where things were outsourced for convenience, like cleaning and home delivery shopping, when both parents were busy working. And for many struggling on one income, even our reduced expenditure will seem excessive. But anyways, for the purpose of the example, here was our budget….

Expenses   yearly monthly fortnightly
26 2
Car rego $ 2,200.00 $       84.62
Car insurance $ 1,100.00 $       42.31
House ins $ 1,100.00 $       42.31
Car repairs $ 1,000.00 $       38.46
petrol $       80.00
Sundry $     500.00
Child care $     378.46
fernwood $       24.00
internode $   75.00 $       37.50
mobile $   80.00 $       40.00
pocket money $       25.00
cleaning $     185.00
food $     800.00
electricity $ 1,200.00 $       46.15
gas $ 1,782.00 $       68.54
water $ 1,000.00 $       38.46
rates $ 1,300.00 $       50.00
primary school fees $ 155.00 $       77.50
piano $ 1,200.00 $       46.15
netball $     350.00 $       26.00
health insurance $ 1,600.00 $       61.54
girls clothing $ 1,000.00 $       38.46
movies $     100.00
red cross $   45.00 $       22.50
guitar $ 1,200.00 $       46.15
dancing $     800.00 $       30.77
Fred hollows $   35.00 $       17.50
World vision $   35.00 $       17.50
oxfam $   40.00 $       20.00
newspaper $     568.00 $       21.85
Boys school fees $ 4,624.00 $     177.85
Girls school fees $ 550.00 $     275.00
Girls mobile $   30.00 $       15.00
foxtel $   66.00 $       33.00
gifts $ 3,000.00 $     115.38
mortgage $     923.00
total       $ 4,545.96

And on top of this, my husband and I had amounts of cash deposited direct into our own accounts, for non-accountable spending – haircuts, clothes etc – our sanity allowances.

So as you can see with this budget – there was plenty of room for improvement.

From here, we went line by line and justified each and every expense. The conversation went something like this:

Cars: we still need two, because at times we are ferrying around 5 children and 2 adults, but let’s revisit once children start to get their own licences. Each car is getting on to ten years old, but serving us well. We will use the most economical car for the most amount of travel to reduce our petrol expenditure.

School fees – not negotiable. Not moving the kids from their schools for savings purposes. All kids are settled.

Food: ridiculous expenditure. Still a necessary budget item, but some significant savings can be made here. Resolution: shop only at Aldi and the fresh food markets and reduce to $500 per fortnight. No more home delivery… Savings: $300 per fortnight.

Utilities and rates – all still necessary expenses, but where possible, we will try and reduce our consumption. I’ll write about that later.

Kids extra-curricular activities – all not negotiable, and great for their health. No change.

Cleaner – loved having a great cleaner – and had a fabulous one. But with the risk of public service job cuts, we decided to save as much as possible and do the cleaning ourselves. I now pay the girls to help, we get it done in three hours and once I pay them, I save $120 per fortnight.

Sundry expenses: some sort of vortex going on here – a category for any other expense. Usually the case is money is spent because it is in my wallet. Coffees, the odd lunch out, kids school excursions, odd kid lunch money. Resolution: reduce to $300 per fortnight, savings: $200 per fortnight.

Girls’ clothing; instead of having a $1000 budget, we will only buy what is necessary to replace. No more weekend shopping-is-our-hobby. Anticipated savings: $500 per year.

Newspaper: can get it online. Saving of $568 per year.

Mobile phone; once my contract finishes this month, I will switch to an Aldi plan for $35 per month, savings $45 per month.

Health insurance: grrrr   – it stays.

Gifts: that stays, but we will look for savings.

Mortgage – this is our minimum repayment, and of course we pay four times this amount on our mortgage.

Ok, so for the year of austerity our zero based budget looked like this:

Expenses   yearly monthly fortnightly
26 2
Car rego $ 2,200.00 $       84.62
Car insurance $ 1,100.00 $       42.31
House ins $ 1,100.00 $       42.31
car services $ 1,000.00 $       38.46
childcare $     368.00
petrol $     100.00
Sundry $     300.00
fernwood $       24.00
internode $   75.00 $       37.50
mobile $   20.00 $       10.00
pocket money $       25.00
cleaning $       65.00
food $     350.00
electricity $ 1,200.00 $       46.15
gas $ 1,782.00 $       68.54
water $ 1,000.00 $       38.46
rates $ 1,300.00 $       50.00
primary school fees $ 155.00 $       77.50
piano $ 1,200.00 $       46.15
netball $     350.00 $       26.00
health insurance $ 1,600.00 $       61.54
girls clothing $     500.00 $       19.23
movies $     100.00
red cross $   25.00 $       12.50
guitar $ 1,200.00 $       46.15
dancing $     800.00 $       30.77
oxfam $   25.00 $       12.50
Boys school fees $ 4,624.00 $     177.85
Girls school fees $ 550.00 $     275.00
Girls mobile $   30.00 $       15.00
foxtel $   66.00 $       33.00
gifts $ 2,500.00 $       96.15
mortgage $     923.00
total       $ 3,642.69

Savings – just over $900 per fortnight, or $23,000 per year. Main reductions: cleaner, sundry items and food. We will suspend our Foxtel over the summer when football finishes, which will provide more savings. Another item that might get challenged next time we look at our zero based budgeting process again (it happens annually) is our movie night money, that usually is a cheap dinner out for the two of us and a movie. We might look to more eating at home and just the movie tickets, which is $35.

One of the interesting things that I will point out about this process, is that each stage of adjustment becomes the new “normal”. We had a higher budget that then first one a few years ago, let me tell you. I was easily able to justify our food expenditure at $1000 per fortnight because we have a large family. Our year of austerity for another family could be a year of luxury or a year of hell. It’s all relative.

By cooking with cheaper cuts of meat, using seasonal fruit and vegetables, and by producing my own fruit and vegetables, you can see our food bill has reduced substantially. But this reduction has been over time. As we got used to a new food bill level, we saw more opportunities to reduce it.

So – how do you budget and what do you find the most effective way of keeping control of your expenses?

The family finances – Financial Psychology part 1

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It’s a scary thing putting your family finances out there for all to see, but in the interests of encouraging others, I have developed a five part family finances series.

Part 1 – Financial psychology

Part 2 – The year of austerity budget and the new normal

Part 3 – Where to from here now that our income has been halved

Part 4 – Net worth tracking

Part 5 – Retirement planning

So the starting point for us:

We were both in the public service in middle to senior management levels. I’m not prepared to disclose our family income, but suffice to say that in household surveys we were always ticking the $250 000 and over box – and it was substantially over.

We moved in together with our blended family of seven in 2009, both reeling financially from two divorces with some superannuation and a mortgage of $350k against a house now worth about $700k.

Then we kind of financially dicked around a bit. We put in a new pool (above ground, but with a fancy deck); renovated some rooms, bought a second hand seven seater car and I realised mid-way through 2014 that we were still sitting at $140k on the mortgage some five years later, and had only managed to get through just over $200k, despite our reasonable income earning reality.

So – the year of austerity was born. Just like Greece, we decided to cut back on expenses and knock over the mortgage within a year. I can happily report that we have achieved our goal, which has enabled me to take the next year off work and spend some more time with my children, as well as potentially go back to work after that on a part time basis.

So what was the psychological shift that enabled us to make the transition? I read Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence by Joe Dominguez and Vicki Robin and in a nutshell, I realised that each time I purchased a new item of clothing, something new for the house or bought a convenience meal that I was trading my life hours for money.

The premise is this: everyone only has a certain number of life hours available to them. Each time you purchase something, you are trading some life hours away. EG I could buy this nice $200 shirt that will bring me immediate pleasure, and perhaps the next two to three times that I wear it; but to get that enjoyment, I have to work for four hours (of half a day) to net that kind of cash. You add this up over a whole wardrobe, a new car, brand new kitchen appliances – you get my drift and you realise that you will need to work for most of your life to achieve short-lived consumption happiness.

The other thing I realised is that purchasing new things each pay day is like being on crack cocaine. It feels good at the time, and even the first few times that you use or wear your new thing – but then the “thing” you have purchased becomes a part of your new “normal” and you find yourself still craving for more. This is called hedonic happiness – short lived, but leaves you wanting for more. And it’s insatiable.

So the shift in gears in my mind has been two-fold:

  1. Each time I want to buy something, I think about is it worth the life hours – adding an extra half day/year/five years to my working life; and
  2. Is this purchase just for hedonistic reasons, or is it something that we actually need.

What have you learned about your financial self?

Cosmetics shame and empties challenge

So we went to the States in 2013, the AUD was holding up strong and everything was cheap including make-up and I wasn’t considering minimalism back then.

Oh and I am a GWP junkie. At least I was. A Gift With Purchase offer would have me hovering over a David Jones counter, pronto.

Consequently, in a small cupboard in my bathroom, I confronted a shameful fact today:

  1. I have 23 lipsticks
  2. I have over 50 containers (small/medium/large) of various moisturisers, creams, body lotions, shampoos and conditioners, facemasks, exfoliates, toner, makeup remover AND THEY ARE MY SPARE ONES.

It’s funny – simple living and paring back to the essentials is a process and not a project. Six months ago, I would have been proud of myself that I had organised them into neat little zip lock bags into their little categories.

Now, six months on, I am looking at them in horror. So much consumption. No end in sight in terms of getting to the bottom of the storage bin and just having one of everything, like a real minimalist.

Possibly, if I was hard core, I would think about donating them just to clear my clutter immediately. But I’m not hard core. I know I will use these products at some point in the very near future. So I have set myself an empties challenge. The challenge is:

No more makeup or moisturisers until all of the little bottles are used. I am going to set up a little bucket in my wardrobe to put the empties in, to remind myself of the challenge, and I will post on progress.

Here is some shameful before evidence:

all lipsticks

hair products

What is your shameful hoarding secret? (PS I’m sure I will continue to horrify myself as my expectations are reset with this simple living process).

I’ll follow the sun…..

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I’m chasing the sun around my house…..

Hard to believe that I’m chasing the sun in a week of -6 and -7 overnight in the Nation’s capital. Freaking freezing.

This week I have had some time off work – with headaches and fatigue (yes, yes, all clear signs).

So I have had the time to watch the rhythm of our house, and think about our electricity and consumption use

And this is what I found out.

We have heavy curtains to reduce heat loss, but with the two of us working, opening and closing the curtains to maximise sun and reduce heat loss just isn’t high on the priorities. What I discovered I that when you have time, you can care about these important factors. And remarkably, the house does not require heating between 9am and 5:00pm if I play my cards right.

I need to:

Draw the curtains at night when the heating comes on, to retain the heat as much as possible.

Open only the drapes in the morning and leave the shades down until the sun starts to stream though the windows. Between getting the kids off to school and when the sun streams in, I sit and write on the couch where the sun is captured through the front windows. It’s so yummy and toasty to sit with the sun heating up my back.

During the day, I get out and do some physical work in the garden while the sun is shining. This keeps me warm, reduces our heating costs and gets me being productive. Plus plus plus.

When the sun starts streaming, open up the shades and let the sun shine on the floor and heat up the slate tiles. It’s delicious. And the house keeps a cosy temperature of 19 degrees in side all day.

I sit and meditate in the afternoons, in the front window with the sun at its warmest.

Finally, I manoeuvre the clothes horse around to get the clothes dry.

All the while, I’m watching the Wattson click over our net power usage, once we take into account the solar panels.

Wow. Without the experience of chasing the sun, I would just have the heater on all day.

What do you do to maximise the sun?

We’ve just pressed STOP on the treadmill of life…

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Yep – we’ve done it. Metaphorically at this stage. We’ve hit the button and are reassessing our life choices.

I’ve reached that critical half way point in my working life, at age 42, and a series of questions have started to emerge in my mind:

  • What am I working for?
  • How much do I actually need to work?
  • What will be the big expenditure items that I need to save for between now and retirement?
  • What do I need to live comfortably in retirement?

As part of slowing it all down, my husband and I took some proactive steps to find out the answers to these questions. And the results have surprised us.

We can actually work much less than we are currently

YIPPEEE!!!!

(cue fireworks)

To get to a point of knowing an answer, we went through the following process.

  1. We have virtually paid down our mortgage over the last year of self-imposed austerity measures.  We have set a pretty rigid budget since last September, and it has worked.  Our mortgage will be paid down in November.  I’ll post more detail on how we achieved this at a later stage.
  2. We have taken time to understand, and have sought advice on our superannuation funds.  My husband’s fund is a defined benefits scheme, which means he receives a multiplier of his final average salary as a lump sum, as well as an indexed pension for life (I didn’t just marry for love alone….).  To understand these figures, my husband contacted his superannuation fund and was provided access to a calculator that spelled it all out.
  3. My superannuation fund is just an accumulated benefits scheme, but I have been making some voluntary contributions in the past few years and I have accumulated a reasonable amount that will “top up” any further living expenses that we might require in retirement.  I found a useful calculator at www.industrysuper.com If you plug in your super balance, and adjust for your anticipated weekly expenses, you can work out how long your super will last you for.  For my purposes, I just added on what we would need on top of my husband’s pension, and we will be able to live until we are 104.
  4. We then went through a process of understanding what our retirement income will need to be in today’s dollars.  To do this, we went through a budget that included a little overseas holiday each year and worked out a budget of $75k per annum, in today’s terms.  We also benchmarked this against other retirees of today (our parents, for example) to understand whether that was reasonable.
  5. Between now and retirement – we have worked out what are major items of expenditure will be:
    1. Small house renovation ($100k)
    2. Savings funds for each of the kids and their homes or educations ($100k)
    3. A couple of car upgrades ($80K)
    4. Downsizing to a nicer, solar efficient home ($300k extra)
  6. We are now working on a spreadsheet to develop just exactly how much we need to earn between now and retirement, so we can achieve some balance between what we do to earn money, and how we want to live.

I’m no financial planner – I’d suggest you absolutely get your own advice, but this process has been completely liberating. Instead of thinking that I would need to maintain or increase my current salary levels and keep working forever, I’ve actually learned that I can decrease my salary. I can take a career break. I can earn less. I can do less.