The Year of Investing - November 2017

November is the real start of summer! And it has been the start of businesses ramping up for Christmas, and my investments have all performed admirably. I've been completely disengaged from this blog dealing with professional turmoils at work, but I'm cautiously optimistic this shake up will lead to some career leaps, more money and more responsibility if I can play my cards right - and not lose my temper at the guy who seems determined to snatch the same opportunity.

The Year of Investing - October 2017

What a month! It was crazy expensive, I saved a tonne of money and I went out, with people! I'm not a huge social butterfly but I'm always up for a good costume party. There was a hint for summer for a day or two, and then winter laughed and laughed and took over again. At least the finances went well.

Budget Reboot Challenge: Good Ol' Fashion H20

Hello Budget Reboot, have you tried turning it off and on again?

Money saving posts are always the same - stop doing this, stop buying that, stop having any fun and live a sad deprived life while watching the numbers in your bank account tick up and up. Of course, they don't frame it that way, but when someone asks you to give up something you love in the name of money, we get pretty defensive.

Instead of 'giving up' let's try something new. Hit the refresh button on your spending habits with this Budget Reboot Challenge.

This month's challenge: Replacing all your bad habits with a glass of water

Did you try last months Budget Reboot Challenge: Fast Fashion?

Asking you to replace a bad habit with a glass of water sounds like a joke, and not a funny one at that. However there are plenty of things to consider, starting from the mundane to the obscure.

Firstly you can replace expensive drinks with water. Sweet teas, fruit juices, soft drinks, and especially energy drinks add up to hundreds of dollars marching out of your wallet each year. However water (and I'm talking about water from the tap, not expensive bottled water) is just a few cents per kilolitre.

Replacing habits with water

If you are tired and need a pick me up it's easy to reach for a coffee, an energy drink or something sugary to try and spike your energy. But if you are dehydrated you'll only experience a small rush, followed by feeling even worse than before. If you are dehydrated a couple of glasses of water will be a better pick me up than an energy drink.

More than replacing drinks with drinks, you can reduce other expensive unhealthy habits as well. If your dehydrated, your brain will send hunger signals. Rather than buying an expensive packet of chips from the vending machine, first have a glass of water.

To truly stretch this experiment - can water help you quit smoking? Maybe. If you're smoking is an excuse to walk away from your desk and go outside, consider swapping one cigarette a day for a glass of water. It may satisfy that need to step outside, to fidget with something, to have a break.

Reducing needs by drinking enough

There are other things that are indirectly connected to how well hydrated you are that are costing money on a daily basis.

I have three different moisturizer tubs - one on my work desk, one in my bag, and one in the bathroom. Despite this I have been dealing with dry cracked hands for more than three months. The moisturizer is covering up the symptoms, but the cause is that I am dehydrated.

Just as I carry two lip balms around - instead, I could be carrying around a bottle of water.

Lastly, I very rarely take painkillers for headaches. For small pains I drink a glass of water and go on with my day. For bigger aches I have a couple of glasses and a nap. Only when the pain is bad enough that I can't nap I take painkillers. I only need to use painkillers once or twice a year - in most cases an extra glass of water solves the problem.

Click to embiggen!

Turn it off and on again: Bad Habits vs. Water

The point of the Budget Reboot Challenge isn't to force you to change your ways, but to commit to something for a set period and see what it's really like. Turn off snacking, smoking, your moisturizer reliance, and turn on water instead, and at the end of your commitment, ask yourself if you really need to add that habit back in again?

How long can you replace a habit with a glass of water? One Week? One Month? One Year? How much can you save doing it?

I can commit to drinking two litres of water a day for a month!

At the end of that; well to be honest this is a habit I'll probably keep. I have been using a lot of moisturizer as my hands have been extremely dry and scaly. In the last week drinking two litres of water a day I've already noticed an improvement. I'm hoping that by simply drinking more water, I can stop moisturizing every day.

Whatever you're replacing with water, ask yourself at the end of the month:

Do I need my old habit?
Do I feel healthier?
Did I save money?

Budget Reboot September, how did you go?

Back in September I asked you to try buying less clothes, or even none! I committed to buying nothing, except for one costume. And I have to say, I failed. Wondering what I bought? What super exciting item was it that ruined my plans. What glitzy, glamour piece caught my eye? Nothing exciting, I bought socks... wheee!

Total cost of socks? $8 which I will wear until the holes are so big they don't stay on my feet.

Miniature Homesteading: I got worms!

I dream of a home in the country, with sprawling green meadows filled with cows. A dog or two sprawled at my feet and hens clucking in the distance while I drink fresh coffee with a dash of today's milk. I picture an orchard with every kind of fruit tree, with my hens running and digging under the trees. I dream of a wide open space where I can walk the dogs for an hour without leaving my own land. In my mind we have our own pond for fishing, and a creek full of frogs that dries up in summer leaving behind a bed of washed pebbles.

But right now I live in the suburbs on a teeny tiny 140m2 block. This doesn't mean I've put my homesteading dreams on hold.

Day one - 50grams of foam, 50grams
of mealworms, and the wheat bran
they were packaged with

I got worms, they're multiplying!

I read an article recently that said mealworms could digest styrofoam and turn it into usable fertiliser. This coincided nicely with realising that I'd love to have quail, but most commercial feeds don't high a high enough percentage of protein so I'd need to supplement their diet.

Of course, considering I already have chickens, getting another kind of poultry on my tiny property is probably a bad idea. Impulsively buying a half dozen quail would have been a bad idea, but impulsively buying a batch of mealworms was great!

Set up and start up costs

Foam is delicious!

Back in September I started with one small five liter container ($3), 50 grams of foam (free) and a double handful of rolled oats ('free' from my pantry). I bought 50 grams of mealworms ($8) and set them loose in their new home. 

I very quickly found myself having foam donated by my zero-waste friends, and discovered the meal worms will eat husks from bird seed and unpopped popcorn. For the first month of feeding I've spent $3 to purchase a back-up bag of oats so they aren't living entirely on foam. I've also started washing foam trays from meat packaging as another free food source.

Turns out 50 grams of mealworms don't eat much, but they grow super quickly. I've already split them into three new containers to prevent overcrowding, and I spotted my first couple of beetles yesterday!

Wait, beetles, I thought they were worms?

Meal worms aren't actually worms, they are the larval stage of Darkling Beetles (Tenebrio molitor specifically, for the latin buffs). After hatching mealworms take about three months to grow to their full size, when they then pupate. Kind of like cocooning,  meal worms become dormant for a few weeks while they transform into beetles. Approximately two weeks after becoming beetles they start laying eggs. Each female Darkling Beetle lays more than 500 eggs in its lifetime. In warm weather this entire process speeds up.

One month in - big fat worms!

So what does this mean in short? I bought 50 grams of meal worms. They've started turning into beetles so in a couple of weeks I will have 50 grams of beetles, which (if I ask google) will be close to 200 beetles. Given six months to complete a full life cycle, my 200 beetles will lay 100,000 eggs leading to (if my maths is right, and 100% of the eggs hatch) close to 25kg of beetles. In one life cycle!

Realistically this won't happen, because meal worms will prevent overpopulation by, well to put it bluntly, cannibalism. And because nature isn't perfect, so there is no way 200 mealworms will all reach adulthood and have 100% success rate their eggs hatching. Oh, and half the beetles are male and they won't lay eggs ;) However since I will be running at least 4 tubs of meal worms, I expect to end up with a couple of kilograms a month.

Cashed up with bugs

Because this is a personal finance blog, it would be remiss of me not to considering the financial benefits of these little guys. 

All the pupae slowly growing
into beetles

I purchased 50 grams of meal worms for $8. If I can find buyers for my meal worms, I can sell roughly a kilogram a month without depleting my stock. Of course, I will be selling them cheaper than a pet store (to encourage people to drive to my house, rather than a convenient pet store) so I expect I could sell a kilogram for $100, or 50 grams for $5.

Outside of the pet food market, there is also the possibility of selling them for fishing bait, or as recyclers for anyone interested in reducing their waste output - what other creature do you know that can break down Styrofoam?

Worst case scenario? I'm out $11 of supplies, plus approximately $3 a quarter for food. In return I receive an endless supply of chicken treats for my girls, high quality fertiliser and creepy crawly entertainment.

Getting rich while I sleep?  

I might not become horribly wealthy selling meal worms. If I'm lucky I'll cultivate enough regular customers to bring in a little extra money each month. While I don't plan to retire on my insect empire, I look forward to knowing that I have an asset growing in a few storage tubs, literally while I sleep.

I recently swore off side-hustles that take hours of my time and return little money, and even less enjoyment. So far my meal worm colonies haven't made a cent, but they have provided plenty of entertainment for me and my cat, grossed out my friends, fertilised my blueberries, and let me be insufferably smug about my ability to recycle polystyrene.

And in the event of a worldwide crisis (read, Zombie Apocalypse), perhaps people will start wanting mealworms for their own dinner. I should probably wean them of the Styrofoam first though.

DRP drip your way to riches

Investing can be tricky, daunting and just plain hard. In many cases the struggle doesn't end when you finally buy an investment, because then you need to manage it. You watch the value of stocks, make sure rentals have a good tenant and deal with the constantly changing value and cashflow.

One way to get the most out of your investments with minimal effort is with a Dividend Reinvestment Plan (DRP)

When I was working in a fast food store, and studying at university I wanted to buy an investment property (over achiever!), but I didn't have the money or the income. Instead I sat down and started buying investment bonds. My first purchase was Primary Healthcare Limited (ASX code: PRY) . For $2,000 I bought 20 Bonds, which at the time were returning more than 7% p/a.

I held these for a little over three years, where they paid dividends quarterly like clockwork before the bonds were redeemed and my initial investment returned. In three years I made $420. As my first investing venture this was pretty amazing! In those three years I bought Bonds with other companies, and ended up with a portfolio of $20,000.

This would be a great success story. Except... I have no idea what happened to those dividends.

The final resting place of the under-utilised dividends

While I've moved away from Bonds and into investing through Vanguard, RateSetter and Acorns, I once has a collection of bonds paying roughly $200 quarter. As a less than 20 year old, this is an amazing amount of money being brought in from a completely passive investment. However, I didn't reinvest it, and it never grew. 

Payments were made quarterly into my bank account and absorbed into my every day spending. The problem with corporate bonds such as the ones I was investing in is that they have no automated reinvestment schemes - the only option for dividends is to have them paid directly into your bank account.

While it's wonderful seeing money come into you account every three months, it's hard to partition out such small amounts.

Dividend Reinvestment Plans

When investigating new investment now, I have a few things I check, but one absolute necessity is stress free reinvestment. I don't have the time or energy to watch my investments and make sure that when I am paid $11.17 (or some other obscure amount) that I portion out that money into a new investment. It's far too easy for that money to disappear into my every day spending, and it's really hard to find an investment that let's you make such small contributions.

The majority of stocks that pay dividends allow you to enroll in a Dividend Reinvestment Plan - commonly written as 'DRP'. I love these plans for a few reasons, but mostly because I'm a lazy investor and want to do as little work as possible to earn my money.

How it works

Dividend Reinvestment Plans are super simple. To sign up you fill out a couple of online forms that takes less than five minutes. Once these are completed, rather than receiving cash dividends, your money is automatically reinvestment in the company. Without even lifting a finger, you receive more and more shares of a company each quarter. The only involvement you have is reading the statements and feeling smug about your good choices.

Discounted purchases

One of the companies I own shares in (from before I learned about Vanguard and bought individual stocks) has just announced their quarterly dividends. For everyone enrolled in the DRP they are offering a 3.5% discount on the share price. Put simply, the shares are currently worth $2.10 each, but I'll be buying new ones with my dividend for $2.02. If I was to sell them immediately, I would make 18c on each share - which is great considering the dividend they are paying is only 4c per share. 

Of course, if I wanted to sell these new shares, I'd need to pay brokerage.

No brokerage fees

One of the biggest kicks in the teeth when buying shares is the brokerage fees. When I was investing, the cheapest fees I could find was $30 a transaction. Absolute madness! When buying $3,000 worth of shares, I would immediately be behind 1% because of the transaction costs. There are new systems available that only charge $6 a transaction, which is much better, but still a fee I'd like to avoid. With a dividend reinvestment plan, you don't pay brokerage - which is money back in my pocket. 

Automation

I am such a millennial - my favourite part of DRP's is that they're automatic. I am lazy. Whenever I have to think and plan, I get tired and I want to nap instead. I have a finite amount of brain function each day, and I love doing absolutely nothing to recharge.

Having a completely automatic reinvestment plan is great.

DRiPping my way to riches

Dividend Reinvestment Plans are amazing for the lazy investor, because they create a set and forget path to wealth. The quarterly distributions remind you that you own a piece of a company and should keep an eye on it just in case, but otherwise there is nothing to do. Historically some of the most successful investors have been the ones who simply forgot they had investments, and uncovered them years later.

The Year of Investing - September 2017

September went so well I set myself an investing stretch goal! It may have been a quiet month on the blogging from, but the weather has turned wonderful, my accounts are trending steadily upwards and life feels good.

Focus on your day job

A popular idea in the personal finance sphere is to start a side hustle. An online business, babysitting, or even a blog like this one can bring in a couple of hundred a week if done right. Of course it can also bring in next to nothing if you don't do it right (ask me about my blog profits ;) ). However we (almost) all have day jobs that are where we make most of our money.

Given a little love and attention these day jobs can make us a lot more money than any side hustle - for the same number of hours a week.

Side Hustle Rates

The income from side hustles varies wildly. Babysitters can charge $20-$25 an hour, maybe more for multiple children or overnight stints. Pet sitters generally only charge $20-$25 a night. Freelance writing rates vary from $10 an hour to $40 an hour, or sometimes $5 for 500 words, up to $20 for 500 words.

For every wildly successful freelancer out there, there are 100 more people make a measly $5 a week from online surveys or less. 

Of course, we don't often talk about the unsuccessful hustlers. Their stories just aren't as interesting, but they outnumber the success stories at least 100 to 1, maybe even 1,000 to 1. Or ever more!

Day Job Rates

Minimum wage in Australia is $18.29. While this might not seem very exciting when compared to making $40 an hour freelancing, day jobs have these wonderful things called promotions.

But before starting on the idea of making more money, remember that day jobs also come with annual leave and sick leave. In my position I earn 4 weeks annual leave each year, and 12 days sick leave. I also get public holidays off and get paid the same for a public holiday week.

With 4 weeks annual leave, 12 days sick leave and 12 public holidays, there are 44 days each year that I don't need to be at work, and still get paid.

Considering minimum wage, the rate on paper is $18.29 - $695.02 a week (38 hours) or $36,141.04 a year. However, consider that a full time employee can take all their leave and will still be paid $36,141.04 for only working 46 weeks a year. 

This means your actual hourly rate for the time you are at work is $20.67. This is a couple of dollars higher than your 'on paper' rate and well worth keeping in mind.

A freelancer on the other hand, does not get sick leave, annual leave or public holidays off. They can walk away from work whenever they want (assuming they still meet all their contracts) but the money won't follow them.

Earning more

There are two ways to earn more with a side hustle - work more, or charge more. 

To earn more with your day job you can't pick up more hours (in most cases anyway) - you just have to figure out how to charge more for your time. This comes through in terms of payrises, promotions and bonuses.

It seems easier and more enticing to earn more through a side hustle. After all so many nights are spent watching bad TV, so we have so much free time to trade for money. It also seems to happen instantly, just a few hours set up work for quick returns. 

However, side hustles are terribly draining. Human beings need to work, rest and play. We need to do nothing to take care of ourselves. While the draw of easy money is hard to resist, there isn't much money, and it is terrible for our health and well-being.

The simple alternative is to put in an extra 5-10% effort at work. It's boring, it's dull and when you do it day after day it can feel like it doesn't return much. However we often forget that we have infinite earning power. There are people being paid million dollar salaries.

While a million dollar salary might feel out of reach, by hustling at work rather than on the side, seeing a 5 - 10% pay rise each year isn't a far fetched idea. Starting from minimum wage, a 5% payrise each year for five years would mean you're now earning $23.43 an hour, an extra $200 a week. If you secured a 10% pay increase each year you would now be earning $29.45 a year, an extra $425 a week. 

Could you make that kind of money from a side hustle? Sure, but you wouldn't have the energy left to excel at work, and you'd be eating in to your free time. Is it worth losing all that time with your friends, family and hobbies for a measly couple of hundred a week? Probably not.

Budget Reboot Challenge: Fast fashion

Hello Budget Reboot, have you tried turning it off and on again?

Money saving posts are always the same - stop doing this, stop buying that, stop having any fun and live a sad deprived life while watching the numbers in your bank account tick up and up. Of course, they don't frame it that way, but when someone asks you to give up something you love in the name of money, we get pretty defensive.

Instead of 'giving up' let's try something new. Hit the refresh button on your spending habits with this Budget Reboot Challenge.

This month's challenge: Clothes Shopping

Did you try last months Budget Reboot Challenge: Eating Less Meat?

Spring is finally here! Not just according to the calendar, but according to the weather as well. The Spring Equinox is tomorrow which means warmth, long days, sunshine, and a whole new wardrobe! Time to start shopping for new shoes, shirts, shorts, light-weight summer jackets, and all those things that you bought this time last year.

Wait, bought this time last year? If we bought all these things last year, why do we need to buy them again?

According to the ABC's War on Waste, Australians go through a ridiculous amount of clothes. In this documentary they work with a group of girls to teach that that clothes can be worn more than once. These girls actually had to be encouraged that it was okay to wear the same outfit twice, whereas I have a jacket in regular rotation that I have owned for more than eight years.

Apparently I'm doing it wrong though - apparently at the end of every season I'm supposed to throw out those clothes and buy a new set. All my winter clothes, out the door to make room for all my Spring-wear. That I'm going to toss in 3 months to buy Summer wear.

If you couldn't tell by my dripping sarcasm, I think this is bloody ridiculous. To be fair I am removing all my winter wear from my cupboard - and stashing it elsewhere in my house. When it gets cold again next year I'll shift it all back into my cupboard.

The cost of a whole new wardrobe

Clothes these days are cheap. T-shirts for $5, pants for $10, jumpers and dresses for $20. With a few hours shopping effort (why would you want to!) you could purchase a whole new wardrobe for under $300, giving you a whole new look and variety of choices for summer. 

With so many cheap (poorly made, sweatshop) clothes available it's easy to get suckered into the fast fashion movement. It doesn't seem like much at the time to spend $30-$40 on a whole new outfit. But over time, it adds up to a ridiculous amount - which chains you to your 9-5 desk for years longer.

Let's assume you replace your wardrobe each season for $300. On top of that, you buy some outfits for special occasions (weddings and such) that you absolutely cannot wear again (oh the shame of outfit recycling!). These special occasion outfits cost another $400 a year.

Each year you're spending $1,600 a year on clothes. While it might not seem like much at the time, after 10 years you've lost out on $22,000, all for clothes that only stay in your wardrobe for a few weeks. 

If you were to put that extra money towards shortening your mortgage you could knock 9 years off your mortgage. If you've got a credit card debt, letting your clothes last through the seasons could be the quickest way out of the hole - by not spending any more, and freeing up money to make extra repayments.

Why buy new when there is so much excellent
under-priced stock in the thrift shop

Turn it off and on again: Buying any new clothes

The point of the Budget Reboot Challenge isn't to force you to change your ways, but to commit to something for a set period and see what it's really like. Turn off clothes shopping, and at the end of your commitment, ask yourself if you really need to add it back in again?

How long could you go without buying a new item of clothing? Big Kid Little Adult has started a challenge, to buy nothing new for a year (underwear excluded, you can buy that). Going in to summer if you need a few more singlets, just cut the sleeves off a ratty old shirt. I have so many of these, I actually have to hide shirts from myself in summer, otherwise I'll cut them all up!

How long can you commit to not buying new clothes? One Week? One Month? One Year? How much can you save doing it?

I can commit to Buying Nothing for a month! (Except for one costume... I've got dress-up needs! But I promise to buy second hand)

At the end of that, Turn It On again: This is the fun part. After the end of your commitment, you're free! You can buy as many new clothes as you want, but first I need you to do a status check for me.

Did you miss shopping? Did you find new ways to wear existing clothes?
Did you save money? How much?
Did you really feel like you were missing out? Maybe you could keep going with it?

Budget Reboot August, how did you go?

Back in August I asked you to try eating less meat. I committed to finding a meatless meal that Mr. FIRE would enjoy, and I failed. Drat. I fed him Miso Soup and Eggs on Hash Browns. While he enjoyed both of them, he argued that the Miso left him hungry, and that Eggs on Hash Browns made a great breakfast but weren't enough for a dinner. The search continues!

I did eat a lot of meat free meals myself while Mr. FIRE was away for work. Mostly because it was easier (being lazy helps some times). While I normally spend $200 a month on groceries, September is on track to be closer to $150. This is a pretty big saving, but to be fair it might be more that Mr. FIRE was away, than that I spent less. Then again, while he's away I have to buy everything myself, rather than sharing the cost - so maybe I did save?

You should be buying cheap shit

Just last week I said that you should stop wasting your money on shit. A big part of that is not spending money on cheap shit that falls apart after a couple of uses and you have to constantly replace.

I'm not changing my mind, but sometimes you really should buy cheap, second-hand, knock off shit before you buy the expensive top of the range good stuff.

Let's be frank, $140 jeans are totally frugal if they last 8 years. But if you buy them and realise you hate them, it was a waste of money.

That kitchen aid gathering dust?

The thermomix you bought and discovered you hate risotto?

You got a pool then realised you're afraid of drowning?

Absolute total wastes. Good quality expensive things that have burned a huge hole in your wallet without making you happier.

If you want to buy something expensive, you should buy a cheap shit knock off version first.

Trial it, see how much you like it, see if you enjoy baking muffins in a cheap silicon tray before buying an expensive set (FYI, silicon bakeware is amazing. I make so many muffins now...)

Buy it cheap

So you've decided to start off a new diet where you drink green smoothies every morning? Good for you, but step away from the $80 NutriBullet. Instead, grab yourself a $15 Blender. Let's be honest, it might not last forever, but there is a good chance it will last longer than your obsession with green smoothies.  

Buy it second hand

Whatever it is that you're just starting out - from cooking, to hang-gliding, to fencing, and back someone else has probably done it first. Before you rush out to drop $20,000 on a hang glider, see if you can pick up a second hand glider for a measly $5,000.

Or maybe, for a more relate-able idea, you probably have a friend with a thermomix sitting in the back of their cupboard not being used.

Financially free AND gravity free!

Buy it on special

If you've have a cheap knock off in the cupboard, and you've borrowed from a friend, then you can hold out for specials. While new rock climbing shoes can cost over $100 places like Anaconda regularly have sales where you can get new gear for 50% off. 

or maybe, you'll find a new hobby

The beauty of buying cheap shit, before committing to top price, top of the range equipment is that you'll never be left with a $30,000 hang glider and the realisation that you're afraid of heights. If you're enthusiasm outlasts your equipment, then that's a great reason to pick up some better quality items. But if you're only going to stick to a juice diet for a few days, why bother dropping $80 on a blender when a cheaper version will do the same thing.

Acorns - 12 month wrap up

Acorns are offering double sign up bonuses for September, which has drawn eyes there way and lead to them being crucified in the media with sensationalist headlines. But after a almost a year I feel like I've got the right to say, they ain't that bad. In fact, the returns are decent, the apps easy to use and the mindless investing structure is a great starting point that everyone should get behind.

If you need convincing, here's an almost 12 month wrap up.

I opened my Acorns account in October last year while sitting at my desk. I found I had developed this habit of going out for overpriced lattes simply to get away from my desk and chat with my coworkers. Once I had my account up and running I started depositing $5 each time I was invited out for coffee. The same amount of money way leaving my pocket, but I was much happier with the outcome. I'd rather buy time away from my desk permanently than a few manufactured minutes.

(BTW, this review will make a bit more sense if you've read about Acorns before, you can head over to my earlier review for a bit of background.)

However, a couple of weeks later I realised that I had an account balance of $25, and I'd just paid my first monthly fee of $1.25. For some super quick maths, that's an annual fee of $15, or a ridiculous 60% of my account balance.

Here is where everyone gets mad at Acorns. If you are only putting round ups in your account, then the fee structure is going to kill you. With round ups alone after a year my account would barely be hitting $200, because I'm not a big spender.

Round Ups are Acorns prime draw card. They track your spending and 'round up' each transaction. Spend $1.10, Acorns will take 90c. Except they don't, they wait for you to hit $5 worth of Round Ups, then take $5 each time. It's not exactly what they advertise, but it's still sneaky background investing that (most) people won't notice.

Except as I said, the fees on a small account are appalling and this is what most people are complaining about.

However to bring your fees down to a reasonable amount, you only need $400-$500 in the Acorns bank. While I was sitting in the passenger seat of a camper van in Tasmania I plumped my account up with a few easy button presses and dropped my annual fees down to 3.75%. The Acorns app is so easy to work with I did this even while my internet connection was dropping in and out.

Now let's be honest, that's still not a great annual fee. My Vanguard account pays a measly 0.75% per annum. However to open a Vanguard account, I would need to find $5,000 and a lot of people just starting out don't have that kind of money lying around.

When I started looking at investing I had $1,000. I definitely didn't have the confidence to drop $5,000 on Vanguard. That is the market niche that Acorns fills. Yes, the fees are higher than Vanguard, but the return (even after the fees) is going to be better than a bank account.

Remember that historically the share market returns 7% per annum after inflation. Ignoring inflation, the returns are closer to 10%. Even after paying 3.75% in fees, Acorns will return more than a bank account, but importantly it is hugely educational.

In my last monthly update I noted that I was losing more money each day than the cost of a cup of coffee, because the market was falling. A couple of years ago this would have been terrifying and a sign of a losing investment. I know now that it's simply the ebb and flow of valuations. One day I'll be down $10, the next day I'll be up $15.

And for people who haven't read this and are still paying the huge fees - well their big lesson will be how excessive fees destroy your investments.

For people starting out with investing, Acorns provides a solid return and a great education at a rather low risk.

Acorns performance

In the past I've reported returns of over 10% on my Acorns account, even after fees. However the times, they have a-changed and the last couple of months have not been kind. However this isn't just a straight sales pitch, this is a realistic outline. In the first six months I was up 10%. Now I'm only up 2.32%. If I wrote this review a month ago it would have been better. I'm reasonably confident in a month or two the numbers will move back upwards.

   
You can see on these charts when I dropped in $400 to plump up my account, and when I switched from adding $5 a week, to $75 a week in July.

In fact, the markets are changing so much that since I took these screen shots two days ago my returns since opening have bounced back up to 3.14%/ The longer that my account is around, the less bouncy these returns will be.

So if you're new to investing, I absolutely think you should sign up for Acorns. With this referral link you'll get a $5 bonus, which covers your first four months of fees. Build your account up to $500 as quickly as you can, then set a regular weekly investment that you can handle. If you start out with $5 you'll invest $260 in a year without even noticing. If you can push that up to $20 a week, you'll have $1,000 at the end of a year, without even noticing.

While you're learning to invest you can open the app each day and watch the charts bounce up and down. It's a great lesson for investing for the long haul and not worrying about day to day swings.

Stop buying shit

Shit, slang something inferior or worthless.

This is where the frugality movement and the minimalism movement come together and truly shine. Because you can be a minimalist with only a few things, but they can be crappy things you have to replace every two weeks. Or you can be frugal and buy something on super special, but maybe you didn't really need it.

Stop buying shit that you only use once

Think of all the things you buy just to throw them away again. Garbage bags are one of the five things you'll never find in a finance bloggers budget because you are literally paying money for garbage.

However there are less extreme examples like paper plates, straws, bamboo skewers, paper towels, tampons and disposable coffee cups that can be replaced by reusable items like real plates (or wipe down plastic ones) metal straws, metal skewers, kitchen rags, menstrual cups and keep cups.

Not only will you be literally saving the world with less waste, you'll be saving your hip pocket as well.

Stop buying shit that falls apart

In the first six months after moving out together Mr. FIRE and I bought and broke three different cheese graters. Two of them broke while we were using them, the third somehow got rusty while it was in the cupboard. We then bought a cheap knock off multi-purpose kitchen dicer that came with a grater, julienne slicer, mandolin slicer, etc. etc. That broke the first time I used it as well.

So finally we caved in and spent $30 on a decent grater like this one. We bought it from a proper kitchen supply store, instead of trying to find one at a two-dollar store and it's been going strong for three years.

If I'd bought the expensive version first, I would have spent $30. Instead I wasted $50 on cheap crap before finally dropping another $30 on a decent one. 

Don't trick yourself into thinking you are saving money buying cheap shit that falls apart. Buy quality once and enjoy it for years to come.

Stop buying shit you don't need

How many coffee cups do you have in the cupboard? I can tell you Mr. FIRE and I have 6 small espresso glasses, 6 latte glasses, 4 tea cups and 4 large cappuccino cups (yeah, we like coffee). While this sounds like a lot, it works out to doing dishes two or three times a week if we want another coffee.

However, when I lived at home with my parents with had a shelf over a metre wide, and three mugs deep that was full. At a guess I'd say we had at least 40 mugs, all the same size and shape for 3 people. We used the same three mugs every day. Yet for some ridiculous reason we would buy mugs as souvenirs, as Christmas presents, as birthday gifts... I'd say we had over $500 worth of mugs we never used. We didn't need any more mugs, yet we kept buying them.

We also had a garden shed full of tools with multiples of the same type. We owned a bamboo sushi rolling mat even though we never made Nori Rolls. We had a label maker but nothing labelled. If I wanted anything, I always dug through the cupboard We had a fondue kit, a slow cooker, two different blenders... we had everything.

The thing is, we didn't need all these things. Most of them we rarely used. So many things were bought and used once or twice then never again. We bought them because it's easier to make Nori Rolls with a bamboo mat than by hand. It's easier to have a big blender instead of working in batches. It's easier to buy another trowel instead of finding one you already have.

Laziness cost us a lot of money. 

Stop buying shit you don't want

Here's a big one that costs people. How many times have you been early to a job interview, been waiting for a plane, or just had a few moments free and suddenly smelt something delicious in the distance. There are cafes on every street corner, and the biggest lure is boredom and habit.

In these moments somehow coffee and a snack mysteriously materialises in our hands, and money disappears from our wallets. Once I walked out with a coffee I didn't want and a really disappointing croissant because... I don't know? I was bored. I needed to kill some time.

I can't believe anyone wants
or needs this many cushions...

I had literally bought something I didn't want!

And it's not just quick and easy snacks either. I have found myself in clothes stores with the rest of the team while on derby trips hunting for something to buy before I realised that I didn't want anything new, and I couldn't fit it in my suitcase anyway.

Every time I go through Bunnings I end up looking for things to buy. I start with the things I came for, and if I can't find them I somehow still end up looking for something to buy.

I'm not a shopper and I somehow get lured in to buying things. If my friends are shopping, I feel compelled to shop. If I'm near a cafe, I feel compelled to snack. If I enter a shop I feel awkward leaving without buying anything. Until I got over this I used to spend money on stupid shit that I didn't even want!

Start buying your life back

So if you aren't buying shit, what are you buying? If you stop buying shit you'll find your pockets lined with all this spare money. Spend some of it on buying quality things that will last for years (we own $180 frying pan - thankfully it was 60% off) and then spend the rest of this spare money on buying free time. 

Every dollar you aren't spending on shit, you can spend on more dollars with this fancy trick called 'investing'. If you've just got a few dollars, start with Acorns. A couple of hundred, consider peer-to-peer lending with RateSetter. Over $5,000 you can break into the share market with Vanguard.

Buying shit for $20 will give you a few moments happiness, or maybe just buyers remorse. Every $20 you invest will give you back $1 a year for the rest of your life.

Do you want more shit? Or do you want to start buying your way free of the 9-5? Your choice.

The Year of Investing - August 2017

Smashed my savings goals and smashed my investing goals. A month of low bills and upward trending markets worked out wonderfully!

The oft forgotten value of doing absolutely nothing

The average adult makes 35,000 decisions a day. Ranging from breakfast, to business deals, to whether to bother to find matching socks, to how to politely tell your annoying coworker to chew with their mouth shut, we do a lot of thinking.

I'm going to bluntly and honestly say I'm tired of thinking! Instead I challenge you to embrace the oft forgotten value of doing absolutely nothing.

Obama's suit, Steve Jobs turtle neck and Mark Zuckerbergs t-shirt

What do these three guys have in common and why do I care about their clothes? Because all three of them decided to wear the same thing every day. While most of us make 35,000 decisions a day that affect our lives, Zuckerberg and Jobs are/were running massive tech empires, and Obama was running the entire United States.

While I might stress out over whether I want to get a snack, or finish my report, these guys decisions had a big impact. By choosing to wear the same outfit every day they saved their thinking power for things that really mattered.

Decision fatigue

Decision fatigue is the reason why we eat fast food instead of cooking for dinner when we haven't got a meal plan in place.  It's the reason we lay on the couch flicking through 67 channels but not watching anything. 

When decision fatigue hits it leads to throwing your hands in the air and shouting 'I don't care anymore' even when it's something you are really passionate about. In my case, it lead to crying in the shower Tuesday morning.

Stuff the side hustles!

I asked on Twitter what side hustles people were pursuing and one answer really stuck out to me.

Thanks Happy Camper!

Between this blog, freelance writing, being a member of two committees and the board for Roller Derby I am beat. I'll be honest, I can't keep up this pace and my main hustle is suffering because of it.

I once read a blog about freelancing that said "If I'm just going to lie on my couch watching Jerry Springer reruns, I might as well be writing articles at $2 a pop. It's better than nothing". I lived this for years, feeling guilty when I wasn't chasing contracts. Every time I took a cheap contract, I figured it was better than watching reruns.

I now need to say fuck that. My relaxation and rejuvenation is worth more than that crappy $2 articles. My mental health is more important than my wallet.

"My mental health is more important than my wallet."

I have one outstanding contract to work through, and then I'm taking a hiatus from freelance work. The return on investment for my time is minimal, and compared to my stress levels it's absolutely not worth it.

The oft forgotten value of doing absolutely nothing

So what am I doing instead of my side hustle? Absolutely bloody nothing! I am going to reserve my precious thinking power for my every day job. If I can lock in a measly 1% pay rise at the end of the year, I'll earn an extra $700 in 2018. To build a side hustle that effective I would have to neglect my sleep, my health and my boyfriend more than I already am.

Instead, I am giving myself permission to do nothing. I'm going to play video games. I'm going to read books. I'm going to bake more delicious snacks while watching Sons of Anarchy and all the other TV shows I bought on DVD back when I was a kid with too much disposable income and no idea what to do with it.

I will be having more naps!

I give myself permission to spend my downtime however I want. And once I have recovered from this fatigue (and the sun comes out, bring on summer!) I look forward to a better relationship, being happier at work (bring on that pay rise!) and having the energy to pursue things I love, not just those that might make an extra dollar.

Just a couple of days after making this decision I'm already feeling better, and my brain has kicked up a notch. When I was in high school I wrote half a novel, with this extra time on my hands my brain has run straight back to it. Perhaps NaNoWriMo is in my future.

Lost income from Side Hustling: About $50 a month
Costs of DVDs: Free (now, they were about $40 each ten years ago)
Getting back my time, energy and passion: Priceless

The sky isn't falling, and you should be investing

I generally avoid mainstream media. I realised very young that most news shows are interested in showing you all the horrible things happening in the world. They devote 90% of an hour news block to tell you about all the bad things that will never affect you (Do we really care that a flock of chickens escaped and are running amok in a caravan park?) and the other 10% to sports.

Unfortunately this obsession with the worst news has burrowed into the minds of most people, and turned us all into hopeless pessimists. Investors are convinced the next market crash is right around the corner, and sitting on their piles of gold, waiting for the best time to invest.

That time is now.

This post isn't going to be a pearl of economic wisdom proving that the economy is going to continue on it's amazing upwards trajectory without a blip. In my lifetime there have been two great market crashes (the dot com bubble and the GFC) and pessimists are convinced that Australian housing is overpriced and the bubble will burst any day and drag the share market down with it. I've been hearing that for ten years, so I don't trust those experts.

Market returns over the years

That's not to say it won't happen, but I'm not stressing out about it. Markets will yo-yo up and down, but in the long term they'll keep travelling upwards.

Take for example, this chart from Vanguard.

This chart show what would happen if my parents invested $10,000 in Australian Shares from the day I was born until now. Despite two major crashes it returns over 10% per annum, and is now worth $123,000. Over such a big timeline, the dot com bubble is barely visible.

If my parents had been a little more conservative and waited until just before my 15th birthday, they would have invested right before the Global Financial Crisis. Let's say they invested in April 2007. Ten years later, the chart looks more like this.

This chart is much flatter, but it is still worth 4% per annum. While not as amazing as the last one, this chart shows what would happen if my parents had bought in at the worst possible time in my life. A year after buying in, they would have been down 16%, or over $3,000. However, as long as they didn't panic and sell, just a few years later they would have made that money back, and be $4,000 ahead.

Of course, they could have been really super smart, and bought in at the bottom of the market. That's the dream, because then their returns would look more like this:

From February 2009 to now, the share market has returned 10.9% per annum. A $10,000 investment becomes $24,000 in just a few short years without you adding a cent to it. Investors often quote 7% as a historical average, so anyone who could get 10% would be absolutely thrilled.

Invest at the bottom of the market... right?

So, Hands up everyone who wants a 10% return on their investments? Yepp, me too. Keep your hand up if you're willing to sacrifice $85,000 to get the right market timing. Not me.

Once again, hypothetically, let's say my parents had $20,000 to invest in me when I was born (if only!). To hedge their bets, they put $10,000 in a Vanguard Australian Shares Fund, and they hold $10,000 in cash, waiting for the best time. But watching the market crash in 2009 they were too scared to deploy that $10,000 in cash.

The $10,000 in cash is now $30,000 because it's been sitting a high interest bank account. The shares had grown to $95,000, but when the market crashed they dropped to $50,000 in a few short months. So my parents decided it was too risky to put the money into the markets, and they left it in cash.

Today, at the ripe old age of 26, my returns would look something like this:

That rapidly growing blue line is now $123,000 of Vanguard shares, paying dividends every year. That purple line, crawling upwards at a snails pace, is the cash that was held aside for when it was the 'right time'. It's only worth $39,000.

So when is the best time to invest?

The best time to invest is yesterday. Or last year. Or even last decade if you could. However I assume that none of you have a time machine handy, so the best time to invest is today, and everyday moving forward regardless of the doom and gloom you keep hearing.

Over almost any ten year period* you will make more money from investing than from stuffing your mattress and waiting for the apocalypse to come. The market might crash tomorrow, it might crash next week, it might crash the day before you retire early with your million dollar nest egg.

Most highly paid hedge fund managers can't consistently beat the market. Even if they could, they can't stop a crash from happening. If (like me) you're many years out from retirement, the best place for your money is in the markets, earning a return.

And if the market does crash tomorrow, I'll be the first one at the sale buying up even more shares to fund my future.


* While I was playing with the Vanguard Index Charts I managed to find a couple of scenarios where cash was a better bet over ten years. Over 15 years, cash never won, even when you set the 'end date' at the very bottom of the GFC.

The Holy Trinity of Financial Success

For most people three primary expenses dominate their expenses - housing, transport and food. 

In my case they take up 37.5%, 0% and 6% of my expenses - in that order. Lower expenses are a key path to Financial Independence, which is why finance bloggers spend so much time talking about food.

By keeping my expenses lower, I'm fast-tracking my path to Financial Independence, and I'm doing it on a pretty cushy lifestyle.

According to MoneySMART our the three biggest expenses at any life stage are Housing, Food and Transport. With the exception of single folks under 35 who are spending a little more on recreation - maybe it all the dating they're doing! Maybe they need some more frugal date ideas like these.

While frugality can be used to target any part of your life, slashing the big expenses will have the best outcomes - and you can do it without compromising your happiness.

Cheap house 

While my housing expenses make up 37.5% of my budget at a whopping $15,000 a year, I also bring in $7,800 a year in 'rent'. I started house shopping before Mr. FIRE and I decided we wanted to live together. I planned to have a room-mate to help offset the costs. 

During the house hunt Mr. FIRE pointed at the maybe he could be my housemate. Since the house (and the mortgage!) are entirely in my name, Mr. FIRE pays me rent. As a result the net expense of my house is only $7,200 a year, or a measly $600 a month.

My house isn't quite this small,
but tiny houses are gorgeous!

This cost includes all the bills, repairs, maintenance and upgrades. 

After crunching the numbers I could have bought a much pricier property (even without Mr. FIRE or another room mate!) but by choosing a smaller (but still super comfortable!) home I slashed my housing costs.

Initially, the plan was to put Mr. FIRE's rent payments directly into my mortgage. With an extra $300 a fortnight, I would have cut my mortgage repayment time in half, and saved $88,000 in interest payments.

Instead, I'm choosing to leverage my mortgage and invest instead. Assuming a 7% return, Mr. FIRE's rent will be worth over $200,000 in fifteen years. I'll still owe $150,000 on my mortgage, but I'll be $50,000 better off. 

While some people might prefer to have no debt, my $200,000 in investments will generate more than my mortgage will be costing - winning! All through choosing a smaller house and getting a 'room mate'.

Cheap food

According to MoneySMART the average young couple are spending $200 a week on food. In contrast, I budget $200 a month and I assume Mr. FIRE spends the same. Hopefully one day I'll convince him to track his spending so I can report this accurately!

While I have a love of frugal foods, baking my own sweets, making homemade snacks, and I have learned some great meat-free dishes to keep the cost down, these fancy tricks aren't the core of why I spend so little.

The main reason my food costs are so low is simple - I cook for myself, and we very rarely go out to eat. In my Epic Food Week post I outlined how I stay on top of my food budget, and keep food waste down.

You can make these are home ridiculously easily!
You just need sauce and cheese. Pineapple is also
a brilliant addition, or sun dried tomatoes.

One of our favourite lazy meals is chicken schnitzels and chips. This is a basic pub meal that normally costs around $18 each. In contrast, we make it at home ourselves for less than $3.50 each. We could do it for even cheaper, but we like to top our schnitzels with sweet chilli sauce and melted cheese, delicious!

Plus we don't have to shout over bad pub music to talk to each other, deal with obnoxious Friday night crowds or find parking. Instead we have cheap delicious food in the comfort of our own home.

If we were to go out once a week for schnitzels (rather than eating at home) we would be spending an extra $15 a week each. This small change is worth $800 a year, or over $11,000 in 10 years. 

Of course, not many people could go out for dinner and only spend $18 each. While $18 meals exist,  it's more common to find meals ranging from $20-$30. Add a beer or wine on top of that and you're looking at another $5-$8. It's not unrealistic to spend $30+ on one meal.

On average Australian's go out to eat 2-3 times a week. By learning to cook delicious food at home and dropping your restaurant trips to once or twice a month you can save almost $300 a month and still enjoy fancy date nights.

With such big savings, it's easy to see why Finance Bloggers talk about food so much!

Cheap transport

The final category in the Holy Trinity of Finances is transport. For most people this means cars. A friend of mine working as a second year teacher has just taken out an $8,000 loan for a new car. In a public school teachers salary this is more than 10% of her pre-tax annual income.

On a 5 year loan, the repayments are $42 a week, which means 4% of her take home pay is taken up by her car loan payments, before she even starts driving.

Add in another $600 a year in insurance, $600 for registration, and $50 a week on petrol, her car is costing almost $6,000 a year. 11% of her take home pay is spent on maintaining a car.

This cost isn't including maintenance, regular services, road trips, and any other little expenses that crop up along the way. I don't say this to shame her, this is the normal way that most people manage their transport.

When couples move in together, they tend to both bring a car to the relationship - as Mr. FIRE and I did. However, after living together for four months, my car looked like this:

I haven't owned a car in two and a half years, I just ride a bike everywhere instead. When Mr FIRE and I moved in together I bought a property that was half an hour ride from work, and fifteen minutes from roller derby training. On occasion I need to go further afield, and either I borrow Mr. FIRE's car or get a lift with a friend.

Over two and a half years, my transport costs look something like this:

• First Bike : $600
• Bike accessories : $300 (lights, panniers and a rack)
• Second bike : $550 (Some jerk stole my bike!)
• Replacement bike accessories : $150
• Replacement bike lights ($100 - seriously, my lights were stolen a month after I bought them)
• Bike service : $80
• Various at home maintenance parts : $100
• Total : $1880 in two and a half years - $14 a week

Biking everywhere costs me $14 a week. If my bike hadn't been stolen, it would be a measly $10 a week. In contrast my teacher-friend with her $8,000 car loan is spending ten times as much, at $115 a week!

Let's consider this cost over ten years. Assuming that I have to replace my bike every 3 years for whatever reasons (thieves are the worst!) I'll continue spending $14 a week. In ten years, I'll spend $7,280.

In the same time frame, assuming that my friend replaces her car in five years, and therefore her payments remain constant, she will spend $59,800!!

Considered another way - I save $100 a week compared to her, if I invest this savings, I'll have $75,000 in ten years.

Spend less, cycle more, retire early to cheese and wine!

Or considered yet another way, I like to look at how much I need invested to cover the cost with passive income. To cover the $14 a week cost of owning a bike, I need to invest $18,200. However to cover the $115 a week of car ownership, I would need to invest almost $150,000!

The Holy Trinity of Financial Success

Put together, food, housing and transport form the three biggest expense of our lives. Following the normal path you can easily spend $40,000 a year on these three main expenses. With a few lifestyle changes like a smaller home with a roommate, cooking great food at home (maybe even eating some meatless meals)  and swapping out car trips for walking, or riding, you can save thousands of dollars a year.

Plus, with a smaller house, there is less to clean.