Hey, this site uses sponsored adverts to make a lil' money. If you'd like to whitelist firebythirtyfive.blogspot.com.au that'd be ace.

Friday, 7 July 2017

The Year of Investing

The time has come to set new goals for the new financial year! After spending the last seven months building up a hefty $15,000 emergency fund, it's time to move on.

It's time to start the Year of Investing!

To reach Financial Independence, Retire Early, and not have to go to work on a Monday ever again I need lots of money. More importantly I need money that produces more money. Right now I spend between $25,000 and $30,000 a year. This doesn't include the maintenance costs on my investment property, because that is covered by the rent. So if I wanted to walk out of work and never come back again, I need to find a way to make $25,000 a year, without a regular paycheck.

Back when I started this blog in December 2016 I declared that I was chasing $50,000 passive income by 10 February 2026 drawn from a combination of Shares, Peer-To-Peer Lending and Investment Property. That was my plan to be financially independent by my thirty fifth birthday. I've since realised this is wildly overstated. I'd like to retire on slightly more than I spend now and at this stage of my life, that means I need a mere $30,000 - after paying for investments

I realised in the last six months that if my investment property costs me $15,000 a year to hold, and brings in $15,000 a year in rent, then I don't need to factor in paying for it once I retire. But I also can't count on it as an income stream. For the time being, my rental property is a zero sum game, with some nice tax benefits on the side.

My original estimate was based on spending $40k a year and thinking I'd like a bit more than that in retirement. Since $15k of that spending is to keep my rental running, and since it earns $15k I can remove that from the equation.

That still leaves me with find $30,000 worth of income. According to The Trinity Study, an investment portfolio 25 times you annual spending will last almost indefinitely. Of course, this portfolio can't include the equity in your home, because no grocery store will accept "My house is worth $400,000" to pay for a dozen eggs. Instead it needs to come from investments that generate an income, and can be sold in small portions. For me this means stocks, bonds, and peer-to-peer loans.

To fund my $30,000 lifestyle in retirement, I'm going to need to find $750,000 in the next eight and a half years.

So how do I plan to invest?

For the next twelve months I am going to focus on supercharging my investments. The earlier in my retirement journey I start investing the more heavy lifting will be done by compound interest. By spending my money on buying more money in the early years, I hope to see my investments growing on their own through the next few years.

In the Year of Investing I plan on building up my existing accounts until I have 10% of my retirement fund. Starting from $52,000 I'm aiming for $75,000 by July 1 2018, an increase of $23,000 - just shy of $2,000 a month.

Acorns (Starting Balance, $820)

I want to build up my Acorns account so I can start paying the cheaper fees. Acorns charges $1.25 a month for account balances under $5,000 and 0.025% per annum for accounts that are over. With my current balance of $820 I'm paying 1.8% per annum. 

Since fees are the number one destroyer of a balanced investment, I'm keen to switch over to the better rate.

Assuming a 6% return, I'll be depositing $75 a week into this account to reach my target of $5,000.

Vanguard (Starting Balance, $39,566)

My Vanguard funds consist of Australian High Yield Shares (focused on divdends), Australia Shares, International Shares, and Australian Bonds. By having four different funds I can track their values and when one rises, the others tend to fall - notably when shares rise, bonds fall and vice versa. I plan to keep these balanced throughout the year, which means if share prices fall I will buy more shares, and if bonds fall I will buy more bonds. In this way I hope to buy when things are 'on sale'.

I'll be automatically investing $800 a month ($200 in each fund). Assuming a 6% return I'll need to invest an extra $650 a month, which will depend on the price of each fund at the time. Hopefully by using a mix of dollar-cost averaging, and dollar-value averaging I'll see better returns. 

I'm aiming for $60,000.

RateSetter (Starting Balance, $11,414)
Finally, RateSetter. For anyone who hasn't read my review, I love RateSetter. The returns are amazing, the customer service is wonderful, the website is... good, could be better. The system is so simple to use and so easy to monitor I managed to get my mother involved!

With all that said, I don't want to put all my eggs in one basket. I'm assuming an 8% return from RateSetter, I'll be adding $200 a month, and I expect to see a balance of $15,000 at the end of 12 months.

The big picture - my savings rate

In total I'm hoping to invest $23,000 in the next 12 months. On top of that I plan to keep up with my mortgage repayments, which should see my debts drop by approximately $12,500. In the next 12 months this means saving $35,500, just shy of 50% of my income. 

So on top of paying down my mortgage and investing, I plan to squirrel away a little bit more so I can declare that I saved 50% of my income. In the last 12 months I've saved 41% of my income, so I thought, 'What the heck, let's push for 50%'.

According to the networthify early retirement calculator, if I pull this off I'll be able to retire in 9 years - just a few short months after my goal. A lot can happen in nine years, and I intend to prove that calculator wrong ;)

Let the Year of Investing begin!


  1. Awesome update! Best of luck to you and these sweet investment goals!

    1. Thanks - I'm so excited I keep checking the balances daily... it definitely doesn't work like that :p

  2. Good luck. Acorns seems a bit corny for someone who can save that much money.

    1. Did you just pun? :D

      I know Acorns target is people who are dipping a toe into investing, but it's worked well for me over the last few months to just siphon off little amounts without me noticing. Every bit counts :)

  3. If it works for you, sure, or even as an experiment it can have value for blogging purposes i guess.

    But my take on acorns is that it is targeted at people who are not like us. People who can save great chunks of income don't need little smidgens of money siphoned off without noticing. I want to notice!

    I don't really see the point of paying management fees on top of the index fund fees when you can buy ETFs directly. I was kinda turned off acorns when i realised that for the average person who sets this up with no starting balance they would be paying huge % management fees until they got up into the $100s of dollars. I guess they gotta make a living but damned if its gonna be off me.

    Nice article, i will have to check out ratesetter. I was pretty stoked to find your blog by the way, we have so few quality aussie FIRE blogs and I'm really enjoying yours.

    1. I definitely notice - I've got nice big spreadsheets for everything :D So far it's actually performing really well after fees (check out all my monthly wrap ups) but I'm definitely aware the fees are a killer and keeping a close eye. So far as a blogging experiment it's been worth the efforts.

      I was in a camper van in Tasmania when I realised the average person would be paying more than 10% in fees without throwing in seed money. I was kind of furious, but I stuck with it because I had enough money to bring the fees down to reasonable amount. I am enjoying having the app on my phone giving me a quick reference to how the markets are behaving.

      I actually got over my (short term) coffee buying habit with it - instead of going out for a coffee with work mates I hit the round up button and made an instant instead :D put aside $30 and got real sick of crummy coffee

      And thanks for the compliment :D Sometimes blogging feels like shouting at a wall - it's always nice to hear people like my writing

  4. Well done! A lot of my investment plan for the year also includes Acorns, Vanguard and Ratesetter so I'm really looking forward to your posts with regards to how your investment will be going along. I am definitely with the others in that Acorns has atrocious fees so I have a feeling that I will be bowing out of Acorns after I see out my 12 month experiment, but we will see! Bring on the year of investing!

    1. Whoops, that was me forgetting to sign in on my identity.

    2. I thought I recognised those goals - It was either you or someone with a super similar voice and goalset ;)

      I'll be including my rate of return for Acorns in each monthly post so we'll see if it's worth keeping. It looks great on paper because I bought in just before the Trump rally and everything has been rocketing up since then


Related Posts Plugin for WordPress, Blogger...