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Tuesday, 6 December 2016

The 'starting' point

Okay, so I'm going to take a bit of a dive into transparency. I'm a little uncomfortable with telling the world about the numbers, but I also want to set myself some accountability.




The short-term goal
By the 1st of July, 2017 I will have $15,000 in my mortgage offset account, and $5,000 in my high interest savings.

Given that my usual annual spend sits somewhere around $40-50k, this money will act as a proper emergency fund. Despite having been on a (rather half-assed) path to Financial Independence for about two years I've never really felt the need for an emergency fund. I have a few good excuses though:

  • Why have an emergency fund when I'm overpaying my mortgage and can withdraw the money without penalty?
  • Why have an emergency fund when I have multiple income streams (rent, dividends and my employment)
  • Why have an emergency fund when I have such low expenses?
Well all these went out the window this year when I decided to go to a private hospital for knee surgery despite not having private health insurance. I wanted my knee fixed and I wanted it now! Then I went an renovated my rental property and refinanced my mortgages at the same time, conveniently forgetting that the spare money in those mortgages was for my renos, doh! Oh and I had six weeks without a tenant, and the market sucks so the rent went down $10 a week.

So at the end of that, I'm getting an emergency fund. With $5k in my general savings I can confidently cover a couple of months of groceries or take a holiday, and the $15k in my offset account will cover six months of mortgage repayments, although since that account is responsible for bills as well it's more like three months. And that's without tightening up on expenses.

Anywho, here's where we are starting:
Offset Balance: $1,250.00
Savings Balance: $461.24
Total: $1,711.24
Remaining: $18,288.76, 207days

2 comments:

  1. I maybe mistaken, but, is not better to have money in the offset as opposed to having it in a high interest savings account? Your saving interest payments and you don't get taxed on those savings, so it's a double bonus! I'm not sure if I'm correct here but normally the amount of interest you save, is the same, or better than those high interest savings accounts anyway. I would load all my savings into the offset and keep track of it in excel, unless you can do sub/multiple offset accounts like some banks offer. Just my 2c. Good luck!

    ReplyDelete
    Replies
    1. Hey Wookie, sorry I only just saw your reply!

      Mathematically, yes, you're right. It's definitely better to be putting the money all in the offset account. Psychologically, not so much. I enjoy that little bump up of money at the end of each month, and having that 5k sitting separate to my offset account has been really comforting to look at.

      Mathematically - My high interest account earns 3% my mortgage charges 3.99% So I'm worse off my .99% on $5k, which works out to less than $50 a year. I'm willing to lose that little bit for the psychological benefits :)

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