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.

I want to ride my bicycle: For health and wealth

The biggest change to my life since moving house three years ago is that I can ride my bike to work every day. Apart from saving a bucket load of money I feel so much better. And hungrier. And a lot more likely to die. And I sing a lot of Queen.

Before I became a bike rider, I was pretty terrified about the concept of riding on roads with cars, who are obviously jerks according to most of the comments on news articles. My route to work takes me down the main road of the CBD, which is also where the majority of the busses are picking up and setting down. The bike lane is almost permanently blocked down that road, which means easing around the busses and out into traffic.

There are a lot of people out there who aren't particularly fond of the idea of sharing the road with a cyclist. Riding down that particular stretch of road means constantly looking behind you for a decent sized gap to slide out into traffic, generally trying to pick someone who will graciously give you the road for a few seconds. Coming up to an intersection I'm more worried about the idiot next to me gunning it, pulling in front of me and then hauling on the brakes to turn left. The trip home through town means watching out for pedestrians who are so engrossed in their phone they don't think to check the bike lane before stepping out onto the road. Waiting for two pedestrian walk cycles because it is the only safe option for 'turning right' at one specific intersection gets me dirty looks from everyone. And I've been heckled by pedestrians.

Despite how much I whinge about my near death experiences, it's actually really nice riding to and from work, and people are mostly not jerks. It just doesn't make a good story to come home and say "Wow, over 100 cars drove past me today and gave me a decent amount of space". Whinging about that jerk who tried to kill you by screaming around a blind corner and then panicking and slamming on the brakes blocking the entire road is a much better story.

Before I started riding I only heard the scary stories, because they are exciting and memorable. It's not that interesting to tell your friends about the warm quiet burn in your legs and lungs that makes you feel alive. That you walk into work feeling awake. That you can leave the office tired, grumpy and ready for a nap and be energised by the time you get home. Or that the path home is slightly downhill and flanked by trees that shade you from the sun and the rain and just look so darn pretty. Those things happen to.

Source: http://www.n2e.org/problems/why-you-should-ride-a-bike/





Safety is sexy

I think what people miss when they think about the dangers of riding a bike, is that every single one of the issues I've faced could have happened in a car. I've seen just as many car-on-car near-misses as car-on-bike near misses. I'm not a scared rookie anymore, I don't ride with one curb-side earphones in, I check two or three times before pulling out into traffic, and I'm on the brakes at every intersection even when I know the cars have a stop sign. I also happily glare down drivers trying to enter roundabouts in front of me, and I'll swear at (and flip off) anyone who drives too close. It probably doesn't help the cyclist-driver war, but it makes me feel better when my heart is trying to leap out of my chest.

On my bike I'm aware of how fast I'm going. I feel the wind in my face, and I feel my bike start to shake a little bit or wiggle wildly if I try to pedal in low gear at high speeds. In my car the only indication of how fast I'm going is that little needle on the speedo. I'm also aware in my car that my accelerator and brakes are much more powerful and likely to get me out of trouble. On my bike my accelerator (legs) and brakes (fingers, and core strength that keeps me from going over the handle bars) aren't as great so I need to be more aware of my surroundings.

Since I am aware of my surroundings, I feel pretty darn safe. I'm a adult and I can take care of myself, and I am responsible for my own safety. Whether I'm in a car or on my bike I can't control the choices of people around me. That mentality has been the key difference for feeling safe on the road.

Burning all them calories

I'm also a lot hungrier thanks to riding. I've had to up the value of my meals to balance the fact that I'm riding over 16 kilometres every day. I've try to be thrifty about it by adding diced cashews to breakfast, but diced cashews are a slippery slope to porridge with strawberries, blueberries, chia seeds, honey and diced cashews. And trading toasted sandwiches for homemade chicken stir-fry twice a week. And homemade chicken Hawaiian. I've still kept a few tricks though, like adding lentils and grated carrot to pasta.

The thing that amuses me is that despite eating more, heavier foods to keep up with my appetite I still can't gain enough weight to kick over the magical 60kg. Since the weight on the scales isn't actually a measure of self worth I didn't bother buying a set when I moved out but I weigh myself every time I donate blood. I also know that according to the mirror I'm leaner, with better muscle tone in my legs, butt and even arms. According to my legs, heart and lungs I'm getting fitter because I don't feel like a shaky blob of jelly when I get home.

Hey wait, this is a personal finance blog

The best part about riding my bike to work is that I can now happily skip over that $22 p/week gym membership I was going to get. Considering I ride 80 kilometres a week I don't need anymore cardio. I even get to chuckle to myself as I watch people pull up to the 'fitness club' in their cars, and sweat on their stationary bikes and treadmills whilst I'm enjoying the outdoors and getting to work. 

On top of that $22 p/week I'm not spending, I also get to save $34 p/week on the bus, or $100+ per week (mostly parking fees) if I was crazy enough to drive. Any extra I'm splashing out on filling healthy foods is still less than I'm saving. Plus I really love food, so I'd probably be splashing out anyway.

Even after having my bike stolen back in January I'm much further ahead on my finances by riding than any other kind of commuting (well, except walking). I spent just under $800 on my new bike including accessories (and replacing the light that was stolen in the first week!). After riding to work for six months I've saved $816 on bus fare, so it's all money in my pocket from here!

Source: http://www.streamlinerefinance.net/cost-of-commuting.html

Finally, I feel better. Not just physically, but mentally. I don't feel like taking a power nap the second I sit down at my desk. I don't spend the bus ride home scrolling the meaningless Facebook posts, or succumbing to road rage. I still grump when people risk my life to shave five seconds off their commute, but I'm generally a little out of breath and I can't get properly worked up. When I was suffering through an hour long bus ride to and from work, I got to reflect on the time I was wasting and it was pretty darn depressing. I don't feel like my ride home is wasted, and I still have enough spare brain space to plan these soap-box soliloquies while I watch out for cars, and laugh at people failing terribly at golf. 

Even more than saving a couple of grand each year, having the appetite to really enjoy my delicious food and keeping myself physically and mentally healthy, I love cruising past cars. I've had cars and trucks overtake me multiple times in one trip because while they're stuck in traffic, or waiting at a red light, I'm sneaking down the bike path. It's just the icing on the cake, to know that my ride home takes about the same amount of time as trying to do it in a car would.

For health and wealth - you should get a bike. On the weekend I plan to ride mine to the bakery. It'll probably be bad for my wallet and my physical health, but I won't mind while I'm relaxing in the sun with coffee and a danish.

Goals Update: January 2017

What an expensive month! Wowzer...


As last month, I'll start with my New Years goals, but the money part is a doozy this month. Skip ahead if you want cash-voyuers.

Do physical fun stuff 4x a week

Still nope. It's the 'fun stuff' that's killing me - I do a quick morning workout, I've expanded the get-home-from-work workout and I bought a barbell and some weights, but that's not really 'fun'. The boyfriend and I went out slack lining twice, but we haven't found the time to go rock climbing. And despite getting a zippy new mountain bike I didn't make it out trail riding. And derby is still heavily theory at this time, yay new ruleset.
Grade: D 

Create something each month

I created two things! Both on this blog. I always want finance calculators to do things a little differently than they actually do, so I made some myself. Check them out

• I made a calculator that helps show how much you need in Superannuation to last from 65 to forever versus how much you need to get to 65 (or whatever age you're allowed to access your Super)
• I also worked out why I'm not a millionaire (yet!). This handy dandy little calculator lets you plug in your recurring expenses (like coffee, gym memberships, the usual culprits) and shows you how much you would have if you stopped spending that and started investing it. It helps show how little changes can really add up!

Grade: A+ 

Apply for one freelance task a week

Well, technically I did this. I applied for six different contracts and didn't get the courtesy of a reply from any of them. I find this to be pretty normal using UpWork. I generally get replies from maybe 1 in 10 applications, and of those less than half translate to actual work.
Grade: B

And now, the money!

Here we go

January Totals

Income

Salary	$3891.98
Sidegigs	$194.40
Home	$600
Investment Property	$1097.30
Dividends	$0.00
Total	$5783.68

Salary

This is a normal 2 fortnights worth a pay. How exciting *cough, not really*

Side gigs

They did not want me to go to work that day

I petsat the cutest little Chihuaha for a couple of weeks over Christmas. He was the most adorable little butthead, super polite, got along great with my cat, never messed in the house and snuggled like nobodies business. He was also a doorbell, but all things considered it was only a tiny flaw in a truly excellent dog. I was a little sad to see him go.

Home

I bought home entirely in my name, but my partner lives here. He pays half of all the bills, plus $150 a week in rent. Pretty sweet deal.

Investment Property

A full months rent! I haven't seen that since September! Also my tenants lease was originally signed for six months at $299 a week. I've now locked them in for a full year at $305 so starting next month this will go up again.

Dividends

No cash dividends paid in January, but through reinvestments I now own 1 more share in the Vanguard Australian Properties fund, 104 more in the Aus Shares Fund, 109 in the High Yield Aus Shares Fund, 39 International, and 12 Australian Bonds. And my Acorns account paid out $4 in dividends. A whopping $4!

Expenses

	Spent	Budgeted	Annual Average
Home	$1,548	$1,250	$1,313
Investment Property #1	$1460	$1,250	$1,668
Personal Bills	$140.99	$142	$89.83
Groceries	$276.67	$200	$191
Pets	$29.35	$25	$12
Derby	$163	$108	$100
Travel	$0	$108	$131
Other	$844	$250	$525
Total	$4,464	$3,333	$4,031

Home

Only a smidgeon over, which is nice considering I paid my home insurance in a lump sum. Covered for the year, so I won't see that bill for twelve months! Whee!
The average is reasonably over budget because I have set an ambitious goal. I refinanced my home loan back in September and it's down a bit over $100 a month. I'm going to have to keep an eye on the utility bills, but I'm pretty confident that I can bring that average down where I want it.

Investment Property #1

Council rates (quarterly) and the Water Bill (every 4 months) decided to fall in the same month. Lucky me.
The average for this property is over budget because of last years renovations. If I removed them from the calculation I'd be smack on budget. I'm not going to take them out to fake the numbers though, I'm keeping it in for a realistic perspective of what the last 12months has cost.

Personal Bills

This is my phone bill and health insurance, it should never change.
The average is low because I upgraded my health insurance to include hospital cover in January. So the average is reflecting the old, lower cover and will steadily come up across the year.

Groceries

Almost 40% over. I have no excuses. I learned to make salad dressing and spent a fair bit on fresh delicious things. I also stocked up on rice, beans and dried fruit which will hopefully last a while and lead to lower costs in February. I'm hanging out for winter and soup. The grocery budget loves soup season.
This average is in line with my goals! Woo! But.... I spent a couple of months on crutches last year when my partner did most of the shopping, that may have skewed things. Time will tell.

Pets

Hey Big Spender! I bought a 20kg bag of chicken feed and 4kg of cat food, which should last two months and 1month each. I figured out how to make my own budgie seed bells which should cut down on wastage moving forward. Store bought seed bells are stupidly expensive, so I'm keen to DIY this.

Derby

Ahh January Derby. I didn't actually pay league dues yet, but I ordered an official shirt so I can be involved in sanctioned tournaments, paid for camp ($35 for two nights, five meals and a whole lot of awesome!) plus the food and drinks at derby events fall in this column. Januarys are generally a pricey month.
The average is behaving itself quite nicely! I only plan to travel once this year, and I think I'll have enough frequent flyer points to cover the trip.

Travel

No travel, no spend. Easy peasy :)

Other

Remember how I said my bike was stolen? Yepp, good times. The bike replacement and necessary accesories (rack for my panniers and commuter lights) was $700. I also had to pay over $50 in bus fares for the few days I was bike-less. So if you take that absolute *insert excessive swearing* out of the equation, I spent $30 at the movies, $30 on two overpriced craft beers, $25 on a set of weights, and $8 on a coffee/networking meeting. Not to shabby.
The average though... is in a terrible place. I paid through the nose for knee surgery last year. By the time Medicare and my leagues health insurance were done, I was still about $5k out of pocket. Hence why I now have hospital cover. Hindsight is a wonderful thing.

Total

Yepp. It was a great month *feel the sarcasm flow*. Even without the $700 on the bike, I'm still over by $400 (12%). It mostly comes from being a big bills month, but I still want to watch it really carefully. The average is also over, so I need to find some changes to bring everything in line.

Savings Goal

High Interest: $5,017.59
Offset Balance: $4285.00
Credit Cards: 1,402.37

Total: $7,088.91
Remaining: $12,911.09 ($2,582 per month)

No, that's not a typo. I have less in my offset account this month than I did last month. Even though my income for this month was $1,319 higher than my expenses. Umm, I'm not sure. I think it might have to do with the way I'm tracking what goes on my credit card. Because I track the expenses when they occur, but it doesn't effect my offset balance until a few weeks later. It's also due to the fact that I only report my mortgage payments as the interest, and I'm still siphoning money off into my Vanguard Investments. I know it looks a little skewif, but I promise I'm not hiding any spending!

Edit: I've backtracked, added credit card amounts and this hand-dandy chart!

See where we were in December.

Goals Update: January 2017

What an expensive month! Wowzer...

Bikes, Burglary and Budget Blowouts

Before I start I need to address my improper use of 'burglary' which is defined as "illegal entry of a building with intent to commit a crime, especially theft". My bike was stolen from the street, so it's not technically burglary. But alliteration makes for a good title, so let's roll with it. Or not, as my wheel deprived situation would have it.

We're now twelve days into the month and I can unhappily guarantee that I will be going over budget. January is normally a pricey month for me because a lot of quarterly bills hit in January, and a couple of annual ones but this month sucks in every possible way because.... some jerk stole my bike.

This is every kind of unacceptable. I don't own a car. I deplore catching busses. I cruise past traffic with a smug grin on my face thinking about how I'm out in the fresh (city) air, getting exercise, moving faster than you suckers in your cars, and I'm doing it all for free. My favourite 'game' on my ride home is to race busses. It's a 2 km stretch, with one set of traffic lights and about 6 bus stops. I win most days. I only shower at home once a week because I shower at work every day. My workplace actually provides bottles of body wash. Which means a bottle of body wash at home lasts me forever.

I'm also that annoying guy who gives you a cheeky sideways grin whenever you complain about traffic or busses and points out you wouldn't have this problem on a bike. And now my bike is gone. The reclaim rate on bikes in South Australia is something stupidly low, apparently around 10%. With my bike being stock, with no distinctive markings I have almost no hope of seeing it again. I also lost the paperwork with the serial number when I moved house, so I have no way of proving it's mine even if I do find it somewhere. I can only hope that whoever stole it parks it near my work/house, has left all my accessories on, and that they didn't remove the half broken reflector. Those are my 'identifying features'.

 In a nutshell, I'm stuffed. So, four days after the theft, say hello to my new bike!

Okay so this photo obviously isn't my bike, but it's what I'm getting. My old bike was a Myka 2013 bought almost exactly three years ago (three years and a dayto be precise!) and my new bike will be a Myka 2016. Looks like it's going to be the last one of this model with disc breaks, and it has 3 less gears than the last one. It's all kinds of weird that the bike has less features, but to be honest, when you commute you tend to use three or four gears, and when I (rarely) ride trails, I use three or four different ones. So I'm sure I won't miss the extra three gears.

Financially, I wouldn't normally do this. Lose something and buy a new one in less than a week. But It's not like a luxury buy of a new mp3 player. Or a big ticket item like replacing a car. So far in just three days I've burned through half a tank of petrol, ripped up my ankles skating 3kms because I was too stubborn to drive, and probably doubled my water bill. And the gas bill since I like my showers warm. And I've been completely non-functional at work. If not for my morning work-outs I'd probably be catatonic.

The numbers though -
New bike: $550
Accessories: Approx $150 for a rack and three new lights. I haven't bought them yet, so that's a guess.
1/4 tank of petrol: $15ish
7-8 days of catching a bus: $53.70

So financially, losing the bike has stung, but going without stings more. In just one week I've already spent 10% of the replacement cost of the bike in getting around. That's ignoring the gas / water that I'm using showering at home. And the inconvenience / annoyance of losing my freedom. And grocery shopping has been appalling. I can't just stop by the cheap shops for the good milk on the way home, I need walk to the expensive shops after work, buy a bag full of groceries and lug it home on the bus. A bike fitted with decent panniers can hold double what I can carry, and I don't even blink.

So the budget for this month is completely blown out, bike thieves are among the lowest scum on the earth, and I now know every pawn broker within a 15km radius of my workplace. Harumph, harumph, harumph. How frustrating.

Oh, and now that I'm done sulking about my bike. I need to get fillings on Tuesday. Wish me (and my wallet) luck!

Bikes, Burglary and Budget Blowouts

Before I start I need to address my improper use of 'burglary' which is defined as "illegal entry of a building with intent to commit a crime, especially theft". My bike was stolen from the street, so it's not technically burglary. But alliteration makes for a good title, so let's roll with it. Or not, as my wheel deprived situation would have it.