Aussie Firebug: Hey guys, welcome to another episode of the Aussie Firebug podcast. Podcast, the financial independence podcast pool Australians where I interview clever people who have already reached on the way to financial independence. Our guest today is Pat from lifelongshuffle.com. Pat is 29 year old construction engineer, working in Sydney who’s planning to retire early within 10 years. Pat, welcome to the show

Pat: Hey Mat, how are you going on? Yeah thanks for having me on the show.

Aussie Firebug: Yeah, not too bad mate, not too bad. Where does lifelong shuffle originate from mate?

Pat: Well, a few people have asked this question and it’s just kind of my brain child. I was a bit bored at work one day and I was you know, just thinking about…I have to get out of this and I was reading other blogs and I thought, this looks easy enough, I’ll start my own blog and I decided to call it lifelong shuffle. And the story kind of goes back to one of my mates who used to have this kind of really weird dance that he used to do before he would hit on some girls at the bar. We used to call it the Ken Host Shuffle, and for some reason I was just thinking of that on that day and it turned into part of my blog name.

Aussie Firebug: That’s a very funny origin for that name. Does he know about the blog?

Pat: He doesn’t know about the blog, I’m not sure if he knows I copy pasted the name of it on the dance that he used to do.

Aussie Firebug: Wow, the way I looked at it like lifelongshuffle I sort of you know, was a bit of a metaphor for shuffling through life in a particular way which is what you are about you know, looking through the wind of everything like that. That’s funny; it has that story behind it.

Pat: Yeah.

Aussie Firebug: So what was the original shuffle called?

Pat: The Ken Host Shuffle.

Aussie Firebug: The Ken Host Shuffle.

Pat: Ken Host is just a place in kind of out of Sydney where my friend comes from.

Aussie Firebug: Alright you know if you blow up and the blow comes mainstream I might come after you for some royalties so, Ken Host Shuffle royalties maybe; very funny. Did you always want to retire mate? Or was it something that you discovered later in life and you wanted to pursue?

Pat: Yeah I mean, not straight away. You know, when I first started fulltime work, really exciting and really interesting to me and did the university thing for like five and a half years, so kind of all that youthful excitement and energy was, I had it, kind of like everyone else does but after several years of doing that you know I just began to drain on me as it does and I’m in the construction industry of course I must have already mentioned that on the podcast. And it’s just one of those industries which it really kind of screws people down with really long work hours and working weekends and just kind of lots of pressure on the field. And so eventually a kind of desire grew inside of me and there was a tipping point and eventually I kind of went on google one day and I tried to start looking up that early retirement and I came across a few blogs and almost immediately it just kind of all really made sense to me. And it’s like well I’ve kind of always known I didn’t want to work forever, I never really had a detailed plan to get there but once I saw those blogs and I saw other people that had changed it and other people who were trying to do it kind of really cemented the idea in my mind and yeah, it was born really quite quickly.

Aussie Firebug: It’s such a common thing you know that you go online, you know maybe not sure what you are looking for then you come across one of these blogs and all posts and whatever and when you figure out you know people are really doing it, it’s sort of like the light bulb moment. I had that when I read a book but it sound like you read it on a blog. Can you remember which blog you were reading when you figured out like this is a thing and this is what you’re going to try to do?

Pat: Yes, so the very first blog I came across and I had a lot in me that I can’t really remember how I came across it, because it was Bill Carry Creko, with James, I’m not sure if you are familiar.

Aussie Firebug: Yes, I have read some articles before, I don’t follow as much as some others but yes, he’s been very popular.

Pat: Yeah, and to be honest that was one of the only ones I read before I really started my blog and before I kind of did some more detailed research into the ozzy scene. I mean it wasn’t until a bit later before I started kind of well, what other bloggers are out there really started to search, and kind of found them.

Aussie Firebug: Yeah I know that. And is this sound like, you know you mentioned that you always knew that you wanted to not work forever.

Pat: Yes.

Aussie Firebug: Has that been in your mind since you were a kid or was that an influence that you know by your parents or your upbringing or anything like that?

Pat: I don’t think I was influenced by my upbringing, I think it’s, to be honest I don’t think so at all it’s just something that you know when I was at work the concept or idea, a conventional early retirement really appealed to me. When I say conventional I mean five or 10 years early.

Aussie Firebug: Yeah.

Pat: Kind of not retiring at 65 like my father had to and so I started you know, investing my money well before I had the idea of retiring very early and I kind of think that investing that money was kind of a part that conventional early retirement goal. But yeah, it kind of, I really became focused and determined obviously kind of late last year, early this year when my blog was born.

Aussie Firebug: Yeah, who taught you about investing?

Pat: You know Mat, absolutely no one.

Aussie Firebug: At all?

Pat: Yeah, really. I think I’ve read a bit of your blog and you’ve mentioned the same thing you’ve kind of come from a wonk family and you sort of started your culture in investing in real estate and everyone is just like that you know, you have to buy a house, rent money, debt money et cetera and I didn’t go and invest in any real estate but that’s partly because my parents and my extended family would just really sort of anti-kind of securities or anti-equities, that’s you know, for my whole upbringing.

Aussie Firebug: Which actually is the common thing with you know baby boomism you know, it’s always bricks and mortar as a safe bet and you know, anything in the stock market is what I gain into them.

Pat: Yeah, exactly. And I had an uncle that lost big in the stock market and I think my father especially when I was young it kind of sounds like he was exactly like you said, terrified of the stock market. As far as he was concerned it’s just gambling your money which of course we know not to be the case after doing some varied research, yeah.

Aussie Firebug: Yeah, I know that. So just good said of that question, what are you investing in currently?

Pat: Yeah, so I’m kind of almost 100% shares at the moment. Perhaps at any one point I’m not just 100% just because I’m waiting to pile up a bit of money so I can then

Aussie Firebug: Oh yeah, sure.

Pat: More shares in a sort of cost effective manner. But yeah, mostly Australian equities with that kind of a really tiny exposure by what I can tell everyone else’s standard to international equities.

Aussie Firebug: So how much percent would you say is Australian equities?

Pat: I think at the moment it’s 80 to 85% Australian equities.

Aussie Firebug: So what’s the reasoning behind that?

Pat: Well, I’m not sure if you’ve read my Franking Credits article.

Aussie Firebug: I have, great article by the way. I would definitely link that in the show notes, it’s one to definitely read if you are unsure of the Franking Credits.

Pat: Yeah so I actually found that kind of bizarre, well not kind of bizarre like I understand the sort of how everyone wants a lot of diversification to head against a bit of risk from the Australian market not doing so well, but those Franking Credits, you know they literally are like an extra percentage point on your returns and you kind of mentioned to anyone that you’re going to go with this asset, cross with that asset, cross when this one has sort of one percent cost involved, they’d be like , “What are you crazy? You’re going to invest in an asset clause where you are paying one percent higher fees”

Aussie Firebug: Yeah, it’s blasphemy.

Pat: No, yeah exactly. It’s all kind of investing in Australian equities like that kind of what, Wow, I’m getting an extra percentage point of returns per year which of course is gigantic, and it can really speed up the investment process.

Aussie Firebug: Absolutely, so what is the fifty percent international? Do you pick the stocks or are you an ETF investor, I can’t remember on your side if you’ve said it either or…

Pat: Yeah, I’m mostly ETFs and then I kind of have a few Australian stocks which I bought, I’d say kind of not stupidly but against all my better judgment.

Aussie Firebug: I have, I told you that’s safer.

Pat: Well some of those turned out great others they just kind of posting along not doing much so I think all in all if you take all of those stuff that I’ve bought together they kind of just equaling what I get out of my ETFs so yeah, it’s like…

Aussie Firebug: You know, I did the ETF thing as well but you know I think it’s you know, whatever you are comfortable with like it’s whatever blend of shares you’re comfortable with and even I’ve seen some people you know pick and choose their own shares but they sort of stick with the you know, the bigger companies, and companies that are in the ETFs anyway, so really there really is no right or wrong answer, whatever makes you sleep at night really but yeah, you know, if you know what you’re doing and you think you know you can make a good judgement call like you know, I don’t see why not. What ETF, what Australian ETF are you invested in? Venga?

Pat: Yeah, Venga VAS. Yeah, that’s it, that’s my…

Aussie Firebug: I’ve seen that, yeah. That’s a, it’s a common choice you know, you’re like you’re talking about management fee it’s probably hard to, I don’t know if anyone is offering that point zero zero or point zero four percent of the you know, measurement fee out there.

Pat: Yeah, the Australian is point one four I think. It’s the US one that gets that ultra-point zero four.

Aussie Firebug: These two, yeah sorry you are correct, it’s the VTS is the point zero four. Yeah that’s right, still…

Pat: Unbelievable like point zero four

Aussie Firebug: I know that’s just insane. What about the international. You are in cheers or you are going for ETF’s s as well for international?

Pat: Definitely ETF and again VTS is what is at the moment. I am kind of hoping to get into other international ETFs but just kind of cruising at the moment and seeing what my next purchase would be

Aussie Firebug: I mean VTS as well I do like every month. I just go by whatever ratio is you know whatever split is out of my three funds split and I just top up that one. I just do that. But I‘m sort of not of hoping like if the Australian dollar was to decline any further which some people are predicting that it is coming to 90 cents I would go and start leaning towards buying some VTS just because of the fact that it is unhitched against the Australian dollar like if you look at the returns if you had put in some money in 2012 and was parity or was just a little bit over its such a good opportunity that I’ll know what to do for next time you know it gets me that I will I be buying a whole bunch so that when it comes back it is like boom you get that unhitched bonus.

Pat: If you bought US VTS security in 2012 you would be doing very well right now.

Aussie Firebug: Yeah that’s just so good. I lost. Next time you know now that we know we will be prepared for next time.

Pat: Exactly. Back in 2012 I was spending most of my money travelling so

Aussie Firebug: Right, I spend like… I actually went to the states. Can you believe it? It was a once in a life time trip but we spent I am not kidding if you like this is before I truly discovered financial independence. I spent like a good 18 grand or something and I converted it to US it was like a 2months trip but I bought so many things because I knew a whole year that if I was going to buy this wait until I will go to America because it is going to be cheaper. I went to New York and I spend like 4 grand in New York I bought laptops…I got watches clothes everything. I had been holding out for a whole year but because each stand was so good I got all these electronics and everything was so much cheaper I really cleaned up but I thought if I just kept $1000 currency and converted I could have made some money of that but you know you live once I guess

Pat: Exactly

Aussie Firebug: I was going through your blog and you had another interesting article which also I would link into the show notes. You are not a huge fun of Super.

Pat: Not at all. The reason for that is mistrust of government policy over my lifetimes so I am 29 now and before I can access my Super I am looking at something like 30 years or a bit more than 30 years. I just don’t trust that the government will keep all rules the same so that I can access my Super when I want to and cant access it in the same way that people can right now. I much prefer to invest outside of Super.

Aussie Firebug: I don’t add anything extra to Super which I am guessing you are not adding anything extra either so your main fear is that if you start adding extra to super because super can play an important role in early retirement if everything holds up the way it is now but your main concern is that the government with the meddling fingers, you know they have a history of meddling where they shouldn’t be they might change something and you might not have access to it. Is that your main worry?

Pat: Yeah. Essentially and it is not just not having access to it it’s just having access in different sort of ways and what happens to the money when I die, or my beneficiaries die and all those sort of little questions and all those sort rules that can change over the next 30 years.

Aussie Firebug: Do you think that if you are approaching the preservation age there is that much change. Like if you are three years out of the preservation age and you might start to follow some money into super just for those juicy tax savings.

Pat: Well yeah, exactly. As I approach preservation age there is obviously the risk of changes. it completely diminishes as you get closer and closer and so I am not sure exactly when the tipping point will be for me but I imagine somewhere like 10 years before I reach my preservation age I would start to think well it is only two more different governments and two more governments changes before I can access my super so maybe I will just contribute a little bit more now

Aussie Firebug: Sure. There is a few people that I have spoken to on the phone that have the similar mentality as you that they don’t trust the government and that they would rather keep it sort of on the fence. I am on the fence. I am building up my profile on super I am not contributing any extra bit I don’t know if I will because I made a little calculator that sort of you know that calculates how much you need for super how much is inside super to have the quickest way to financial independence in Australia is a two phase system if everything stays the same. Right now you need sort me on the outside you need to sort me on the inside super but when push comes to shove I am not sure if I will actually contribute to super or not so I am on the fence about that. When we are talking like I would need to shave off an extra year or something… is an extra year really that bad to guarantee financial independence. I don’t know, that’s a bridge I will cross when I get to it I guess. You are in Sydney right now aren’t you?

Pat: Yeah I am in Sydney.

Aussie Firebug: You are currently renting with your partner is that right

Pat: Yeah that is correct and we are renting in a sort of share apartment so we live with someone else at the moment and I am kind of a big proponent of share accommodation in these really expensive capital cities so me and my partner practice what we preach in terms of that article and we are sharing.

Aussie Firebug: Awesome. I have also done sharing before as well even in the country where rent is a little cheap but still it half’s your bills so I am definitely a believer in that also. Sorry I am coming to an article which I don’t remember when I read it but you are not very keen on Sydney’s property market which I think is quite understandable it a big crisis at the moment. Do you ever see yourself buying a house in Sydney? You are from Sydney originally like your friends and family are all in Sydney

Pat: Yeah all my friends and family are in Sydney and I was born here and to answer your question I don’t see myself buying a property anywhere in or around Sydney at all, ever. I think I… it’s a little bit more expensive it depends on what you consider Sydney but perhaps go up to the central coast or down to sort of Wollongong area and buy a property there but those are place which I don’t even consider to be Sydney any more. They are places you can even drive to and fro, you spend a day there you might even sleep there because driving back would be too much of an imposition on your body

Aussie Firebug: Yeah so are you planning to retire in Sydney. My question is that are you planning to rent forever?

Pat: No I do want to own a property I have sort of been considering my options. I am not sure exactly where I will retire and obviously a lot of it has to deal with my girlfriend as well where she wants to live and what she is comfortable with but I considered sort of Presbenerio or Sunshine Coasts I haven’t looked too far into it but buying a property is certainly one of my sort of long term aspirations.

Aussie Firebug: Is your partner from Sydney as well

Pat: No, she is from Wollongong actually and yeah she’s moved up to Sydney for work because there is a not a lot of work in her field down in Wollongong.

Aussie Firebug: How is she taking all these financial independence business? Is she on board with it at all?

Pat: Yeah she is actually and I am kind of surprised may be a little bit surprised by it to be honest but she is yeah very supportive right from the beginning and she has a very big part to play in all of my blog posts. When I write something it’s sort of a grammatical mess and verb errors and tense errors and all sorts of stuff but she comes in and cleans up every post after I have written it and it’s been really great

Aussie Firebug: Do you know I had the same deal going on with Mrs. Firebag but she got sick of it towards the end so, I even had a radar that was doing for me which was cool but I had to like every time I did a post I didn’t have to wait for her to log in and check in I always do it myself now and there is heaps of errors but I don’t particularly care about that much.

Pat: Sometimes I feel the same way. Just get them out just don’t worry

Aussie Firebug: Why don’t you take us back to the moment like was there a conversation you had with her explaining what you were trying to achieve and what you envisioned your life to be when you reached financial independence. How did that go?

Pat: This is kind of really awful not because the conversation was hard or anything but I had never did really discussed it with her before I started my blog and I kind of just sprung the blog on her.

Aussie Firebug: Ooh well.

Pat: That’s kind of how she found out.

Aussie Firebug: So you just wrote in a blog post one day and she said what are you doing and you just dropped it on her?

Pat: Yeah, my first blog I don’t know. I was a bit embarrassed to be honest or so unconscious about writing my own blog it’s not something I ever imagined myself doing years ago or when I was a child or anything so when I wrote that first blog post I kind of brought it to her and I was like hey, I have started a blog do you want to read it. That’s when she kind of really found out.

Aussie Firebug: What did she say? How did that conversation go you know? Perhaps like I have seen that you want to retire early and we are not going to be saving for the next ten years does this mean that we are not going to eat. How did that go? I am sure she had 100 questions

Pat: She did have 100 questions but she didn’t ask them straight away she kind of let them on slowly and I think at the very beginning she was just very supportive and really happy and she thought right well I have really missed blog. She thought that was pretty cool and so she was really happy to begin with. Little later on we started feeling out those sorts of issues. Well do we eat out anymore, how much we eat out what we spend our money on? Writing the blog has just been great and getting my thoughts out and her having to read every single one. It is aided in our communication a whole lot and every time I write something new she gets another little insight to how I am thinking about these things but yeah she is enjoying it. To be honest I think I asked her about it one day and she said you know what Pat, not much has changed whatsoever to be honest we spend a little less on eating out and we just think about what we are spending our money on and that’s about it. Otherwise we still enjoy ourselves, we still get out, to be honest we probably even spend more time together now, we do things that we enjoy even more and yeah. I can’t say there have been any negatives whatsoever.

Aussie Firebug: Yeah I know. It’s really funny some people you know, I don’t know if you’ve had to explain to people what you’re doing but if I’ve ever had to explain that you know, some people what I’m doing it, yet still, they are like what so you know you’re going to live you know, on nothing live like a peasant for 10 years and then just live like a peasant for the rest of your life. They’re like, “Nah, it’s not that, it’s not like that.” It’s just like you know the new offering that’s like you know $1800, like when you start caring about that crap, like we happy to use like running out of phone, we don’t need to go out you know three or four times a week, buying clothes isn’t like a huge deal for us. I think heaps of consumer bullshit can be carrier and it can half your bill and then you sort of get to a level where if you’re cutting any more of your spending, then it sort of is impacting your life a bit, like way more than the first 50% you can get. And that sort of way out I mean my partner you know I was at the extreme level for a year or so then, I was a bit too extreme. And she sort of levels me at a bit so we lived a crime life. Like we go out when we want to go out, she buys new shoes if she wants to buy new shoes but there’s always, like she’s very responsible. She was responsible even before she met me and I always have like a little rule you know, we’re going to make sure I like it, I never impulse buy anything, I like think of it before, a few days and if I still want to buy, I just buy. We’re just conscious, we’re conscious of how much we spend and that’s really a bad it, like that’s not even like, we are not like starving ourselves, like some people think. It’s nothing like that.

Pat: It’s really funny like depending on how much you rated stuff sort of read my blog or if you haven’t read it at all yet, you kind of see a general theme of me just trying to explain or trying to express my thoughts that, wait a minute, like, we’re living in Australia where we’re living like these extraordinarily, like rich and opulent lifestyle compared to the rest of the world and compared to history. Like I mean I never go hungry I’m out you know, the other weekend I was at a friend’s party, we’re having a barbeque, I was drinking a nice cold beer, I was socializing and I’m like this whole nut costed me like five to $10 like I’m living like this really fun really comfortable really kind of beautiful Australian life, which is just extraordinarily sort of rich. Any sort of standards that you can make other than just comparing yourself to sort of other ultra-consumers first world country citizens of the year 2017 or the early 2000s, whatever you want to say.

Aussie Firebug: Yeah100% agree even the fact that if you live in Australia that puts you in like the top five percent wealthiest person in the world straight away without even doing anything or just the fact that you are in Australia that even on the minimum wage you are richer than majority of people on the planet. Yet people still complain.

Pat: That’s right and what you said by the way kind of confuses you are like wow you are being like really like a pervert if you are denying yourself of these pleasures and well actually no. Like you said everything I want and more I’ve just like cut away all the bullshit that doesn’t matter and that’s the key. Finding out like really finding out what matters and what doesn’t and when you start cutting away you figure out very quickly that all of this other shit like this external consumer gloss it just doesn’t matter and none of it makes you happier none of it improves your life and any sort of discernable way at all and once you start cutting away all that shit and you kind of de-clutter your life and you really de-clutter you remind and you start living I’d say a much better life because you are focusing on the things that do matter . you are going out for walks you are focusing on your works you are focusing on your relationships and instead of like every week and going to the shopping center and just buying the newest brand name in clothing because you have to look in front of your friends the next time you see them you are going out with your mates and you are kind of both look like buns but you are both running around the bay and you are both happy and yeah it’s amazing when you just cut away all that crap. How much better things become.

Aussie Firebug: Preach, preach it Patty Artist 100% truth you are right there. A minute of truth just dawns you just drop. There is a really cool view, Mr. Money Muztag. I think he was in it. He was talking about it like what makes us happy because at the end of the day I don’t care what you are doing it’s all about happiness. You enjoy being happy 24/7. Everything you do is to be happier even if you have given up your dome, or you are donating money or you are helping other people that is a side effect releasing dolphins and making you feel better about yourself which is a by-product of happiness. Right and Mr. Money Muztag has this video and it’s like the secret to happiness is being there is no secret it’s been here for years. There are certain things that the human being needs like shelter, food, security everything like that like basic human in needs. If you live in Australia odds are you know you are unfortunately harmless or something bad has happened to you. Once you got every basic thing a human being needs covered like at a basic level, you are being fed, you got a house a roof over your head so that beyond that is like a few other things that is needed to make a human being happy like creating relationships and family things like that physical fitness is a big one I mean that’s it, you know what I mean. There was no other, there was no apple mac book back in the stone age but people were surely happy but then there are books of people being happy you know like throughout history when there was no these things. That exist today and they didn’t exist then like it’s the same simple things that matter and so many people grow they look beyond and they think if I get that next promotion or if I am on this money suddenly I am going to be happier. Things like that or if I get that new bag it’s going to make me happier. It won’t make you happy you might get some like a rush of happiness but it deteriorates it’s not the new thing anymore. Then you know you flattered with Mac and campaigns that the new bag or the new Wife and suddenly your things crap it’s like just focus on the basic things like what a human being needs at the most basic level is usually all that you need and there is a little pleasure along the way that make you happier or you know I’ve got nowhere to go makes me so happy you know that is a little bit of new technology but very little, there is a few things I love but there is so much of other stuff they want to started to track my spending’s also I don’t really care about that that can go, the next thing you know you have cut out 30% of your spending just like that.

Pat: you really need to link to Mr. Money’s Muztag video. Have you

Aussie Firebug: have you watched the video I am referring

Pat: Oh yeah I’ve watched it probably ten times

Aussie Firebug: Yeah, that’s right that means it’s awesome.

Pat: The way that he sort of articulates those thoughts and the way expresses them just really hits the nail on the head and it’s really hard to disagree with anything he is saying in that video just because I mean his really precise.

Aussie Firebug: Definitely the link to that video like as he said he can articulate it a lot better than I can but it just hit a nerve with me and I am sure he will hit a nerve with a lot of people it’s like just the basic stuff is where we are human beings, we are just an animal on earth and certain things biological can make us happy and all this other crap is marking in you know 21^st century bullshit. With technology advancements it’s now good to have a heater if you feel cold you can turn this heater on and it makes you warm that’s cool. There is so much crap that you just don’t need. We saw that turning off our phones we went off the tangent

Pat: That not off tangent at all I think that’s like really the key to financial independence is finding out what you need and why and what you don’t because all flesh will quickly erode any sort of extra income you get if you let it

Aussie Firebug: I completely agree, absolutely. Why don’t we get back to yourself and on your website there is a goal tracker that sits to the top right of your website and it currently running round about $250000 and how I interpret it is that you need roughly 1.25 million to hit your financial independent number. Is that correct

Pat: Yes. The way I set that target is that I have taken the nominal amounts in ten years’ time to be 1.25 million which is equivalent roughly to 1million and 17 dollars.

Aussie Firebug: Got you. When you reach this number that means that you are financially independent correct

Pat: I think I will actually reach financial independence much sooner that when I hi that number just because I am spending actually far less than the income that that amount of money would produce. I am actually planning for a little bit of lifestyle inflation in terms of the sort of house I want and perhaps a family and that sort of thing.

Aussie Firebug: How much income is that that you planning to get form that at the end

Pat: Todays there was forty thousand a year

Aussie Firebug: That’s for you to be financially independent does that include your partner in that goal.

Pat: It doesn’t actually .it depends on when I think about it. That amount of money is more than enough why believed to sustain me and my partner for the rest of our lives. As I said earlier, a family will need slightly more than, adding my partner into the mix, in my mind and I have discussed with her a couple of times. Looking at around 1.5 or 1.6 million not much more at all

Aussie Firebug: I guess that when you are at that stage the difference is to save one hundred thousand dollars takes years. I mean to save the next one hundred thousand takes less and so on and so on and so on. If you write 1.25 million to add on the next couple of 100000 with the purpose of comparing interest on the markets takes a while in those years and shouldn’t be too far away. Have you got joint finances already or you haven’t tightened this.

Pat: No, we’ve got completely separate finances think they completely try and spare it to each other but as far as bank accounts and investment accounts that is completely separate.

Aussie Firebug: Does she invest herself

Pat: Yes she definitely does. In a lot of ways she is perhaps invested even more impressive way than have because she is five years my junior she is much stronger than I was five years ago.

Aussie Firebug: is that partly due to your nose you are quite fond of her or she is just shown an interest earlier on.

Pat: well she didn’t show interest in investment so much but just in being really good in money manager and not spending all that money and yeah she got a full time job. You know she left University and she had a part job before her bur she never just went out and spend all our money time and I think kind unlike me she just had more money than she could spend in a sort of rational way without kind of feeling completely ridiculous and that’s how I came later on my original couple of 100k. I didn’t really have a goal so can’t spend that much I just spend what I wanted ad then its stopped anything above that was just like what the hell I can’t spend this bloodshed’s that ridiculous I had no desire to.

Aussie Firebug: It is such a bonus isn’t it if your partner good with money, starting of the bar like more and more and it’s just like thank God that I want with someone that was just a reckless spender and that didn’t come out of the woodwork until a few years because I never looked at her bank account at all like the first couple of years when we joined finances last year and sort of like when I say joined finances it just becomes transparent. She has got all separate accounts and I have got mine but I guess the only difference is we invest in the one trust so she will help me out. She would transfer money to me and we will invest together that’s far the only difference but it’s just such a bonus that she wasn’t reckless.

Pat: I think finding someone like that you know isn’t a complete coincidence. Even Stephan told me it’s just my girlfriends name for all of your listeners who don’t know she was originally was attracted to me partly because I wasn’t very materialistic at all and I would just go out and try to shed off a lot of my wealth even though when I met her at least a few months afterwards it was kind of clear that I had quite a lot of money but yeah.. so with you I am sure part of the reason that you were attracted to each other was even if it’s kind of unconscious you are not materialistic you have good money management skills etc. sort of thing

Aussie Firebug: Do you know I have never actually thought about that but it does make sense now that you said it. It maybe subconsciously yes I was attracted to that side and maybe she was as well but yeah maybe that’s what happened. That’s a good sign to think of that I never thought of that one that’s a good one. You said in your blog that you want to retire by 39 and you are 30 still how long, so you are sill 29 now 10 years to go how long do you reckon it’s going to take to get there?

Pat: Since I have had that original target and original post I have gotten a promotion and I have driven my spending down even further and I have really kind of become conscious of everything I am spending I think by the latest calculations me on my own it will take about 6-7 years and if I throw Stephan in to the mix and we’ve that sort of reduced target together which is about 1.5M it will only take us about 5-6 years so yeah it’s been great and getting an extra income obviously helped and we are really driving don those costs it’s just really driving that date forward and it’s so powerful when you can see that date coming forward and you work it all out and you the results of kind of everything you are doing and it’s like yeey I can keep driving these costs down and I can drive my income up in this day. It’s going to be hit even before I realize it.

Aussie Firebug: that’s awesome , from where I am sitting that’s unbelievable and you know for those that are listening in having a partner you might think it might take twice as long, having a partner and you know you have to factor them in as well but it actually doesn’t if they have got a decent enough job. Having a partner could actually save you money because you have got someone else to turn in good money as you are doing even normal money but everything is cut in half like the rent is cut in half , the groceries are cut in half and it’s a lot more efficient living with someone else than having two people living two people living in two separate homes paying two separate rates if you are in the home, two separate gas bills and everything like that it’s a lot more efficient with a partner trust me.

Pat: Yeah two can live almost as keep as one

Aussie Firebug: Absolutely. You can almost do it almost like, yeah there are a few that you are extra but just as is mathematically impossible not to behave as two people as one but it’s very efficient. it’s all surprised like what the hell like huu we are pretty much living off Chris’ pay cheque which is more like the same she was like she is still living off my pay cheque and all those it’s been unbelievable.

Pat: if you don’t have a partner then obviously things are a bit more difficult in terms of reaching that goal but yeah if you do find someone and they are as intense on not working away their entire lives or running that rat rail their entire lives then yeah it just sucks. MI6 is so much better and so much easier. If I could Segway as well

Aussie Firebug: Sure

Pat: Just on topic, I can’t exactly where I read it but perhaps I can find something and link it to. They say something like 70 or the majority of divorces are a result of financial problems and so when your finances are in order and when you’ve got a partner that thinks financially the same as you you’ve kind of eliminated the major cause of most divorces in first world countries so it’s just another way of being financially independent really does drive being happy and yeah that’s sort of quite an important goal for everyone and being happy like we are talking about before with Mr. Money Muztag that it should be the goal of everyone to kind of be as happy as you can and help other people as much as you can and that should make you even happier and that’s just another plus or advantage to kind of achieving this goal.

Aussie Firebug: That’s a really interesting statistic if you could find that article it would make it cross link operative on the show but I have heard that you know that financial stress is a big cause of marriage breaks but I have had that it foes up to 70% but I believe that for sure that like 100% that’s very believable just because I know personally some couples that have gone through hard time because of financial stress, because of arguing about money, because of work related stress, because of they weren’t home enough and wherever and a huge motivation for me to reach financial independence is to have that time back to not worry about money to you know when we eventually have kids to not be even working three days a week would be a drain. I can’t imagine that. Three days a week for ever. I would be happy to do three days a week but eventually I have the option of working null days a week but it is just not in the brain for me to have that option and to achieve that goal and have so much stress lifted off your shoulders so you can go back to what is important in life like we’ve spoken in realities just focus on the important things and just cut off all the rat race bull shit.

Pat: The sort of rat race would steal so much time away from you and even more time than most people realize probably more time than I even realize: going for a full time job ad trying to sort out yout life in these sort of gaps around full time work and as you said get them out of your mind and let them go just having like could you imagine having the kid and actually having the beautiful sort of privilege, the luxury of being able to spend time with your kid which is possibly the saddest thing I have said this whole podcast like so many parents don’t have the luxury of spending time with your children. It’s kind of sad when you think about that but then this goal like just thinking of that sort of thing if I do have children which I do want to eventually just being able to wake up and just not have to race off to work and then get back home when they are tired and they have obviously gone to sleep.

Aussie Firebug: Exactly

Pat: It would be just as you said amazing, just unbelievable. Every day would just be like look I get to spend time with my kids instead of running around and racing around and never seeing them

Aussie Firebug: The saddest thing about being rushing off to work at 4am that’s a fear of mine. I am looking at all these dads working at pretty big office pf 1000 people and there are some people and there are some people working obviously going to work at four I was like are you insane, that’s ludicrous I know like that’s what you do, like if you have a kid you can’t have his time I am like oh my God I definitely … there is no way I will be working full time even if I don’t reach full financial independence when we have a kid I want to work three days a week for sure I have already worked that out so that when I am in my thirties I will be able to take a few days off and if I have to extend my financial date for a couple of more years I don’t care I would work 3 days a week and have that home time and have that sleep time and not sacrifice things, people sacrifice things when money is, whether they need more finances whether they need to work overtime, they need to do this and suddenly they are not going to the gym, they are not doing this, they are not walking the dog, they are not doing the things that make them happy and that is to earn that dollar to be able to live that life and its bad to walk into a thing

Pat: Like you said I have seen this sort of zombie parents who are barely present and that’s just like aah men I hope that doesn’t have to be me one day

Aussie Firebug: Exactly it is a big motivator for me for sure. I know we’ve spoken a little about it before but tell us a little bit about your sweat Part. How long have you been blogging for and what do you hope to achieve with it

Pat: I have been blogging since January this year and in terms of a goal I am not sure really I won’t be creative you know I can get a larger readership but to be honest I am really happy just kind of plugging away writing my blog posts. Some people seem interested a few other people seem quite annoyed at what I write but that \s ok too because it creates a bit of interesting discussion and yeah that’s about I am happy if I don’t get rated for the time being. it does kind of give me a bit of… it is one of this things that I am happy to do right now even though it actually sucks money out of my life to be honest I have definitely spent more just setting up the blog than I will probably make on the blog but just a sort of freedom to create something myself and invest time in something which the primary motivator isn’t just to make a few dollars and has been very empowering and it’s been quite enjoyable and I just have to keep doing that.

Aussie Firebug: Awesome stuff I know with my blog I did it sort of as an accountability thing and making sure my strategies made sense and they weren’t crazy and the response has been awesome like I have had so many people get in contact with me, like solicitors and like seasoned investors that I can meet up with any time and ask questions about and have people critic my strategy and I can have those how are you doing this and you should be doing this and it is awesome and I like passing content and making these podcasts for people to listen to its so much fun and like you said I have put in way more money than I will probably make but it is not about that it is about expressing myself and holding myself accountable really.

Pat: Definitely

Aussie Firebug: So if there is any listeners out there wanting to get in contact with you what’s the best place they can reach you

Pat: The best place is obviously first of all read my website kind of see what I am all about

Aussie Firebug: What is the address to your website?

Pat: its lifelongshuffle.com and I am usually pretty responsive in there and I try to answer every comment personally that is posted and I have obviously the privilege of doing that because I don’t have an extremely huge readership so I can keep up with all the comments that re posted. Otherwise I spend quite a bit of time on the FI Australia edit so if you kind of post there and I find what you posted interesting I will be able to respond to it or you can message me I don’t know is it good my username Pat the shuffler on reddit.

Aussie Firebug: Yeah sure. FI Australia is an awesome phone board I always go there myself. And just the lastly, if you had to give one bit of advice for a new shuffler what would it be

Pat: I think the best thing I could say is that you will learn very quickly just like what we were discussing before how much all that other shit just doesn’t matter. All the consumable shit, all the latest gadgets all the fancy clothes all of the fancy hand bags kind of showing of to your friends. Getting the sort of ritual respect coffee everyday like none of it matters at all and its quickly going to deplete you of all your money and eventually you will deplete all of your happiness as well but that none of that stuff really brings you real happiness and it just takes time away from you to really going to find what brings you really happiness in this world. So the best piece of advice I can give is just start cutting things away that don’t matter and you will quickly realize how much they don’t matter

Aussie Firebug: What’s to live by Part what’s to live by you guys if you have enjoyed this podcast and you want me to make more be sure to drop me a comment and ratings on iTunes just search ozzyfirebag on iTunes and you will find I am also SoundCloud at www.soundcloud.com/aussie-firebug. Show notes of this episode can be found on my website at www.aussiefirebug.com. Pat it’s been an ab solute pleasure of mine thanks for coming on the show.

Pat: No worries thanks for having me mate, I was definitely looking forward to it and I always look forward to your next podcast.

Aussie Firebug: Ok… too kind mate

Pat: Bye buddy.

Aussie Firebug: Hi guys, welcome to another episode of the Aussie Firebug Podcast, the financial independence podcast for Australians where I interview clever people who have already reached are on their way to financial independence. Our guest today is Jayden Vecchio, a director and co-founder of Red & Co., who was awarded the 2016 F.B. AA commercial mortgage broker of the year. You may know Jayden better as the co-host of the very successful Rentvesting Podcast aimed at Gen X and Gen Y property investors. Welcome to the show Jayden.

Jayden: Right, thank you for having me. This is a lot of kind words there.

Aussie Firebug:[Chuckles] Yeah I hope I got everything right and pronounced everything nice–

Jayden: Nailed the pronunciation as well [Laughing]

Aussie Firebug: It’s an Italian last name, is it?

Jayden: Yeah, it means old which I’m not but you know, getting there. [Chuckles]

Aussie Firebug: What part in Australia you from mate?

Jayden: So I’m based in Brisbane in sunny Queensland, it was pretty hot today. And yeah, like you said, I’m the director of Red & Co. so we’re a property and financial services business and also yeah, lucky to co-host the Rentvesting Podcast so it’s similar to what you do like helping people with growing wealth really.

Aussie Firebug: Awesome, awesome stuff. So yes, sunny Brizzy, have you always lived there- grown up there your whole life or?

Jayden: Yes, so I grew up here, went to school here and then lived in Sydney for a couple of years where I think I got first involved in property down there which was obviously a fun way to do early in 2009/10 so when there was that big beautiful chunky first home owners’ grant, that was kind of just before– there was bit of a low off in Sydney when peaks in the market was pretty soft and then yeah, moved back to Brisbane a couple years ago and the family and that sort of stuff.

Aussie Firebug: Let’s dig into that just a little bit further. So you grew up in Brisbane and then you moved to Sydney in when– 2009? 

Jayden: Yeah and sort of– well actually, I moved down, I was with Macquarie bank at the time and my first day in Sydney was like in September 2008 which was fun yeah like literally like–

Aussie Firebug: So when the world was going down.

Jayden: — the first day I was like so happy, had my like little rolly bag, rolled into the office at 9:00 am and the office that was normally bustling and busy and like people on the phones and yelling and screaming, whatever, it was like dead quiet like you could hear a pin drop. Everyone was in a meeting room, myself like trembling like yeah, I’m so excited, it’s my first day at work and basically you know, 400 people got laid off that day in the mortgages department, they shut down their division like it was a crazy time to be in that area but I guess fortunately for me, I was very cheap labor because I was on Brisbane salary living in Sydney and I was pretty much a grad so there was no point making me redundant. I could stay on and do the work of a couple people and the more expensive people that got paid well, they were let go and it was very bit of a baptism of fire thing seeing you know, the highs and lows of property, obviously that was a bit of a tough time especially on the funding side but super interesting time to be around like you know.

Aussie Firebug: So that’s the really interesting to me because Australia didn’t really- well, from my perspective- get affected that much by the GFC so to hear like you know your perspective on that that 400 people were laid off, like that’s– I really didn’t think Australia caught it that hard. And you would have been in the thick of it working at a bank you know, as large as Macquarie is, how close was it to all falling over in Australia?

Jayden: All in the area, so Macquarie at that time got all their funds through securitization so what that means is it’s kind of like what happened in America where they bundle up thousands of mortgages together then they’d sell them to particularly investors who put money in them and they’d pay like a coupon so they pay investors to return their money just for example so effectively, that market stopped overnight because it relied on banks giving loans to each other and investors putting money in these loans and because of all the stuff that happened in America, basically that market was completely stopped so Macquarie being heavily, they were completely funded by securitization, they had no money overnight which meant they had to shut down their team like the money that they had out, they had to sort of work out how they could refinance that and get it back on balance sheet and the bank had to kind of pretty much buy back those loans more or less and there was nothing wrong with them. It wasn’t like in America where we’re giving people loans to someone in a trailer park, [chuckles], it was very different structures there because like you know in Australia, our loans are full recourse so if you take a mortgage out here and you decide you don’t want to pay it back one day, the bank will chase you and they’ll put defaults on you and they’ll make sure you pay it back whereas in America at the time- and I think it’s still a bit the case- you can take out a loan, you can decide one day you don’t want to pay it back and because they don’t recourse people, it’s literally just putting the keys in the mail and sending it back to the bank and leaving the house there. So like very different markets so it obviously wasn’t Armageddon like it was in the States but certainly for Macquarie who relied on those markets, they had no money to give and so they had no point of a mortgages sales team.

Aussie Firebug: Wow! So that’s the subprime like crisis thing, right? Like that was the name of it in the US, the Subprime or whatever–

Jayden: Yeah, in the US, they called it like the Great Depression, not the great depression, the called it different, obviously in Australia we call it the GFC, Global Financial Crisis.

Aussie Firebug: Yeah, but I thought like that there was subprime loans, I’m not an expert in that–

Jayden: Yeah so basically like in the States what they were doing was they were getting like big piles of loans and then basically on… So a bank would have a bunch of trash loans where they might be on– one thing they did a lot in the States were like these honeymoon rates so they might give you like a really cheap rate for three years, you know, it might be 2% but then it resets and it goes like 6% so then your payments go up like four times and then that’s basically– that whole subprime thing, all these rates reset at a similar time where people’s repayments went up and also backed up with the fact that Americans can walk away and say like “Later guys, thanks for the loan but no thanks.”

Aussie Firebug: Isn’t that bizarre?

Jayden: So crazy.

Aussie Firebug: Isn’t that absolutely ludicrous like so do they take a credit here or is their credit rating destroyed if they walk away from a loan? Like surely, there has to be some sort of–

Jayden: It might like affect your credit rating but from what I understand like you could walk away and it’s not like here where like they will chase you, they’ll take anything like your dog, your wife, like your pair of jeans like–

Aussie Firebug: [Chuckles] Hide your kids, hide your wife.

Jayden: Men! Like they won’t stop here whereas there, it sounds like- you know from my understanding- like you just leave the keys, you walk away, it’s the bank’s problem, not yours.

Aussie Firebug: Yeah, I’ve read about that as well but it just seems so bizarre to me that that they would let that happen like you could just roll the dice on anything you take, the riskiest investment ever and–

Jayden: And apparently like a lot of their lending standards were like– they got like a bit pissy on lending standards so they had to like lend a certain amount to different like demographic groups and like– it wasn’t like here where it’s like: well if you can’t afford it, you can’t get a loan. Like literally, the banks now, the way it’s regulated, unless you’re making a certain amount of income, if you’re over a certain age, you can’t get a loan like it can be tough in certain situations but I think fair probably because it’s going to help everyone else whereas they had a certain point for a Latino, for an African American, for whatever it is where you had to sort of sit in those profiles which you’re just like well, that’s crazy like it should just be based on merits not on whatever so yeah, a lot of craziness there and hopefully it doesn’t happen again but we’ll see.

Aussie Firebug: Yeah, fingers crossed mate. So, you’re obviously– well you’re a mortgage broker, you’re a director of Red & Co. so we’ll sort of skip to hear but that’s alright. Let’s go back a bit. So did you study finance at school or how did you get involved with finance? Did you know from an early age you wanted to go in there or?

Jayden: It was also one of those things like I studied business and IT at university, and actually started with IT–

Aussie Firebug: Go for IT!

Jayden: Yeah, mainframe and computer–

Aussie Firebug: Great, great, love it, love it.

Jayden: [Chuckles] But yeah, like sort of got towards the end of uni and I could always– maybe because of my family loved property, liked dealing with that sort of thing so I wanted to get in something property related, enjoyed finance, ended up getting that job from Macquarie and towards in almost like a grad program so that’s sort of how I got into the industry, through grad program, through university and got in that way but I think then I think then it was sort of like the mates that I had in Sydney that were heavily into property that liked it that I would spend Saturdays looking at open homes, going to auctions and just getting a good feel for the market down in Sydney and that’s really sort of what initially got me in and my first investment was down in Sydney in Alexandria, a unit down there.

Aussie Firebug: And so what year is this?

Jayden: Sort of like 2009, so I’d probably been in Sydney like a year or so and that’s when like I didn’t have a huge amount of savings but I was fortunate enough that the 1$4000 first home owners’ grant at that point and you could still get sort of 5% deposit loan so most of my deposit was probably the grant, like a bit of my own savings and managed to get into that property but my intention was always to– you had to live in it for six months to rent it out, to turn it into investment property and really like rentvest which is what it’s called now but I guess it’s what people did in those days– we were like: well, I don’t have to make the repayments myself. You can get tax advantages if I rent out the thing with [00:09:54] and everything else, I’ll just move out, rent it and live with a mate and that’s what I sort of did after six months, lived on a mate’s couch and became a landlord living on a couch. It just kind of worked out really well.

Aussie Firebug: That’s awesome. So what attracted you to property? You mentioned that– did you say your parents were property investors as well or you come from a sort of a family that–

Jayden: Yeah, I think I came from a family of property investors. I think also working in the mortgages team at Macquarie there, you’re kind of surrounded day by day with property and people buying stuff and investing and you just kind of get stuck in it a little bit so I sort of went that way and then the more saw it, the more I liked how it was kind of tangible when you could get across it and you can understand the suburb and you know some of them around and whether or not I was right.

Aussie Firebug: Yeah, and why did the same thing. I used the first time buyer’s grant but I did it originally and it was like close to twenty grand that I got–

Jayden: It was like twenty one, wasn’t it?

Aussie Firebug: Yeah, just over. I know it was like– thinking back now like such a lot of money that the government just gave me to go purchase a house and like yeah, I did the same thing like lived in it for six months but then rented it straight out and like it’s just crazy to think about how many years it would have taken me to save that much money and then you also factor in like I built to get that amount of money so then like stamp duty is nothing when you build a house and yeah so you’ve got to take these advantages when they’re available, right?

Jayden: Well, I reckon the thing that it’s easy to forget so I think mine was like fourteen grand, right, but like to actually earn 14 grand in my job net, you almost need to make 25-30 because then you get taxed and then you know, by the time it gets into your pocket and super comes off and everything else so yeah, I think like if the grants are there and it makes sense so like you’re not just buying property just because someone tells there’s a depreciation on these negative gearing benefits like you actually do the numbers and sit down and you know, the numbers make sense, I think you definitely grab with two hands.

Aussie Firebug: Yeah, so did you buy that investment property with an ultimate goal behind it or you just sort of had a bit of money, you’re working and you wanted to you know, make a smart investment? What was your strategy behind that first investment?

Jayden: So I reckon I was kind of lucky because a good mate of mine who was a director at Macquarie there had like ten or eleven properties at the time so he was kind of like taking me around showing me sort of the places like you know, it was kind of the next suburb along so it was like this Sydney city CBD, this red farm which was like a touch rough at that point, there’s like Alexandria which is kind of in between mascot and it was like the next suburb along that was pretty close the city, near a train line and like going through a bit that gentrification process like it was a bit industrial but still kind of cheap so I think like seeing him, seeing you know, what it’s like to have sort of 10-11-12 properties and just I like the idea of having some positive cash flow really and having someone sort of paying off my mortgage at the end of the day and obviously the tax benefits help as well. So yeah, I think like I went in there thinking that ultimately I wanted to build a portfolio and not have to work every day which you know, it’s like what you do, you know the fire piece, just becoming financially dependent and getting away from that sort of 9-5.

Aussie Firebug: Yeah, now I’m hearing you definitely. I think we spoke a bit about- you know before we started this podcast- like I don’t think anyone goes into property investing without you know, some sort of greater goal other than just owning the property and for a lot of people, it’s that replacing your income that you do. You trade your time for money and your full time job and you know, you imagine yourself one day sitting on top of this portfolio and it’s just working day and night for you and all you have to do is sort of you know, collect the rent every month and pay a few bills here and there and you can be off traveling or do doing whatever you want to do.

Jayden: Man, there’s a good quote. I think it’s Brian Tracy says- or maybe Jim Run- : You could work full time at your job and part time on your business and it’s kind of like that like you’ve got– obviously, your 9-5 pays the bills and it’s important in the short term but really, you’ve got to start building up your own business and you know for me, it was, I guess a property portfolio. For other people, it might be shares or funds, it can be different things but I guess yeah, that’s important to think about as well.

Aussie Firebug: Absolutely like I think– well it depends because– it’s funny because I quite like my job after that heaps of times but I always had in the back of my mind ever since discovered that financial independence was a thing that I’ve got to get there because then I have the choice because I know that I might like it now but I might not always like it and I went through a job change you know, the start of this year where I was in a really great job but then it sort of got a bit meh towards the end there, there was a change of management and I didn’t quite like what was going on so you know, even though it’s great now, it might not always be good and having that financial security knowing that you don’t actually have to go to work every day to survive I just think is you know, a freedom that everyone should experience at one time in their life.

Jayden: Yeah, so true.

Aussie Firebug: So great, so got the first property so did you study in Sydney– did you go to Sydney to study or you got the degree in Brisbane?

Jayden: I just finished in Brisbane and that’s when I sort of like I worked a bit in Brisbane then kind of got transferred down to Sydney. So yeah, like bought that first property, got a taste I was like this is awesome–

Aussie Firebug: And did you say it was cash flow positive?

Jayden: That one wasn’t but that was like the intention and this was when rates were like 6.5, like high 6’s, like the rates were kind of edging up because they obviously thought Australia’s economy was a bit even then. It was a bit weird. So I was actually going the other way. I sort of, like maybe within 12 months of buying that property, I thought I was ready to become like a property mogul so I borrowed a bit of money for my dad, got that property revalued and then bought another unit in Newtown which is sort of the next suburb along from Alexandria for like 330 and then sort of like scraped because the deposit could hardly service it but kind of did it like in a way that– like I can basically just scrape all my money together and even make the repayments. That really stretched me and that being in a time when interest rates were going up got me into like a bit of a pickle because the rates were going up and I’d sort of budgeted based on what the rates were when I got the loan but now it’s going up like it was starting to choke me like it got pretty uncomfortable?

Aussie Firebug: So that’s your third one started to choke you?

Jayden: It’s the second one. So the problem was like–

Aussie Firebug: But you were renting both of them, yeah?

Jayden: Well, so this was the problem. So like I’d rented out one of them, was living with my mate and then the second one that I bought, I thought I’d sort of like renovate and tidy up a bit before I either rent it or sell it so there was like two months basically that I didn’t rent it arm but to be perfectly fair like I didn’t really do my cash flow– I didn’t do any forecasting really so I kind of like backed the envelope like yes it will totally work, I’ll make repayments that’s fine but like in that time, the rates sort of went up by like 0.3% which then impacts across both properties, the rental doesn’t go up, my day to day salary doesn’t go up and so I just got into like a really bad situation where I was pretty much like living on credit cards, had to sell that property like I was in mortgage distress really but you kind of like manage it but it was still like– it was a good lesson in that if you’re going to make any financial decision, you really need to look before you leap and I hadn’t like I’d done my figures kind of like yeah, roughly, the repayments are these, the repayment is going to be that, the rent is going to be this, totally sweet but then as you know, you own a property, there’s insurance, there’s body corporate fees and it’s all different, you know there’s stamps you have to pay, there’s mortgage insurance I had to count the new one, a bunch of stuff that if I’d really probably thought about it- and plus like I was renovating so that would be like a grand for some paint and stuff and then it ended up costing like five which then like that you know hammers you when you’re pretty living a bit fine so–

Aussie Firebug: Especially it’s the guy that’s you know, your second year out of uni in Sydney, like one of the most expensive cities in the world like I’d imagine that the cash flow is you know, sort of limited to begin with. [Chuckles] 

Jayden: I was on like 50 or so– 55 then like so it’s the millionaire’s factory at Macquarie but it’s not like I was on a millionaire salary sort of thing and owning like two properties and only one’s rented like it was pretty tight.

Aussie Firebug: You were doing pretty well though. For someone who’s on 50k living in Sydney with two investment properties, that’s not bad.

Jayden: Yeah, I was pushing a bit but I guess I just hadn’t done my figures right and hadn’t done it right so if you’re going to do this sort of stuff like definitely model your numbers on a worst case scenario because–

Aussie Firebug: Yeah I always factor in a whole 2% rate increase last time I bought a property, that’s what I factored in but it’s actually gone down quite a bit since I bought although Commonwealth bank at the moment are upping their rates and they are upping rates for investors as you well know but that’s another story–

Jayden: Which is actually like interesting– I’ve done it for a couple clients and even some where like it’s not great tax-wise but its almost to the point where you’re paying almost a percent more for interest only as an investor at the moment compared to if you pay principal and interest, like you almost in some cases like a percent below what you’re paying so you can reduce your cost.

Aussie Firebug: Is that actually still for investors though? Can investors just say to the bank: Hey, I want to pay principal and interest and you’ll lower it for me?

Jayden: Yes, like the differential is huge. Like it’s up to a percent. Just because of like APRA and all these other banks and stuff–

Aussie Firebug: I didn’t know that there you go. I might be giving you a call after this podcast because I thought if its investor loan, they like know you’re paying a premium to be a property investor in today’s market which I agree with. I think that’s–  I’m slightly annoyed because I’m paying you know more than other people but I don’t mind it because if they can prevent all like– if that’s what they need to do to stop the crashing from happening, then like that’s what they need to do.

Jayden: Yeah, if it stops silliness, if it keeps the market a bit tempered, it makes sense but only because it’s you and only because there’s a few people, you know a couple hundred or more people listening, there’s a couple ways to get around that so like I said, yeah, like the interest surrounding the principal interest differential can be up to a percent; with some banks it might be 0.3-0.4-0.5 but even as investors pretty big. The other way you can do it with some banks, you can declare it as an unoccupied loan–

Aussie Firebug: Yes, and I actually have one of my investments I never told them it would turn into an investment so…

Jayden: Which tax-wise it doesn’t affect you because it just like the purpose of the loan was to buy an investment property, it’s an investor property that’s cool so that’s a good little life hack that you can use. Some banks will want you to verify no one like a rates notice or something but I think definitely like it’s a good little hack to get around that you can potentially just call up the bank, tell them to change it across and get it done.

Aussie Firebug: There you go. We might have saved my readers thousands of dollars, Jayden.

Jayden: Yeah dude, it’s that simple. Actually so another little life hack which you can do which I do for clients all the time, and you can try the CBA because they’ll do it on the spot. You just say like for example Sun Corp is doing like 3.79% variable for an occupied Payne islands at the moment so depending on interest friendly but you can just call and say like “Hey, I’ve got an offer to refinance, can I speak with your attention team?” And usually like in a phone call you can kind of arm wrestle them depending on how long you’ve had your loan for, you know 0.2-0.3-0.4% in just a phone call or like happy to help out people just to do that with their existing bank. It’s a good way that you don’t necessarily need to refinance because it’s a bit of hassle but you can still save on your rate and really, it’s money in your pocket–

Aussie Firebug: And heads up, heads up massively like if you’ve got a few properties and you know, you got a few hundred thousand dollars you know.

Jayden: Man, even if you’ve got one property like you know 0.1 on a million bucks is $1000, you know $500 a year on 500 grand like that’s your package fee, it’s pretty big. How hard do you have to work for $500 like that’s–

Aussie Firebug: Exactly and that’s so funny to imagine something like that because there was a comment on one of my blog articles the other day and it was like: Isn’t it funny like people, they won’t do stuff sometimes, they’ll be like I can’t be bothered doing that. Like I’ll give an example, we do like you know the credit cards sort of hack that I’ve spoken to you about–

Jayden: Love that by the way.

Aussie Firebug: I have a credit card. I go through a few credit cards you know every single year, I sign up and get the credit card bonus for a few different credit cards and every single dollar I spend, I try to spend on the credit card because if you’re going to spend a dollar, you might as well accrue it on the credit card to get the points and then you know, once you accrue so may thousand points, you start getting cash back rewards or you get cheap flights and you know what not so you might as well use them as long as you pay it back full every single month. So I was commenting on someone like I can’t remember, they said like people won’t do this because they’ll say I can’t be bothered signing up for it and then going through the whole hassle but if you work it out, literally it it’s like you sign up for a form online, the credit card comes in, you might have to go to the bank, I’ve spent no more than a few hours doing this whole credit card thing, right? No more than a few hours in my whole if you add up everything and it’s probably saved me one trip especially when we went overseas and I got the insurance with the credit card. I’m talking like two and a half grand, everything combined; cheap flights, insurance everything. Hell like if you work out how much people get paid per hour for them to earn two and a half grand and that’s after tax so they’ve got to like make three grand, are they seriously telling me they can’t be bothered like doing all this shit but then on the flip side, they can be bothered getting up out of bed, ripping themselves out of a nice warm bed at 7:00 in the morning and going to work for like $35-40 an hour? Do you know what I mean? Isn’t that so funny that mindset is completely like– they’re not willing to do something that’s going to save them a shit load of money that’s only going to take a few hours but it might take a little bit of things they’re not used too, that might be out of their comfort zone but they’ll do the same mundane stuff at their job for [00:25:28] money and they’re happy to do that, well they may not be happy but they do that.

Jayden: Arguing with a mate a little while ago. My whole principle was like you’ve got to sweat the small stuff a bit so he was like: oh, I don’t care about paying that $2 ATM fee, like I prefer to be comfortable. I was kind of a dick, I’m like show me your statement. Anyway we went through it, like he was paying like almost $200 a year just in those fees because like you know you go to a pub, it’s $5, you go to the wrong bank, it’s $2.50, you go to a show like at the movies it’s like $3.50 like it actually adds up and then $200 every ten years is two grand which sounds like something small but two grand here, two grand there, it actually adds up and then with the power of compounding, mate that’s like hundreds– it can really add up over time.

Aussie Firebug: I’ve been to known to run a kilometer to go to an ATM like a Commonwealth Bank ATM, I get teased by all my friends. I just refuse to pay that. Do you know if I’ve ever told this story on the podcast but the biggest like out of everything in my life, the one moment where I had to just cope something that I just couldn’t get out of was at a Boxster in Melbourne, we’re at the strip is and like the best man was like trying to get everyone money to get the guy a lap dance and I was like now worries, cool, but I’ve ran out of money, I need to get some more money out, went to the ATM, right? Yup, like prepare yourself. Guess how much you would think an ATM at a strippers would cost?

Jayden: I reckon like $4 is like almost half a drink so that feels expensive.

Aussie Firebug: Like 4-5 bucks is like your jaws on the floor, right?

Jayden: Yeah, that’s like half a drink so it’s–

Aussie Firebug: Twenty bucks. Twenty dollars.

Jayden: Really? You’re sure you weren’t drunk and it was two dollars?

Aussie Firebug: No, no, no because like it popped up on the screen and I was like– and I said to the guy, “Are you joking?” And he’s like, “It is what it is,” and I’m like, “Can I get a stamp? Can I just go to an ATM?” He’s like, “It’s going to be $25 to get back in,” so I was like uh huh they’ve done that deliberately like so you can’t get a stamp, yeah? Like you’ve got to pay the $25 to get in and I’m like “Mmh, okay.” Like I’m going to have to… like I can’t not do this but this is the last time I’m ever come into your establishment.

Jayden: [Chuckles] we’re done!

Aussie Firebug: Like yeah, so I just like coughed that on the chin and I was just like, oh this had better be the best lap dance ever–

Jayden: He has to be a very happy guy.

Aussie Firebug: Dude, the best man ended up like dropping like $1200 or something in the strip club that night. He was being silly, he was like lap dance for you, lap dance for you, so when I walked out of there you know a couple of hundred dollars like, “Hmm well, Smitty dropped so much more.” 

Jayden: Couldn’t have been that much money, [Chuckles]

Aussie Firebug: Yeah, probably going to be not as bad as him so anyway–

Jayden: Actually so just quickly finish up on that though. I got a sweet card, so not [00:28:27] Macquarie but Macquarie have like a debit card where I reckon their advert is, and I think [00:28:32], they’ll cover any ATM fee in Australia and it works on Apple Pay because I always like used to forget my wallet at the office and just go with my phone, and doesn’t have any fees so check that out because I think that actually cover that.

Aussie Firebug: So Macquarie, I’ll put that on the show notes, Macquarie card…

Jayden: Yes, it’s like a Macquarie debit card. I’m pretty certain, I’ll have to like to check but they cover like– it’s either all the major banks’ ATM fees or its every ATM in Australia. I’ll send you the email afterwards.

Aussie Firebug: There should be no such thing as an ATM fee, I don’t care what they say. It’s just bullshit, like oh, we’ve got to service the ATMs, like piss off. It’s 100% money grab. You know, bring on the bitcoin, I don’t want to hear about banks like I just want to decentralize, bring on the bitcoin and we can be done with your bullshit fees and just hoops that you have to jump through like no, catch you later! Anyway, so, I don’t even know where we were, back on topic. What were we talking about?

Jayden: Uh, we’re in properties, fees.

Aussie Firebug: Sorry, here’s one for you, I don’t know who asked this but I’m curious to know. So, you have the first one, you get the second one, you’re under a bit of stress, the banks probably should’ve like through your application figure that out but anyway, did you sell the second one?

Jayden: Yeah, I had to. So like at the time of application I’ll say, the intention was for both properties to be investment properties so like the banks, there was more income probably on there than what actually happens–

Aussie Firebug: Oh yes they thought you were going to get rents from the get go?

Jayden: Which was definitely my intention the whole time and there was a change of situation for the record obviously but yes, I think that’s kind of where I backed myself into a bit of a corner and then obviously that coupled with the rates going up, with not having a huge or any buffer realistically. Yeah, I had to sell that property unfortunately and lucky for me like the market– it wasn’t stagnant but it was starting to pick up so I–

Aussie Firebug: So when did you buy the second one, 2011?

Jayden: It seems like ten-ish, maybe eleven.

Aussie Firebug: And how quickly did you sell it?

Jayden: Like I reckon I sold it within like a month or two, like it was fairly quick.

Aussie Firebug: That quickly? Shit! I’m guessing the market didn’t recoup your buying cost and selling cost?

Jayden: So like I paid like 330 and I sold for 355 and then we were like oh you yeah you made money but then once you could like stamp duty, what I paid in LMI, yeah like I would have probably lost a bit of money, yeah I wouldn’t have broken even so that was not– but it was more like well, that’s a good way to…

Aussie Firebug: [Chuckles] you had a go, you had a go, didn’t pan out. You had a go and so then what happens then- what do your next move in investing?

Jayden: So then I sort of like took it easy for a bit, moved back to Brisbane, well actually [00:31:38] with my wife and bought a property in Miami on the Gold Coast. So again like that was like definitely one of those worst houses on the best street. It was like four hundred and thirty grand maybe. And this is one where like I will kind of spend thirty grand on it, fix it up and make it good enough to live in and then just live in it for a bit then probably move back to Brisbane eventually but then because we got a bit you know there was like the dreams of like this was going to be a family home and that sort of the stuff from thirty grand we went to spending like a hundred grand. Bit of deal creep there which again like should learnt my lesson the first time and actually budgeted and sort of stuck to a budget which again is not a good lesson where like you can easily just get in love with certain things in a property like I’m going to live in there like what’s spending another hundred dollars on a tap or what’s spending another two hundred dollars on a toilet or that’s right, the floors are only fifty dollars an extra square meter and that stuff just adds up and up and up. So again without properly– like we spent money, it was really beautiful but then around that time is when I wanted to start my own business so that I’ll probably want to get rid of some debt, consolidate and sell off so that one we sold and made back a mega profit like a wouldn’t say it was super lucrative but that was definitely one of those ones where like there was a lot of deal creep in there and I think if we’d stuck to our original budget, probably would have made a lot more money from it. But so like I think like that’s so American– I see it happen all the time, I reckon you would too where you know, if you’re investing in something, you need to remove your emotions and we got a bit emotional like oh it’s going to be the family home, we’re going to make it a bit nicer and buy the extra taps and spend the extra bits in here and we were completely like which wasn’t our objective so if it’s an investment, you need to stay objective like impartial opinion because otherwise you can go from thirty to a hundred grand and spend three times your budget and not end up with the right result.

Aussie Firebug: So all the other numbers isn’t it– like I tell people that all the time anyone that like even like family members and you know I got sisters that ask for advice sometimes, I’m like: if the numbers work then– if everything works on paper and you’re confident and you know you’ve budgeted for a 2% increase and you know all the factors, then pull the trigger for it but if you’re just sort of like on a hunch or like you know, I just I feel as though this suburb is going to like go well, like that’s not really investing, you know what I mean, like you want to do–

Jayden: Oh men! So like I had these like friends of mine, they recently put a property on a contract in a suburb where they’re paying like eighty grand over, probably a hundred grand over the median house price on a house that is below average. And I had to come to confession last week like here’s the comparable, here’s the facts like you’re actually paying over and they were like this is a family home, you don’t understand, we need a backup for [00:34:46] and this is the thing like you can just make the worst decisions if they’re emotional and if you’re not looking at the numbers. You need to like take a deep breath, there’s always another deal, there’s s always another property, there’s always another house, there’s always another investment. You don’t need to– like you’re not going to die if you don’t buy this one so just take a step back, take a deep breath and do the numbers.

Aussie Firebug: A family home, like if you want a family home that’s a little bit different I can understand you forking out some money like if there’s an emotional attachment okay but people need to separate buying a family home to live in to an investment and like I see it happen all the time as well where they try to do both. They try to do the family home but like and it’s going to be a good investment as well and it rarely works. It rarely works that way.

Jayden: Well so I reckon like you’ve heard it all the time like you make your money on the buy so like it doesn’t matter like how long you hold it or how well you do. Like if you’re overpaying by fifty- a hundred thousand dollars, like you’re just never make that back–

Aussie Firebug: You have to wait five years just to get it back, yeah. You’re right, some overpay because it’s their dream home. I’m more comfortable like if you really want it and you got the money and you’re okay, okay well then that’s like you know, go for it then if you really want to pay that much but if you’re buying it for an investment like there is no other– you’re buying it to make money like there is nothing else, it needs to make money. So cut any emotion out of it whatsoever; I like this one because it’s it looks pretty, no, does it make you more money? Like to the sums, is the cash flowing more? Is a predicted growth– have you looked at the population? Is it need public transport? You know, what are the major infrastructure developments going on in the area like that is where you should be looking. You shouldn’t be looking on cosmetic stuff. It’s got nothing to do with that, it’s all about the numbers when it comes to investing. I always get into arguments with people like about this all the time. If you’re buying to lie in, I don’t care about the numbers then. That’s your business and you do whatever you want with your money. But you buy an investment, it should be a 100% about the numbers and don’t try to mix the two because you will probably get a house that you don’t really love and an investment that isn’t really that great, you just get mediocre in both, and you won’t get either one that’s really good.

Jayden: So true.

Aussie Firebug: Let’s talk a bit the Rentvesting Podcast just for a second. So, I love it, listen to it, I listen from out here–

Jayden: Thanks man!

Aussie Firebug: Yeah, I definitely listen to it. I think it’s awesome what you’re doing. It’s probably like I don’t know… I’ve come across the rentvesting podcast even before you know you contacted me to come on air and like it’s– I don’t know too many other Australian podcasts out there that really speak on your financial independence side. I know there is like property chat I think or property talk on iTunes and a few other podcasts but it’s awesome you know, the more the merrier and I think it’s great for the podcast scene in Australia in this space. So just tell us a bit about the name Rentvesting, where did the name come from?

Jayden: Yeah man so it’s kind of like I came to realization early on that like I grew up– I’m assuming your parents might have been similar where they always like well you know, you buy a property, you live in it, you stay in a good job, you pay off your mortgage and then you finally retire at 65–

Aussie Firebug: Yeah, that’s, my life–

Jayden: Yeah, yeah I know it’s like the opposite [00:38:18] like it’s like yeah, you know you’ve got to work in that job, make sure it’s stable, be sensible, you can take you four weeks a year and I’m like that’s shit like it just doesn’t work like–

Aussie Firebug: I think that was every parent in Australia, every person that as born in 1960 says that to their kids.

Jayden: Like everyone says that like having lived in Sydney and seeing like where it was and where it is like it’s crazy expensive and even in Brisbane like if you want a nice house with some land, Melbourne is the same like you’re just further and further out so what’s the fun in living fifty k’s away at a city with a house and a mortgage if you’re aren’t sort of living the life. So the whole rentvesting thing is kind of like whoa, you can still invest, you can still live the life you want, you know, buy what you can afford and live where you want so that’s where it sort of came about. So yeah, like I think investing in property and in different assets is super critical but it doesn’t mean that you need to sacrifice your life to be paying off a mortgage so potentially look at renting or look at reducing some of those overheads so you can invest the surplus elsewhere and you know that might be different asset classes and helps you get into the market quicker and do lots of different things so that’s kind of where it came about and we talk about that, we talk about property in general and it’s similar to what you do like investing and helping the younger people like us because it’s stuff they don’t get taught school unfortunately and it’s stuff that like if you look online, there’s probably like some dubious sources so at least it’s impartial and you know it’s just in the name of education.

Aussie Firebug: Loving your work mate, loving the work and I completely agree like reinvesting is a strategy that me and my partner are currently using you know and like you said you rent where want to live and it makes so much more sense numbers-wise, and I’ll say it again, look at the numbers to rent a capital city like we’re renting in the country and it’s not quite as– like it’s very close renting and buying in the country is almost like on par with each other. It depends obviously where the interest rate goes and how much the house appreciates but it’s almost the same, a little bit cheaper to rentvest but in a capital city, it’d be a no brainer for me like an absolute no brainer. It is so much more cheaper to rent in Melbourne and Sydney than it will be to buy and start paying house repayments. So incredibly cheaper and like being able to sleep at night, being able to like you know, have the freedom to move around. The only reason that me and my partner would buy a house is when kids come on the scene, that’s it, because we want the stability that you’ve got to have with kids, you don’t want to be rooting houses you know every year with kids. At the moment, we’re young, we’ve got no cats, no dogs, you know not that much crap in the house like we’re living carefree a bit you know at the moment like we can bounce around if we chose to and travel and do whatever so owning a house isn’t really on my list of priorities and people always think you’re crazy when you say you know I’m renting so I’m in a pretty good job, I’m 28 now and you know people say like, “Why are you renting, like are you wasting your money?”

Jayden: Yeah there’s this huge stigma which like I reckon like rent money is not dead money because like you’re paying four- five hundred bucks a week but then the landlord is paying for you know, the body corporate, the insurance, all these other rates like it’s still expensive to own a property realistically.

Aussie Firebug: And if you buy a house you’re paying interest anyway so the interest is more than the rent which is true in Melbourne and Sydney, way more in Melbourne and Sydney then like you can’t tell me that rent money is dead money because the same thing can be said of interest, interest money is dead money as well, it’s the same bloody thing so people just don’t see it that way and I don’t know if you get it like when you are investing I don’t know if you still– it sounds like you own the house now but people just like they raise their eyebrow when they hear you’re renting–

Jayden: People definitely do and like I’ve got an eight-month old daughter so like we bought a house not long ago, sort of doing that it purely for stability as well but yeah before that like renting was great, like we were living in an apartment paying it was like say five hundred bucks a week but the mortgage repayments on that would have been eight hundred with like all the other body corporate, it had a pool and stuff like, it was fifteen grand a year like that’s amazing that we’re saving by not owning it and I could own property interstate or other places and diversify–

Aussie Firebug: People always say that as well, they’re like: well, what happens in thirty years and you don’t have a house and you know the person that’s paying more that owns a property, they’re going to own money when the house goes up it’s like yeah, that’s true but if you rentvest and you invest the surplus that you’re currently saving–

Jayden: Exactly, and in that scenario it’s $300 a week that I was saving that I could invest in funds or different things–

Aussie Firebug: Or another house, you can invest in another properties so of the market went up, your investment property went up also but you have that flexibility of not leaving at that one place, you have flexibility to bounce around and you know do whatever you want to do as a young person. So now, I’m all about that life, rentvesting is awesome. I actually wrote a post about it, I can put it in the show notes for people, big fan, big fan of that definitely.

Jayden: That’s right.

Aussie Firebug: Just before we move on, we didn’t get to the end. So you said you sold the other property, you had the one property. Please tell me that you were a part of the city property burn that happened between–

Jayden: Men! No, complete amateur.

Aussie Firebug: Don’t tell you missed out on it completely.

Jayden: Like so I bought my first property for like 330-is as well, it was around the same price point and I sold it for like 420 a couple of years later so like I made a bit of money but like it recently sold for like 600 grand so I like I think that’s where I got kind of– because I was starting my businesses, I was probably trying to be a bit conservative and probably should’ve expected it a bit more but yeah I think like that’s probably good: learning that property is long term asset–

Aussie Firebug: Seven to ten years, seven to ten years.

Jayden: Yeah, didn’t own it for that long, could’ve held it a bit longer, could’ve used fixed rates and probably other instruments to help like give myself a bit more stability but yeah like didn’t lose money but probably didn’t make as much as so could have but again, a good lesson I guess to the listeners out there.

Aussie Firebug: Well, like no one is predicting that anyway, you know you’d have to be a master analyst to see that burn coming, but oh well. You know, I can’t dwell like everyone could’ve bought bitcoins when they were ten cents and be millionaires by now so you can’t be too hard on yourself so that’s it so you sold the original one you bought and then now it’s just you know, you’re focusing on your business, are you?

Jayden: Yes, I’ve got five properties at the moment so I’ve sort of recouped a bit over the last years which has been cool so I’ve been involved in a couple of different small development projects. I like looking at adding value that way and just sort of format with those in Brisbane, there’s been a bit of rezoning so effectively they say like in Old Queensland like 800 square meters, they now should build three townhouses behind that Queensland or a couple of units behind that Queensland and then selling some and keeping some more just to keep the debt at probably like a sensible level.

Aussie Firebug: Yeah, yeah gotcha.

Jayden: So if I could keep everything now I would but it’s just more keeping the debt manageable because I don’t want to get back in that 2009/2010 situation where using my oven to heat my apartment which was kind of– [Chuckles]

Aussie Firebug: [Chuckles] Yeah well, you know, you can tell your kids that, daddy used to heat the apartment using the oven, that’s what he went through to give you this life. So are they all in Brisbane or you got joints all over the country or?

Jayden: Yes, so they’re all in Brisbane now so I sold it the two apartments in Sydney, sort of subsequent I sold the place on the Gold Coast so all this stuff is in Brisbane because I kind of really intimately understand the area, I know what’s going on there and get, and I still think like stuff in Brisbane is still fairly cheap compared to Sydney and Melbourne, I think I’ll still look at buying into sate, just it feels at the moment for what I’m looking for, Brisbane probably makes sense, yeah.

Aussie Firebug: Now, on your rentvesting website, you say you know the podcast unpacks the facts behind the property market, explains what’s really going on and where the market is heading. So being a property investor yourself with five properties at the moment, you bought another two, that’s seven that I’m counting so far if my math is correct, you got a bit of experience- dare I say- in the property market up in Breezy and you’re also director of a– it’s not just mortgage brokers but you can go into what Red & Co.  does in a second but I want to hear your opinion on the Brisbane market and then where you think you know, stuff is going in Australian general so if you were investing in property today, what would you be doing?

Jayden: Yeah, so I think like what you hear in the media, there’s a lot of hype so if you listen to– if you’re investing in shares and listen to what’s in the media, you probably want to jump off a bridge every other day and it’s similar in property; there’s always a bad report and there’s a good report and there’s a bad report so I think like you need to take an impartial and look at an independent view; what you sort of understand what you get. I think in Brisbane there’s probably certain pockets that are a bit over supplied which you probably read in Sydney and Melbourne and everywhere else and across Australia so if you’re buying an apartment say in Jam side or if you’re buying an apartment in Fortitude valley, like the rentals are getting a bit soft but it’s not devastating so you can still get them rented and you can still buy stuff of value. I think in Brisbane the opportunity probably is buying land so you know, an old house within sort of five to ten k’s to the city for under half a million bucks is possible, probably more sort of under 550 now but that’s where I think the value is in Brisbane so you can look at sort of suburbs in 10 K range, circle $550000 and those suckers will rent out sort of $500 dollars a week quite comfortably and you might buy six or seven hundred square meters for a block so I think that’s where there’s huge value in Brisbane because it’s still quite cheap here. Sydney and Melbourne, yeah they’re doing their own things I think and parts of a different different kettle of fish but yeah, I still think there’s this huge value and huge opportunity investing here but you just need to get a feel for potentially you know, if you’re going to look at investing, you’re from interstate, come and have a look, I’d be probably be wary of people selling stuff, [00:49:54] that sort of stuff, you know, do your own research, get your independent advice and make sure you’re making the right decisions.

Aussie Firebug: I know this is a pretty blanket statement, it’s very hard to sort of answer a bit: you deal with a lot of people getting loans for different properties and what not, commercial I’ve seen as well on the website, what do you think of the current state of Australia’s lending practices and where we’re at with the you know the bank’s loans and everything like that? Do you think we’re on the brink of a crash or I just wanted to hear your opinions on that?

Jayden: No so I reckon like the banks are still too conservative for there to be some crazy at US crash so like unless unemployment went to some crazy levels and people literally couldn’t afford their loans, I think in general the practice is a pretty prudent here because the banks you got to remember if you applied for a loan today although you might be paying say 4% on your interest rate or in the three’s potentially, the banks are more willing than based off 7.5% interest rates and on principle interest payments of 25 years so where you might be paying two grand a month now, they’re actually modeling it based on assuming your payments are at four and a half or five grand so they are a fairly conservative compared to in the States and previous practices. I think like it probably like would have to be a whole loan not going to fix like if there was a global recession it might have a knock on the [00:51:29] because it might affect you know exports and like there would have to be a whole lot of things to happen for that to occur. I think in general like if the US economy and the Eurozone still keep chugging along slowly and slowly, I couldn’t see there being a huge correctional, you know the bottom falling out of property also because it still fairly tightly held property here. There’s not a huge amount supply broadly speaking like there might be certain pockets of it but they’re still getting rented out and soaked up so it doesn’t feel like it’s going to be completely catastrophic. You know there might be areas in Sydney and Melbourne where they’ve had 100% growth over the last 5-6-7 years. If that comes of 10 or 15 percent, that shouldn’t be devastating because it’s come off such a high growth–

Aussie Firebug: Yeah, it’s gone back to them like you were just saying that it’s–

Jayden: Yeah just normal so I think like people that are saying it’s all doom and gloom, I think they always like I remember– what was his name? Steven King when I was in Sydney in 2009/2010 he was prophesying that the Sydney property market was going to fall out, he was an economists, you can still look him up, he’s a huge doom’s day guy, Steven King.

Aussie Firebug: Steven King, I’ll put it in the show notes.

Jayden: Yeah like he was saying back then the Sydney property market was going to crash and he actually sold his family home and then subsequent to that his family who would have gone up 100% in value and he probably could have retired and now he’s still like on Fox news and that sort of stuff so–

Aussie Firebug: It’s just so hard when I hear these people are– I don’t know what’s going to happen over– I’m the first one to say, I don’t know and I don’t actually think anyone knows what’s going to happen but all you can do is control what’s happening right now and make decisions based on the now and if something happens in the future, you try to mitigate the risk as best as you can but I just I think it’s crazy you know people trying to time the markets and you see it all the time like on the forums you know. Everyone preaches like don’t try to time the market! Don’t try to time the market but then you see everyone writing about like you should sell your property because it’s going to blow up, like that’s timing the market, stop trying to do that! Buy within your means now and then if something devastating happens well then you try to deal with whatever happens. Don’t buy beyond your means. Do your figures, do you numbers and if it looks good now, I would buy now.

Jayden: Yeah, have a buffer and then you know, if you can afford it now, if you can afford it with plus 2%, then you’re fine like you can ride that out. It’s like any market. It doesn’t matter if it’s shares, bitcoin, property; it’s all cycles. It goes up, it goes down like that’s just the nature of the market.

Aussie Firebug: Exactly, and you only lose if you sell when you’re down. You [00:54:25] lose any money, but it could crash to zero and if you notice how you start losing your money, you just have to wait till it goes back up because even everyone points to Japan, it’s been going down 20 years. Well, it’s creeping back up. I’m not saying that you want to be in that situation but I’m just– you only lose if you sell, that’s the point I try to make to a lot of people.

Jayden: Yeah.

Aussie Firebug: Anyway, Red & Co., why don’t you tell us a bit about that before we wrap up this broadcast?

Jayden: Yeah, so we’re a property services business so we’re a bit different in that we do like I’d say finance, look at the residential and commercial side, we do rental management sales so that’s cool because it kind of gives our landlords a bit more feedback and they kind of get that side of things. And the sales are just existing properties, it’s not off the plan or that sort of thing and yeah, that’s kind of the business. Help out a lot of investors and first time buyers and first time investors so that’s kind of why I started the Rentvesting podcast because like I said there’s like a lot of trash material out there that wasn’t impartial and I just wanted to sort of clear it up and just wanted to sort of clear it up and help people get a bit of a better education on this stuff because you just don’t learn financial independence at school, you learn to get a big mortgage and try and pay it off so just because the bank’s is going to lend you that money doesn’t mean you should take it.

Aussie Firebug: And what’s the best place that listeners can find yourself and Red & Co., where should they look for these?

Jayden: Yeah, so probably just google Red & Co. or Jayden Veccio or just Rentvesting Podcast, just google that, you’ll find it pretty easy.

Aussie Firebug: I’ll put some links in the show notes. Now, I always try to end with this question: the best advice to give someone at the moment trying to reach financial independence in today’s market?

Jayden: Oh men, I feel the most relevant thing is don’t sell early. [Chuckles] And don’t time the market like it’s just you know, have a plan, stick to it and think the longer term like I saw good thing when I was flying back the other day on becoming Warren Buffet and you know, his whole thing and why he’s done so well is he looks longer term, he sort of looks past the short term, the volatility, you know the five, the ten years, taking 20 or 30 of you and I think it’s the same with any investment. If you try to make money in six months and flip something and do that, like it’s going to be tough but you take the long term view, you won’t lose.

Aussie Firebug: I think that’s good advice, guys. Usually the long term unless you get financial stress or something; if you can hold something long enough like a good asset, usually builds you wealth over the long term. I’m going to wrap up now so you know, if you enjoy this podcast, want me to make more of them, make sure you drop me a comment in writing on iTunes, just search for Aussie Firebug on iTunes and you’ll find me, I’m also on SoundCloud at www.soundcloud.com/aussie-firebug. Show notes of this episode can be found on my website at www.aussiefirebug.com Jayden, it’s been an absolute pleasure mate, thanks for coming on the show.

Jayden: Thanks for having me.

Aussie Firebug: Hi guys welcome to another episode of the Aussie Firebug podcast, the financial independence podcast for Australians where the clever people who have already reached or on their way to financial independence. Today’s guest is an attractive schoolteacher who learnt the value of the dollar at her first job at Domino’s wobble boarding on the highway for five dollars an hour. Christina’s interests are cats, Netflix and anything U.S related but most importantly and the reason she’s on the show Chrissie is the better half of the Firebug couple. Welcome to the podcast Mrs. Firebug.

Mrs. Firebug: Thank you. I like the introduction.

Aussie Firebug: What? Did I get anything wrong?

Mrs. Firebug: No. It’s pretty good actually.

Aussie Firebug: The Domino’s wobble boarding is quite a funny story. Do you just want to like quickly go the background behind that?

Mrs. Firebug: Sure. So basically, I think you know it, and there was an ad in the paper for a new Pizza shop opening up. So me and my friends we went to the job and all of us got it. It didn’t say that we had to wobble board on the side of the highway and so I didn’t really know about that and then…

Aussie Firebug: So we’re talking wobble boarding is, it’s literally like we’re talking someone holding the sign, you know, like two pizzas for, ten bucks mobile boarding like.

Mrs. Firebug: Shaking.

Aussie Firebug: Shaking a board on the highway.

Mrs. Firebug: Yeah. So I had to basically do that and then one day, I think my friend was doing it and a car like got distracted might crash up the back of like another car. So they cut it. So yeah it was pretty happy when that happened.

Aussie Firebug: Because you were water boarding really and they’d get distracted, yeah? So why don’t you just tell the audience a little bit, a little bit about yourself. Just anything that you want you want to mention.

Mrs. Firebug: Netflix is correct. I love to just hang out. I’m a teacher so like by the end of the day I’m pretty much like no one talk to me anymore. Poor Matt has to go silent for a couple of hours.

Aussie Firebug: just silent mode.

Mrs. Firebug: I know. I’m just simply close to my family. I like to go to the movies and shopping, such kind of stuff.

Aussie Firebug: Just a normal country girl.

Mrs. Firebug: Country girl. Chilled life.

Aussie Firebug: So we’ll get into the proper questions now. So when did you first notice I was a bit weird about money. Well, first of all let’s just say so we’ve been together for what five and half years now?

Mrs. Firebug: Six and a half.

Aussie Firebug: Edit that out, six and a half years. Time flies when you’re having fun. So we’ve together for a while now and anyone else that’s in the fire realm, for me anyway, at the very start you sort of, you know, don’t hide it. It’s like you do things that you probably stop doing six months into it. So when did you first notice that this guy is a bit of a weirdo?

Mrs. Firebug: Probably on our first date.

Aussie Firebug: Oh no.

Mrs. Firebug: You set yourself up the big plan.

Aussie Firebug: I did set myself up, I’ve never lived this story down.

Mrs. Firebug: So after a few disco passes, Matt decided to ask me out on a date. So I get a message saying do you want to go bowling and I was thinking I hate bowling but I feel bad so alright let’s do it. So he picked me up in his… What was it called?

Aussie Firebug: 1995 ford falcon.

Mrs. Firebug: Wagon, family car and off we went to bowling. We got there and I had not been like on an actual proper date before I was only 18. So I was a bit of a newb.

Aussie Firebug: She’s 18 and she’s never been on a date thought she had leprosy or something. I was like what how’d she not have a boyfriend before.

Mrs. Firebug: I’m just quiet girl, anyway so we got to the bowling and we’re standing there and getting our shoes and what not and the lady says the price and I was it off better offer to pay you know. I get out my twenty dollars. I was like oh yeah here you go and Matt goes thank you takes it and pays for it. So I ended up paying for our bowling date.

Aussie Firebug: You didn’t pay for it, you paid half.

Mrs. Firebug: Yeah half but still it’s pretty embarrassing for you.

Aussie Firebug: Alright. Yeah.

Mrs. Firebug: So since then I remember like going home being like, ‘I had to pay’ and my sister was horrified. That was definitely the first indication but I don’t know just little things.

Aussie Firebug: I’ve never lived that down as well.

Mrs. Firebug: Yeah, I mean that’s being…

Aussie Firebug: Like that has been the story that gets told every single time our anniversary’s brought up or you know something. With me being a tight-ass, I definitely dropped the ball. So everyone’s listening like you hundred percent should pay for the first date even if she offers you one hundred percent pay, I stuffed up. I’ve been paying for a lot of things since then I can never, that’s like you can never repair that one.

Mrs. Firebug: Yeah, you can’t redo that.

Aussie Firebug: It doesn’t matter if you’re on the fire journey or not, you pay for the first date. You only pay for the first couple dates. That’s definitely my stuff up. But other than that was there like…

Mrs. Firebug: I feel like everyone wasn’t like tight ass back then so I don’t think it was so much that you were really over the top with it or anything like that. Not that I notice more probably when you got your full-time job.

Aussie Firebug: What happened when I got my full-time job?

Mrs. Firebug: Things started to… We didn’t go out as much anymore.

Aussie Firebug: I hadn’t really discovered fire for like the first year of my working full time. So I saved heaps of money that year.

Mrs. Firebug: Oh yeah maybe that first year.

Aussie Firebug: Compared to how much we spend out but…

Mrs. Firebug: Yeah but like definitely. We did go out together for a while then too we didn’t go out as much anymore and go to dinner and dates and stuff, but we had our own money. So I don’t know it didn’t really affect me per say that much.

Aussie Firebug: So when did you first hear about the whole financial independence concept? It would have been from me.

Mrs. Firebug: Oh 100%.

Aussie Firebug: Like can you remember how long?

Mrs. Firebug: How long? I don’t know, since you started reading all those books I guess which one was that probably like three years ago.

Aussie Firebug: Yeah three and a half years ago

Mrs. Firebug: Probably like you read like heaps and heaps of books. I remember being right into it. That’s when i first heard about it. Initial thoughts were great let’s do this. I don’t want to work for long.

Aussie Firebug: Did you have any doubts because I thought that you had doubts and I’m always telling you about this epic thing that people were doing, you know, all over the world I thought like she doesn’t really believe it 100% or…

Mrs. Firebug: Yeah. I think it was more than like you were so into it and I was just kind of, oh yeah sounds good.

Aussie Firebug: Yeah, you like the not working bit.

Mrs. Firebug: Yeah. That really got me good and I think that just because I hadn’t heard about like all my friends and family like worked right up until retirement age, like my parents are still working. So I just hadn’t heard of it before so I think I was like, oh surely it can’t be that good if no one else is doing it. But now that we’ve kind of dealt further into it I know a lot more and I’m all about it.

Aussie Firebug: And was there a moment where you actually felt like this is a real thing, like we could get there?

Mrs. Firebug: Probably not a specific like moment but just the further you kind of got into it and with your investing in your properties and then going into like the shares and stuff and I started to think, this surely is going to eventually work out for us.

Aussie Firebug: What’s been the hardest thing to adjust to once you we were trying to get to financial independence?

Mrs. Firebug: Probably just like having to make those sacrifices. Obviously, we wanted to travel overseas into a big Europe trip. So probably having to like wait for that because it’s been I think we originally wanted to do it like

Aussie Firebug: No.

Mrs. Firebug: Not that one?

Aussie Firebug: Last year

Mrs. Firebug: America

Aussie Firebug: Yeah? You?

Mrs. Firebug: Know that’s when we first wanted to do it.

Aussie Firebug: What?

Mrs. Firebug: Like that’s when we had the idea and like knowing back in like 2013 or something that it was going to be three or four years away with hard work and having to be like patient about it and that’s why I kind of did my own little trip to kind of tide me over.

Aussie Firebug: So we still want to do a Europe trip. So Europe trip is on the cards. Like a big Europe trip but we had it planned originally for 2016 but I sort of…

Mrs. Firebug: You pushed it back?

Aussie Firebug: I pushed it back at 2014. In 2014 I was in a really good job relatively speaking and I didn’t want to leave it in two years because I thought and I’ve just discovered this whole financial independence and I was like, oh my god, like the 20 in your 20s you have to earn like the 20s is the golden time to get ahead in life. I was still live in a home back then I was like we need to save you know as much money as we can because if we don’t save in our 20s and 30s it’s so much harder and at that’s the time of your life. So I was like look, and I remember breaking it to you like it was a big thing.

Mrs. Firebug: Yeah.

Aussie Firebug: I don’t want to quit my job in 2000 and, I think it was 2016. I think we were planning for three years.

Mrs. Firebug: Yeah.

Aussie Firebug: And you got really upset because?

Mrs. Firebug: Yeah I was. I didn’t like my job.

Aussie Firebug: Yeah. Chrisy was first year teaching and she had a rough first year.

Mrs. Firebug: Yeah. So I think that was her escape. She knew that she had to get to that.

Aussie Firebug: I only have to get two more years of teaching and then we could go on a Europe trip, but then I broke the bomb that was that we were not going to the Euro trip anymore. We’re pushing it back and you got really upset. But you kept America.

Mrs. Firebug: Yeah then I did get America for myself but yeah I guess. What was the question?

Aussie Firebug: Yeah it was the hardest thing and you said sacrifice.

Mrs. Firebug: Yeah. I did say sacrifice. Waiting on this trip like that’s been a big sacrifice.

Aussie Firebug: That’s definitely being a big sacrifice.

Mrs. Firebug: Yeah.

Aussie Firebug: Because we’ve been talking about this trip for years and when I said like, I’m going to push it back like two or three years you were devastated.

Mrs. Firebug: Yeah I was like what!

Aussie Firebug: All our friends were going on euro trips and stuff. So that was rough and plus you wouldn’t like any jobs. But we don’t sacrifice like…

Mrs. Firebug: Not really.

Aussie Firebug: Like we leave a great life.

Mrs. Firebug: I think like for me as well I’m not one of those people that just spend spend spend anyway.

Aussie Firebug: You were pretty good but not me good. But you were pretty frugal.

Mrs. Firebug: You would to and send nothing. So I have to live. A girl’s got to live.

Aussie Firebug: Oh yeah, but I think we have a fantastic lifestyle.

Mrs. Firebug: Yeah, I think its fine. I got a job straight away when I was like in year nine. So from then I like save save save, anyway, I had that.

Aussie Firebug: I think you save more money you know than what I save but you go to your parents

Mrs. Firebug: Hey. Shhhhh.

Aussie Firebug: She got a car so that was the reason she saved more than I did. I’d like to buy car but she’s a rich girl but that was a rich girl thing to get done a car.

Mrs. Firebug: I needed it. I was going to university. I had to drive.

Aussie Firebug: Yeah, keep telling yourself that. We had a look at the our finances the other day and I think we’re on track to be under 50k, well under 50k. I think was we’re going to end up around about 45 or something.

Mrs. Firebug: Yeah

Aussie Firebug: And that is you know you’ve been up…

Mrs. Firebug: Yeah

Aussie Firebug: That includes multiple times going to queens.

Mrs. Firebug: Oh yeah.

Aussie Firebug: In that 40-46 k whatever it’s going to be.

Mrs. Firebug: It’ll be three trips.

Aussie Firebug: That’s three trips to Queensland that’s you know weddings that’s you know I think we’ve, we’ve had a very expensive financial year.

Mrs. Firebug: Yeah.

Aussie Firebug: I know we haven’t like it’s not being outrageous but I could definitely live like this forever.

Mrs. Firebug: Oh, yeah.

Aussie Firebug: We go way out, would be now we go to the pub and everything like that so our lifestyles fantastic, I think you know correct me if I’m wrong so I don’t think we sacrificed too much. The euro trip was probably the biggest sacrifice that we ever made and I think that’s what will get us ahead or what has gotten us ahead more than anything

Mrs. Firebug: Yeah, it was definitely the right thing to do it was just hard to say at the time.

Aussie Firebug: Absolutely. I went so far. I was pushing it back when I said you know in 2013 and I’m like we’re not going to go to 2018 {13:00}

Mrs. Firebug: That’s like coming in. Hey, were you…

Aussie Firebug: You weren’t too impressed.

Mrs. Firebug: I wasn’t.

Aussie Firebug: What advice would you give others to try to get their partner on board with financial independence who are into it as much as they are?

Mrs. Firebug: Um.

Aussie Firebug: So you would have been in that position?

Mrs. Firebug: Yeah. I was pretty much in that position just because I didn’t know about it and you’re very passionate about it. I’m like go get that into it.

Aussie Firebug: This is probably the number one question I get. So people have emailed me before like comments about an episode like this you know interviewing you because that’s probably the, and you see it on forms all the time as well but where someone’s right into it and they might be unlucky where they have someone that likes spindle you know,

Mrs. Firebug: Yeah that’s

Aussie Firebug: Whereas we never, I never had that problem with you but I can’t totally understand you know, and they had like successful partners, you know, people that are really career orientated. So I like to work hard but then I like to play hard. I’ve spent a lot of money like how I’d be so hard what like what .

Mrs. Firebug: Yeah.

Aussie Firebug: What’s the best thing I’ve done to sort of…?

Mrs. Firebug: Steer me.

Aussie Firebug: Steer you in that direction without being like forceful?

Mrs. Firebug: Too much.

Aussie Firebug: Yeah.

Mrs. Firebug: Yeah. I think that’s a good like point try not to like ram it down your partner’s throat even though you’re like so passionate about it but like easing them into it maybe a little bit also I think like trying to like help them see the bigger picture is important as well even though, you know, it’s hard to think. I’ll you know 10 years down the track will be financially independent and might make sacrifices now trying to maybe get them to see that would be a good idea because then they’ll get on board hopefully. Other advice um, I don’t know just.

Aussie Firebug: Well here’s one for you so that’s like the positives of that idea.

Mrs. Firebug: Okay.

Aussie Firebug: Was there anything that I didn’t go over that well with you and that made you, you know, push further away from you know wanting to go down this path with me?

Mrs. Firebug: I mean the only thing I could really think of is the pushing back of the trip maybe not trying to like, like doing little things like maybe going out to dinner and stuff like that not cutting everything out like you’ve got to make some compromises. I think that’s important like we still go out with our friends. Not maybe every week but you know every couple of weeks and we might go the movies and things like that. I think it’s just maybe compromising with your partner and start small like try and cut back little bits at a time and then slowly hopefully they’ll come on board especially if they are like someone that likes to spend a lot but…

Aussie Firebug: Was reviewing the spendings weekly?

Mrs. Firebug: I was good yeah well I think it is good because I, I think you try to make me do that myself before we kind of combine our finances and I went on there once I was like okay and then i got like over it but we have like a ‘well i kind of don’t love them all the time but a weekly you like capture.

Aussie Firebug: We have weekly catch up on Sunday not when Mrs. firebug is real meet up mode because she’s got the whole week of work coming up. She is the worst time to do it but that’s just the time I do it, the laptop out and we’re sitting around said okay sweetie we’re going over the transaction for the week sit down, let’s try to remember everything we spent.

Mrs. Firebug: And I’m like terrible my memory I don’t know what that is and I eventually figure it out but yeah I think that is good because I do go oops I probably should you know be a bit more careful or what it just like it’s good to see.

Aussie Firebug: I think I always tell people that is my number one people. I feel or say like how do I save money I always tell them track your spending that is the biggest I’ve not even it was a opener for me when I first did and I thought I was like had no leaks in my budget was everything was white and then you track your spending for a couple months oh my god what is this, what is that. So track and we use pocketbook.

Mrs. Firebug: Yeah.

Aussie Firebug: And probably another thing that I get asked a lot as well is how to us that we had we set up our finances together. so we don’t have a joint bank account we don’t, we keep the our bank accounts separate because there’s no really need to have a joint bank account or not at the moment there isn’t. so I have money in my account Mrs. Firebug has money in her account and I look after some bills, she looks after others and we’ve come to just that understanding of what hers is mine and what what’s mine is hers. so I usually pay a lot of things out of my account and then who’s whom her income comes into piles up and when you’ve got pocket book if you haven’t used pocket book before I’ll put it in the show notes it’s a really good tool. You can link multiple bank accounts to the one accounting pocketbook so i can log in and I can see how much money Chrissie’s got in her account and i can tell much I’ve got in my account across the multiple accounts that i have and I can say you know well you’re you know you’re nearly at five thousand dollars savings that’s really good can you transfer me two and a half and I’ll use what’s in mine and we’ll buy 5,000 bucks of ETS or something like that so that’s how we’ve worked at the last year so I think that separation is a good thing and yeah I don’t see a real reason why you have to have joint accounts. That’s a bit of an old-school method I think having it in with this pocketbook you know you’ve got the app install in your home yet you can see you know what’s in mine and I just don’t see a reason to join accounts yet. So that’s how we do it and it’s really good come Sunday night because we can go through all the transactions that have happened across you know multiple cards; credit cards, debit cards whatever we’ve used to spend money and we can categorize it and we can put a little note to it and then we, yeah we review it you know. I usually, we usually have a budget of every month and one week got we’re going near it will be like okay we really need like tight me about the last couple of days but it’s been pretty good like I think that’s a good way to work it.

Mrs. Firebug: Yeah think it’s a good tool.

Aussie Firebug: And this we only, we only joined finances last year in which you might know you would have seen the post I’ll link it in the show notes but I’m really excited to when the end of financial year comes to do a new post and just to see you know what we spent for the whole entire financial year on you know where our money went basically. I think it will be an eye-opener again and we can address it when we go over it. Alright. What’s your dream goal once we reach financial independence? What do you picture your life being like in our mid to late 30s and beyond?

Mrs. Firebug: Well, definitely not working but so easy girl. Definitely like even going down to like two or three days a week in when we hit our thirties I guess would be great and then eventually plays that out.

Aussie Firebug: I think you’ll still work.

Mrs. Firebug: I don’t know.

Aussie Firebug: I think you’ll pick up something else.

Mrs. Firebug: Maybe I don’t know I think I cope well with like three days a week.

Aussie Firebug: I would totally, I would cope.

Mrs. Firebug: That’s a dream.

Aussie Firebug: So, well with three days a week that I could yes I like my job.

Mrs. Firebug: Yeah you like enjoy it.

Aussie Firebug: If I work three days a week right now oh my god I could do that I feel like I could do that for everyone.

Mrs. Firebug: Yeah, I think that is like sustainable whereas teaching full time as well and you’re worth ASG not as much as.

Aussie Firebug: Yeah, teaching the teaching hard shout out to.

Mrs. Firebug: I mean do you get a holiday that’s good shout out to all the teachers hard work for me financial independence. I really like the idea of picking how many days a week to work.

Aussie Firebug: And I think that’s a very freedom.

Mrs. Firebug: To you probably would enjoy work a lot more seem like I’m doing it because I want to know…

Aussie Firebug: Yeah, after. Absolutely. I think about like there’s been a few weeks this last couple months where I’ve had an audio and then there’s a public holiday and I do only work three days a week and it’s just like…

Mrs. Firebug: Oh yeah.

Aussie Firebug: You know we have four days off a week. The amount of town visits he could do it. Absolutely. I just a might. When you know I think about when kids roll onto the scene and like people at work have got kids and they’re so tired they come and work. Remember me like five hours sleep. Yeah. I’ll wait to work on what… How great would it be to only work three days a week, you know.

Mrs. Firebug: Yeah, I think.

Aussie Firebug: During that time.

Mrs. Firebug: Especially at thirties like hopefully we’ll have kids so definitely not working as much during that time being able to go and watch their sport and all that kind of stuff because they will have I’m sure commitments in life and I think actually see without.

Aussie Firebug: The most realistic thing as well dialing back the days worked you know I said before we live an awesome life style for less than 50 grand a year now I know when kids are all honesty thing expenses are going to jump up and everything but assuming we get to a point where we paid off the house and we’ve got all these investments and it’s and it’s generating you know X amount of dollars we you know the first 18 and a half thousand dollars income is tax-free and then you know you only tax so much you know up to what is it thirty six thousand dollars whatever but we could totally make way more than 50,000 by working less than five days a week both of us you know to get there. So I just think that is a really trying to work, to work towards and it’s well within our grasp as well look very realistic goal go. I don’t have any grand plans of you know making five hundred thousand dollars cash flow each year because we don’t need to like to get to that point would be so hard and we take it be so much sacrificing and everything but we are well on track to make enough money in your mid-to-late 30s to reach financial independence and at worst only work a few days away so pretty excited about when we get there.

Mrs. Firebug: Bring it on.

Aussie Firebug: Bring it on? What’s your favorite of the Firebug post of all time and why because I know your avid reader of the blog and you’ll have an epic answer to this?

Mrs. Firebug: I will admit sometimes I do get the emails and not Reba I’ve seen that I can actually go into the analytic and see who’s got a

Aussie Firebug: She’s opened it was and she hasn’t clicked on the link.

Mrs. Firebug: Something okay um one that comes to mind as I did like so sometimes proof read them as well so this one sticks out there about the renting versus the buying one.

Aussie Firebug: Yeah, rent versus buy.

Mrs. Firebug: That’s it, yeah.

Aussie Firebug: I’ll put a link in the show notes because that’s actually one of my most visited posts of all time well they get um yeah so I liked that just because for me as well.

Mrs. Firebug: I was always kind of under.

Aussie Firebug: So do you want to tell the audience just a little bit of what it’s about and why you liked it so much?

Mrs. Firebug: Well, from memory it’s about why it is better to rent than to get sucked into buying and having this huge mortgage and things like that. For me like I always just thought that’s what everyone did like my family my parents, my brother’s, my sister all just bought a house and just pay it off. I don’t know. I just thought everyone did and that was what it was everyone was supposed to do and then Matt. He kind of opened my eyes to the idea of like renting instead of buying like renting to as your main house kind of thing. So I don’t know. I just thought that article is really interesting because it kind of pointed out some of the positives over buying a house and getting locked in. The only thing I would say like would be when we come back from our trip life, I don’t know about renting forever especially when we have like kids and stuff like just because it would be annoying if you keep daddy property and things like that and having to move every few years. But I’m yeah right now it works for us perfectly like.

Aussie Firebug: And so we’ve been renting for nearly a year but I was room sharing for a while here and I, it’s good that you bring that up because that’s probably enough a like mind setting thing that um what we went against the grain big time yeah and family feels oh my god with us my mum would not stop saying to us like we have to buy house she’s almost like embarrassed there’s…

Mrs. Firebug: Yeah, I think that was insane i think like people look down upon with the rent like it’s like you’re anything like it isn’t yeah what’s wrong I think that is like the culture of our parents generation as well that they do think that renting isn’t as good as buying but then you’re like well but why…

Aussie Firebug: Yeah, well, actually we crunch them all and like even without the number-crunching wheat like we’re moving in like a week and how much harder would it have been if we bought either, like where we come from yeah to where we went to and now we’re going back to where we come from so like it just would have been so difficult. The renting, the flexibility of renting is awesome for us and we’re not going to have to worry about selling a house renting it out doing anything when we go on our trip so renting is just it’s worked what we brought a lesser and that the housing market by the way mum has actually gone down a little bit. she wanted us to buy like in 2013 and I we can get a place cheaper right now then it was gone for in 2013. Eve not the same so it’s factoring inflation there you know we’re better off we’re you know and my parents are well and truly in the you know property never goes down people like well entrenched into that metro. So yeah you can imagine the disappointment when we haven’t bought a house but I agree when we move back from our trip will probably buy like I wrote in the post as well like the biggest advantage I see for blind is the stability and if you don’t if you don’t have a reason to be stable like we don’t real reason like we could get another job or go live somewhere else or go oversees there’s no reason that we want like a hundred percent sure exactly how and I just think like kids obviously I wouldn’t be want to be renting with kids but other than that like I’m cool, I’m cool to rent you know be annoying if the landlord kicked us out by it’s not the end of the world when you’re two single people so I’m glad you enjoyed that post.

Mrs. Firebug: I read that one.

Aussie Firebug: I think you might have a word check, spell check that one.

Mrs. Firebug: I read there I did do a few of them

Aussie Firebug: Because I’m horrible with grammar and you can tell.

Mrs. Firebug: Terrible.

Aussie Firebug: Terrible life sentence I’m actually I think I’ve been told I’ve got a mild case of dyslexia like and it’s like a bit of a family joke. So if you ever see spelling mistakes or grammar mistakes on my post, you know, don’t tease me, it’s a disability.

Mrs. Firebug: Go easy on him.

Aussie Firebug: Go easy on me. I’m sensitive about it um look we’ve reached the end of what I had as the podcast sorry is there anything else that you can think of that um you want to say or mention because it’s been a pretty you know been a pretty exciting journey so far well it’s me why what…

Mrs. Firebug: I know really I mean just yeah go easy on your partner’s I guess to try and lure them into the idea of financial independence especially hearing it for the first time it does seem like oh is this legit and…

Aussie Firebug: She’s crazy it does I don’t know I first read over it is shit actually achievable now that was my I was buried yeah I just think skeptical until I met people.

Mrs. Firebug: until yeah I think that’s true to you need to like actually meet people who have done it to actually believe that it can be done because I was very skeptical to start with so yeah what about it I think.

Aussie Firebug: awesome, awesome insight from a partner of Ozzy Firebug. Thank you as well for coming on I know you’re a bit nervous to come on to the podcast so I appreciate that, you’ve been fantastic. If anyone want as a specific question for Mrs. Firebug that we miss because I’m sure I miss something just put in a comment of the post and I will ask her and I’ll put a reply so contact her through the post.

Mrs. Firebug: I hope it was helpful.

Aussie Firebug: yeah I really hope it was helpful to guys because i know a lot of you, you know wondering about it or struggling to get your partner on board i was very lucky that Mrs. Firebug was pretty frugal to begin with.

Mrs. Firebug: So lucky.

Aussie Firebug: She yes so lucky she, you know she was wobbling that board at a young age knew how hard it was to earn the money.

Mrs. Firebug: You knew how to work hard.

Aussie Firebug: So I was I was very lucky if you enjoyed these podcasts I want me to make more make sure you drop me a comment and rating on iTunes. Just search or the Firebug and on iTunes and you’ll find me. I’m also on sound cloud at www.soundcloud.com/aussie-Firebug. A transcript and show notes of this episode can be found on my website at ww.aussiefirebug.com thanks again for your time this is Firebug.

Mrs. Firebug: No worries.

Aussie Firebug: Hey guys, welcome to another episode of the Aussie firebug podcast, the financial independence podcast for Australians where I interview clever people who have already reached or are on their way to financial independence. Our guest today is Steven Ryan, a 31 year old property investor who at age 29 became the 2015 investment property magazine – investor of the year. Steven has been featured on such programs as ABC 7.30, property investor magazine, real estate talk and many more. His net worth is well into seven figures and has reached financial independence but there is no plan to stop working any time soon. Steven, welcome to the podcast –

Steven: Hey, thanks for having me –

Aussie Firebug: Ah, I guess we will just begin ah, with your story – um, and how you managed to be in the position that you are in today, starting from the beginning.

Steven: Okay, ah well – starting from the beginning – born is a pretty small town in the south Wales ah- was ah, had different views to the norm I guess um – well to figure out where that would sort of eventuate into something that was productive and useful – ah, so a lot of experiments as a teenager and as a young adult, ah trying to figure out what I wanted to do with career and stuff – ah eventually I ended up falling into graphic design job – ah, wasn’t as challenging or interesting as I had hoped, so I spent a few years trying to figure out what I actually wanted to do with my life and in the process I discovered the whole property investing and just wealth creation – and personal development ah, sides of life. Ah, a few years later after buying a few properties, I quit my job – started a mortgage [00.01.33] business to help other investors and ah, that kinda brings us today in a nut show, am sure we’ll talk in more data about some of those bits – that’s the short story.

Aussie Firebug: Okay cool Steve – so um, is it Steven or Steve – which do you prefer to be called?

Steven: ah by first name, whatever you want –

Aussie Firebug: Um, am going to call you Steve –

Steven: Okay perfect-

Aussie Firebug: Um, so when you say, um, a few, ah different opinions to the norm, what do you mean by that when you growing up?

Steven: Ah, I’ve always been inquisitive um, and always been willing to challenge conventions ah – so I ah, I think the earliest I can recall that happening is ah, when I was being brought along to Sunday schools – a very young man, ah, I had a lot of questions to ask that I, wasn’t getting sufficient answers to – um, through out of to high school I had a lot of ah, head butt moments with teachers as well – not out of ah, an interest in causing trouble, but just to – to try to understand things better and question everything, so I’ve always been curious um, am very learning driven – big passion for science as well so, um most people would describe me ah – you know me quite well as a complete [00.02.39] but then I would follow it up saying what a pretty nice guy, so um – very unconventional in just about every aspect of ah, my life I would say.

Aussie Firebug: Nothing wrong with that –

Steven: Yea well, if you keep doing what everybody else does, you get the same results and ah –

Aussie Firebug: That’s exactly right – that’s exactly right –

Steven: Yeah –

Aussie Firebug: Um, so you spoke a bit of – so you got into property investment when, even investing is not really, you know a property investing – most want to spend their money on .

Steven: Yeah –

Aussie Firebug: Do you – just walk us through a little bit of that –

Steven: Yes sure, um – I’ve always been pretty reasonable with money in terms of ah, you know saving ah, and not spending too crazily. There was a time ah, I was about 25, I believe and my parents out of nowhere ah, announced they were getting divorced and um, that was so be it – but ah, the interesting thing is that I’d remembered them working their tales of their tired old life time – ah working very, very long hours and they had barely anything to show for it when they divided assets; so ah, that kind of got me thinking – they’ve done something wrong here, they’ve really stuffed up – I mean, they did what they could with the information that they had but, for them to have worked so hard for so long and to end up with so little made me realize that something had gone wrong there and I sort of decided at that point, I didn’t want to follow in the same footsteps – that I would educate myself ah about, you know making my money and also hanging on to it and multiplying it, and that got me on the path of learning how to invest um – so it was probably early to mid 20s and ah, I’ve been saving money that entire time – managed to head on an overseas trip to Europe – I think about 22 and [00.04.32] of bags to take free breakfast for lunch and things like that – so I returned with a little bit of savings and ah, then the parents’ divorce, so I continued to save a little bit and bought the first property, I think I was 25 – yeah, it would have been 2010 October –

Aussie Firebug: And where did you buy and how much for?

Steven: I bought in city – I paid three hundred and thirteen thousand for a nice little one bedroom apartment ah, well within my budget, I could have spent quite a bit more, but I wanted to be sensible and that was the, I guess the purchase that got things rolling – but at that stage I wasn’t ah, too well read on investment. I knew that buying the property was good, I’d done my sums and realized that even if properties just [00.05.14] information, I’d need pay rises emulate that were more than realistic for me just to keep up with the higher purchase price – so it made sense and then from there I sort of put the head down and really got into learning how to invest and create wealth.

Aussie Firebug: And how did you manage um, putting the deposit down for that- um 25 years of age, you know three hundred and that’s quite a large sum of money –

Steven: yes –

Aussie Firebug: a deposit, um did you go too uni or you were working full time ?

Steven: I studied, I studied for a number of years out of high school – um, I think that probably I had been working fulltime, maybe three years before that, so I probably had saved about 10 or so grand a year since starting full time work – I was ah, certainly a pretty typical teenager in terms of ah, the drinking habits and tracing girls and what not but, I was ah little bit unconventional when we went out for drinks ah- I would bring ah, a little [00.06.00] [00.06.01] with some red wine in my jacket rather than spending ah, super amount of drinks over the bar {laughter} – and so I managed to save the deposit while still having a typical ah, teenage [00.06.08] [00.06.09], yeah –

Aussie Firebug: Do you know what, do you know what? I did the exact same thing but I–

Steven: {laughter}

Aussie Firebug: I did it with um, like ah – like or something.

Steven: Yeah, okay –

Aussie Firebug: Or like ah a little flask –

Steven: Yeah –

Aussie Firebug: I dint have wine but, such ah, such at once as well. True story –

Steven: Yeah, I ah – I never did so –

Aussie Firebug: actually you know why – because I remember this now; the girl would give me funny looks every time I went to the bar and ordered coke and I was getting drunker and drunker and she must have thought, this guy has a flask and I was really sneaky –I went to the toilets and everything and the security followed me in and he found me doing it and he kicked me out. [00.06.50 – 00.06.53]

Steven: The things you do on the way to financial {laughter} independence, I can say that I wasn’t repaid [00.06.58 – 00.07.00], tables have turned.

Aussie Firebug: Alright, you save some money, full time work – you are a pretty good saver, were you still live at home when you bought this – ?

Steven: No, I moved out of home at 19 to come and study in [00.07.08] so I would grade up in [00.07.09] ah so, I was pretty smart with the money I had [00.07.12] in the whole time and lived to a typical [00.07.15] [00.07.16] or shouldn’t say – I saved quite a bit for how much I was actually earning – I should also add at the same time as studying, I was doing some freelance design work as well as I had started music [00.07.35] online and a few other things – I had a little bit of income coming through and also YouTube channel so, I was able to add a little bit of additional savings ah, just through those –ah, so throughout my studies I was actually already accumulating a small amount of money –

Aussie Firebug: You’re hustling – you’re side hustling everywhere –

Steven: I didn’t realize I was hustling but ah yeah, I guess that was what I was doing at the time.

Aussie Firebug: Ah, very good. [00.07.58 – 00.08.00] to be honest because I saved a hip of money but I was still living with my parents – that was the number one biggest advantage all I had, but you know – to say that – you said, close to you know, $10000 a year when you’ve moved out of home and living in Sydney that’s – that’s um, very good, very good savings indeed. Um so, you bought the house um, and you continued down the property path [00.08.20 – 00.08.24]?

Steven: Um, look at the stage that I bought the first place, I just knew that the numbers might [00.08.31] ah – I dint really know the intricacies investing property or anything else, so I was looking at all sorts of options – but am very analytically minded and it’s not very hard to without a calculator and do some sums and say the advantage of property ah, the fact that you able to leverage 80 – 90% means that your dollars go quite far, ah looking historically at ah, you know house prices and also factors that affect the [00.09.00] of supply and demand. I felt pretty comfortable that property was something that I could do well with – um, so I spent probably the next 3 or so years saving like [00.09.08] at the same time researching like an obsessed crazy person um, so devoured dozens of books, went to made-up, red forums, listened to videos – all kinds of stuff to educate myself – I watched [00.09.21] and researched everywhere I could think of in a stryer and eventually settled on more property as the way for me to go to fill that foundation ah, [00.09.29] second investment property – first investment property, second property September 2013 – I paid for 60, 100 dollars for that one – um using equity from the first property. So I took 3 years effectively to [00.09.47 -00.09.51] but I was able to unlock that – ah, the same time I was saving like crazy as well but I didn’t actually need to use savings for that second purchase, that was all equity – ah for like [00.10.03] again six months later, I took equity out of the second property – I [00.10.06] very well on that one – for the third and you know the story goes on so –

Aussie Firebug: So how many properties do you currently have?

Steven: Ah, I’ve got four at the moment – total value about 2.6 – 2.7 million somewhere around that point.

Aussie Firebug: And do you keep your loan to value ratio, is everything under 80%?

Steven: At the moment yep – additionally when I was [00.10.23], ah generally I was borrowing 88% – capitalizing that is mortgage insurance up to about 90%, ah if you try to accumulate assets – it kinda makes sense to use as much of other peoples’ money as you can. It allows you to [00.10.35 – 00.10.38] in case of emergencies and also just to return on your initial capital is much ah, [00.10.43]. So that initial portfolio – I think a total of my own savings period ah, maybe [00.10.53] dollars of cash has gone into that and the rest of that [00.10.57] come equity, so that’s seventy or two thousand dollars is now controlling a portfolio many times its original value ah, and I have seen at least a 10 times return on that initial capital as well so –

Aussie Firebug: What’s the rental [00.11.10] [00.11.11] across your properties?

Steven: Um, yes a good question – ah the very first place that I bought ah to live in which now I don’t occupy, that’s in the early 7%, ah so getting a pretty good rent return on that one that I have earned is ah, six and a half [00.11.21] years. This is the benefit for not turning properties over quickly to its [00.11.27] – you get appreciation value, you also find that rents tend to track up but the amount of mortgage you own doesn’t increase – so second property ah, ran five and a half [00.11.32] I would say – ah the third property, low fives – the fourth property, very high fours. So overall ah, they are just making me a few grand a year after [00.11.39 – 00.11.41] you know facted in and the tax returns gone through – ah but my initial goal for those was always focus on capital growth, ah which I believe over time there will be an appreciation value and the rents will take along as well which is what am saying now.

Aussie Firebug: So the, the portfolio in total is cash flow positive?

Steven: Yes – first of all, [00.12.05 – 00.12.08] a few thousand dollars of you know – its neither here nor there really, it’s a bit of pocket money ah, yeah.

Aussie Firebug: And am well aware of the strategy of pulling equity to buy the next one as I have done it myself for earning three properties, um the, the biggest thing I have with that, what is your – what is the angle because obviously you are very um, you know a lot of equity – you know ah, ah they are worth so much money and um, you got loans on them and they’ve given you a little bit of you know a few thousand dollars a year in positive cash flow – are you planning to ah, wide until the rent gets to a certain ah point until it’s you know an income or are you widing for a property to reach a certain point you might sell one and pay off the debts off the other – what’s sort of your strategy there?

Steven: Yes, so – if I hadn’t gone along the path I thought I would be which is stay as a [00.12.59] employee keep [00.13.01] along, ideally I would have continued to accumulate properties – get you know a dozen or so, um under my name and at some point in the future 10 -20 years later through one or two property cycles – sell some and pay the others off completely and then have a [00.13.20 – 00.13.21] properties all producing me rental income – but since I moved into business and the income increased somewhat, so am actually now going to moving into property development ah, just starting small initially but taking some of the equity that is in existing portfolio – using that to do small projects and then keeping everything I’ve planned to sell along the way, ah those developments will be cash flow positive and then take that chunk of equity and sky up into a solely larger project then [00.13.43 – 00.13.45] – so ah, very quickly I would have turned cash flow neutral to fairly cash flow positive at the same time as being able to hang on to those properties.

Aussie Firebug: Great – do you have any shares?

Steven: Ah yeah I do – ah, I’ve got a [00.13.57] number on ah – in the US. It’s not a portfolio I would recommend for the faint hearted ah, goes against most conventionally investing wisdom – ah, that’s a little bit more of my high risk, high return money, so it’s not the typical um, you know index [00.14.17] portfolio – ah, a very, very, very heavy ah, [00.14.24] especially relating to artificial intelligence, ah machine learning- so ah, Teslar is my biggest holding and make up about over 70% of my portfolio value –

Aussie Firebug: That’s been doing pretty well in the last couple of years, hasn’t it?

Steven: Yeah, Teslar has done reasonably well, um – I still feel that they’ve got one less ah, digit in the value of the shares compared to where they ultimately get to over the next decade. But I accept that it is pretty high risk company, but I also try to invest quite um, ethically as well so, there is a reason for investing in that company outside of trying to return a profit but just to keep things moving in a good direction as far as ah, renewable transportation.

Aussie Firebug: Yeah, and is it more fun investing like with the tech companies in the US, it’s not your bread and butter you know what you’re going to live off for the rest of your life or-

Steven: No, like honestly if my entire portfolio goes to 0 or we have JFC number 2 which will happen at some point in time I’ll be fine with that. I’m pretty risk adverse and it might sound almost unexpected for me to say but I think that shares are one of the highest risk investments that you could possibly make. Even with a high level of education, unless you are looking at a really long term hold period. And so my idea is, my portfolio is to hold for some time but I won’t be too perturbed if I see large fluctuations in the value over there. Property is the bread and butter and also business is kind of making up the main chunks there and shares are just something to diversify a little bit and see what happens there.

Aussie Firebug: You know you might have triggered a few in the financial independents crowd. Do you mean picking stock, picking shares individually or you know because majority of the people here in this space are all about those index funds right like you’ve totally read behind those lines –

Steven: I think index funds are fantastic but the unique option that we have in Australia, if we can learn to understand what drives our property values which is effectively land values rather than the building sitting on them. Given the nature of our market, that the huge difference between supply and demand excluding a few particular niche areas and types of dwellings like off the plan apartments in the eastern city CBDs. We have been underbuilding housing in Australia for a very long time we’re also one of the highest net worth countries in the world. So for somebody that’s sort of starting out or at a stage where they’re trying to accumulate capital and increase their net worth. It’s very hard to make an argument for shares having even close to a hope of competing with property assuming that you are willing to leverage property at 80-90% and that you’re not able to do much lending on shares above say a 50% land to value ratio. Keeping in mind also if you do leverage on shares you do have the risk there of something like a margin call which doesn’t occur with properties. So as I said I’m very analytical on that side of things and I think it’s great to have you know the best holdings in different kinds of investments but I’m pretty confident that my property returns are going to be multiple [00:18:01] above my shares even if I went to do something like just grab the old index funds. The other thing too is that I’m pretty impatient, you’ll certainly see good long term results on shares especially index funds are really the way to go then to be pretty conservative but it’s hard to match all highly leveraged assets.

Aussie Firebug: So what you’re basically saying is you see in the future, and we’re sort of skipping ahead because I wanted to delve in into this area a bit later on but [00:18:33]. Property returns are going to blow shares out of the water in terms of returns over the next 5/10 years? Is that –?

Steven: In terms of cash on cash returns so I would suspect that shares would have just a better chance if not more of probability in terms of percentage growth to up before property in Australia but we’re not factoring in the leverage so [Voiceover]

Aussie Firebug: That’s a key point as well. I always hear that, look and you know I’m in both camps here. I’ve got 3 properties but I’m up to about 70k in index funds now so you know if either one goes up I’m really happy. But I do think that whenever someone is saying you know shares beats you know the last ten years shares have out-performed property. Yeah maybe a dollar vs. dollar percentagewise the have but they’re completely ignoring the whole. Like I think that best thing about investing in property which is the leverage, so yes I agree with you on that point.

Steven: Yes and also we do have to be very mindful to factor in the risks as well if you are levering shares you’ve got the probability of a margin call and keep extra capital in reserve. Those kind of things as well say, as I said I’m quite conservative and so I’m not somebody who would be comfortable to leveraging into shares at all. For fear of having the margin call in the worst case scenarios so I’d be putting a dollar into shares if I double that I make two dollars whereas if I put a dollar into property I get 10 from the bank and if I you know say that the same doubling there I’ve turned 1 dollar into 10 so I get a ten times return. It’s kind of hard to argue with that.

Aussie Firebug: Sure, alright one of the – I want to move into – for those listening Steve is also the director of Interstellar Finance who are actually a finalist in 2016 Australian Mortgage awards. So is it your actual company Steve?

Steven: Yes it is my company, yes I founded and I’m the director yup.

Aussie Firebug: So can you tell us a little bit about Interstellar in general, how it came to be and what you’re looking to do in that space?

Steven: Yeah absolutely, so I rather got obsessed with the investing thing and so I could talk about and think about and do was property investment related that kind of happens I think when you see the value in something that can have a big impact on your life. So it got to a point where I had a lot of people asking for help and guidance and ideas and this that and the other. It took a while for me to – I guess for the penny to drop but I realized that I was in a job I didn’t really enjoy. I had been fired from my first and nearly lost my second as well so I was clearly not a good employee. And I found a way to transition from that design career to a full-time mortgage broker thanks to an incredibly generous and selfless mentor who changed my thinking and my life ultimately. So I transitioned across a few years ago to fulltime mortgage broker and just 100% focused on helping people who want to build wealth for themselves. Whether that’s people just starting out with property or people that are a little bit further along the path and don’t really do much lending for an occupiers, it’s really a pretty strong investor focus and I get a lot of joy out of having people come to me and discussing what their long term goals are and putting a bit of a road map together on how they might be able to achieve this.

Aussie Firebug: So you do strategy as well as outsourcing and finance?

Steven: Yes, I mean the strategy it’s not rocket science to be honest it’s really just a matter of looking at what’s somebody’s goal, what’s their timeframe, what are they trying to achieve, what are their current resources, what changes might occur you know [00:22:32] when the goal is achieved. And how can we best give them the best opportunity to achieve or come as close as they can as achieving their goals. So it’s really just a matter of looking at the numbers and putting a bit of a plan together in terms of if we can do this, this and this then this is where we will get to. Because a lot of people I think one of the mistakes that people make, maybe not so many of your listeners but in general in terms of financial goals is they might think I’m going to invest in you know some shares or invest in a property or you know buy some silver. But they don’t really know why, what the end goal is. Maybe one of my main goals is really to help people clarify exactly what they are trying to achieve but more importantly why? If you don’t have a strong why you’re not going to have the drive and willingness to do what it takes. You’ll talk yourself out of things, you’ll procrastinate, and you’ll let fear prevent you from acting. So my real job is to help people clarify what they’re trying to achieve then kind of give them the resources and empower them to actually take some action.

Aussie Firebug: Excellent, I think that’s so important as well. Clear road map, what you’re trying to achieve, why you are trying to achieve it. Rather than I should just buy a property because people have been telling me that’s what smart people do and I want to be smart, which is funny enough. The reason why I started to buy property but then I read ‘Rich Dad Poor Dad’ and the rest is history. But still –

Steven: A lot of people start and it’s better than doing nothing, but it’s definitely worth going why? And it really has to be tied to something more important than just a financial goal too. Because if you don’t know what that result is going to bring you in terms of your lifestyle, how you can give to others, how you can have freedom it’s meaningless. Like nobody cares if you’re worth 2 million dollars or 10 million dollars or if your passive income is xyz, you really need to tie that into something more meaningful than just a number. What’s it going to do for you, how is it going to change your lifestyle, how can it help other people and impact other lives in a big way as a result of achieving that goal.

Aussie Firebug: Now just while we’re talking about this I guess it a good segue so you could pull up stumps right now, you sold everything that you’d owned you’d have enough money to live passively for the rest of your life, is that correct?

Steven: Yeah a fairly moderate lifestyle but one I’ve certainly lived the majority of my life, no problems yup.

Aussie Firebug: So, and it’s funny I’ll just let the audience in on a little story we had over email as I was trying to get Steve to – we were trying to book a time to do this podcast and Steve was emailing me back saying how flooded he was at work and how he just didn’t have any time to you know do the podcast and it was hard to get days and everything like that. And I just thought it was ironic that this is a guy that’s worth over a million dollars, 31 years of age could be financially independent right now, pull up stumps and basically leave as you said a moderate lifestyle but you’re working harder than ever mate. What’s the reason behind that and with the whole financial independence retire early, I want to put it to you, what’s your goal with property investing and does the ‘retire early’ bit in fire does that interest you whatsoever?

Steven: Good question there so what was the first question that we were covering off?

Aussie Firebug: I think it was just what’s your goal, what’s your ultimate goal? Why you doing property investing and I know you started business down but what –

Steven: And why I’m working so hard I guess in the meantime. Yeah I’m going to give that to kind of [00:26:12] let it sink so the reason why I’m working harder than ever now is because I absolutely love what I’m doing. I’m able to take people who are at a point where they are willing to make a potentially really important decision that can change their lives for the better. And be the catalyst for them actually making that change or taking that action or you know following up on that decision. And so I spring out of bed in the morning and I kind of get myself to stop doing what I’m doing in the evening because I know that I’m really having a big impact on people’s lives whether it’s one or two conversations we have here or there or even if they don’t end up really going down the property investment path. To plant a few ideas and seeds in their minds that can really change their thinking, their mindset, their outlook. Very rewarding and after being in business for a little while I start to hear the feedback coming from people that literally saying things like you know you have completely changed my life or the way that I think, you know I’m really grateful. So what I’m doing now is so rewarding I can’t think of anything else at this point of my life that I would rather be doing with my time. So that’s what keeps me doing what I’m doing, there’s no other reason behind it which is –it’s a great position to be in, being excited to get up and wishing you didn’t need to sleep so much so you could help more people –

Aussie Firebug: Can I just add to that as well, I’ve been to a lot of foreign seminars met a whole bunch of people that are multi-millionaires that run businesses and they do it because they love doing it. And it always annoys me, so many people just can’t accept or get over the fact that someone is worth so much money but they’re still working and it’s like you know they must be a con artiste. Why would they work if they’re worth? If their story was true why would they still be working? Yada, yada, yada. It’s like actually there’s people that exist that you know legitimately just do it for the love and yes it’s a business so you’ve got to make some sort of money I mean to keep the business functioning. They’ve got stuff they’ve got to pay, you know they’re not going to do it at a loss but essentially they are giving away their time for free. This people do exist and you can be in that position if you become financially independent. I just think a lot of people have never even considered the concept of financial independence jump to all sorts of conclusions for people that have walked the walk. And yeah they might charge a little fee you know for their wealth of information that they have, that they can’t get over that fact you know. It always comes back to that why would they still be working if they were worth so much money.

Steven: Yeah I think most commonly comes down to a few things, some people are – then they’re in a position in their own lives that they’re not happy or satisfied enough with they can’t understand why anybody given the choice to just throw it all in, you know just go sit on a beach and drink cocktails wouldn’t do so. Another part of that I think is many people aren’t willing to face the fact that they’re not where they want to be in their lives and they are the only ones to – who is responsible for that. So rather than go you know what if this person is doing this, why would they still be doing this and ask more questions and uncover that they are really passionate, they enjoy what they’re doing etc. They just make a decision without all the facts based on their own perspective rather than reality.

Aussie Firebug: So would it be fair to say, so you’re working a job you didn’t particularly like, would it be fair to say you were striving for a financial independence to escape that job?

Steven: Definitely a push to get out of there, to change my circumstances absolutely.

Aussie Firebug: And now that you’re in a business that you do like do you find that you your goals have now changed– considering you do you like your job as much as you do?

Steven: Yeah, well I guess my goal of getting out of my full time job, I walked free of that a couple of years ago. It’s probably going to go down as one of the more memorable days of my life; just having the freedom to say “see you later,” and just take control of my future. Yeah, the goals probably have changed a little bit and not so much what I’m trying to do which is just get some freedom and have a big impact on a lot of people’s lives which is really what’s pushing me, coming back to your earlier question of really my goals but I’ve come to realize that I have a lot more potential and capacity than I initially thought and every time I set what I feel as an extremely ambitious goal, at some in the future I realize it was actually a quite meager and well within my capacity so my goals don’t necessarily change, they just expand so you know, I initially had some financial goals which I exceeded well ahead of schedule so I reset those and reset those and now with the business, the same kind of thing; you know I had some goals for my first year or so in business in terms of how many people I could help and stuff like that and I shot past those so the goals really just– once I am confident and have the self-belief and the mindset and thinking to know that I could chase something more, I’ll just set a bigger goal to keep pushing and learning and growing and challenging and getting out of my comfort zone.

Aussie Firebug: Cool. Great. Now, I want to get in to some nitty and gritty stuff about the industry. So, you know, 2015 Property Investor of the year, you’re the founder and director of Interstellar Finance so you’re heavily in an industry that is such a hot topic at the moment, well it’s a hot topic nearly of every moment, but I really want to pick your brains over a few questions about the Australian housing market. So firstly, do you think Australia is in a housing bubble? Why- why not?

Steven: What’s a housing bubble?

Aussie Firebug: You tell me.

Steven: Well, we need to have a clear definition of what we’re referring to.

Aussie Firebug: Alright, let me rephrase that then. Do you think that– let’s be honest, it’s now one in Sydney because I don’t buy into the whole Australia is in a, you know unaffordable– that every place is unaffordable. It’s when people start hyping on about this, it’s 95%– they’re talking about Melbourne and Sydney, they’re not talking about anywhere else, if the price increases like Melbourne and Sydney have seen the last ten years or so, is it sustainable– do you see house and apartment prices coming down by 20-30% over the next five years?

Steven: So the sustainableness of the growth, or sustainability, if we’re talking in the last ten years, if we average that out then– I’ll say that in the last probably three or four years, definitely not sustainable. This is what we refer to as a property cycle. So you’ll have a period of little to no growth and then you’ll have a period of pretty strong growth year on year and then things will taper off, maybe correct a little bit then [00:33:27] and you’ll have again stagnation for quite a period of time and then again a process will push pretty rapidly for a few years and that seems to be a repeating cycle going back a century or more in Australia. I see at the moment, Sydney and Melbourne in particular are pretty much peek of the market, I wouldn’t be buying there as an investment unless I’ve got a view of 15-20 years or more. I stopped buying Sydney a number of years ago and moved my money to Brisbane. Apartments, I would not be touching off-the-plan apartments with a four million kilometer pole in the Gold Coast or Brisbane or Melbourne, perhaps even Sydney, there’s quite a large amount of supply, there’s quite a large number approvals still yet to commence construction and you’re asking for trouble with those types of investments but a savvy investor wouldn’t really be buying those anyway because you know, a brand new apartment, you’re paying the developers profit margin, they’re marketing fees, their advertising fees, their agent commissions. None of my clients, for example, are buying those types of things but definitely I caution to be yielded there. Outside of that, houses are a different kettle of fish: Sydney and Melbourne again I wouldn’t be buying houses there at this stage in the cycle. I think we’re pretty much done with the growth, I don’t have a crystal ball but there’s a very large market out there at the moment in many other capital cities around Australia at a much different stage of their property cycle so plenty of opportunities out there for people willing to do their research instead of get it from the news.

Aussie Firebug: So you don’t see any sort of crash happening?

Steven: Look, I don’t have a crystal ball, I can’t say for sure but I don’t see any triggers for you know, 10-20-30% reduction in prices in Australia; that would be unprecedented outside of a few anomalies like [00:35:19] towns in the history of real estate here. Even the GFC, the worst that we saw was about a 10% reduction which a year or two later, things had bounced back to where they were so I would have to say something orders of magnitude, bigger the GFC to have any reason to believe that would happen.

Aussie Firebug: Now, you’re such a great get guest for this question because you’re in the business of sourcing people loans, I personally– I’m a bit on the fence: look, I’m not too sure what’s going to happen but I think a major contributor to the spike in house prices in the last couple years, a major contributor for that has been record-low interest rates. Now, you being a mortgage broker, where do you see interest rates moving this and the next couple of years and basically I just want to know your opinion on that whole situation and also, is now a good time to fix your rate? Why or why not?

Steven: Good questions, good questions. As I say, my crystal ball isn’t perfect so take all with it a grain of salt. My gut feel is that we’re in for pretty low rates for the foreseeable future unless there’s major improvements in our economy overall, I can’t see reason for the Reserve Bank to be lifting rates; maybe we’ll get a quarter percentage or two here or there, nothing too substantial. Any much further out than a few years, I really can’t see that far but I do feel that we’re not likely to return to the rates that out parents perhaps experienced in you know, the early nineties or in a different era, a low inflation era. We’ve got the Reserve as an inflation target that we have now which has been pretty consistently maintained as well as so I’d be surprised if we see too much movement either way with rates. That being said, lenders are within their own rights to move their rates and change their margins as they please and they do have the power to do that. I won’t name names here but certainly a year or so ago, there was a very competitive price discount being offered by certain lenders to bring on new business and retain existing. I was seeing those same lenders now call back a lot of that lost profit by lifting rates here or there, some of them under the guides of [00:37:44] you know, and APRA wanting to slow investor lending. As far as fixing rates go, that’s a much more complicated decision than just fixing so you’ve got some certainty over right; there’s some implications there around what are your plans with that loan: are you building a portfolio or are you just an occupier, will you ever consider refinancing or moving, would you ever invest, will you ever want to access equity? I actually think this is my first loan on occupier property before I knew what I was doing; probably the most costly mistake I’ve ever made actually, came to about $50,000 in total from extra interest and a huge break fee when I realized that I had made a serious error of judgment because I didn’t know what I didn’t know at the time. What do I say– talk to your broker about that stuff. Make sure that they know what your plans are longer term and they can give you a bit more guidance as to whether or not it might make sense and also just think about the risks of fixing versus not. My lens is currently all variable and I plan to keep them that way unless I see very strong reason not to do, otherwise.

Aussie Firebug: Yeah, I am a fan of variable as well. I actually did write an article about fixed versus variable, just a shameless plug and for that article, I’ll put that in the show notes but yeah, I am I’m on the variable camp as well. I think there’s very rare moments in history where you actually fix your rate and you come out ahead. Like you said, it’s a different story– it depends on circumstances like if an interest rate hike is going to put you under water then you should probably fix but if you’ve got the capital and you got the buffer, I think that variable might be the better option 80-90% of the time like throughout Australian history or something, details like that and it also you know, like you said, if you’re an investor, you think you can’t withdraw equity out and like all that stuff but I’m a fan of variable. Now, on the– so you don’t foresee it going up too much, what about the federal reserve, the US Federal Reserve Act, their rate the other day, I think in the other week, and I immediately see on the internet, I think it was ANZ or maybe it was [00:40:04], but it’s one of them, upped their rate on investor loans which like you mentioned, the investor loans– the cash rate isn’t directly tied to– like the banks can set their interest rate whatever they want. Is there a correlation there and a lot of people are speculating that the Federal Reserve is going to up their rate again possibly three times by the end of the year, how do you see that playing out?

Steven: Yeah, so look there’s some correlation, not maybe as strong as many might believe. The raise for that lender who shall remain anonymous for fear of scaring people have other motivations as well to lifting those rates just do it with and proportion of investor lending growth on their loan books versus their own occupied growth so anything they can do to pull more capital in for their existing investor book and also deter people from bringing additional investor lending costs they’re doing at the moment. I think that there’ll be some influence you know, to fit those rates in the US; there’s a little bit of funding that the Australian lenders- at least many of them- get from the US as well but I can’t see it having a huge, huge impact and it’s really going to be you know, a little bit more down to local conditions but just on a plane earlier, you mentioned if a rate rise was going to put somebody under water then definitely worth fixing, I would say that if somebody has a loan and a single rate rise could put them under water, they should not have got a loan, it shouldn’t have been approved either. People need to be very mindful that their circumstances can change whether it’s change of household income, whether they can have injury or long period off work, all sorts of surprises and dramas can happen as well and it’s really important when people are taking on large amounts of debt that they have sufficient buffers and sufficient insurances or whatever they need to do to make sure that they can weather those kind of storms and not be blown around like a plastic bag in the wind when things change so that’s a really important point for your listeners to do well on whether you’re taking on an occupied mortgage or investing. It’s crazy not to retain a reasonable buffer of cash to cover living costs and expenses and surprises and rate changes so that you aren’t forced to sell at a bad time.

Aussie Firebug: Spoken like a great mortgage broker. That’s a good segue into my next question. You mentioned that everyone should have a buffer which I kind of agree with, fantastic advice. How have you seen the banks change their lending standards over the last few years that you’ve been in business? Has there been a big shift? If so, in what direction and how do you see it moving forwards because from what I read, it’s harder and harder to get a loan these days for an investment property.

Steven: Yeah, you’re reading fairly correctly. The timing of starting my business was pretty much in line with the beginning of the very intense tightening on lending policies so APRA has basically been in the ear of all the lenders in Australia telling them they need to pull their [00:43:23] up a little bit and that’s had a very, very large impact on mainly people– unfortunately not the right folks to really hurt, but people that are starting out and people on those low to middle incomes who have an existing mortgage or are looking at doing some investing to get ahead so up until those changes started to come through you know 18 or so months ago, it continued to get tighter and tighter. Somebody on a pretty reasonable sort of median income in Australia could start to put up a bit of a nest egg for themselves and get the ball rolling whereas now it’s become extremely challenging whereas previously many lenders were looking at your repayments on existing loans that you may have: basically at what you’re actually repaying and then a small buffer on top of that to factor in a couple of rate rises. Generally now loans that you have elsewhere and a proposed loan are being assessed at about 7.5% interest and are being assessed usually over a 25-year loan time. So we would have to see– I don’t even know how many a quarter percent interest rate rises for rates to get to that, probably talking 16 or 20. So now the lenders are effectively factoring in the Reserve Bank or themselves passing on you know, a dozen or more rate increases and saying can you afford to pay that? If you can’t, no loan for you. So it’s definitely become a lot tougher. It’s made things very challenging from my perspective as well but you know, it comes with the territory. We do have record-low interest rates at the moment and so it is sensible for lenders to be mindful they won’t stay here forever, yeah.

Aussie Firebug: I think it’s a good thing, do you think it’s a good thing?

Steven: I think so. There’s probably better ways to go about it but it’s a very complicated issue. The thing that’s very unfortunate is the people that it’s affecting are the people that it should be affecting least and that’s people on those lower and middle incomes who are now either unable to get a foot on the ladder or have thought that they were doing the right thing by paying their off as quickly as they could under the impression that I could you know, refinance it and increase their loan later you know, use that money for renovation or for a buffer and now many of those people are stuck. It’s not necessarily the best– yeah, many folks have got the short end of the stroll there. I think lenders certainly have to be responsible and generally they are with their lending as well. It’s a shame that sort of a third party needs to step in and decide what policies they’re able to implement in terms of how they’re assessing lender payments and things like that because it’s bringing the lenders more and more in line with each other and it’s getting closer to the point where it’s just like what flavor of vanilla would you like? You know, you can have yellow vanilla or the red vanilla or– there’s very little choice, I mean differentiation between the lender policies now which means less choice with consumers and it also means that the larger banks can use their resources to crush their small competitors which means less competition so…

Aussie Firebug: Interesting because most people won’t have even thought about that from that perspective but it is interesting to hear what you have to say. Do you think– so you mentioned that the banks are now calculating all loans on about 7.5% say you know, “if you can’t pay it back when it’s at 7.5% we’re not going to give you a loan,” which I think is a good thing. Do you think there’s going to be a point where a household simply cannot service a loan and in your professional view, do you think Melbourne and Sydney are close to reaching that point if current trends continue the way they’re going with prices rising, how far away is it because you know I, and I’ll bring up an example: my sister and her partner were looking for a house a few years ago in Melbourne and are both professionals working full time earning good money and like some of the houses that their friends were buying, it was just– the loans on them were at outrageous and you know, they crunched the numbers, they did their due diligence and you know, a few– a 1-2% interest rise here maybe if one of the– her or her husband lost their job, you know they’d be underwater very quickly like it was getting to a point where all their friends are you know, getting these enormous loans but they’re so close to– they’re so on the edge of something bad happening that it’s I think, and you’re going to know more than I will because you’re approving people’s loans all the time that at some point, you just– the household simply does not have the income to support a loan.  Are we anywhere near that point in specifically Sydney and Melbourne?

Steven: Look, Sydney and Melbourne, you need an above-average income to get a below-average house at this point in time; that’s just the nature of the property cycle. I think there’s a big gap between what people could afford to be paying, this is what a lender will give them assuming that their household expenditure is reasonable. If a lender is assessing your repayments at approximately double what they are or close to, there’s still quite a bit of room to breathe but that’s a very different issue from the fact that people who are taking out loans that they’re going to be slaves to their jobs for another 40 years just to repay them on an occupied property. They may well be able to make the repayments but the penalty they pay in terms of their lifestyle over the next two or three or four decades is a bit ridiculous at this point in time. I would be suggesting that if people are looking at getting home in somewhere like Sydney or Melbourne, to think how can they actually multiply their money now at other markets and other investment classes and bring it back into Sydney next time when they’re not going to be competing with crazy people that have been it missing out and missing out and missing out because it’s– the median price just about everywhere in Sydney now is seven figures. That’s a very long commitment; you’re going to end up paying about three times the amount back to the bank over the lifetime of the loan but a lot of people trying to keep up with the giants who don’t know any better, and we’re saying this right now: just about everybody buying homes in Sydney and Melbourne right now are making a decision that it’s going to have big– probably negative consequences for them in terms of their lifestyle for many decades to come because there are no other option.

Aussie Firebug: I know it’s crazy but surely there’s a point– you know it reaches a point where the household income just simply cannot afford to pay back a loan of a certain you know magnitude–

Steven: Well definitely beyond that point for the typical household in Sydney but given that we have extremely low levels of stock- same for Melbourne- the people that are competing for property now aren’t a typical household, they are done and dusted, they’ve been on the sidelines for a year or two. People who are competing now are people that have additional resources, higher incomes, already on the property ladder, have help from mom and dad, are downsizers so in terms of affordability for them, I think that there’s still a little bit of a room to go but in terms of affordability for a wider audience, definitely not there but given that we have such a shortage of supply and such a high demand, I won’t be surprised if the process was to continue rising throughout the rest of this year before they taper off and maybe come back a little. But from there, I think things are going to be flat for quite some time. I don’t say prices continuing to move like this for many more years to come, I think it will be very flat for quite a while.

Aussie Firebug: Yeah. Only time will tell.

Steven: That’s correct.

Aussie Firebug: Best advice to someone trying to reach financial independence in today’s time?

Steven: Educate yourself and learn from people that have done what you are trying to achieve and forget about the input from everybody else. I think one of the biggest mistakes people make is not educating themselves and not learning from people that can help them so if you want to learn how to you know, retire early from your job, is it better to talk to your colleagues who haven’t retired early or find somebody that has retired early and ask how did you do it? You’ll find that people that have had some form of success however you define that in life generally are quite generous with their time and advice and if you can find a mentor that’s also willing to spend a little bit of time to help you to recommend some resources: books, courses, seminars and to change your thinking, I think that will have the biggest impact on your life. And don’t get your investment advice from the media; their role is to sell advertisements, not give you an unbiased and accurate reflection of what’s going on. So self-education and learning from people that have walked the path, I think they’re the big tips.

Aussie Firebug: Fantastic, and was there anything else that you wanted to add or comment that we didn’t speak about in the podcast?

Steven: Actually yeah, there is one other thing to add in the mix. If you’re really, really adamant on becoming financially independent, business is definitely going to be the most effective way to get you there so I mentor of mine, my mortgage broker actually while I was investing said to me a while ago, “Steven, your biggest limiting factor is going to be your income. There’s a pretty low ceiling in your industry. Maybe you should think about business.” And at that stage, the thought had never occurred to me. Fast forward a few years and I now have started a business that’s certainly paying the bills and I think that if people are really interested in financial independence at retirement, early in particular, plugging away at a pay-cagey job you know year after year and buying your index funds stuff will certainly get you there earlier than most but if you really want to add some fuel to the fire and accelerate things, it’s well worth looking into business.

Aussie Firebug: Great. Great perspective from someone that’s done it. Anyone– if someone was to get in contact with you, where can they find you?

Steven: They can find me on a property chat forum or on my website, just Goggle Steven Ryan Investor or Mortgage Broker, I’m sure you’ll find me somehow. I’m happy to have a chat to anybody if they’d like to have a bit of a look at what their options are in terms of investing but other than that, I’d say if anyone’s curious to learn a bit more about the property stuff in particular, just head over to the www.propertychat.com.au the AU forum. There’s tons of people there with great amount of experience happy to share their thoughts and ideas and answer your questions and that could fill a lot of the blanks in for you.

Aussie Firebug: Right, I’ll put a link in the show notes guys to Steve’s profile on property chat and stuff like that and his website so you can find him quite easily. Alright, great. If you enjoy these podcasts and want me to make more make sure you drop me a comment in writing on iTunes, just search for Aussie Firebug on iTunes and you’ll find me. Also on Sound Cloud at www.soundcloud.com/aussie-firebug. A transcript and show notes of this episode can be found on my website at www.aussiefirebug.com. Thanks again for your time Steven.

Steven: My pleasure. Thanks for having me and keep doing a great work.

Aussie Firebug: Thanks, will do. Cheers mate.

Steven: Cheers

Aussie Firebug: Hi guys, welcome to another episode of the Aussie Firebug Podcast, the financial independence podcast for Australians where I interview clever people who’ve already reached or are on their way to financial independence. Our guest today is actually a podcast listener, he reached out to me via email. Chris is a 29-year old millennial from northeast Victoria who works for a major corporation in a regional town as an engineer. His current net worth is an incredible 301,000, which is mostly invested in Vanguard Managed Funds. Chris reads the blog and listens to the podcast and he thought he could contribute to the discussion so here we are. Chris, welcome to the podcast.

Chris: Yeah, thanks for having me here.

Aussie Firebug: Yeah so really interesting way we got together- you just shot me an email, I guess you listen to a few of the podcast, did you?

Chris: Yeah I think I’ve listened to them all.

Aussie Firebug: Yeah cool so yeah I thought it was really cool. You shot me an email, you know, it had a whole bunch of stuff about you and you know, basically said if you’re interested, we can set up a time and date and we can do a podcast with yourself, which took me close to 6 months to set up because of how much stuff I got on but um… yeah, so here we are and I’m excited to get into it. So I guess the first question I’ll ask you, I gave a bit of an intro about you just before, is there anything I missed or anything that you want to add to that?

Chris: No, that’s about right. I started on not the financial independence journey as it was back in about 2013 after reading Mr. Money Mustache and there’s been some evolutions along the way about how I think but it’s looking pretty good so far I reckon.

Aussie Firebug: Yeah, cool. So were you always good with money at a young age?

Chris: Yeah, I think I’ve generally been pretty good at money. I remember I always had about $10,000 aside for most of my life–

Aussie Firebug: Even as a kid?

Chris: From age probably 15 onwards.

Aussie Firebug: Whoa, that’s a lot of money for 15-year old.

Chris: Yeah, I might  be overstating that but I always had money in the bank- I’m always used to having money in the bank that I wouldn’t spend except for emergencies, whatever that is, because it’s never happened.

Aussie Firebug: Yeah sure, and was that like– did it come from your parents like that mentality with money and having stuff/having money in the bank and you know, saving up for emergencies and stuff like that?

Chris: No, I don’t think so because the more I learn about my parents’ finances- it always seemed fine growing up, you know I come from a relatively well-off background- but the more I talk to my parents as a grown up, they were terrible with money and large credit card debt and you know, borrowing against the house to pay for– you know, not for fruit, well for sort of frivolous things. You know my sister would dance six times a week racking up hundreds of dollars of lessons, I would play music three or four times a week racking up hundreds of dollars of lessons and my parents wanted to fund that all, couldn’t afford it so you, just spend it on the credit card.

Aussie Firebug: Yeah, as you do like that’s just– kids are expensive, right?

Chris: it seems that way, yes.

Aussie Firebug: [Chuckles] Yeah right, so there wasn’t like a… you know, read a book or watched a movie or anything, it just sort of comes naturally to you?

Chris: It must have done, yeah.

Aussie Firebug: Okay. And so you said you first discovered the concept of fire in 2013, like were you saving- you were just generally good with money and you were saving but it wasn’t till 2013 until you had a goal to sort of walk towards, is that accurate?

Chris: Well, it wasn’t till in 2013 that I bought my house as well so I had– ever since starting work I had been saving for something so first of all, I took a huge trip around America so the first year or so I was saving for that then–

Aussie Firebug: What year was that?

Chris: So that would have been 2011.

Aussie Firebug: That was actually a really good– I went to America 2012 when the dollar was over parity back then and I didn’t realize back then how good it was but yeah, 2011 wouldn’t have been too bad as well I think.

Chris: It was pretty nice.

Aussie Firebug: Yeah right.

Chris: So you know, I was used to saving my money for that then I bought my car so I was saving… so week to week I’ve always been pretty good at saving but prior to this I’d always been like well I’m saving so that I can spend all my money at once, basically.

Aussie Firebug: Yeah, you know I had a very similar experience growing up as well that I’d save all this money and I’d be like well, like there’s no point in being the richest person in a graveyard like I need to spend it so I’d like have a big weekend and I’d buy a whole bunch clothes or whatever then I’d feel bad for like just wasting all of the money and it wasn’t until like I found at that financial independence was a thing that it you know, gave me a goal to walk towards and it made it so much easy to save these huge amounts of next stock pile, these huge amount of wealth because it was going towards something.

Chris: Yeah, absolutely.

Aussie Firebug: Yeah, right. So what you did, you bought a house/

Chris: So I bought the house in like 2013 so I sort of discovered the blog, thought maybe this is a good idea but I’ve got something on my mind at the moment and so all that money that I was working towards saving the house, I just kept saving it basically and I’ve tried to trim out the costs here and there on frivolous stuff that doesn’t bring me joy and yeah, keep putting it into shares now.

Aussie Firebug: Yeah right. So how did you actually stumble across Mister Money Mustache?

Chris: A friend of mine. So when we moved here to Victoria, I started meeting new friends kind of thing and one of them was a bit of a follower, she’s not super into the tenants although they’re pretty good, but yeah she mentioned Mr. Money Mustache and oh, “you could be just like him Chris,” well something along those lines.

Aussie Firebug: yeah, right, and that just opened your whole eyes to all the possibilities?

Chris: Yeah, I read the blog you know, I read one article that she was like “you should start with this one,” and then I just like read every single blog post he’d ever written and yeah, I was hooked.

Aussie Firebug: It’s a common theme I think. Well, a lot of people discover Mr. Money Mustache and then they just go nuts. For me it was a book, Rich Dad, Poor Dad, but same sort of a concept like you read and you’re like oh my God! And you read a whole bunch of things and then yeah, it’s pretty cool. So you said you moved to Victoria, where were you living previously?

Chris: Prior to that I lived in Bathurst for a couple years in sort of South Wales I guess, just over the Blue Mountains from Sydney.

Aussie Firebug: Okay, I was not aware of that, that’s not– it’s not metro, is it regional as well?

Chris: Yes, it’s regional as well. So Bathurst, you know the big– the 24-hour race, the supercar?

Aussie Firebug: Yeah, yeah, right. Yeah, yeah I know the supercar race, of course yeah. Okay, cool was that for a job or?

Chris: Yes, that was for my graduate job straight out of uni, I moved out there.

Aussie Firebug: Yeah, nice. That’s quite a move.

Chris: It was quite a move. Yeah, it was three hours from home which is you know, about enough that you can get back in a weekend but definitely far enough away that you’ve got to make your life there and then same thing moving here sort of thing so I’ve moved around a little bit for a while. There was– I think there was a six-year period where I moved every year just about.

Aussie Firebug: Okay, that would have been difficult, was it?

Chris: Um… you certainly have to get good at making new friends because otherwise you’re a very lonely person.

Aussie Firebug: Yeah, actually it was going to be my next question like so obviously you left all your friends and family, did that help save money? I suspect it would.

Chris: I wonder that. My friends are pretty good. Back home, I’m friends with a lot of PhD students and otherwise very low income people so they tend to want to be frugal when we go out anyway which is just what I want to do so we get along pretty well.

Aussie Firebug: That’s a life saver. There’s nothing worse than hanging out with a whole bunch of people that all want to spend money every weekend and you’ve sort of got to be like, “uh… like no, I don’t want to do this and I don’t want to do that,”

Chris: Like this damn a little?

Aussie Firebug: Yeah, that– it makes it hard so that’s good that you have that. So have you calculated your savings rate at all?

Chris: Yes, so I calculate it once per year. I go through pocketbook which is one of these apps that will link into all your bank accounts and you can categorize all your spending.

Aussie Firebug: Yes, that’s great.

Chris: So the year I discovered fire, 2012-’13 financial year, like I was already at about 50% saving rate so that was I was saving for the house so that was mainly a normal kind of thing. For when you’re ahead, 65%, last year I hit sorry, 14-15 I had 70% and then last year I did terribly partly because I got on an international holiday every year and two of those fell on the same financial year so I do one each calendar year but it was like a back half of one year and the front half of the next year so last year the rate was only 56% which was lower than I would ideally like but it was a nice holiday so it trades offs.

Aussie Firebug: Yeah, exactly. Yeah, I guess you can’t live you know, it’s got to be tradeoffs, that’s exactly right, you can’t be overly frugal, you know, have a bad quality of life, it defeats the purpose I guess to reach financial independence but yeah, it’s still good, 56 is nothing to pull your nose about. So you bought a house and now I have to ask so you just got a touch over a $300,000 net worth, is that including the house?

Chris: That’s including the house, correct.

Aussie Firebug: Okay and how much of that equity is part of that $301,000?

Chris: $107,000 is in the house.

Aussie Firebug: $107, okay alright. So you were what- 26 if my calculations are correct, when you bought?

Chris: Right, yeah, that sounds right.

Aussie Firebug: Yeah right, and I do have to disclose because I did I ask you about it, you did have some contributions to your parents towards that house, am I right?

Chris: Yeah, so we paid a 20% deposit and I had saved 10% of that, my parents gifted me the other 10% so I’ve gotten a bit lucky there.

Aussie Firebug: Yeah, yeah, yeah and like that’s– if you’ve got those advantages, you’ve got to take them, right? Like everyone’s got different circumstances so there’s no harm–

Chris: Yeah, as much I said my parents aren’t good with money and I was joking about that earlier, my parents are both public servants and living on government pensions which are pretty generous so they’re doing just fine I think they’re too taking the gift of them.

Aussie Firebug: Yeah and I’m sure they’re doing above average. I guess when you read and like you start listening to the fire crowd, so many people’s savings rates sound so abysmal but like in reality, if you’re saving 50% of your income, you’re better than 99.9% of people. It’s all the blogs that you’re reading. Yeah, cool–

Chris: Are they absolute outliers?

Aussie Firebug: Exactly right, exactly right. Alright so that’s about close to $200,000 in Vanguard, is that right?

Chris: Correct.

Aussie Firebug: Yeah, now I guess I’ll ask so why Vanguard?

Chris: I drank the cool aid I guess, I read a few books on investing well I was saving up enough to have a share portfolio so I started by just putting the money I had on the mortgage, paid off early for 3-6 months while I worked out how I wanted to invest/what I wanted to do and I’m pretty much convinced by the idea that some very, very well paid, fairly smart people on Wall Street buying and selling the bulk of shares and the idea that I could be smarter than any of them was unlikely, I don’t have the interest, I don’t have the inclination and I definitely don’t have the time so just riding the market out seemed the way to do it and Vanguard was the first player in that space, I had a look around at the different fee structures and Vanguard generally came out favorable so that’s where I made the call.

Aussie Firebug: Yeah right. Now you originally emailed me about that you did manage funds but we were recently speaking and you said you’ve just made the switch to ETF’s, do you want to tell us just a bit about the thinking behind that decision?

Chris: Yeah, yeah, absolutely. So the managed funds are really great because once you’ve opened it for $5000, you can just be paying $100 at a time and so when I started this journey, I was on a lower income and couldn’t save as much of my post-tax income per week so you know, a couple of hundred dollars or a $100 into an Australian fund and $100 into an international fund worked out really well, kept me disciplined, made sure the money kept going but the fee structure in a managed fund is much higher and I’ve never worked out why exactly that is but you pay about 0.9% expense ratio in the managed fund compared to only about 0.15 in the ETF’s but on the tradeoffs, you pay brokerage every time you want to buy into the ETF’s so if you buy $100 shares and you’re paying $10 brokerage you’re an idiot basically.

Aussie Firebug: Yeah, I think there’s a calculator app there that I might link to in the show notes that basically you know, you punch in buy shares what frequency you want to buy and stuff like that, it works out you know, is it better off to open up a managed fund or is it better off to go through ETF’s, yeah I’ll put that in the show notes.

Chris: Yeah, link that one because I did the calculations myself when I first started which is why I ended up in the mutual fund but I always knew that about this point in net worth, it seemed worthwhile to make the switch. Also I’m able to invest about $2500 a month in my take home pay so that seems to make the brokerage less significant, it’s a $10 or $11 fee and with CMC markets, that works out to about 0.5-0.4% I guess.

Aussie Firebug: Yeah right, cool. And so I’ve always gone through the ETF’s, I’ve never gone through the managed fund and I’m curious myself, are they the same? Are they exactly the same- can you know how like the ETF’s you can have like VAS for Australian shares, can you buy the managed fund equivalent of that or is it something different?

Chris: Yeah, they’re basically– they might not all be the same but I mean VAS and VGS I think and there is an equivalent managed fund for both of those.

Aussie Firebug: Yeah, got you. Okay cool and so how long– what time frame have you been investing through Vanguard for now?

Chris: So I started it on the 21st of May 2014, according to my spreadsheet.

Aussie Firebug: So a few years now and you loving it? Is it all going as you thought it would be?

Chris: Um… it’s up and down. You know there’s periods where you know I would throw $2000 a month that it and still have the same amount of dollars at the end of every month, which was a little bit sad. I sat on $49000-$51000 dollars of shares for how long- 10 months I think, so you know, that’s me throwing money into it and just watching it go down every month. That’s a little demoralizing but you’ve got to be in on it for the long haul. I take– particularly the more I follow this fire path, I probably got different goals in mind or a different philosophy in mind than a lot of people. I read on the Reddit a lot, people who just hate their jobs because they’re ultra-high pressure and they’re ultra-high earning kind of thing and they’re just begging to get out whereas I actually, I really quite enjoy my job, I quite enjoy my life even if I could retire right now, I’m not sure I’d change anything other than maybe go down to four days a week at my job so I almost pursue fire in absence of wanting to spend my money on anything else like I spend my money– I buy everything that I want but Mr. Money Mustache and the other bloggers like yourself have helped me focus on do I really want to drive a BMW to work every day or is my $200 bike actually a much better way to start the day and I’m firmly of the opinion that riding my $200 bike to work every day makes me fitter, makes me happier, makes a healthier, just gives me a better overall lifestyle.

Aussie Firebug: Yeah awesome, really, really cool. I think it had a really good post that the less things um… I don’t know how to table this correctly, it’s like the less things that you want, the more things that you’ll have, basically something of that nature. Like him and his wife come Christmas time, there is literally nothing that he really wants in reality. He has everything that he wants so he’s happy with what he has, you know spending such an incredibly low amount of money in a year compared to other people in his salary bracket that it’s like yeah, you think if you want that new BMW, you’re never got to satisfied because the new one is going to be released the year after, the year after so yeah, it’s a cool concept to have and I’m definitely a big believer in that as well. Me and the girlfriend actually, we’re just about to head off to a hike after this podcast– yeah we live in regional Victoria as well and like I love going down the road and hiking around where we live and it costs zero money to do and it’s awesome, you know I would much rather do it than like go out for  like go clubbing or something like that.

Chris: Yeah, pay $300 to go to a club or something.

Aussie Firebug: Yeah and even if you take away the dollar value, I’d almost like– well pretty sure I’d rather go hiking than like hit the beach or something than do the other thing that costs so much more but um… yeah that’s really cool to hear. What sort of bike you have- you don’t have an electric bike, do you?

Chris: No, I don’t have an electric bike. I’ve been tempted that several times but I just keep getting fitter so the electric bike gets less and less necessary. When I say about everything, I want every now and then that’s a big purchase so you may say you’re not really on the fire path. I’ve been riding a $200 trek 7.3 FX for the past three years but for Christmas I bought myself a giant defy advance 2 to which is full carbon fiber hydraulic suspense. It is magical.

Aussie Firebug: Yeah, I don’t think that’s too– you know, you can spoil yourself every now and then. I ride an electric bike, actually and I love it like I don’t ride it to keep fit, I always get talk shit from people at work like, “you’re a young, fit boy, like why do you have an electric bike?” something I’m like, “this is my toy, like I zoom around town on it like this is– I like riding this thing. I don’t do it to– like I run and play footy and stuff and I don’t ride my bike to keep fit but I love it. Have you ever ridden one? — Because it is so much fun.

Chris: I would love to give it a try because I’ve also thought, you know, I’ve replaced 90% of my car journeys with a bike, I reckon I could replace 95-99 if I have the electric bike because there’s times when you know you know, I’m going to be riding back at 11:00 PM, I don’t really want to so I’m just going to take the car out this time but if I had the electric bike and I knew it’s going to be pretty to scoot home I’d ride even more.

Aussie Firebug: Yeah, they’re really fun. I should do a post on them that they’re really cheap to build these as well like I remember looking–

Chris: Oh, you built one?

Aussie Firebug: Yeah, I build all of mine like oh my God, you save. You know, it costs you about a third of the price if you build like if you buy the conversion kits, that’s what they’re called, and you actually buy a decent bike like you can buy a joint and then you can put an electric kit onto it and its kick-ass like it’s so good. You get like a really high quality Samsung-cell battery and like a really good engine–

Chris: I reckon that would be a great post- that would be something I’d love to read.

Aussie Firebug: Yeah, I’ve got so many posts I need to get through but I’ll add it to the list but if you were to buy a pre-made one, you know, they’re still like $2500 if you want a real kick-ass one but I built mine for like 950 bucks and I ride it everywhere like all around town so…

Chris: Ever heard what the correct number of bikes to own is?

Aussie Firebug: Um… one? [Chuckles]

Chris: Well, one more than what you’ve got now.

Aussie Firebug: Yeah, I agree. [Chuckles] I definitely agree to that.

Chris: Alternatively, if you have a spouse, the correct number of bikes S-1 where S is the number when your spouse will leave you.

Aussie Firebug: [Chuckles] I like that too. I might put that in the show notes. Alright back to what we were talking about, so Vanguard yeah, you made the switch to ATF’s so tell me about– do you sell– so you’ve got a whole bunch of managed funds still or?

Chris: No, I sold out of them.

Aussie Firebug: So you completely cashed out?

Chris: Yeah.

Aussie Firebug: And did you jack a hit to a capital gains tax?

Chris: No, luckily, luckily [chuckles], I’d lost money on my shares so I had to cover the capital loss to carry forward.

Aussie Firebug: Right, so okay. So you lost money–

Chris: During the timing of the market, you know, that period I was saying where I kept throwing two grand a month and I kept making no money, the way it’s worked out is I’ve actually lost capital on my shares in Vanguard so…

Aussie Firebug: Cool and so it’s all in ATS, and which parker are you through?

Chris: I use CMC markets.

Aussie Firebug: And it was $10 a–?

Chris: $11 and if it’s over a certain value, they charge percentage as well.

Aussie Firebug: Okay, that’s quite like, I go through it at —

Chris: But it’s brighter as you– Yeah, I bank with Commonwealth but yeah, they’re about twice as much so…

Aussie Firebug: Yeah okay I might look into that. What’s it called, CM markets, is it?

Chris: C-M-C Markets, yeah.

Aussie Firebug: CMC Markets. I think my last one, like I just did under 10 grand’s worth and it was like 19 bucks so I’ll have a look.

Chris: Yeah that’s not too bad. That’s kind of the level of trading but I think CMC would’ve been 11 bucks for that much.

Aussie Firebug: Yeah, cool, cool. So you’re going to stick with Vanguard, any other investments interest you or you’re just going to stick with Vanguard till you hit fire?

Chris: I’m probably going to stick with Vanguard till I hit fire. Other than investing in my own business, which I think about, already I’ve invested a little bit I think on and off you know, took a big ten-twenty thousand dollar investment and get a proper production running, Vanguard just seems like the zero effort option.

Aussie Firebug: Yeah, I can definitely echo that sentiment as well because I’m with Vanguard and have three missing properties and it’s definitely– like Vanguard is just effortless, you know, you throw money at this thing and it spits out money, it just keeps giving you dividends and like eventually, it should go up after like a long period of time so it couldn’t be any more easier. I’d recommend it to absolutely anyone like the properties have done well for me so far but like I definitely– they’re in active management, those at Vanguard so it’s completely passive you know, so, so low maintenance. Tells us a bit about this business, what’s this business you’re thinking about starting or you already started?

Chris: We have started it, me and a friend from university, it’s a kick-starter business so I decided to learn how to program electronics last year, it must have been even the year before now that it’s 2017 and I’ve always had an interest in clocks which is pretty common for engineers and people who want to do electronics so I’ve designed this clock which I call The Light Clock. Initially it was going to be just a Christmas present for my grandfather because he loves clocks as well, but I kept posting about it on Facebook and a lot of people were like, ‘wow! That’s so cool, Chris,’ and a couple of them were like, ‘would you make one for me, I’d be happy to pay for it,’ I’m like oh, I have an idea now.

Aussie Firebug: So you’ve got a kick-starter page at the moment, do you?

Chris: It’s not live now, I threw on the kick-starter in October/November 2015, we raised $31,000 off that which was pretty amazing for a first time kick-starter I’m like shocked that we made it so then went through a manufacturer, we bought a lot of parts you know, custom designed parts from China, shipped them over to Australia, hand assembled them in my parents garage with some friends, bought them dinner, [chuckles] low labor costs there and shipped them all over the world so they’re in something like 30 countries, we did track it at some point.

Aussie Firebug: Oh my God, so what actually is it- it’s a clock, it’s a?

Chris: It’s a clock but rather than– it runs 120 high-brightness– let me– I’ll send you a link, you could put this in the show.

Aussie Firebug: Yeah, I was going to say, send me a link, it sounds cool and have you got a website or anything?

Chris: We do, yeah. It’s just www.thelightclock.com, it should be in your text chat.

Aussie Firebug: Yeah, it is. Nice, okay, I’ll put that in the show notes and you guys can check that out. That’s exciting.

Chris: Yeah, it sort of was exciting, yeah we got a map, we’re in must be 20 countries, most of North America, a lot of Asia, Australia, a lot of Europe kind of thing but yes, as a clock, it’s sort of– it’s 120 high brightness LED’s and it connects to the internet so you can use an app with it on your phone and so rather than having a long hand and a short hand like a typical clock, you might have a blue hand and a yellow hand so it lights up your whole wall in this beautiful color which you can customize.

Aussie Firebug: You guys can’t see obviously in the podcast, but it looks pretty cool, I understand what you’re saying now that I can see it, yeah nice. How much do they run for?

Chris: They’re $229 US at the moment which is at about $300 Australian.

Aussie Firebug: Yeah very nice. So you programmed it yourself?

Chris: I programmed it myself, yeah.

Aussie Firebug: What language?

Chris: Arduino code.

Aussie Firebug: Arduino?

Chris: Which is sort of C but designed for electronics rather than just pure programming so it’s got a whole lot of libraries to run the LED’s and to run the Wi-Fi module and you know, you can attach sensors to it. It has got a lot of libraries prepackaged ready to go for that kind of stuff.

Aussie Firebug: Yeah cool, nice, very cool. And also so you’ve got that business and you work as an engineer but you’ve also got a side hustle?

Chris: Yes, I do, yeah.

Aussie Firebug: Why don’t you tell us a bit more about that?

Chris: Yeah, last year we decided to run our houses on Airbnb, we have a three-bedroom house just between the two of us which is massively excessive to our needs so it made sense to rent out a room. We’d had a lodger before, you know, someone who lived here full-time but we felt we liked our privacy some other time but didn’t need it all of the time so Airbnb, you get a much better rate per night and you have people on staying you know, one or two nights and then you can go back to having your privacy.

Aussie Firebug: So what was that conversation, like that with your fiancé, you know because that’s a site that interests me as well but you know, convincing the partner to have someone move in for a couple weeks or days at a time, how did that go down?

Chris: Pretty good, the way I sold it to her is that you know we have this wedding coming up which is going to be pretty expensive and that all of this money would get channeled straight into the wedding fund.

Aussie Firebug: Yeah right. And so what are you getting, just out of curiosity?

Chris: In some weekends, $60 a night, and we give a 20% discount if you stay for a week or more. But that’s still more than my mortgage like if people staying for a week, they’re paying my mortgage for me.

Aussie Firebug: That’s so cool and so that’s all through Airbnb?

Chris: All through Airbnb.

Aussie Firebug: And what do they charge?

Aussie Firebug: They make it very confusing to work out what they, they’re real sneaky. They charge me a couple of bucks on my end but I think they charge the guest a couple of bucks on their end as well. I actually don’t–. It’s got to be around 5-10% mark but it sort of well probably deliberately difficult to work out what Airbnb’s take is.

Aussie Firebug: And so you’re living in regional Victoria, how big is the town/city that you’re in, the population?

Chris: Um… it’s got 100,000, no probably like 80,000 somewhere maybe down.

Aussie Firebug: So it’s quite big, it’s a decent size, not like– I live in a town that’s like 2000 so the odds of me getting someone you know are severely lower.

Chris: Where you are, yeah.

Aussie Firebug: Yeah exactly but yeah now that’s a cool idea especially if you’re in like the city or something. That’s very cool. I guess the only thing is like you have a loan for your own home but if you are renting a house, I don’t know the rules behind subletting it.

Chris: Pretty sure you have to ask the permission of your landlord.

Aussie Firebug: I don’t know if you actually do because I’m a landlord myself and I read all the magazines and everything every month and I have heard, correct me if I’m wrong please someone in the comments if you know the answer to this, but I think that it’s part of like once you sign the contract, you are actually allowed to sublet but it sounds wrong, I’m not sure, I’ll find the answer to that but yeah, I thought it was some sort of weird thing that they actually can’t stop you from, you know, renting out a room via Airbnb because when you think about like if someone rented one of my houses, what’s me to stop them having someone sleeping like in another room, why can’t they just have like a friend over for a weekend? I couldn’t really– like I’d be a real prick if I said, “you know what…”

Aussie Firebug: Yeah, your landlord having that power over you, not to rent out.

Aussie Firebug: Yeah, exactly so I don’t know what the rules are anyway I’ll figure that out and put it in the show notes but yeah, so that’s another income stream?

Chris: Yeah.

Aussie Firebug: You guys would be loving– paying for the wedding, paying for your mortgage, sometimes that’s cool.

Chris: Yeah, it does help.

Aussie Firebug: Was there any– I guess if you’ve got the other business of the clock like I was kind of saying was there anything else you’re looking at as a side hustle but I’m sure–

Chris: That’s enough hustles for me.

Aussie Firebug: Yeah absolutely, like I’m having a look at this, The Light Clock website, you know, like all legit and everything so that’s very cool. Yeah, so you’ve got a few things going on then?

Chris: Yeah, I like to do things that I like to do. The Airbnb is purely for money as a side hustle, the light clock doesn’t really make me a whole lot of money, it’s just a fun thing sort of thing, learn a bit about business, learn a bit about coding, learn a bit about manufacturing as you said before, I’m an engineer so the idea of having a product that I have developed from the ground up was really, really appealing.

Aussie Firebug: It’s really cool. I really respect people that go off and create their own thing and make a little business out of it so you know, good luck to you.

Chris: Thank you.

Aussie Firebug: Do you know– have you worked out your financial independence number?

Chris: Um…it changes I was recently- I don’t know whether you read the post- there was a big analysis done on financial independence, the mine sub which this 4% rule that we’ve all been using for about I reckon is probably not that safe for a retirement. So you know, if you’re going to retire at 60, 4% is probably pretty safe, if you want to retire at 35 then you deal with a lot more risk with a 4% withdrawal rate so I’ve just shifted to a 3.5% safe withdrawal rate and that would put me at needing three quarters of $1000000 plus having paid off my house so that’s about a bit over 1000000 total.

Aussie Firebug: So assuming that your house is paid off, 370k. Sorry 350k?

Chris: 750k, 750k.

Aussie Firebug: That’s not too bad. And how are you going to incorporate super into that like I don’t know if you’ve seen, I had a financial independence calculator specifically for Australians that highlighted the you know, we could super search a tax advantage strategy, it’s hard to ignore it completely and you sort of have to break down your financial dependence number into two sort of numbers, one before you can hit your preservation age and the other one being how much after having super at your preservation age to last forever. Have you consider that at all?

Chris: I have considered that a bit and I’ve been working with you on your– I’ve been looking at your calculator with keen, keen interest so I’ve just made a whole lot of suggestions–

Aussie Firebug: Which I did read your email actually and you know what, I’m just about to release the second of it all, version 1.2 of it, because there was an error in one of the cells that was like throwing out this weird result and everyone was emailing me about the super contributions so yes, it’s coming everyone, I’ve added it in, you can change how much your employer contributes to your super yearly, yes it is coming.

Chris: That would be awesome so it’s basically something I’ve put in the back of my mind, my employer owes me, sorry doesn’t owe me, offers me a super match which I take advantage of, but I don’t sacrifice beyond what I need to get the maximum of that match. I would be really, really interested as we develop your calculator, as you develop your calculator and I’ll help where I can sort of thing, whether I should start contributing more because the tax advantages you know, are quite significant the more you move up in income and there’s that $25000 a year limit that you’re allowed to put into it so if I want to take more advantage of this super tax advantage, I need to start now rather than starting one year before retirement and just saying I’m going to put my whole income into super, something I should be thinking about. I’ve always sort of figured that retirement is ten-ish years away so I can be gradually working out the details but you know, that’s one of the details I would really, really like to work out.

Aussie Firebug: Which is what so many people do, right? Like they go through their whole life and in the last five years, they hit 60 or something, in the last five years, they dump in 90% of their salary into their super like it’s such an inefficient way to do it but like you’ve got understand not everyone can– it’s thinking about these sort of things at our age so I’ve had a play around with the calculator like the improved one that I’ve like fixed and it’s so incredible you know, you only have to add such a little amount of money into your super because we’re so young just to see it compound all the way up into your preservation age, it turns into such an incredible amount of money so easily, just like a couple years of solid contributions can just make a world of difference like it’s absolutely incredible. And the other thing is well, because your preservation age is you know, 60+ years away, who knows what they’re going to change it to by the time we get there. That gives us so many years that if we’re approaching the preservation age or a couple of years away, worst case scenario, and I think about this all the time like this, the whole financial independence you know it’s good to calculate a number and like you know, I made a calculated to help people calculate a number of years and so forth but really, worst case scenario, if you do you run low on cash, you can get a job, like you can get a job or you can do something else just to top up your money or your net worth for a few years and that just blows the projections completely out of the water like if you’re going to get another job 10 years down the track and you’re only working for a few years and suddenly your financial independence type, it’s decreased so much just because you hadn’t factored that into the equation when you first did it so I always think of worst case scenarios like that, it’s a pretty nice option to have if that’s your worst case scenario, you know, for you to survive I only have to work an extra year, didn’t think I’d have to work but it’s pretty cool.

Chris: Yeah, absolutely.

Aussie Firebug: Yeah I now I sell– I don’t know if I asked you– do you know how many years you’ve got till you reach your number?

Chris: If my very rough calculations are correct, then I’ll need another eleven years.

Aussie Firebug: Eleven years, that puts you what- up to 41?

Chris: 41 years old, yeah.

Aussie Firebug: Yeah, right, cool. That’s incredible and do you think you’ll work up till then and just like completely shut down or like do you have other aspirations that you want to move into once you hit that magical number and you know, you don’t have to work for a living?

Chris: Well, like I say, I quite enjoy my job so there’s a very strong possibility that I could get close or get there and just talk to my boss and see if I can organize you know, a three day week or a four day week, I might take a year off as a sabbatical to just go traveling. I used to live in the UK so I could go and visit friends over there. Yeah, I don’t see my life really dramatically shifting. This isn’t some sort of utopia that’s going to turn my life around but I think it’s just a hobby that’s fun to approach kind of thing so, yeah a bit more leisure time; potentially a year off or months off to go traveling.

Aussie Firebug: And I think that’s a good way to look at it as well like if you already have a happy life and then you reach financial independence, well that’s fantastic, it shouldn’t be– the goal shouldn’t be once I reach financial independence then I’m going to be happy because I don’t think like if you’re living a bad life you know, having a number tick over to a certain net worth in your bank account isn’t magically going to make you happy.

Chris: No it’s not.

Aussie Firebug: So I think it’s a good way to look at it and I am just on that, you know, winding down the days per week. I think that’s why I’ll do it as well because wouldn’t it just be magical to work three days a week, four days off? [Chuckles]

Chris: Four-day weekend but three-day week, yeah.

Aussie Firebug: Four-day weekend just sounds phenomenal to me. I could work just about any job like if I only had to be there three days a week and this is coming– you know, I like my job as well, I’m quite happy in my job but I feel though like five days is just like too much time out of my life like there’s so much else I could be doing and want to be doing even though I like my job to an extent. Three days a week, that sounds phenomenal, you know, imagine how much leisure time and creative time you could use to just do anything that you wanted without– and the other thing as well for me is you know, when kids roll along like I’ve seen a lot of people at work rocking up to work like an absolute zombie because their six-month old has been crying all night and hasn’t been sleeping or whatever, that really appeals to me you know, winding down the full-time work to you know, four days a week/ three days a week and then maybe you know, if I don’t like that job anymore, I could just quit without any repercussions financially and then pick up something else that I really like so just all the options and flexibility, really cool.

Chris: Yeah, money buys you a whole lot of options, that’s what I’ve found even more generally, you know since I’ve started down this track and have plenty of cushion underneath me, any setbacks doesn’t stress me anymore. My partner ran my car into my house, that’s got to be expensive but who cares, it’s only money.

Aussie Firebug: Yeah and that’s the beauty of having that buffer ride it’s like it doesn’t stress you out, yeah very cool. What’s the best bit of advice you can give to someone like you’re really young with such a good net worth already, and well on your way to reaching financial dependence, if you could give the best bit of advice to someone trying to reach financial independence today, what would it be?

Chris: I reckon you’ve got to start- and I see a lot of people do this which I think is good- you’ve got to start it as a hobby so you’ve got your hobby as how little can I spent this year? And it’s really fun, I found it really fun to work out you know, what can I say shave; if I ride to work, what does that shave? If I just make my own bread and have a sandwich, what is that shave? And have had a lot of fun with it but don’t feel like after a couple years that you can work out what’s important to you doing that so you know, buying a canteen lunch every day, super not important to me but owning a nice bike, turns out that is important to me and I’m okay to spend the money on that so I would say start by going as hard as possible for a couple years with the idea in mind that you’re not going to live this ultra-hard for the rest of your life, it’s going to help you figure out what’s important to you. I think the fire mindset is about working what’s important to you and only spending your money on that. There’s so many temptations in the world of people who want your money that don’t increase your happiness, don’t increase your life in any way, cut them all out and only buy back the ones that are important to you.

Aussie Firebug: Yeah wonderful. Great advice, I definitely agree with you and everything you said. I think having– and I always tell people even just friends and family that don’t even know I have this blog or anything, just that they know I’m good with money, you know, what can I do to help me save money? I always say track your expenses, that’s the number one thing- track all your expenses because it will open up your eyes to how much crap that you buy that you don’t even care about that you couldn’t even give two stuffs about but it’s coming out of your account every month. Track all your expenses and sort of make a game, like you said. We both use pocketbook to track our expenses. I love looking at the pie chart in pocketbook just about every day and like seeing how close I am to the record for this month and you know, if I don’t spend any money in the next couple days, I can break the new record and stuff like that so it is good to make a game out of it but like you said, you know, you quickly realize how important the real important stuff is to you and like it’s not the world if you just splurge once in a while on that sort of stuff.

Chris: Yep, if it’s adding value to life, buy it but if it’s not, cut it out.

Aussie Firebug: Yeah, cool. Now, you don’t have a website up or anything, a blog or anything like that? If anyone is listening to this podcast and wanted to ask you a question, what’s the best way to get in contact with you? I know you’re on Reddit?

Chris: Yeah, find me on Reddit, that’s where I do most of my financial independence kind of stuff so if you want to send a private message to Chris Melba, I’m happy to chat with you.

Aussie Firebug: Yeah and I’ll put that in the show notes, Chris’s Reddit username, so on Reddit where do you hang out mostly on?

Chris: I’m subscribed to Personal Finance, Financial Independence, F.I Australia, Australian Finance and the ESPA 266 but I browse slash 00 quite a lot so I just got a huge amount of crap sent to me through that.

Aussie Firebug: [Chuckles] Cool. So yeah, you can hit Chris up on Reddit if you have any questions for him. And that brings us to the end of the podcast. If you enjoy these podcasts and want me to make more, make sure you drop me a comment and a rating on iTunes, you can search for my name, Aussie Firebug, on iTunes and you’ll find me. I’m also in SoundCloud at www.soundcloud.com/aussie-firebug and a transcript of the show notes of this episode can be found on my website at www.aussiefirebug.com. Thanks for your time, Chris.

Chris: No worries. I’ve just got a Mr. Silver, a friend mine who is also semi- F.I path, he says hi, he’s a podcast listener as well.

Aussie Firebug: Oh, who’s that?

Chris: Mr. Silver, he is on Reddit.

Aussie Firebug: Okay, Mr. Silver, alright. Shout out to Mr. Silver on Reddit. Thanks a lot Chris.

Chris: No worries. Thanks very much.