TLDR; One of those journey posts. Net worth above pre-crash highs; savings rate good, dividends slashed.
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Instead, the whole world is waiting with bated breath for news of a vaccine or treatment that puts coronavirus to bed.
I was actually quite shocked at how well the Australian share market held up overall during reporting season. There were some winners, but most results were pretty weak-to-dire. And while you can argue that the market had already baked-in the results in the prices, who can honestly say with a straight face that August/September 2020 had the same outlook as January 2019? Sorry, I digress.
While world governments seem to be still grappling with the health aspects of coronavirus, imminent economic collapse seems to have been averted. I’ll have some more thoughts on possible ramifications from what has already happened later in the month though.
On the balance of things, I’m still quite pessimistic about the shape of domestic and international recovery. A vaccine is still a while away from being approved, let alone rolled out to the masses (mid-to-late 2021 before us plebs get access?). Government debt globally has skyrocketed. And in the personal finance space in Australia at least, the continued scaling back and eventual demise of JobKeeper payments will be one to watch. At stake is only the local economy, house prices, job security, and the state of the ASX.
At least Brexit seems to be going well. Oh, wait. And who knows what’ll happen next month in the American election now that the President has taken a turn. But it won’t be boring regardless of what happens. 2020 keeps on giving.
So with another three months in the record books, how has our net worth fared for Q3 2020?
Next week I’m writing an article about how domestic shares can have an often unacknowledged level of international market exposure. However, our portfolio hasn’t got sufficient international exposure from that alone give us diversification. So it was time to branch out with some international-only holdings. In fact, about 80% of our remaining share investments will be in funds with an international focus.
That said, we’re not entirely out of the domestic share market investment game. We also took up a Retail Entitlement Offer for one of our smaller share holdings. But that only came to just under $1,000.
After starting the quarter with $1,044,000 in our share portfolio, how did it end?
On 30 September, we had a share portfolio worth $1,091,000 – up $47,000 or 4.5% on Q2. As part of that, in addition to the $36,000 in share purchases mentioned above, we also received dividends – some of which were reinvested.
However, you’ll need to wait for our upcoming Q3 income and expenses report to see what our dividend income came to. Spoiler alert though: it’s not pretty.
All in all though, it wasn’t a bad result, given the ASX200 finished the quarter down around 1.4%. Far better than the devastation we saw back in January-March at least.
Well, we started Q3 on $423,000 and ended with $447,000 – an increase of $24,000 or 5.6%.
Only about a quarter of that is from employer contributions – as we’re not making extra contributions to our superannuation. So that’s great outperformance! Even more impressively, that’s more than the $428,000 that we started the year on before it hit the fan in February.
Given that superannuation is a bit of a black box, it’s hard to tell why it outperformed so much. But I know that a large chunk of my personal super is in international shares, so maybe that explains it.
So while our share performance hasn’t been anything terrific, at least superannuation is turning up to the party.
But what do our go-to property sites have to say about our house price?
Well, Onthehouse.com.au prices it at $775,000 – identical to both Q1 and Q2. Conversely, an ANZ property report said our house is worth $711,000 (down $2,000 on Q2, but up $40,000 on Q1).
Like in the past, using a rule of not moving the price unless we have a pair of sources agreeing on a price move in the same direction, we’ll keep the house price at $655,000.
We still think prices in the $700,000s are too much, but would gladly take it when it comes time to sell.
In terms of calculating our net worth, our mortgage is fully paid off in regards to having money in an offset account. So the full capital value is ours in that ledger.
Last quarter they rose back to where they were in Q1, and the story was much the same in Q3:
Unlike our home, these properties do have mortgages on them with money owing. We started the quarter owing $369,000, but that dropped to $367,000 over the three months.
That gives us total equity of $238,000, an increase of $2,000 or 0.8%.
Also stay tuned for a series of articles on our investment properties starting in the next month or so. We’re going to be talking about the finances behind them in greater detail for the first time.
We landed on $2,461,000, an increase of $103,000 or 4.3%.
Like our superannuation, that’s actually a small increase now on the numbers we saw at the end of 2019 that was our previous all-time high.
While it’s good to actually be making some level of progress at last, it just makes me feel a bit like 2020 has been a bit of a waste. All that work and saving for practically nothing. But, that’s a first world privileged problem to have at the moment.
All in all, a good quarter on the net worth front. Next up we’ll have our Q3 income and expenses report. Sadly, the news there – particularly for our vital dividend income – is much, much worse.
BLOG POST LINK: https://hishermoneyguide.com/quarter-3-2020-net-worth-update/
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That said, the individual days go by quickly enough. It’s nice being able to watch TV over lunch, for instance. And you can’t beat regular cat hugs.
However, with an office only 10 steps away from bed, things are kind of all merging into one. It’s a bit disconcerting that this working from home, Covid-normal has now been in our lives for over six months.
The best news of all is that 2020 is 75% done. We can’t wait to see the back of it. Surely 2021 can’t be any worse?
But while the year has been memorable for practically all the wrong reasons, what about our finances? If you saw our Q3 net worth update, you would have seen that we recovered to our pre-crash highs. Sadly though, the news is less good in this update.
Currently neither of our jobs are under imminent threat. But from next year onwards, we’re both quite worried that we’ll be under the termination microscope. I’m desperately trying to cling on long enough to achieve long service leave in early 2021 to give us a bit more of a monetary buffer if I was retrenched and needed to find a new job in a dire jobs market. Ellie has already reached long service (once again beating my efforts).
We’re also currently trying to max-out our annual leave balances as much as possible to use them as an alternative bank account in case we lose our jobs. It just seems prudent in the current environment.
However, let’s talk money. For our salaries, we had six pay cycles in Q3 – one down on Q2. In total our salaries earned us $38,062 after tax for the quarter. That’s a small increase of $936 or 2.5% on last year.
Coronavirus continues to impact our bottle collection efforts for this year. We managed to make one trip during the quarter, collecting $83.40. We’re only picking up a few here and there these days, with most coming from our parents. That’s well down on the $235 we had this time last year. The blog itself earned $249.89, entirely from Google Adsense payments from ads displayed and clicked.
After seeing our income from online surveys increasing, Ellie also published an article during the quarter on what online surveys are and which ones we use. True to form, our income from them for the quarter hit a new high of $460. That’s an increase of $175 on this time last year. Q4 is already shaping up well on that front as well.
Our side hustles amounted to $793.29 for the quarter, giving us a total active income of $38,855.29 between July and September. That compares to $37,765 last year – an increase of $1,090.29 or 2.9%.
And that, folks, is about as good as the news today is going to get.
Okay, that was more like an apprehensive wince.
Q3 is usually an important quarter for our dividends – the biggest of the year when many stocks provide final distributions. Naturally, this year is like no other that we’ve experienced. So let’s see what the damage is while comparing the previous two years:
Ouch.
A total of $10,218.59 for July-September represents a dividend reduction of $6,220.64 or 37.8%.
That’s not good. Like we’ve said before, our goal is for share dividends to make up the bulk of our early retirement income. So losing well over a third of that is… bad.
While our Q3 2020 net wealth rose above pre-crash levels, clearly this is an area we’ve gone backwards in.
Our high exposure to the banks is really our biggest undoing here. Thankfully over the last two years we’ve been investing heavily away from them, knowing it was potentially a fatal flaw. In this instance, it has proven to be the case with one hell of a stress test.
Instead we’ve recently been investing in Listed Investment Companies, and only during this last quarter did we buy our first ETFs. On the LIC front, things are actually quite encouraging. These quarterly dividends only reflect three out of six LIC dividends we’re receiving in this half of the year. All of our LIC holdings have now announced dividends, and the biggest cut to dividends was “only” *cough* by about a third, while a couple have actually increased their dividends. So at least the strategy to invest in LICs for their ability to smooth dividends seems to be paying, well, dividends.
All in all, pretty sobering results, but we’re not too depressed yet. We’ve previously discussed that we always expected there to be some lean years once we hit early retirement, and 2020/21 is looking to be a prototype of that.
In retirement, as long as we’ve got enough income coming in to cover our basic living expenses (which will be larger than they currently are), we’ll still have a great life – with the ability to cut back further if required.
In addition to dividends, once we FIRE we’ll also have some rental property income coming in. As telegraphed in our earlier Q3 net worth update, we’re providing an update on these properties in the coming month or two to give a better idea of how things stand there. So a bad result with dividends alone won’t necessarily sink our early retirement hopes either.
That said, from the dividends that have been announced it looks like Q4 will be a little brighter than the drubbing we just experienced. However, one thing that’s certain is that dividends won’t rebound overnight. The second half of this financial year will be very interesting.
\The numbers listed above are ‘somewhat net’ – for the purposes of calculating our savings rate. It includes franked and unfranked dividends – but not* franking credits (which are essentially pre-paid tax credits). For the unfranked dividends (and a small additional 7% portion of the franked dividends due to our marginal tax rates), we pay additional tax towards the end of the calendar year. For reference, we received an additional $3,409.69 in franking credits for the period – giving us a total of $13,628.28 in gross dividends for the quarter.\*
[EXPENSE CHART IN BLOG POST]
In total we spent $3,528.22 for the quarter, compared to $4,272.89 last year – a decrease of $744.67 or 17.4%. While at face value that should be lauded, in reality our car service (Q3 last year) was pushed forward a month this year (to Q2). So really our spending is roughly flat, which we’re still happy about. That said, there are a few stories behind the numbers worth mentioning.
Our electricity usage went up 28.3% due to working from home. However, our bill was only 19% more expensive thanks to a government relief payment for households due to coronavirus. But with 13.4kWh per day consumption, it’s indicative of what sort of daily usage we’d have in retirement if we were home all day. It adds up having extra TV time over lunch, the microwave and kettle running a few times extra a day, and a couple of computers running non-stop when they previously weren’t. In other news, we’re swapping electricity retailers in October to what should be a slightly cheaper plan. We’ll see how things change next quarter.
Speaking about working from home, both Ellie and I will be claiming the Australian Taxation Office’s shortcut method to claim $0.80 per worker, per hour worked from home between 1 March and 30 June when we lodge our tax returns in Q4 to get some of those extra expenses back! Though look into your tax options to work out what works best for you.
We also started the process of swapping internet plans to the NBN (long story – we’re still not on it and won’t be for a while – more details in Q4). We were only a couple of months short of getting kicked off ADSL, so it was forced on us. The best plan we could find was $55 a month compared to the $50 we have been spending. With extra working from home we felt we really couldn’t do with the most basic of plans available. It also meant we needed to buy a pair of WiFi dongles to go with a new (free) modem. Our existing modem just used good old RJ45 ethernet cables, but because of the location of the NBN outlet we needed to go with WiFi.
Continuing the IT theme, Ellie’s computer also died during the quarter. In the end we bought a refurbished one from eBay for $109, which wasn’t bad at all. It was a mild gamble buying it, but so far it has paid off and she’s happy with it. The event also inspired the article on how we can’t avoid some expenses forever.
My driver’s licence renewal also arrived, so that was an extra expense compared to last year – almost $350 for the year so far with Ellie’s also coming up at the start of the year. At the same time though, the savings in fuel costs compared to this time last year more than make up for the licence fees.
In total, if you take out our New Zealand holiday from the start of the year, our expenses for the year-to-date are very similar to last year’s at this stage – $12,083.81 compared to $12,710.74 in 2019. (If you offset us being away for a couple of weeks in February, our expenses would be a few hundred dollars higher. The more things change, the more they stay the same.)
With total savings of $45,545.66 for the quarter, that’s a 92.8% savings rate.
It’s a good result, though tempered by the reduction in dividends. Regardless, we’re fundamentally in a good place at a horrible time. We’ve been incredibly fortunate to date, and it’s not something we want to take for granted. Our own job security is slowly coming on the line, so we need to make the most of the opportunity we still have for as long as we have it.
Looking ahead to Q4, just like last year our tax bill is now a looming issue. We haven’t lodged our tax assessments yet, but we have calculated them. We anticipate that our tax will be will higher than last year. So that’ll be one giant savings rate killer in Q4.
Even if we hadn’t gone on holidays at the start of the year, and still achieved fractionally small savings during year-to-date thanks to coronavirus, we’d struggle to hit a 90% savings rate for the entire year. It would be possible, but highly unlikely. However, a bigger tax bill will put the final nail in that coffin.
Of course, some of the biggest economic news of the year hit this week after Q3 ended, with the delayed 2020 Federal Budget finally breaking cover. It looks like we’ll be about $4,000 a year better off (too late for 2019-20 and our upcoming bill, though!). But we’ll have to wait and see how things go with backdated tax cuts and the passing of the legislation. Regardless, we hope you’ll get a nice benefit from the tax cuts yourself if you’re an Australian.
2020 has been one heck of a rocky ride so far. Hopefully the end of the year brings some positively and signs of a return to normality. Unfortunately, I think that even once we get past the virus with a vaccine (and that’s really still an if) we’ll have a bit more instability ahead of us as a result of economic and budgetary damage that’s already happened. But before then, we still need to make it through the final three months of 2020. Gulp.
Until we meet again, we hope you stay safe and secure.
Cheers,
Alex
BLOG POST LINK: https://hishermoneyguide.com/quarter-3-2020-income-and-expenses/
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Quarter 3 2020 – Net worth update: Up $103,000
After last quarter’s incredible reversal in fortunes, this last quarter has seemed positively sedate. There have been a few bouncy days here and there on the markets, but no definitive trends upwards or downwards (though I’m sure some chartists would disagree).Instead, the whole world is waiting with bated breath for news of a vaccine or treatment that puts coronavirus to bed.
I was actually quite shocked at how well the Australian share market held up overall during reporting season. There were some winners, but most results were pretty weak-to-dire. And while you can argue that the market had already baked-in the results in the prices, who can honestly say with a straight face that August/September 2020 had the same outlook as January 2019? Sorry, I digress.
While world governments seem to be still grappling with the health aspects of coronavirus, imminent economic collapse seems to have been averted. I’ll have some more thoughts on possible ramifications from what has already happened later in the month though.
On the balance of things, I’m still quite pessimistic about the shape of domestic and international recovery. A vaccine is still a while away from being approved, let alone rolled out to the masses (mid-to-late 2021 before us plebs get access?). Government debt globally has skyrocketed. And in the personal finance space in Australia at least, the continued scaling back and eventual demise of JobKeeper payments will be one to watch. At stake is only the local economy, house prices, job security, and the state of the ASX.
At least Brexit seems to be going well. Oh, wait. And who knows what’ll happen next month in the American election now that the President has taken a turn. But it won’t be boring regardless of what happens. 2020 keeps on giving.
So with another three months in the record books, how has our net worth fared for Q3 2020?
Our financial goals
Before going further, here’s a reminder to our current early retirement goals. We’re looking to retire early before the age of 45 (and we’re currently 35 and 36) with a pre-tax FatFIRE passive income of $150,000 a year. Our net worth target is comprised of the following assets:- $2,000,000 in shares
- $600,000 in two investment properties
- $700,000 in superannuation
- $1 million primarily place of residence
- Total asset goal = $4,300,000.
July-September: Shares
In personal news, we dipped our toes into the ETF waters for the first time. We made purchases of $15,000 and $20,000 for a pair of internationally-focussed passively managed funds that have a dividend focus. They were both trading at around a 20% discount to their pre-crash highs, so hopefully they’ll be a good long term investment.Next week I’m writing an article about how domestic shares can have an often unacknowledged level of international market exposure. However, our portfolio hasn’t got sufficient international exposure from that alone give us diversification. So it was time to branch out with some international-only holdings. In fact, about 80% of our remaining share investments will be in funds with an international focus.
That said, we’re not entirely out of the domestic share market investment game. We also took up a Retail Entitlement Offer for one of our smaller share holdings. But that only came to just under $1,000.
After starting the quarter with $1,044,000 in our share portfolio, how did it end?
On 30 September, we had a share portfolio worth $1,091,000 – up $47,000 or 4.5% on Q2. As part of that, in addition to the $36,000 in share purchases mentioned above, we also received dividends – some of which were reinvested.
However, you’ll need to wait for our upcoming Q3 income and expenses report to see what our dividend income came to. Spoiler alert though: it’s not pretty.
All in all though, it wasn’t a bad result, given the ASX200 finished the quarter down around 1.4%. Far better than the devastation we saw back in January-March at least.
July-September: Superannuation
As mentioned above, the local markets finished slightly down for the quarter. So how did our superannuation fare?Well, we started Q3 on $423,000 and ended with $447,000 – an increase of $24,000 or 5.6%.
Only about a quarter of that is from employer contributions – as we’re not making extra contributions to our superannuation. So that’s great outperformance! Even more impressively, that’s more than the $428,000 that we started the year on before it hit the fan in February.
Given that superannuation is a bit of a black box, it’s hard to tell why it outperformed so much. But I know that a large chunk of my personal super is in international shares, so maybe that explains it.
So while our share performance hasn’t been anything terrific, at least superannuation is turning up to the party.
July-September: Primary place of residence
Property prices have been surprisingly resilient amid the damaged economy. We’re still seeing properties in our area going on sale. How many are forced? Who knows. But prices don’t seem to be falling – yet anyway – in our area. In fact, apparently Brisbane house prices went up 0.5% in September – crazy!But what do our go-to property sites have to say about our house price?
Well, Onthehouse.com.au prices it at $775,000 – identical to both Q1 and Q2. Conversely, an ANZ property report said our house is worth $711,000 (down $2,000 on Q2, but up $40,000 on Q1).
Like in the past, using a rule of not moving the price unless we have a pair of sources agreeing on a price move in the same direction, we’ll keep the house price at $655,000.
We still think prices in the $700,000s are too much, but would gladly take it when it comes time to sell.
In terms of calculating our net worth, our mortgage is fully paid off in regards to having money in an offset account. So the full capital value is ours in that ledger.
July-September: Investment properties
With our PPoR maintaining its value, what about our two investment properties?Last quarter they rose back to where they were in Q1, and the story was much the same in Q3:
- Onthehouse.com.au – combined value $700,000 ($700,000 in Q2 2020).
- ANZ – combined value $616,000 ($617,000 in Q2 2020).
Unlike our home, these properties do have mortgages on them with money owing. We started the quarter owing $369,000, but that dropped to $367,000 over the three months.
That gives us total equity of $238,000, an increase of $2,000 or 0.8%.
Also stay tuned for a series of articles on our investment properties starting in the next month or so. We’re going to be talking about the finances behind them in greater detail for the first time.
Financial state of the union
We finished Q2 2020 with a net worth of $2,358,000. Here’s how things look three months later after Q3 2020:| Asset | Value |
|---|---|
| Shares | $1,091,000 |
| Superannuation | $477,000 |
| Investment properties value | $605,000 |
| Investment properties debt | -$367,000 |
| Primary place of residence | $655,000 |
| Total | $2,461,000 |
Like our superannuation, that’s actually a small increase now on the numbers we saw at the end of 2019 that was our previous all-time high.
While it’s good to actually be making some level of progress at last, it just makes me feel a bit like 2020 has been a bit of a waste. All that work and saving for practically nothing. But, that’s a first world privileged problem to have at the moment.
All in all, a good quarter on the net worth front. Next up we’ll have our Q3 income and expenses report. Sadly, the news there – particularly for our vital dividend income – is much, much worse.
BLOG POST LINK: https://hishermoneyguide.com/quarter-3-2020-net-worth-update/
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Q3 2020 income and expenses: 92.8% savings rate
Life has slowed in the HHMG household. We’re not locked down like we were in April-May, but we’re still keeping socially distant, and minimising going out and about. With vulnerable parents, our actions don’t only risk impacting ourselves. However, it’s terrific to see the reduction in coronavirus cases in Australia over the past few months. Fingers tightly crossed we don’t see another large outbreak like the one that occurred in Victoria.That said, the individual days go by quickly enough. It’s nice being able to watch TV over lunch, for instance. And you can’t beat regular cat hugs.
However, with an office only 10 steps away from bed, things are kind of all merging into one. It’s a bit disconcerting that this working from home, Covid-normal has now been in our lives for over six months.
The best news of all is that 2020 is 75% done. We can’t wait to see the back of it. Surely 2021 can’t be any worse?
But while the year has been memorable for practically all the wrong reasons, what about our finances? If you saw our Q3 net worth update, you would have seen that we recovered to our pre-crash highs. Sadly though, the news is less good in this update.
July-September: Income and side hustles
In good news, my wife Ellie managed to score herself a minor pay rise from mid-year, bringing in almost $80 a week extra after tax. It’s not a huge amount, but it’s better than what I achieved: triple doughnuts or $0.00, with a pay freeze until next year. Frankly in this economic climate, any increase is a minor miracle, so great work Ellie!Currently neither of our jobs are under imminent threat. But from next year onwards, we’re both quite worried that we’ll be under the termination microscope. I’m desperately trying to cling on long enough to achieve long service leave in early 2021 to give us a bit more of a monetary buffer if I was retrenched and needed to find a new job in a dire jobs market. Ellie has already reached long service (once again beating my efforts).
We’re also currently trying to max-out our annual leave balances as much as possible to use them as an alternative bank account in case we lose our jobs. It just seems prudent in the current environment.
However, let’s talk money. For our salaries, we had six pay cycles in Q3 – one down on Q2. In total our salaries earned us $38,062 after tax for the quarter. That’s a small increase of $936 or 2.5% on last year.
Coronavirus continues to impact our bottle collection efforts for this year. We managed to make one trip during the quarter, collecting $83.40. We’re only picking up a few here and there these days, with most coming from our parents. That’s well down on the $235 we had this time last year. The blog itself earned $249.89, entirely from Google Adsense payments from ads displayed and clicked.
After seeing our income from online surveys increasing, Ellie also published an article during the quarter on what online surveys are and which ones we use. True to form, our income from them for the quarter hit a new high of $460. That’s an increase of $175 on this time last year. Q4 is already shaping up well on that front as well.
Our side hustles amounted to $793.29 for the quarter, giving us a total active income of $38,855.29 between July and September. That compares to $37,765 last year – an increase of $1,090.29 or 2.9%.
And that, folks, is about as good as the news today is going to get.
July-September: Dividends
Time to take a deep breath.Okay, that was more like an apprehensive wince.
Q3 is usually an important quarter for our dividends – the biggest of the year when many stocks provide final distributions. Naturally, this year is like no other that we’ve experienced. So let’s see what the damage is while comparing the previous two years:
| Q3 2018 | Q3 2019 | Q3 2020 | |
|---|---|---|---|
| DRP/DSSP reinvested/Direct debit, excluding franking credits | $15,465.78 | $16,439.23 | $10,218.59 |
A total of $10,218.59 for July-September represents a dividend reduction of $6,220.64 or 37.8%.
That’s not good. Like we’ve said before, our goal is for share dividends to make up the bulk of our early retirement income. So losing well over a third of that is… bad.
While our Q3 2020 net wealth rose above pre-crash levels, clearly this is an area we’ve gone backwards in.
Our high exposure to the banks is really our biggest undoing here. Thankfully over the last two years we’ve been investing heavily away from them, knowing it was potentially a fatal flaw. In this instance, it has proven to be the case with one hell of a stress test.
Instead we’ve recently been investing in Listed Investment Companies, and only during this last quarter did we buy our first ETFs. On the LIC front, things are actually quite encouraging. These quarterly dividends only reflect three out of six LIC dividends we’re receiving in this half of the year. All of our LIC holdings have now announced dividends, and the biggest cut to dividends was “only” *cough* by about a third, while a couple have actually increased their dividends. So at least the strategy to invest in LICs for their ability to smooth dividends seems to be paying, well, dividends.
All in all, pretty sobering results, but we’re not too depressed yet. We’ve previously discussed that we always expected there to be some lean years once we hit early retirement, and 2020/21 is looking to be a prototype of that.
In retirement, as long as we’ve got enough income coming in to cover our basic living expenses (which will be larger than they currently are), we’ll still have a great life – with the ability to cut back further if required.
In addition to dividends, once we FIRE we’ll also have some rental property income coming in. As telegraphed in our earlier Q3 net worth update, we’re providing an update on these properties in the coming month or two to give a better idea of how things stand there. So a bad result with dividends alone won’t necessarily sink our early retirement hopes either.
That said, from the dividends that have been announced it looks like Q4 will be a little brighter than the drubbing we just experienced. However, one thing that’s certain is that dividends won’t rebound overnight. The second half of this financial year will be very interesting.
\The numbers listed above are ‘somewhat net’ – for the purposes of calculating our savings rate. It includes franked and unfranked dividends – but not* franking credits (which are essentially pre-paid tax credits). For the unfranked dividends (and a small additional 7% portion of the franked dividends due to our marginal tax rates), we pay additional tax towards the end of the calendar year. For reference, we received an additional $3,409.69 in franking credits for the period – giving us a total of $13,628.28 in gross dividends for the quarter.\*
July-September: Expenses
Let’s take a look at our expenses for Q3 2020, with a comparison to Q3 2019:[EXPENSE CHART IN BLOG POST]
In total we spent $3,528.22 for the quarter, compared to $4,272.89 last year – a decrease of $744.67 or 17.4%. While at face value that should be lauded, in reality our car service (Q3 last year) was pushed forward a month this year (to Q2). So really our spending is roughly flat, which we’re still happy about. That said, there are a few stories behind the numbers worth mentioning.
Our electricity usage went up 28.3% due to working from home. However, our bill was only 19% more expensive thanks to a government relief payment for households due to coronavirus. But with 13.4kWh per day consumption, it’s indicative of what sort of daily usage we’d have in retirement if we were home all day. It adds up having extra TV time over lunch, the microwave and kettle running a few times extra a day, and a couple of computers running non-stop when they previously weren’t. In other news, we’re swapping electricity retailers in October to what should be a slightly cheaper plan. We’ll see how things change next quarter.
Speaking about working from home, both Ellie and I will be claiming the Australian Taxation Office’s shortcut method to claim $0.80 per worker, per hour worked from home between 1 March and 30 June when we lodge our tax returns in Q4 to get some of those extra expenses back! Though look into your tax options to work out what works best for you.
We also started the process of swapping internet plans to the NBN (long story – we’re still not on it and won’t be for a while – more details in Q4). We were only a couple of months short of getting kicked off ADSL, so it was forced on us. The best plan we could find was $55 a month compared to the $50 we have been spending. With extra working from home we felt we really couldn’t do with the most basic of plans available. It also meant we needed to buy a pair of WiFi dongles to go with a new (free) modem. Our existing modem just used good old RJ45 ethernet cables, but because of the location of the NBN outlet we needed to go with WiFi.
Continuing the IT theme, Ellie’s computer also died during the quarter. In the end we bought a refurbished one from eBay for $109, which wasn’t bad at all. It was a mild gamble buying it, but so far it has paid off and she’s happy with it. The event also inspired the article on how we can’t avoid some expenses forever.
My driver’s licence renewal also arrived, so that was an extra expense compared to last year – almost $350 for the year so far with Ellie’s also coming up at the start of the year. At the same time though, the savings in fuel costs compared to this time last year more than make up for the licence fees.
In total, if you take out our New Zealand holiday from the start of the year, our expenses for the year-to-date are very similar to last year’s at this stage – $12,083.81 compared to $12,710.74 in 2019. (If you offset us being away for a couple of weeks in February, our expenses would be a few hundred dollars higher. The more things change, the more they stay the same.)
How are we tracking? Q3 savings rate
As always, let’s throw it all together to work out our savings rate:| Q3 | Value |
|---|---|
| Income | $38,855.29 |
| Share dividends | $10,218.59 |
| Expenses | -$3,528.22 |
| Total savings | $45,545.66 |
| Savings rate | 92.8% |
It’s a good result, though tempered by the reduction in dividends. Regardless, we’re fundamentally in a good place at a horrible time. We’ve been incredibly fortunate to date, and it’s not something we want to take for granted. Our own job security is slowly coming on the line, so we need to make the most of the opportunity we still have for as long as we have it.
Looking ahead to Q4, just like last year our tax bill is now a looming issue. We haven’t lodged our tax assessments yet, but we have calculated them. We anticipate that our tax will be will higher than last year. So that’ll be one giant savings rate killer in Q4.
Even if we hadn’t gone on holidays at the start of the year, and still achieved fractionally small savings during year-to-date thanks to coronavirus, we’d struggle to hit a 90% savings rate for the entire year. It would be possible, but highly unlikely. However, a bigger tax bill will put the final nail in that coffin.
Of course, some of the biggest economic news of the year hit this week after Q3 ended, with the delayed 2020 Federal Budget finally breaking cover. It looks like we’ll be about $4,000 a year better off (too late for 2019-20 and our upcoming bill, though!). But we’ll have to wait and see how things go with backdated tax cuts and the passing of the legislation. Regardless, we hope you’ll get a nice benefit from the tax cuts yourself if you’re an Australian.
2020 has been one heck of a rocky ride so far. Hopefully the end of the year brings some positively and signs of a return to normality. Unfortunately, I think that even once we get past the virus with a vaccine (and that’s really still an if) we’ll have a bit more instability ahead of us as a result of economic and budgetary damage that’s already happened. But before then, we still need to make it through the final three months of 2020. Gulp.
Until we meet again, we hope you stay safe and secure.
Cheers,
Alex
BLOG POST LINK: https://hishermoneyguide.com/quarter-3-2020-income-and-expenses/
