Category: Personal Finance

Blog posts relating to individual’s fiannces: savings, credit, debt, etc.

To B or not to B – is that the Question?

To B or not to B – is that the Question?

Ah the B word. You know what that is – budget.

Some say you have to do it to know where your money goes – make an annual spreadsheet! Others stipulate you just need a rough idea: 70% of your money goes on bills, 10% savings, 20% fun, etc.

But before you click out of here to snore or look somewhere else, I have a confession to make.


Not to be

I don’t budget.

Not at all. Never have. Mainly because I find it too boring.

Wait what? A finance person that finds budgeting boring?

Yep. I can look at spreadsheets of share portfolios all day. I read finance books for fun. Planning out holidays and costing projects is great. But give me an expense sheet of last month’s bills and I just… drift…away.

Why? Honestly – I. just. don’t. care.


Spending and Saving

I’ve always been the type of person who cares heaps about how to save money on stuff I hate (let’s pay a higher water bill! – said no one ever), spend money on stuff I really value (skydiving!) and manage money in the best way to make it work and sweat for me rather than the other way around (investing). As for sitting there, bored, an enormous coffee in hand trying to stay awake while I work out exactly how much we spent on staples last month (was it $2.90 or $2.92?) – yeah, no way.

Here’s the secret. I don’t care to budget because I don’t have to. Living within my means, not pay cheque to pay cheque.  I save some money for the future, some for fun stuff in the intermediate term, and I’ve lot a nice plush cash pillow for when my butt hits the electric fence (I have actually done this. It hurts).


Do you need to B?

I’m not trying to boast here. I’m just saying that if you know can save, and you can invest, you can probably afford not to budget.

Now there are some people who may need to budget, at least for a while. Tight funds are one thing, but if you earn a decent income and you’re broke before payday, you may need to sit down and work this out. Actually looking and tracking where your money goes is a really helpful exercise if you can’t seem to save money on a reasonable income.

Then there’s the other extreme – I once knew (a well-paid) someone who would take an inventory of every grocery on their shopping list, take it to every supermarket, and compare prices. Then they would make the trek out to the furthest supermarket to save $0.30 on a can of beans…


Should I buy my home? Part 3 – The Maths

Should I buy my home? Part 3 – The Maths

So if you’re reading this post I take it that you’ve read part 1(debunking myths) and part 2 (factors to consider), and you’re ready to look at the maths. At this point, you’re either excited or feeling slightly queasy, depending on how you feel about numbers. There are lots of numerical aspects we can look at when buying a home, but we are going to take a simple approach. Ready?

The basic rule

All things being equal, it may make more mathematical sense to buy your home when the cost of a mortgage, or at least the interest portion of a mortgage, is equal to the amount of rent you would otherwise pay in the same area. Your costs will be roughly the same, but over the long run you will eventually have the benefit of owning your home.

On the other hand, it may make more sense to rent where a property in the area you want to live in has a far higher mortgage repayment cost, especially if the interest portion alone is higher than the rent you would otherwise pay. If you take the amount of money you save by not paying a high mortgage and invest it, you will likely come out ahead even though you do not own property.

Here are the key aspects:

  • costs of renting versus buying – if they are the same it makes more financial sense to buy; and
  • crucially, if renting works out cheaper, invest the difference in a diversified portfolio to get ahead.

Let’s break it down further.

    Simple Examples*

Axelf wants to live in the beautiful town of Twiianontw. He is deciding whether to buy or rent, and decides he wants to live in a three bedroom house with his family.

Scenario 1 Buying wins

Rent is $500 per week = $26,000 per year

House cost is $375,000. Average mortgage rate is 7%. Mortgage is for 25 years. We’ll assume Axelf saved a 20% deposit ($75,000). This means he borrows $300,000 for 25 years at a rate of 7%.

Mortgage cost is $489 per week = $25,428 per year

Here, buying is the winner. Axelf will save himself a small amount of money buying rather than renting each year, but the real benefit is that for the same amount of money he will eventually own his home.

Scenario 2 Renting Wins

Rent is $500 per week = $26,000 per year

House cost is $500,000. Average mortgage rate is 7%. Mortgage is for 25 years. We’ll assume Axelf saved a 20% deposit ($100,000). This means he borrows $400,000 for 25 years at a rate of 7%.

Mortgage cost is $652 per week = $33,904 per year.

Here, renting is the winner. Axelf will save himself $7,904 per year by renting instead of buying. If he invests that amount for 30 years at a conservative rate of 7%, he will have $746,618**.

Costs of a home

This is a good rule of thumb to determine if it will be more beneficial for you to rent or buy in the same area, all other things being equal. However, there are a lot of other numerical factors to also consider.

These include:

  • if you are renting – rental increases and changes to any invested money (e.g. market crashes)
  • if you are buying – changes in mortgage rates, the cost of maintaining a house, and whether you pay the mortgage off faster than required
  • inflation – costs go up. It’s very unlikely you will be paying the same amount of rent or mortgage in the future.
  • taxes – do you get a deduction of the interest you pay for a mortgage – if yes, this will need to be factored in

    Mars is in Saturn…

Unfortunately, my crystal ball is very cloudy and my chakras are not aligned. I don’t know the future, and neither do you. It is impossible to fathom or work out every eventual possibility on whether it’s better to buy or rent. It depends on lots of different factors, not least how you feel about it. Some people love the sense of security they get in owning their own home, others prefer money in the bank (or better yet, the stock market). None of this constitutes financial advice, which I can’t give anyway. It is, fortunately or unfortunately, your choice what you decide to do.

I hope what you take from this is a sense of freedom. Buying a home is not a milestone or a necessity. It’s a decision. It comes with opportunity cost – your own roof instead of other things you may want to do. Renting is not dead money. In fact renting cheaply in an expensive area often makes much more financial sense, especially if you invest the difference.

Whatever you decide, I hope you decide it for yourself. Don’t let anyone pressure you into buying your home for a false sense of financial security. Buy because you want to, not because someone else said you should.

*I used this mortgage calculator to work this out!

**I used this compound interest calculator to work this out!

How to cheat the capitalist system (legally) part 2

How to cheat the capitalist system (legally) part 2

In the first part of this series, we looked at some of the features of living in a capitalist system. Now we going to have a look at how you can benefit from some of the better parts of capitalism.

Become a shareholder – Buy into the system

If companies run a large part of the world economy to make a profit, you can easily buy into a piece of the action by becoming a shareholder. If you’re not familiar with shares, here is a quick overview. Being a shareholder means being a part owner of the business. If a company makes money and uses it to grow, you’ll benefit from the (hopefully) greater share price. If a company makes money and decides to it pay out to its owners (it doesn’t have to do this), you as a shareholder will receive that payout in the form of dividends.

Why am I banging about shares? They are good investments, but they’re also the best way that you have to profit from company profits. I’m not suggesting buying individual company shares (unless you are prepared to do comprehensive research on each company). I’m suggesting you think about buying index funds, or index exchange traded funds (ETFs). Generally, index funds are a collection of stocks (shares) on a particular stock market (e.g. the New York Stock Exchange). Buying these types of funds means that you can buy all the companies on a particular market, and immediately get access to all their future potential growth and dividends.

You’ll need to do your research, however it is relatively easy to buy a few index funds that cover multiple markets, for example, domestic stocks and global stocks. Keep in mind that shares are by nature very volatile assets, meaning they make and lose their value quickly over the short term. That means you need to invest for a long term horizon where you can ride out temporary falls, at least five years or more. By owning their shares, next time you receive poor service from a company, remember that you are sharing in their profits at the other end, and therefore you’re getting the last laugh.

Be the controller, not the customer – own the system

Let’s face it: some companies care about their customers, others don’t. No amount of legitimate moaning from consumers is going to change that fact. But you can take control over the choices you make, and how you are treated. As a consumer, you have power. You have the power to walk away, the power to take your business elsewhere, and the power to boycott a product.

How do you do it? Here are some ideas:

  • Shop around for the best deal – not just on daily items, but on loans, bills and big ticket items.
  • If you’re not getting the best deal, call your company and ask for a discount. The worst thing that can happen is that a company says no, and that no is coming from someone that you are unlikely to speak to or email ever again.
  • Next time you’re online shopping, do a 30 second google search for see if there’s a discount code you can apply. If someone’s being offered 10% off, it might as well be you.
  • Be prepared to walk away. If a company does not do what you (reasonably) ask them to, go somewhere else. Don’t just threaten. Walk.
  • Check your privacy settings on social media. Why? Well, in addition to identity theft, social media companies use your information to sell specific products and target ads to you. If you don’t want them to do this, you can change or limit it in your privacy settings.
  • There’s no such thing as customer loyalty. You don’t have to stay with a company because you’ve been with them for 20 years. In fact, if you have been there for 20 years, they’d better be treating you right.

All these tips and others are designed to show you that you have power, and you can control much on the goods and services you choose to use. Remember, they’re out to make a profit. Don’t let them make their profit at your expense.

Maximise your value as an employee, or create your own business.

I hope you like your job and whatever you do, you enjoy it. Many companies care about their employees and their significant contributions. However, many others don’t. Here too, you have options. You can take responsibility for your value as an employee. Work out those features of your work that you really enjoy and perform really well at (you have them: everyone is an expert in something). Those features reflect your value. Now you need to make sure that your workplace or business acknowledges and appreciates your value. If they don’t, you have the power to find another job. Much like customer loyalty, your first loyalty as an employee should be to yourself and your worth. I know it may not be easy to find or start another role. However, you have the right to be appreciated. You’re worth fighting for.

If you have ever wanted to start a business, living in a capitalist society makes it easier for you. The internet makes it easier still. You don’t need to bury yourself in bank loans to start one either – you can begin a small enterprise selling items by using sites like Ebay or Etsy, obtain crowd funding on multiple platforms, and start your own website for a relatively cost. You can even start a social enterprise, a non-profit that helps communities through its products and services, employs people that are underprivileged, and incorporates its profits back into the business to keep it growing. That’s a great way to use the best parts of capitalism, and it’s craving for profit, to give back to society as well.

Should I buy my home? Series Part 2 – Factors to consider

Should I buy my home? Series Part 2 – Factors to consider

In the first part of this series we discussed that there are no right answers to the question of renting or buying, only what answer is right for you.

So let’s consider the factors that might go into getting the right answer for you.


Does where you live matter to you? You might want features such as proximity to the coast, a farm, or the bustle of city life. If so, compare the cost of renting or buying. If you want to live in a certain area where house prices are huge, it may often make more sense to rent than buy. If the costs of mortgages and rents in the same area are commensurate with each other, then buying may be better.


Are you likely to change jobs? Do you want to travel? Are you keen on working overseas? If so, are you likely to be out of a certain location for a while? If buying a house makes you feel tied down, or leads you to turn down opportunities in other locations, renting may make more sense. Otherwise, if you leave your purchased home for a while, can you rent your place out – is there a market to do that, and would you be happy for someone else to live there?


Is being secure important to you? Do you plan on living in one area for a long time? What are the rental laws like in your area? If you can be kicked out of a tenancy relatively quickly and the law favours landlords, buying may satisfy your need for security. If however you live in an area with powerful tenancy laws and long leases, renting can be a good option too.


This is such an important factor that is often overlooked. Remember to factor in the time it takes to get to work or school, and the number of commuting options you have (e.g., if your car breaks down, can you cycle or take public transport to work). Long commutes can be exhausting. Or you may gain peace of mind being further away from work. Either way, it may not make sense to buy the home you can afford out in the sticks if you only get to see it in the dark after leaving early and arriving back late.

Property size

If you have several family members, it may pay dividends to rent a home with more space over buying an apartment, for example. Conversely, there may be no need for you to buy or keep that three bedroom home if there’s only one of you living there. If you have pets, how will space (or lack thereof) affect them? Do you need a bit of green space to keep you from going crazy or does a garden sound like more housework?


Does that beautiful home come with a mortgage monster that sucks you dry? Let’s say you’ve run the numbers and you can afford it – if you keep your job, work weekends and never get sick, and interest rates never go up, and you stock up on baked beans…If you can rent in the same or another place for less, that’s likely to be the preferable option. Being house rich and cash flow poor may lead to sleepless nights, and the bricks and mortar aren’t going to wipe your tears away.

Future needs

It often makes sense to make decisions about what you need now rather than in the future, but if you decide to buy, it’s usually for the long term. It makes no sense to secure the deposit on that cute little one bedroom apartment and then adopt giant huskies that tear it apart. Have a think about how a place might address your future requirements. If in doubt, you can rent.


Ah, real estate agents know how to sell anything. I worked with someone who bought a property that the ad said just needed ‘a little TLC’. Six months and six full skip bins later they had only just cleared the back yard of rampant cacti and discovered the water pipes were all broken and needed replacing. Suddenly their ‘cheap run-down house in a great location’ had become their mega mortgage – and they couldn’t even move in. Your move on this one. Do your research before renovating an ‘DIY dream’ – renting might be a lot cheaper.

What about costs?

Now we’ve covered some of the important factors, we need to look at the numbers. This is a qualitative as well as a quantitative decision, so I’ve covered the factors first. But in a couple of future posts, we’ll look at when it may be better to rent or buy from the numbers perspective. Stop shuddering. I promise I’ll make it palatable.

Should I Buy My Home Series – Part 1- Debunking Myths

Should I Buy My Home Series – Part 1- Debunking Myths

This is part of a series highlighting what factors to consider if you choose to rent or buy your home. It doesn’t apply to investing in real estate, which is an entirely different creature I’ll cover someplace further down the line.

It’s one of my clearest childhood memories. My mother (who had fought hard against poverty her entire adult life) sat us down and instilled her mantra: ‘Get an education, get a good job, be financially independent of others, and buy a house’. My sister and I, having heard this lecture innumerable times before, would roll our eyes and troll out the required: ‘Yes, Mum’.

My experience is by no means unique. In many countries, the idea of buying your home is tantamount to being viewed as a success in life. Your own home may come with the simple satisfaction of having your own roof over your head, or a dream of an ideal family, living in a spacious fantasy with high tech appliances and a garden filled with your favourite flowers. In fact in many places the idea of buying your own home is known as ‘the [insert name of country here] dream’. And it’s all bull$%#*.

Wait, what?

That’s a big call.

Let’s backtrack a second. Home buying financial advice, whether professional or society created, generally comes in two flavours:

1. Vanilla flavour, where the assumption is that home ownership is a goal that everyone aspires to; and

2. Choco-mint-raspberry flavour, where (Shock! Horror!) the vanilla assumption is challenged, rent encouraged and statement made that renting means you may be financially better off.

This advice too, is bull$%#*.

Huh? What are you saying? Buy or rent or what? If all of this is bull$%#*, what am I supposed to do?

Well, the ultimate answer is that the right advice is the advice that’s right for you. Oops, so that sentence was a bit confusing. The point is that buying a home or choosing to rent is an emotional, personal and financial decision. There are actually a number of factors that affect your choice to buy or rent your home. In no particular order, they include happiness, location, cash flow, housing purchase price, rental costs, lifestyle, taxes and the ability to sleep at night.

As you can see, the decision is a complicated one. It highly depends on what you want.

To start with, let’s break down some of the most common myths around this topic.

Rent money is not dead money

Rent is a bill for shelter. Like any other bills for such things as electricity, gas and the internet, it doesn’t matter if you pay for it for a few years or for the rest of your life. A house is a major purchase and may it make more sense to rent, especially in expensive cities. This is even more the case if you are fortunate enough to have a long lease (i.e. you cannot be kicked out on a landlord’s whim with 30 days’ notice).

Buying a home is not a sign of success, nor is it necessarily a good investment

You might have a small mortgage you can easily afford to pay off quickly, making the home your own. However, you may also buy a mortgage monster that sucks up your savings right into retirement. Your house might appreciate in value, or it might not (yes, house prices do go down). If it does appreciate, if could reflect your smarts in buying it, or it could be due to market forces beyond your control.

So now that’s out of the way, what factors should we considering when deciding whether to buy or rent our homes? Keep an eye out for Part 2 of this series in the coming weeks.  In the meantime, think for yourself!

Credit – A Love Story

Credit – A Love Story


I gazed upon the colours white and gold

embraced with clear stones that captured nature’s eye.

Eagerly I viewed this gem unsold

with gentle shimmering that made me sigh.

My view fluttered to the price set out in red.

My heart skipped a beat, cruel jar up my spine.

Beauty and glamour did not unshed

the cost of jewels I coveted as mine.

With a deep groan of sadness I turned my face away

when a happy thought occurred to me: another way to pay!


‘Put it on credit!’ exclaimed my joyful mind to me

‘You deserve all things bright and beautiful!’ it cried.

And I agreed. After all, what possible harm could be

created by a loan? I’d set the cash aside

and slowly pay it back as months went by.

I placed an order, I set my borrowed money free.

Soon enough arrived my jewel, my neck to beautify

and with much excitement I wore this gem for all to see.

But shock! Amid the joy my further credit card transactions were declined

at a supermarket checkout. My card had maxed out the limit for it designed.

Heart Break

Oh my love! Whatever’s happened to us?

We’ve worked together so often, had such fun.

You’ve empowered me to purchase gifts and status

in anticipation of my paychecks and my income.

Where have I gone astray? What have I damaged?

When looking back on all of my accounts

no matter how hard it’s been I’ve always managed

to pay all required minimum amounts.

This ‘maxing out’ has sobered me to reason that your caring talents aren’t so rare

I could pay you off within another season – but I think I’ll find a different card, begin another love affair.

Note: If you haven’t figured it out yet, this is satire! As always, think for yourself.

The Hidden Side of the Balance Sheet – Part 2

The Hidden Side of the Balance Sheet – Part 2

This is a continuation of last week’s blog post – The Hidden Side of the Balance Sheet Part 1.

We see people with a lot of expensive stuff and we think it belongs to them. But we don’t know that. We don’t see the hidden side of their balance sheet.

Owing what you own

When people show us the assets that display their wealth, we don’t know if they own them outright, or if they borrowed the money to buy them and are still in debt. If they borrowed the money to buy that item, we don’t know how much money they borrowed, how much they still need to pay for it, and how long they still have to pay it off. If a person still owes lots of money on an item, they don’t own it yet.
Let’s talk about debt for a minute. In our modern world, lots of purchases are fuelled with debt. Most adults have a credit card. Almost everyone who buys a house will have a mortgage. Many of us have car loans and personal loans. Education, business and investment loans, lines of credit and peer-to-peer lending – the options are endless. When it’s used effectively, debt can be great helper to achieving financial success. When it isn’t, the results can be devastating.

The funny thing about debt is that we know that we have it and how much we have – but we forget that others have it too. We see these outward measures of success and we think that other person has the full ownership of those assets. We forget that the beautiful home may not really be theirs, that they might be groaning under the weight of a multi-million dollar mortgage. That luxury car might have been bought on finance to help impress their equally burdened friends. The awesome leather lounge suite may have been purchased on an interest free loan. They could still be paying for those amazing holiday snaps on the credit card in five years’ time.

An example

In the article with the ‘millennial multi-millionaire’, it first stated that he had several properties worth over $2 million. A closer reading however showed that he didn’t actually own in excess of $2 million in property yet. The article mentioned, in a throw away line half way through the piece, that he had used equity to buy more houses. What does that mean?

Equity means the part of the property that he owned, either due to his original deposit paid, the principal repayments he made, or a rise in the property’s value. He had started with a small deposit and large mortgage on one property. After paying that mortgage down for a little while, he used the equity in that property to borrow more money to buy more properties. In other words, he borrowed money from the bank to buy a property, and then used the small bit of the property he owned to borrow more money from the bank to buy another property. And then another property and then another. If you’re comfortable with the risk, there’s nothing wrong with using this strategy. It’s a common (though risky) way real estate investors use to buy more properties and create an investment portfolio.

The key thing to note though is that he didn’t actually own $2 million worth of property yet. Sure, the assets side of his balance sheet read: $2 million! The liabilities side, the massive debt, the hidden side of the balance sheet, also read almost $2 million. He might be worth $2 million one day. Until he pays off that debt, the banks are the millionaires in his story.

What you see isn’t always what’s ticking beneath the surface. While many people may own their luxury goods, many others are sitting on a debt bomb they keep from exploding only by paying the minimum required. Looking at them from the outside, they have all the assets of success. What you don’t see is the constant sweat they’re under blowing out the liability match.

Think for yourself!

The Hidden Side of the Balance Sheet – Part 1

The Hidden Side of the Balance Sheet – Part 1

My guilty secret

A while ago I was scrolling through the news feed of my favourite social media channel. Scrolling past the photos of elaborate brunches and declarations of love for locations, bands and charities, my mind involuntarily focussed on one article. The image was of a well dressed, clean shaven young person, sporting a crisp pink shirt and tailored jacket. His eyes twinkled a glint of self confidence. The click bait title championed “Multi-Millionaire by 30 – What He Can Teach Millenials about Making Money in Real Estate”.

I tried to scroll past but I couldn’t help swallowing the hook. I clicked. Ten minutes later, I’d swallowed guilt, and I’m ashamed to say, a little bit of envy. I walked away from my tablet deflated and feeling a bit inadequate.

The hidden side of the balance sheet

In this two-part post, I’d like to examine articles like this from a slightly different perspective. That is, the hidden side of the balance sheet.

We’re taught from a young age to recognise the pillars of success from the assets side of the balance sheet. It seems like the stuff that someone has on the outside reflects how successful they are. The 30 year old with several properties. The high-flying executive with the top job, and the mansion, top of the range car, and designer suits. The second holiday home. The third luxury car. The 4WD, caravan, heck even the boat (even if you don’t like fishing). The luxury designer poodle. In other words, what you’ve got. But we never hear about the other side: what you owe.

‘What’s a balance sheet?’ I can hear you ask, if you’re not an accountant. Balance sheets are lists of the assets and liabilities of a business or a company. They’re not often used in personal finance. But the basic concept still applies. It’s basically everything you own, minus what you owe. It looks something like this:



Assets (Own)


Liabilities (Owed)


Stock: 100 kg of yummy chocolate


Money borrowed from Evil Bank to buy yummy chocolate





Actually, this table looks nothing like a proper balance sheet, but I’m not apologising because (a) I’m not an accountant, and (b) you get the point.

On one side, there’s what assets Yummy Chocolates has: 100 kg of chocolate.  On the other side, there’s what Yummy Chocolates owes: a $100 loan to Evil Bank for buying the chocolate.  In order to really own the 100kg of chocolate, Yummy Chocolates needs to sell the chocolates and pay back the $100 borrowed from Evil Bank.

So what does this have to do with conventional stories of success, the ones on what stuff people have to show how successful they are?


This post is so long I’ve had to cut it in two.  So join me next week as we explore Part 2 of the Hidden Side of the Balance Sheet.  In the meantime, keep thinking for yourself!

A Critique of the Latte Factor

A Critique of the Latte Factor

Look at any list of savings tips or hacks and you’re bound to come across the Latte Factor.

It goes something like this:

Did you know that your daily latte could be costing you thousands?? Let’s say you buy a coffee on your way to work every day for $5. If you pay for a coffee every weekday for a year that’s $1300! If you invest that $1300 every year for 10 years, and we assume a compound interest rate of 8%, you’re drinking down $21,639! Think about that next time you’re craving for your morning caffeine hit!”

Wipe out the word ‘latte’ and replace it with another small recurring purchase (smashed avocado, buying lunch at work). You’ll see the same tip mentioned over and over again.

I hate this tip.


I’ll get a couple of rebuttals out of the way first. Yeah, little costs do add up over time. And if you’re knee deep in consumer debts (read: credit cards, car loans, finance for your massive yacht), you’re probably better off putting off the coffee for the cash. These little costs are also a killer if you’re struggling just to pay the basic bills. Which is a horrible situation to be in.

But for the rest of us, we probably indulge in the Latte Factor for a reason. Yeah, there’s probably a reason you’re scoffing down your coffee, or equivalent daily indulgence (or vice) of choice. You might be spending mindlessly, but chances are your mind is involved in some way.

What the Latte Factor means

For me, coffee means getting away from my desk, breathing some fresh air, enjoying the aroma of brewing beans, and sipping my version of the nectar of the gods. It means a moment of peace in an otherwise hectic day, a smile from the barista, an improved mood, and energy to continue thinking. In other words, it contributes to my well-being and happiness.

Coffee doesn’t do that for everyone. But something will. Whether it’s the weekly donut, the takeaway fish and chips on Fridays, buying lunch with a colleague, having smashed avocados on toast at the cafe on a weekend even though you can have it for half the price at home – something about that item means something to you. Increased time, quality of life, time with family and friends, silence, noise, peace, chaos, joy – you’re getting something from it.

I’m not suggesting that everything you buy has a meaning. Insurance can be an essential item, but few people will obtain a glow from purchasing it. But some things you buy do mean something. For me, that $5 coffee means that I’ll enjoy every morning over the next 10 years just a little bit more. Which is worth far more to me than an extra $21,639.

Think for yourself!