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Geoarbitrage – All the cool kids are doing it. #2

October 1, 2018 / / 11 Comments

Back in January 2018, when this blog was just beginning, I wrote a post about Geoarbitrage, where I talked about what it is and how Australians are starting to take advantage of it. We hear a lot about Mexico and South America in the FI community, but people down in our part of the globe have different options available to us.

You might notice that at the end, I said I’d talk about how the Frogdancer family took this concept and tweaked it to our advantage. It’s been 8 months since I made that promise. Instead of saying that I’ve never really been in the ‘zone’ to write about it until now, let’s just go with the tale that I was practising delayed gratification with you.

A couple of weeks ago I talked about how I paid off my mortgage on a single wage and became debt-free. When that happened, I thought that the story had finished. I was going to stay in that house until I was carried out of there in a pine box at the age of 120. I’d established an urban Food Forest with chickens, a huge worm farm made out of a freezer, over 30 fruit trees and 12 veggie beds, half of them wicking beds. I’d spent lots of money and countless hours putting all of this together, building up the soil, learning how to garden and look after chickens. All this was on a suburban block 16kms from the Melbourne CBD and life was good.

Late in 2015, I’d just come back from a mammoth 9 week trip to Europe and I’d hired someone to paint the outside of my house. Then I went to an auction of a house 2 streets away.

It was a similar house on a similarly-sized block. Nothing special – a 3 bedroom house with one living area and one bathroom. Nice, neat garden, a kitchen that had been updated maybe a decade ago – nothing out of the ordinary. It went for 1.3 million dollars, which stunned all of the neighbours. Most of us had been there for years – I’d moved in 19 years before and paid $136,500 for my place. We all marvelled at the price and patted ourselves on the back for being intelligent enough to buy just before the housing bubble hit.

As I walked home, I was marvelling at how much equity I had in my paid-off little house and how all of the scrimping and scraping to keep it in the early years had paid off. I remembered when we were looking for a house to buy, (I was still married then), how we’d stopped outside the house to look at it, then driven away without going inside because the cladding was so ugly. When, a couple of weeks later, I viewed the house after it was passed in at auction and the real estate agent mentioned the owners’ reserve price and I realised that with our 40K deposit we could afford it – that’s when we decided to buy. The ugliest house in the best neighbourhood – what a cliché! But I guess clichés are clichés for a reason: they tend to come true.

Nothing had changed in the plan for my life. I was still going to live a long and fruitful life and die in that house… until just before I got home I walked past the ‘For Sale’ sign on my next-door neighbour’s house. I stopped dead in my tracks. I clearly remember thinking, “Is this opportunity knocking?”

You see, when we bought the house one of the main drivers for me was that it was in the school zone of one of the best public secondary schools in Melbourne. My oldest son was just starting primary school that year and the youngest was only 6 weeks old, but I’ve always taken the long-term view. Over the years, the school’s reputation has only grown better and better. As the Melbourne/Sydney property bubble grew, property prices in this school zone began to grow even faster, with a 15% “School Zone” bonus being placed on the already inflated value of each property.

Up until then, this had all been totally irrelevant to me. I was living my life, being vaguely grateful that at least my house wasn’t a total money pit – but really, who cared about rising property values? The boys and I needed to live somewhere and this place was it.

But now… I looked at the two properties side-by-side. Developers LOVE deals like this, as it means they can squeeze another unit onto the block. Units and townhouses were beginning to pop up all over the zone, as individual houses were being priced out of the average family’s reach. I knew it was a viable prospect. My youngest child had finished year 12 the year before, so there was no real reason why we had to live within walking distance of the school anymore. Maybe I could sell my house in partnership with the neighbours for a bit more money than if we both sold them alone, buy a house in a cheaper neighbourhood and bump up my superannuation. I’d spent 10 years out of the workforce bringing up my boys when they were little and my super was woeful.

But could I bear to leave my little house? I loved that house. It took the weekend for me to weigh it all up, walk around and say goodbye. It hurt, but again, I had to keep my eyes on the long term.

It turned out that the neighbours had already bought another house, so come what may at the auction, they had to sell. I had my place unofficially on the market, ie no sign out the front, but letting the Real Estate agents know that I was interested to sell. The house next door had a disappointing result – only 1.24 million. They had to accept it. I was offered the same amount for mine by the person who bought it, but I laughed and turned it down. I loved my house. I wasn’t going to just GIVE it away!

Then a friend of mine contacted me. Her husband was a property developer. We sat down and agreed that we’d go into partnership together. We’d build a couple of massive luxury townhouses on the block and sell them. Assuming the bottom didn’t suddenly fall out of the property market in the meantime, he’d make a tidy sum and I’d make more than I would have if I sold the house as it was. I’ve never done anything like this before, but I took a leap of faith and we agreed to do it.

The obvious downside to this is that we’d need somewhere to live while the townhouses were being built. Most people would just rent something, but we had 2 dogs and 2 cats. No rental would touch us. I had to buy something straight away and use expensive bridging finance to pay off the new house while waiting for the build to be completed on the old. Yikes! But I started looking.

It’s funny, but at the start, I had a definite range of suburbs in mind. “I’m going no further than Oakleigh!” But the prices there were crazy. I fell in love with a house, but it was looking to go at the million dollar mark, which would defeat the purpose of doing the deal in the first place. I needed a few hundred thousand to throw into my retirement account.

I needed to be near a railway line because my younger two boys didn’t drive, so I was pretty well locked into Bayside suburbs, which were pricier. I gritted my teeth and kept looking further down the bay.

“I’m going no further than Parkdale!” Prices there had risen too far.

“Mordialloc!” I actually bid on an Edwardian house that was in need of work and was on half a block of land, but I pulled out when the bidding got beyond 700K. It was only on half a block of land, for Pete’s sake! It went for just under a million.

As I was driving home with my best friend, Blogless Sandy,  who’d come to the auction with me, she said, “You know, it’s the week before Christmas. Take a break, there’ll be nothing new coming up until late January. Get Christmas out of the way, enjoy your holidays, then get back into it when you get back to work. ”

I nodded sagely. Wise advice. As soon as I set foot in the door I fired up my laptop and went straight to the real estate sites.

And then I saw it. The Best House In Melbourne. It was FAR further out than I’d been looking. Mordialloc was over the bridge, and this one was over the NEXT bridge – ‘ a bridge too far’, as one of my friends calls it. But…

…the price range looked do-able. The house plan was absolutely perfect for our needs. The block of land was smaller, which would mean that it’d be easier to keep under control. I couldn’t wait till Monday to ring the Real Estate agent and go and see it.

In my search for the new house, I had a list of 24 things that were either “must-haves’ or “would be nice to have”. Turned out that this place had 22 out of the 24. What were the two that didn’t make it? A short commute to work and enough space for the chooks. So the chickens had to go and I had to listen to more podcasts. Oh well.

The next day (Tuesday), I put in an offer and agreed to take Blogless Sandy down that evening to have a look. While we were there the Real Estate agent got the call that the offer was accepted. I was ecstatic. And I little scared. 750K is a lot of money – but coming from the suburb that I did, it still seemed ultra-cheap for a house way bigger than the one we were living in, 30 years younger and literally 5 minutes walk from the beach.

I paid the deposit the next day, thanks to Blogless Sandy who lent me the money until I got the bridging finance organised. I’d just spent all my ready cash on my trip of a lifetime, not expecting to be buying a house 5 minutes after I got back. Incidentally, this is another reason to get your financial act together – you’re in a position to be able to help people when they need it. I wouldn’t have been able to swing this deal without her and I’ll be forever grateful to her.

The next day was Christmas Day, and I was able to loudly announce to my family after dinner, “I just bought a HOUSE!” We organised a 90-day settlement and we moved in at the next school holidays, in April.

What didn’t go to plan?

  • The process to get planning permits/an arborist reports/water board permission/architect plans etc took way more time than we estimated. Instead of taking 6 months, it took 15 months for final plans to be stamped by the council. That’s a lot of extra months paying bridging finance at 3K per month on a teacher’s wage.
  • The distance away from where I used to live took too much strain on my side-hustle as a Thermomix Team Leader, so I had to drop it. The upside of this was that I was able to go back to full-time work as a teacher, instead of having to take a day off a week to accommodate Thermomix.
  • The bridging finance took 72% of my takehome pay for the first 9 months. Then I went back to full-time work and it dropped to approximately 55% or something. It was very stressful having to see so much of my wage going out the door while at any moment the boom times in the Melbourne property market could end. If that happened, the gamble would’ve all been for nothing. I wouldn’t go broke, but the sacrifices would have been wasted.
  • It was more stressful than I bargained for. Security is very important to me and the thought that I might have tried to be a bit too clever and ended up sabotaging all the work I’d done over the last 20 years was horrible. I didn’t sleep very well for 18 months, and I’d look at my house and think how much I loved it, then think, “If only I owned it!”

What ended up happening?

When the planning permits were all in place, the property developer friend and I went to see a local Real Estate agent to see if we were on track with what we were planning. During the course of the meeting, he casually mentioned that a property in the Zone with fully-approved plans could sell for as much as 1.7 Million dollars because developers are always looking for plans that are ready to go. I thought that he was talking through his hat. That’s a ridiculous sum of money.

Turns out that he knew his market precisely. After paying out the real estate agent and the property developer for his costs and 100K for his trouble, I was able to walk away with exactly the amount of money that I probably would have received had we gone through all the trouble of the build. OMG. As it happens, over a year later the builders are still working on the development. That would have been over a year more of the bridging finance that I would have been paying. You can’t tell me that wouldn’t have been biting by now.

An added bonus, that I could never have planned for, was that over the last 2 years my new suburb has become more popular. My house is now worth 1.1 million, which more than covers the cost of the bridging finance. This was pure luck, but I’ll take it!

Here’s the deal about my geoarbitrage strategy:

By moving 20km further out from the CBD, I was able to capitalise on the equity in my home and put it to work. I was able to max out my superannuation account, which I was happy to do, given my age. You can’t access super until you’re 59, which is about when I’ll be looking to retire, so I’m happy to lock the money away until then. If I was younger, I might have deployed it differently. But a healthy super fund? That gives security. Old Lady Frogdancer will be fine. She won’t have to worry about sponging off her kids in her old age.

I also, as an added bonus, walked away with roughly 350K extra. Before I thought of doing this deal, this is around the amount of money that I thought I’d end up with in my retirement account when I retire at the age of 69.  Now I have it as ‘extra’ padding!

Given this, I estimate that I can retire at least 10 years earlier than I otherwise would have been able to do. This deal has bought back 10 years of my life. That’s huge. Imagine the travel I can do while I’m still nimble enough to enjoy it…

I decided to reserve 50K of the ‘padding’ money to set up the backyard to bring back the food forest idea on a more limited scale than we used to have. I’m in the process of getting this done now. I’m spending money on what I value, which is a rare and precious thing to be able to do.

The house we now live in suits my family going into the future. As you can see, it has 2 zones – which means that at present, the two sons I have living with me have their own part of the house at the back, while I live in the front with my ensuite and walk-in-robe – such LUXURY!. But, with an eye to the future – when they want to come back with wives/partners to live cheaply while saving for a house deposit, we won’t be getting into each others’ way. I’m a big believer in privacy and this house definitely offers that. Ever since I left my husband back in 1997,  providing a secure base for my boys has always been huge for me. This place enables me to keep that option open for them in the future.

It also suits the way of life I want to lead going forward. I’m within walking distance of the Aldi, the train station and (joy of joys!) the dog beach. The design of the house is by far more practical than the old house and it looks beautiful as well. I’m still within easy reach of my family and friends, and although my commute to and from work is now 2 hours out of my day instead of 6 minutes, my years at work are limited so it won’t last forever. I’m just down the road from the Freeway systems, so it’s a straight drive to the airport.

Ok, so Frogdancer is happy with the outcome. Good for me! But what’s the take away for you?

The beautiful thing is that unless I’d started educating myself about personal finance, Financial Independence and the FI/RE movement, with all that it entails, I don’t know that I would have recognised the opportunity when it knocked, or been brave enough to take the leap if I had. I’d read about geoarbitrage on other blogs, but they all talked about moving to a cheaper state or country. That didn’t suit me at all – but moving to a cheaper SUBURB was the way I tweaked the concept to suit us.

That’s the point of the whole thing. By reading books and blogs, listening to podcasts, going to conferences and opening up to others’ ideas and points of view, you’re adding options to the smorgasbord of possibilities. You hear this saying a lot – “The point about personal finance is that it’s PERSONAL.” There’s no one way to work the system to get where you want to go.

It’s exciting. There’s so much information out there that people are generously sharing. Much of it won’t be applicable to you, but gee whiz! Every now and then someone will write or say a nugget that could change your life. Knowledge is power. Opening your mind to other people’s strategies and ideas enables new connections to be made in your mind when you look at your own situation. You have the chance to optimise your current situation and tweak things to make your life even better. Yes, it’s very exciting.

For example, I gained security by doing this real estate deal. However, going forward, I’m not revisiting this strategy. Australia’s urban property market is, I believe, vastly over-heated, so I’m turning to the share market instead. I’m looking at all the information available to me and I’m tweaking it to suit my situation. I’m not following just one way to financial freedom. I’m learning about the options and selecting the ones that suit me best going forward.

I strongly believe that anyone else can, and should, do the same. There are opportunities stretching to the horizon for those who listen, learn and strategically act. Why shouldn’t one of those people be you?

 

 

 

 

Geoarbitrage: all the cool kids are doing it #4.

February 18, 2019 / / 6 Comments

Late last year I wrote a post on how I sold my house, with fully-approved plans to build 2 massive townhouses on it, to a developer. I was going to do the build myself, but when I was offered a crazy sum of money to sell the house ‘as is’, I decided that a bird in the hand was worth two in the bush, so I sold it.

Last November it was passed in at auction. In the time between me selling and them building, the wildly expensive property market in Melbourne had begun to soften. They had a reserve of 1.6M for the right-hand townhouse, but at the auction they didn’t even get one bid. Standing with my old neighbours watching this unfold, I felt bad for the developers. They’ve done a beautiful job on the build. I was also incredibly thankful that I’d made the decision to sell when I did.

Since then they’ve reduced the price twice and last Saturday it went up for auction again. I was planning to drive down to see it, hoping that this time the developers would get lucky. It’s all too easy to put myself in the situation and imagine how I’d be feeling.

I was paying bridging finance for The Best House in Melbourne at 72% of my take-home pay for 8 months, then when I dropped my gig as a thermomix consultant and went back to full-time teaching it was “only” 55% for a further 8 months or so. Imagine if I was still paying that today? I would be beside myself with worry if it didn’t sell.

The reserve price at the last auction was 1.6M. On the actual ‘For Sale’ on the website, it now suggests a range of between 1.4M – 1.480M. I was interested to see where the sellers’ heads were really at. The lowest suggested price on a real estate board is rarely what the sellers will accept!

But, just as I was planning to get ready to leave, I thought I’d check the website to make sure I had the auction time correct. This is what I saw:

There was no sticker on the board at the front of the property yesterday morning, but when I rang Tom27 he said that he drove past in the late afternoon and saw them putting the ‘Sold’ sticker on it then. You’d think he’d tell his mother straight away, but I guess not…

I sent a text to the real estate agent, asking what they got for it…

… then I waited. Saturdays are a busy time for real estate agents.

The suspense was killing me…


… and then he rang.

The townhouse went for 1.45Million, with the buyer paying an extra 47K for modifications to be done to the house by the builder. Imagine having the money to pay an EXTRA 47K to pay for ‘improvements’ after you just spent just under one and a half million dollars…?

I’m so glad for the builder that he finally managed to sell this property, but the scary thing is that he had a reserve amount of 1.6M back in November and had to drop 155K off his projected profit to be free of it. That’s a substantial amount of money.

Still, no doubt he still made a profit. I’m also VERY glad I took the money and ran when I did. Part of financial success is hard work, attention to detail, making a plan and sticking to it for a long time. And part of it is timing.

Clearly, I’ve benefitted from both. May we all be as fortunate!

Geoarbitrage: all the cool kids are doing it #3.

November 18, 2018 / / 8 Comments

Long-term readers of my blog, all three of you, will no doubt remember the posts I wrote about the concept of Geoarbitrage, the first one explaining the concept, while the second one talks about how the Frogdancer family tweaked that concept to suit our situation. Well, when I say ‘family’, I really mean me. I’ve run this house as a benevolent dictatorship for the last 21 years, so once I made the decision the boys had to go along with me. Part of the perks of being single.

Geoarbitrage: all the cool kids are doing it #1. Talks about what ‘geoarbitrage’ is and how it’s slightly different in the southern hemisphere.

Geoarbitrage: all the cool kids are doing it #2. How I took the information in #1 and acted on it to find The Best House In Melbourne.

Time’s gone by and yesterday was the auction of the right-hand-side townhouse. These were the ones that the property developer and I had designed, so I was incredibly keen to see what this one, (the larger one), went for.

(Behind the wall containing the ovens is a butler’s pantry. I suggested that the architect put one in. I’d love one, but this is the closest I’ll ever get to owning one!)

Here’s the web page for the property, for those unfamiliar with the Australian/Melbourne housing market. It runs through the stats and shows photos and the plan. I know I always like to have a look through and I thought you might like it too.

A bit of background – I sold this property with my original house on it + the fully approved plans for these townhouses, in mid-2017 for 1.7 million dollars. It seemed like a hugely inflated price to me, but seeing as I wasn’t the one paying for it, I took it and ran.

Turns out that I sold at the peak of the market. ‘Fortunate Frogdancer’ strikes again! Since then the property market in Melbourne and Sydney has softened by around 8%, particularly after the government brought in laws restricting overseas buyers from purchasing property. Apparently, too many off-shore Chinese buyers were ‘land banking’ here, pushing prices up and making it harder for first home buyers to get into the market.

These townhouses were designed for multi-generational family living with the Chinese market in mind, as many families bring the grandparents over for 6 months at a time. Hence each house has 2 main bedroom areas. Heck, we even had the plans feng shuied!

So I went to the auction with intense interest. Did I make the right decision to sell before the build, or would I have been better off to suffer through the process of building, (and the extra 15 months of bridging finance at 3K/month) to sell at auction?

It’s not often you get to have a ‘sliding doors’ moment, where you get to see what would have happened had you made a different decision. How lucky am I?

I got there just as the auction was starting. I thought I’d have to park a couple of streets away, but no. I got a park right around the corner. When I walked onto my old street, there were very few people there. Not even many neighbours, which surprised me.

The auction started. No one raised their hand. The auctioneer kept talking, then after a minute or two, he put in a vendor bid of 1.525 million. (A vendor bid is when the owners of the property put in a bid to get an auction started. It has to be declared openly by the auctioneer.)

No one put up their hand. The auctioneer went in to confer with the owners. I was standing with my previous next-door neighbour and he said, “The trouble is, in a market like this anyone who’s selling HAS to sell, because why would you put something on the market now when prices are falling? The buyers know this and they’re looking for bargains.”

The townhouse was passed in at 1.525 million dollars. No doubt over the next week or two it’ll sell in private negotiations, but by gum! I’m so thankful I sold when I did. Imagine the stress?

I hope that the builders end up making a decent profit. They’ve done a great job – the house looks amazing. But I can’t help feeling relieved. Frogdancer Jones read up about finances, investing and FIRE for 4 years before making an educated, yet still risky, move to secure the finances of her family.

Looks like she made the right decision.

(The backyard is as deep as my chicken run used to be. I feel sorry for any little kids who’ll move in. The entire building is literally 5 times the size of my little weatherboard house that used to stand here. The whole suburb is morphing into properties like this one.)

I’ll keep you posted when I find out what it eventually sells for.

Geoarbitrage: all the cool kids are doing it #1.

January 17, 2018 / / 2 Comments

When Tim Ferriss coined the term ‘geoarbitrage’  about 10 years ago it meant outsourcing work to a cheaper region or country, usually over the internet. Nowadays it’s clear, after listening to podcasts and reading FI blogs, the term has morphed in the FIRE world into a descriptor of when a person geographically moves to an area that has a much lower cost of living.

Traditional retirees have been doing this for years… both sets of my grandparents did this in different ways after the breadwinners retired. One set moved up to the Gold Coast in the late 1960’s when the cost of living was far cheaper than Melbourne and the weather was far better. The other set stayed in Victoria, but sold their house in Murrumbeena and moved to a 1/4 acre lot in Inverloch, in Gippsland. They bought a caravan and spent 6 months of the year up in Cairns, during their beautiful winters, and then they’d drive down to Inverloch to spend time with us during Melbourne’s beautiful summers. Both sets of grandparents chased the sun but did it in ways that were gentle on the finances and offered them all a great quality of life.

Nowadays it’s becoming more common for traditional retirees to look at moving to a country that offers far more bang for the buck than simply living in Australia does. A couple of months ago I was walking the dogs and I started up a conversation with a guy who lives a couple of streets away. He spends 8 months of the year in Malaysia with his new wife and tiny child and rents out his house in Melbourne while he’s away. He loves the lifestyle, the climate and how cheaply he can live there and he only comes ‘home’ to see his adult children.

Also, a very good friend of mine is looking at giving up work in the next couple of years and has almost fully decided to up stakes and live in Thailand when he finally pulls the pin on working. He’s travelled there a fair bit, even having extensive dental work done there that was prohibitively expensive for him in Australia, and he knows he could buy a near-new apartment with a pool and aircon within a stone’s throw of the beach for what we would consider peanuts. He knows that with his investments and the pension, he would be able to enjoy a lifestyle that would be out of reach for him here. 

People in Australia also look towards Bali, but the disadvantage with beautiful Bali is that Indonesia doesn’t let foreigners buy land. You either have to buy something as a silent partner and hope like hell that they don’t walk away with your money, (which happened 2 years ago to someone I know…yikes!), or you go over there and sign a long lease on a property. I saw this ad on Facebook yesterday and thought that it was a perfect example of Geoarbitrage in action.

In today’s exchange rate, $100,000USD equals $125,140AUD. Considering that the prices of residential real estate in Australia are some of the most expensive in the world, a person could free up a lot of equity in their house by selling their million dollar property, tucking the surplus into investments and living the high life in that Balinese villa for the next 30 years. Who knows? Considering the age s/he retires and their state of health, that 30-year lease might just see them out. Bali has the schmicko hospital that was built there after the Bali bombings, the cost of living there is minuscule and family and friends are a short plane ride away. (Well, to be fair, Australia is so big and so isolated that very few places are a short plane ride away, but you get my drift.) It’s a viable strategy for those who love the tropical climate and the relaxed lifestyle that places like Bali and Thailand offer.

But what if you don’t want to move to another country to live, but at the same time you don’t want to work till you’re 70? What if you want to get your toe into the property market but price tags of 1.5 million dollars for a 3 bedroom fixer-upper in McKinnon are seriously out of your reach?

Geoarbitrage isn’t just a tool to use to inch closer to early retirement. It’s possible to utilise it for other reasons as well. I have a friend in his 30’s who really wanted to own his own home but knew that the million dollar+ price tags of Melbourne houses were always going to be beyond his reach. He decided to think outside the box and bought a lovely little house in Ballarat for less than a third of the price that he would have paid where he was originally living. For those who don’t know, Ballarat is a regional town about 120kms west of Melbourne. It’s a large city of around 110,000 people, so it has pretty much all of the amenities that you’d need … including a university that my youngest son, Evan21, will be going to for the next 3 years. My friend J is really happy with the move, with the only practical downside being his commute. He travels into the city by train, but because it’s a country-line train there are fewer services, so he really doesn’t want to miss his train! He’s already negotiated a couple of “work from home” days a week, but of course, if the commute gets too arduous, there’d be nothing stopping him from looking for a job closer to home. Flexibility is the key.

With a concept like geoarbitrage, you have to seriously weigh up what you are gaining vs what you are giving up. There’s always going to be a downside, but the thing you have to measure is whether the advantages massively outweigh the disadvantages. The decisions that people are going to make about whether or not to do it are as individual as they are. Some people are deeply rooted to a place for dearly-held emotional reasons and they wouldn’t DREAM of relocating, whereas others could quite easily sell up and move on without a backwards glance at the place they’ve left behind.  Then there are all the people who fall into the middle ground, which is probably most of us.

When I next write about this, it’ll be a post entitled, “Geoarbitrage: all the cool kids are doing it #2”, where I’ll share how I tweaked the concept to come up with a move that suited the Frogdancer family’s situation.  It was something I never expected I would ever do, but in life there’s something I’ve learned: never say never!

 

 

 

 

 

Two years into early(ish) retirement – interview.

January 8, 2020 / / 16 Comments
Yachts from the beach.
Beach views…

I’m always interested when retired people continue writing their blogs, or when people post interviews with people who have already reached early(ish) retirement. So many of us in this space are still working our way towards the time when we can strap on our socks and sandals and skip off towards the sunset, so it gives me great motivation to hear from people who have reached the goal and can let us know what it’s like to live the dream.

Today I have a post from my best friend Blogless Sandy. She and her husband retired a couple of years ago, long enough to settle into it, so I thought it’d be interesting to hear her perspective on this whole retirement thing. The photos she’s attached also means we can literally see her perspective as well!

Here she is:

Blogless Sandy at a vineyard.
After a lazy mid-week lunch at a winery.

I’m Blogless Sandy, aptly named by Frogdancer because my real name is Sandy and I don’t have a blog. Who would have thought an English teacher could be so imaginative!

Anyway, given that Frogdancer is working her way towards retirement and I’m already there, she has asked me to write about my experience of retirement so far, a whole 2½ years of it. This all started after her post quite while back titled “Retire? But what will you DO all day?” and a discussion we had at the time about retirement in general. Frogdancer and I met 24 years ago when our kids were still babies and we’ve remained best friends ever since, so we discuss stuff a lot.

A little bit about me. I’m married with 2 adult children and 2 grandchildren. My husband and I retired to the Mornington Peninsula (about an hour from Melbourne, Australia) 2½ years ago, after selling our large family home in a suburb of Melbourne. My husband, who is 11 years older than me, had just retired. Selling our home and buying a smaller house further from the city meant I could also retire immediately. I was 56, so although not an early retirement by FIRE standards, it was still a lot earlier than most Australians manage.

The beach at the end of her street.
Blogless Sandy, like me, has a dog beach at the end of her street. How handy!

I retired on a Thursday and we moved to our new home (the best house on the Mornington Peninsula) the following Monday. When I look back I contemplate that it could have been a complete disaster. I left our family home of 24 years, my job of 27 years, our friends and everything that was familiar, moved to a totally new location, and all within the space of 4 days. Was I concerned? Not at all… well, if I’m being totally honest, maybe just a little bit.

When I announced to friends and work colleagues that I was retiring and moving, the question asked most often was “But what are you going to do?” I’d never considered that filling my days was going to be a problem, but it seemed to be a concern for others. This is understandable, given we spend a good deal of our lives in the workforce with our schedule dictated by our job. Then when we are at home, for many, much of the time is taken up with raising a family and running a house. Our lives are interspersed with holidays where we get to choose what we want to do, but trying to imagine a life that is essentially one big extended holiday can be difficult.

For me, the biggest change when I retired, apart from the obvious one of not having to work anymore, was the lack of social interaction compared to working in an office environment 4 days a week. Even though we often work with people that we are not necessarily friends with outside work, we tend to socialise quite a bit at work. We usually talk with work colleagues about our weekends, events we go to, activities we participate in and just make comments about things in general. Suddenly all that was gone! It was just me and hubby! But don’t panic, it all worked out fine, without one of us doing serious harm to the other. Just saying though, it was a huge change that I hadn’t really thought about before it happened.

Fortunately for us, we’re both reasonably self-contained people who are quite happy with our own and each other’s company. For people who struggle a little with the whole being on your own thing though, it’s probably worth considering how this will impact you. You might surprise yourself and learn to love all that “aloneness”. You may discover that you’re actually damned good company and that a bit of alone time can be quite replenishing.

Biking near the bathing boxes at Portsea.
Just another afternoon at the office on the beach.

I liked Frogdancer’s post (mentioned above) as she was obviously considering that retirement is not just about travel and sleeping in. The day to day needs to be filled with something too and having a number of projects or interests in mind is a good start. When people asked me what I was going to do in retirement, my response was that for the first 6 months I would sleep, read, knit, take long walks along the beach, spend time with my grandchildren and explore our new location. Then once I got bored with that I would consider what else I wanted to do. Of course, I had projects and activities in mind, but my initial goal was to just unwind and treat the first stage of my retirement as an extended “staycation”. I picked 6 months as an arbitrary length of time, not really knowing if it would take more or less time before the boredom began to set in.

Grandchild running down a path.
Imagine retiring early enough so you can keep up with a toddler?

And there’s that word – boredom – that we all seem to be so afraid of. Now I agree that an extended period of boredom is not a good thing, but I don’t believe that short periods of boredom are all bad. After all, if you’re a bit bored, isn’t that when you start looking for something to do? I know in my life, many a good project or new activity has been kick-started by a little bit of boredom.

One by-product of retirement is that I’ve finally learned to slow down – most of the time anyway. It took quite a while to wind back to a gentler pace, but generally I no longer feel the urgency to get everything done today, not when I can see a whole bunch of ‘todays’ in front of me. Life is not lived at the same frantic pace as before and there is more time to enjoy the small moments. Interestingly too, having learned to slow down, I just don’t need as many things to fill the day. Compared to my pre-retirement life, I now feel like I do a lot of “nothing”. It’s not really that I’m doing nothing of course, but I’m going at a slower pace and enjoying more quiet moments.

Blogless Sandy's dogs snoozing together.
Being able to spend more time with the dogs – sounds good.

I know that before I retired, I generally thought of retirement as a fixed kind of thing. You retire, you do certain things, lead a certain kind of life and that’s it until you’re carried out in a box. I realise now, that for me at least, retirement is more of an evolving process. Initial retirement was the “relax and unwind” phase. After years of raising a family and being in the workforce that’s what I needed. There were lots of sleep-ins and idle mornings, lots of lazing around. There were lots of days with nothing planned and lots of spur of the moment outings. It was wonderful, but I reached a point where I needed more than that. I’m the kind of person who functions better when I have some kind of structure to my week and that’s what I have now.

I like the sameness of familiar activities and pastimes, but I also revel in the challenge of doing new things too. Now, 2½ years into retirement I find I’m busy, but a new kind of busy. I’m busy doing the things that I want to do. I always said that when I retired I wanted to volunteer at an animal shelter, so now I walk the dogs at a shelter one morning a week.

Walking group heading off into the bush.
Taking a hike on a mid-morning Thursday.

I also participate in a walking group one morning each week, always in a different, but nearby location. I get exercise and social interaction and get to explore the local area, all in one activity. We look after our grandchildren 1 or 2 days a week, but that has become fixed days rather than the casual arrangement it started out as. I prefer the fixed arrangement as it fills my need for structure.

Yoga studio overlooking the bush.
Imagine having yoga classes in a studio with this outlook?

I always used to speak about doing yoga or pilates but had never actually done more than talk about it. I no longer had the excuse of being time-poor, so I took up yoga about 15 months ago and currently attend 5 classes a week. Then there’s the small commitment of being a member of the local beach cleaning group and trying to combat the never-ending amount of rubbish that gets left behind or washed up on our local beach. In amongst these things are the outings, the dog walking, the bike rides, the walks along the beach, the catching up with friends, the gardening and the pottering around. Oh, and just a bit of bad news, even in retirement the housework still needs to be done!

It’s a lovely kind of life that I’ve created and I’m very content. That’s not to say things can’t or won’t continue to change though. I feel free to keep creating the kind of retirement I want and as time goes on circumstances are bound to keep changing. We were only recently contemplating that before we know it our caring commitment to our grandchildren will be reduced to just school drops-offs and pick-ups. Then we found out that grandchild number 3 is on the way!

Two grandchildren hand-in-hand.
Little do they know they’ll have company soon…

I spent 12 months volunteering at 2 animal shelters and recently decided to discontinue one of the roles. I was feeling overcommitted (overcommitted in retirement! haha!!) and my role at one of the shelters was very physical and rather thankless. I kept going for the sake of the animals, but ultimately decided to focus my energy on the shelter where I feel my contribution has the most impact and is more valued. If I want to increase my shelter volunteer work again in the future I can easily commit to additional shifts at that same shelter.

As mentioned, I took up yoga about 15 months ago. I was attending classes once or twice a week and decided about 5 months ago to make a bigger commitment. I didn’t feel I was doing my yoga practice justice and wanted to see how I’d feel about the whole yoga thing if I got a bit more serious about it. So now I attend 5 classes a week and yoga is my current obsession!

After another 2½ years of retirement, my weeks may be entirely different. I may decide in the future that I want more in my weeks, less in my weeks, different or new things in my weeks. The beauty of retirement is that it’s an evolving process full of endless possibilities, limited only by what I want it to be.

So don’t be concerned when people ask you what you’re going to do in retirement and you don’t have all the answers. If you have a vague idea of some things you want to do and some interests you might want to explore, you will be able to create the perfect retirement for you.

Spa time with bubbly.
Retirement looks awful, doesn’t it?

It’s me, Frogdancer Jones again!

I really like how Sandy and her husband utilised domestic geoarbitrage in much the same way I did to free up capital that was otherwise locked into real estate. Being able to use that money to downsize and invest has shaved YEARS off her working life (and mine too! It’s 2020 – hello part-time work!!)

Something that she didn’t touch upon is that retirement looks a bit different for her and her ‘hubby’. Blogless Sandy likes a structure to her week, whereas her husband is a more ‘go with the flow’ person who takes each day as it comes.

For me, looking at how they’ve settled into their new life down on the Peninsula, it’s made early(ish) retirement seem far less risky and scary. They live life in their own ways and they’re very happy. I could do with a piece of that…

Thanks, Blogless Sandy. Enjoy your beach and your spa!

Does gaming help to develop grit?

December 22, 2019 / / 2 Comments
Ryan24 with a bandaged foot.
Home for the weekend.

Around 3 days ago I wrote about my son, Ryan24, and a conversation we had in the ER with a nurse when we were in there tending to his burned foot. The foot was damaged more deeply than initially thought and although he’s home for the weekend, he’ll need a couple of skin grafts.

The pain he’s constantly in is strong. Even after 9 days after it happened, on a scale of 1 – 10 his level is a 6 on the strong pain killers and a 9 when they wear off. Yet he doesn’t complain. He hasn’t asked to go back to the ER for stronger stuff. He’s told off David26 and me when we offer to help him with things, saying, “Leave me my independence!”

He’s displaying grit. But where does it come from? Are you born with it or is it something that is learned over time? And how can this help us along the road to financial freedom?

The two of us have talked more about pain in the last few days than we have in his entire lifetime. He’s very articulate about it, which I guess is hardly surprising, given the situation. On Friday morning, a couple of hours after standing beside his bed watching him undergo the most pain I’ve ever seen a human being experience when his bandage was being replaced after a debridement procedure the night before, he explained what intense pain is like.

“Mostly pain is easy to deal with because you can do something to ease it, like moving in a different way or something. But this is like having my foot dipped in molten lava and there’s nothing I can do to stop it. You have a pain level you know is unbearable, but up till then, you can deal with it. But when it goes a level about that, and then a level above that… and then keeps on going, there are only two things that can help you. Tears and mental gymnastics.”

(The bold emphasis is mine.)

Ryan24 is a gamer from way back. He’s been playing on consoles and computers since he was a wee tacker. He’s undergone more quests and challenges than you’ve had hot dinners. He’s used to being confronted with a danger, a problem or a dilemma and then working his way through it logically. According to his friends, he’s a good man to have on the team because he stays level-headed in a crisis and keeps the bigger picture in mind. He also has amazing map-reading skills, but that’s beside the point for this post.

This is a financial independence blog, but like the post I linked to earlier, it strikes me that Rya24 is exhibiting many of the traits that lead to success with handling money.

Like so many people who are appalled when they realise how deeply they’ve dug themselves into debt, he’s in a crisis situation. Some people promptly put their heads back into the sand and refuse to deal with the problem they’ve created for themselves. Others choose to take a clear look at their situation and start taking steps to gain relief from it.

Ryan24 is choosing to take the long view of his problem. He knows that this won’t last forever and the best thing he can do now is to listen to the experts and do everything he can to move through this, no matter how painful it may be in the short-term. His foot hurts less when he elevates it, but he chooses to lower it, endure the pain and move around every hour or so, because it’ll help his recovery further down the track if there’s more blood flow to the area.

Similarly, someone enduring the pain of financial insecurity, (which I can personally attest to being a definite mental pain), can choose to also take the long-term view. When you keep the thought and belief that this will not last forever if I make some changes firmly in the forefront of your mind, it makes it easier to make the decisions and sacrifices you need to get out of the hole easier and more likely to be made.

The “mental gymnastics” that Ryan24 alluded to are very much a gamer thing, but anyone can harness them. He’s giving himself challenges to distract himself, such as single-handedly moving his desktop computer box from his room to the man cave, so he could use his computer with the tv as a screen and be able to elevate his foot on the ottoman, as pictured. He’s wrapped all his Christmas presents, sitting on the floor so his foot is on the same level as the rest of him. Yesterday he had the tv playing clip upon clip of some American painter teaching people how to paint landscapes. He wasn’t watching it, but when I asked why he had it on he replied, “Because his voice is so calming.”

Take a listen. His voice is so soothing it could put a raging toddler to sleep!

Just like Ryan24, someone working their way out of a financial problem can use distractions and challenges to help them along the way. When I was spending all those years raising 4 children on my own and doggedly digging my way out from under the mortgage, I used to do things like see how many days I could stay out of the supermarket, using things I already had in the pantry and fridge to feed us. If you stay out of the shops you can’t be tempted to buy extra things you don’t need, right?

When I got a 9 month contract at my school, I bought a new-to-us car and vowed I’d pay off the 20K loan by the end of the contract, just in case I was out of work after it ran out. It was a stretch, but I did it. I felt like I was super victorious every time I could scrape together an extra few dollars each fortnight to throw at the debt. Meeting challenges makes you feel good. If you feel good you’ll keep on until you hit that goal. I used this tactic a LOT to keep me on the track to providing security for my boys.

That Bob Ross ploy by Ryan24 to distract himself? Costs him nothing. Yet it provides a partial solution to his problem of being overwhelmed by strong emotions when the pain hits. No one wants a panic attack! For the rest of us, there are distractions all around that we can use to take our minds off what we’re being “deprived” of as we work our way out of financial insecurity towards financial independence.

Entertainment and fun doesn’t have to cost the earth. What I found useful was to rejig some activities to enable me to still have fun but not sabotage my over-arching financial goals. For instance, when I was undergoing my 18-month stint of paying for bridging finance on my current house at 74% of my take-home pay, I had to cut my expenses to nothing. I didn’t go out very often, but I took out an $18/month Netflix subscription as my entertainment. Worked a treat! When I wanted to see the girls, I invited them to a potluck at my place instead of us meeting at a restaurant. This has become a regular thing each holidays.

Another “mental gymnastic” that I’m pretty sure Ryan24 is doing is to see how long he can stretch out the time before he takes more pain killers. This is an easily do-able tactic for the financially challenged person. How long can you go before you buy that item you really want? Can you stretch out the use of whatever-it-is before replacing it? Can you keep going for another day/week/month at that side-hustle before you pack it in? How long can you go??

Any of these challenges to stretch things out is bound to keep more money in your pocket that you can throw at your situation to make progress. If your financial goal is to put together some savings in the bank, seeing that account total rise steadily and adding to it becomes a game. It becomes addictive, almost. Seeing that debt total fall, at first slowly, then faster and faster as the amount gets smaller and the principal being paid off gets bigger is exciting. You start to LOOK for ways to avoid spending so you can see that total fall even faster. It’s fun.

Now, I’m in no way advocating that the best way to develop grit is to spill boiling hot coffee on your foot. Ryan24 assures me very eloquently that it isn’t much fun. But there are traits that we all develop from areas far outside the financial sphere that we can harness and use to work towards our goals of financial security and freedom.

Maybe a slight gaming addiction is working out to be a good thing after all?

Poverty leaves a mark.

November 30, 2019 / / 30 Comments
Peas in a bowl.
A bowl of ‘free’ peas that grew from the pea straw mulch. We’ve been eating ‘free’ peas for over 2 months.

It’s no secret that financially nowadays, I’m doing ok. Working is a choice, not a necessity, which is why next year I’m dropping back to part-time. Two of the boys have moved out, which means I only have 2 on my hands, but they’re adults so apart from feeding and housing them, they run their own lives. Money isn’t tight anymore… and yet I still cling to my economies. Why is that?

Three years ago I moved into The Best House in Melbourne. After waiting 18 months for my geo-arbitrage plan to come to fruition, the money came through and I installed some gorgeous landscaping in the back yard, including some wicking veggie beds. When the soil the landscaper used turned out to be awful, I had a thought. Why not bring home the veggie scraps from work? The canteen services 2,400 kids and 200 teachers, while the Food Tech rooms throw out heaps of scraps. Compost galore – for free!

A year later, the system is still going strong. I have a little container on my desk that teachers put their scraps in, (you wouldn’t believe how many bananas they go through each day!); the Food Tech room leaves a bag of scraps for me most days, but the real bonanza is the canteen every Wednesday and Friday.

Yesterday I was chatting with the manager as I lifted out the garbage bag from the bin and popped in a fresh one for next week.

“I asked the timetabler if I could work Wednesdays and Fridays next year so I can keep picking up the scraps and it looks like I’ve got them,” I said.

“That’s great,” Tania replied. “Actually, I’m a bit surprised that you’re still doing this. Isn’t it a hassle?”

Wicking beds overflowing with plants.
Some of these plants are what has grown from last year’s plants – self-sown. Some are from the pea straw. Most have grown from the compost materials I brought home from school.

“Sometimes,” I said. Then I went on to say something about organic fertiliser or some such thing, to make me sound legit, like a real tree-hugger.

But really??

I want free fertiliser. Why would I pass up the chance to improve my garden’s soil for free, even if – yes – sometimes it IS a PIA to race down there and then drag it to the car during lunchtimes. Do you know how many bags of compost I would’ve had to buy over the past year to equal what the school scraps + the compost tumblers + time have produced???

Well, I don’t know either, but it would have been a lot of bags bought and a LOT of money spent.

As I was carrying that heavy garbage full of veggie scraps back along the street towards my car, I was thinking about that little conversation. She’s right. Doing this twice a week every week IS a hassle. As soon as I get home I have to deal with the compost, either putting it in the tumbling compost bins or bringing it inside and pulverising some of it in the thermomix for the worms. Sometimes, after school when I get back to the car, it smells a little… fruit cocktail-ish, especially in summer.

This would be more than enough to turn most people off, but not me. Now that I know this resource is here, it’d be such a waste not to use it.

I walked and thought. Maybe people who haven’t had to struggle very much are quicker to let inconvenient things go? I remembered back to the days when the kids were small. They’d go and stay with their father every two weeks, and at the end of the weekend sometimes they’d come home with a box of fruit and veggies from the fruit shop he owned.

Child support was erratic in those days. Money was tight. If those boys came through the door with a box of free food I made sure we used EVERY scrap of it. Anything that got thrown out was like me throwing away money. Child support money. I wasn’t in a position to do that.

Rosemary in a pot.
I grow herbs, like this Rosemary. I cut and dry it sometimes, so I have both fresh and dried whenever I need it. Herbs are ridiculously expensive – grow your own if you can.

Sometimes leftover food gets put into the staff common room. Unused loaves of bread from a fund-raising sausage sizzle, lemons from someone’s tree, a box of tomatoes… that sort of thing. If they’re placed on the tables, they’re free game for anyone who wants them.

It’s astonishing to me how those items can sit there for hours without being snapped up. People, even the young teachers with massive mortgages and/or young kids, won’t pick up a loaf of free bread or a handful of tomatoes to make a pasta sauce for dinner with. I don’t understand it. They’ll let perfectly good food sit there and potentially go to waste because… I don’t know… maybe they don’t want to be seen walking back to their desks with a loaf of yesterday’s bread?

Three days ago someone left a big box piled with potatoes on the table. I walked into the common room to fill up my water bottle and thought, “Great! Both boys are home for dinner tonight,’ so I took 3 potatoes. All good.

The next morning I walked in and there were still some potatoes in the box. Really?? They were the oddly shaped ones; the ones where you’d have to put a little bit of effort into peeling them to get all the skin off. But they were still fine. I waited until recess, then said loudly, “Well, if no one else wants them, I’ll take them!” and I scooped them up.

As I was on my way to my desk, someone said, “It’s great you’re using them for your compost.” I smiled and nodded, but inside I was thinking, ‘Are you crazy? This is another free serve of potatoes for dinner!’

Spice rack.
The dried herbs end up here.

Now, I’m no different from the rest of the staff in many ways. We are all middle-class, we all live within an hour’s drive of the school, we’re all tertiary educated, we’ve all travelled overseas. Of course, I’m astonishingly good-looking, but so are some of the others.

I think the real difference when it comes to things like this is that most of them haven’t been on the bare bones of their ar**s financially. Like I said at the beginning of this post, financially I’m doing ok now. But the years and years of being totally responsible for the well-being of the 4 boys when I was on the sole parents’ pension and with child support at (usually) $20/month have left their mark.

I had a ridiculously small amount of money to manage each fortnight. The mortgage had to be paid, then the bills and then what was leftover was spread among groceries, clothing – little boys grow fast! – and everything else. I owned one credit card, but I paid it off each month. I knew that if I strayed too far into debt I could lose the house and then the boys and I would be even more vulnerable than we were.

Every dollar was important.

When my aunt asked me if I’d like to pick up the unsold bread at a bakery in East Brighton every Tuesday night, I leapt at it. We kept going back to that bakery for the next 15 years. Every Tuesday we’d put 3 laundry baskets in the back of the station wagon and we’d pick up whatever hadn’t sold that day. That shop saved my family thousands of dollars over the time we went there.

Baskets of bread, pies, sausage rolls, bagels, hot cross buns, Boston buns – you name it, it was there. The best rye bread I’ve ever tasted, to this day. The boys and I would go in the back door of the shop and we’d load up the baskets. One basket was for us. I’d put in enough bread to last us a week ( I had a huge freezer) and enough pies and baked goods for dinner that night. One basket would be for friends, while the third one (once I was back at school) was filled with morning tea items to take to work the following day to put in the common room.

Later, when I had the chooks, I’d bring home bread and the unwanted pies and pasties to feed them for a day. It made the chicken feed last that little bit longer.

Feeding my family this unwanted bread definitely tipped the balance of my finances towards the black. It was an absolute life-line that I’ll always be so grateful for. Was it a hassle to drive 2 suburbs away every Tuesday night to do this. YES. It was NEVER convenient. But I did it every week because it was free food and it saved my family from some desperate times.

Me with some bread.
Me, back in 2014, with a laundry basketful of bread in the background.

Is it any wonder now that when I see a box of lemons on the table in the common room, I’ll take a couple? Or when the sausage sizzle bread is piled up, I’ll grab a loaf? Poverty leaves a mark on you, deep inside. On the outside, I’m the same as everyone else at work. But I think about money a little differently.

To me, there’s no shame in taking a loaf of free bread or a handful of potatoes in front of everyone in the room. Why would there be? Free food (or free compost) is a way of eking out my resources just a little bit longer.

Past Frogdancer had to do that as a way of ensuring the boys survived and thrived. Learning how to satisfy our all of our needs and some of our wants wasn’t easy and there were many tears shed and scary moments endured along the way.

As for Present Frogdancer? Because of Past Frogdancer’s efforts, I’m doing ok. But she and I are both agreed – if something is going for free and you can use it, it’s criminally wasteful not to take it and be grateful.

Even if it’s a hassle.

Why an Emergency Fund is a very good thing to have.

November 7, 2019 / / 12 Comments

I guess I’ve always been a bit of a saver. When I was in my teens and twenties I’d willingly save whenever I had a goal in mind, but if I didn’t, I’d tend to drift along the path of life, buying what made me happy in the moment. Heck, in my 20’s I had a VERY expensive dog breeding and showing hobby, which sucked up thousands of dollars over the time I did it. Poppy and Jeff are the descendants of that breeding program, so I’m very glad I did it!

Back in those days, I had no thought for an emergency fund, as I was living with my boyfriend/fiance who had his own small business. In those early days, money wasn’t a problem. It was predominately a cash business. When his accountant asked if he wanted to pay tax on his earnings and A said no, the accountant told him to “Piss it all up against the wall then!”

Dimly, this worried me. It seemed like such a waste. But I told myself it wasn’t my business and it was A’s money, not mine. However, things change. By the time we were married some stiff competition had moved into the town we were living in and the financial good times began to slip away.

Ten years later, by the time I walked out, our finances were dire. By that stage, we had 4 boys under 5, a house with a mortgage just under 100K, two very old and worthless cars and $60 cash each.

Obviously it was easier for my ex to move out of the family home and for the boys and me to stay put while we tried to work out what was going to come next. I allowed him to stay for 6 weeks to get some money together while I slept on the couch. I’m short, but even so, it wasn’t the comfiest of beds! After 6 weeks I asked him when he was moving out and he said, “I haven’t arranged anything. I thought you’d change your mind by now. ” After being informed in a fairly direct way that no, I needed time apart to see if there was anything left of the marriage to save, he borrowed some money from his sister and moved out a couple of days later.

My ex had no money and very little cash-flow from his business, so in lieu of any child support, he agreed to keep paying the mortgage. Meanwhile, I went on what was then called the “Sole Parents’ Pension’, which gave me around $300/week to support the boys.

I felt extremely vulnerable. Every time I looked at the boys I grew more and more determined that they wouldn’t suffer for the mistakes that I’d made in some of my life choices.

I knew I needed some cash to stand between us and a cruel, hard world. I hadn’t heard of an ‘Emergency Fund’ then, so in my head I called it a “Buffer Zone” I decided a thousand dollars would make me feel safer. It seemed like an insurmountable sum to find, but I knew I had to try.

So I started saving. The next 3 months were TIGHT. Every bill was paid as soon as it entered the house and I scrimped and scraped on everything else. If we had a meat meal, the boys had all the meat and I lived on eggs and veggies. Sometimes, if I was really desperate, I’d cut the end off a sausage and devour it. I felt guilty, but sometimes smelling those snags cooking was more than flesh and blood could stand!

The boys’ protein came from mince, sausages, tins of tuna and eggs. We didn’t waste an ounce of food. Funny thing is, some of the meals I made over this time have morphed into our family’s comfort foods. Scotch oatcakes, tuna mornay, cauliflower + macaroni cheese… funny how desperation can turn into fond dinner requests!

At around the 3 month mark I’d saved the one thousand dollars. I breathed a sigh of relief and felt a glimmer of pride. I’d done it! We were safe! But then a little niggle of something made me decide to call the bank to check on how the mortgage was going…

“I’m sorry Mrs ******, but your mortgage is $968 in arrears,” said the nice bank man on the end of the phone. I nearly dropped the receiver. How could this be possible? A said he’d pay the mortgage. It was supposed to be his way of supporting his own children, for God’s sake!!!

My first reaction was disbelief. Then it was blinding anger. How could he recklessly put the boys’ security at stake like that?

My third reaction was a mix of resignation and relief when I thought of the Buffer Zone money. It’d cover the arrears. I loaded the boys up into the double stroller and took a walk down to the bank. Within half an hour of that phone call, our account was back where it should be and I now had around $30 to my name. Half what I walked away with 3 months ago when I left my husband. But the house was safe, which meant so were the boys.

If that doesn’t bring home to a person how important it is to have an emergency fund, then I guess nothing will. If I didn’t have that money put aside and the bill for the mortgage got worse and worse, the trajectory of how our lives turned out would have been vastly different.

That little house was the place we lived in for the next 20-odd years, after I bought my ex out in the property settlement a year later. It was in one of the best public school zones in Melbourne and so my boys got a great education. As an unexpected bonus, I’ve been working at the same school for the last 16 years and so my little family ended up having a stable income, no matter what A decided to do with child support. And in 2018, the sale of that little house enabled me to utilise Geoarbitrage in the same city and release a tonne of equity which has probably saved me from a decade of having to work.

As soon as the boys and I walked back from the bank all those years ago, I started building up that Emergency Fund again. When I was at home with them, before Evan, my youngest, started school, my Buffer Zone was 1K. We had to use it a lot as things cropped up, sometimes the Emergency Fund would be depleted and I’d be reminded yet again about how essential it was to have money put away. You just have to read my ‘About‘ page to see that!

However as the years rolled on and I was in a secure job, as the level of cash in the Emergency Find rose, so did the likelihood of me having to tap it. It’s strange how that works.

A few months ago I had to tap it for the first time in years. Our hot water service blew up and I wanted to replace it with a gas continuous hot water service. What could have been a financial drama was just a minor inconvenience, because I had the money on hand to pay for it. I’m in the process of building it back up now.

Sometimes I see posts stating that the need for an emergency fund is overstated and that people would be better off putting that money into the share market and letting it ride. That’s pure stupidity in my opinion. Having a few grand put aside in an online high-interest account that you don’t touch unless something totally unexpected comes up – this won’t slow you down towards your march towards financial independence! Think about it. We’re looking to amass hundreds of thousands of dollars. Ten grand or so in a savings account is a drop in the bucket compared with that.

But by gum! It’ll help you sleep at night.

Putting infrastructure in place for retirement #4.

October 14, 2019 / / 6 Comments
House plan for The Best House in Melbourne.

Some of the things that people put in place for retirement are big projects, such as the landscaping I’ve done around the house and the verandah roof I’m currently organising to have built. These things have cost many thousands of dollars, but will reap huge benefits once I leave work and have the time to enjoy them. But not everything has to be a massive project. Sometimes it’s as simple as rearranging a few paintings and pieces of furniture.

I’ve put the house plan of The Best House In Melbourne up on the blog before, when I wrote about how I geoarbitraged my family into it. When we moved in, I had 2 sons in their 20’s still living with me. Naturally, they chose bedrooms 3 and 4 to live in, as far away from their favourite mother as possible.

Evan22, who was at that stage Evan20, chose to keep living in the old house until it was demolished, a move that we thought would only be about 6 months but ended up being almost 18 months. When he came home there was only one bedroom left – bedroom 2.

It’s not a bad space. It has plenty of storage and an inbuilt desk, perfect for putting a huge tv screen on for playing games. It’s south-facing, so it’s bright enough without being too dazzling for a bedroom. It has ducted gas heating for winter and a fan for summer and the room opens up to my main living area, which in summer is cooled by a massive refrigerative air conditioner, so climate control is a breeze.

This was his room until he left to live in Ballarat, a regional town about 2 hours from here. He’s doing an acting degree at the university there. He uses this room as a base when he’s in Melbourne, but that’s only a few nights here and there.

He’s pretty much not coming home for 2 years and will probably move straight out again once his course is finished, so it’s time to RECLAIM THE ROOM.

This will be my guest room/sewing room, at least until Jordan26 moves out and bedroom 4 on the house plan becomes free for me to use as a study. But this room needs to be functional as a guest room.

In years to come, as Old Lady Frogdancer totters towards old age, she’ll have friends and relatives who’ll sometimes want to stay. There’s nothing better than having dinner and then sitting on the couch till the wee hours, telling stories, drinking wine and laughing. It’s even better if people can stay the night and not have to worry about driving or getting Ubers.

Evan22 had covered the walls with photos and the wardrobe doors with pages from a script he was writing. Imagine hundreds of blobs of Blutack everywhere. I used to walk in, take a look at the photos still up there and the blue spots left on the wall from the photos he took with him, silently scream and hurriedly shut the door behind me.

The photos are now gone. He did it without me even asking. There’s one small spot up near the cornice where the paint pulled away, but he says that the rest of the paintwork is fine. I was so relieved! I was certain that I’d have to paint the whole room.

I bought a double bed for him when he moved back in. He’s barely used it and he wanted to take it with him up to Ballarat. The thought of taking it apart, then transporting the bed and mattress up there, then putting it all back together again while still having to buy a bed to put in my guest room was all too much.

I suggested to Evan22 that I simply buy him a new bed, as I’d have to buy one anyway, and we’d get it delivered to Ballarat. He was rapt and he’s already got me to agree to a Queen-sized bed. (What can I say? He’s my baby… plus he’s over 6′ tall.)

This painting was bought in Bali back in 2006. Works beautifully in here.

When I moved all of that in, I looked at the space and thought… “Hang on! My bright ladies from Bali would look perfect in here!”

So the bed is taken care of. Fortunate Frogdancer strikes again for the doona. When we moved here, I bought a new wool doona for my bed and stupidly bought a Queen sized one. You’d think that would be perfect for a Queen-sized bed but as we all know, you really need a King-sized doona for a queen-sized bed. Idiot! But now, I just moved my doona to the guest room, complete with the beautiful yellow and white striped doona cover, and bought a proper-sized doona for my bed.

When the boys and I went to Bali, way back in 2006, we came back with lots of wood carvings, lots of jewellery and LOTS of art. It cost more to frame each piece than it did to actually buy them, but 13 years later, they’re still adorning the walls of our house. The yellow of the doona cover picks up the yellow in the painting and it looks great.

I’ll just need to look out for a mirror to put on the wall over the desk and then the room will pretty much be complete as a guest room. I know it’s only a little job, but it’s one step closer to having the house ready for retirement.

Having another pair of eyes look over my figures.

September 11, 2019 / / 11 Comments

On Monday the school had people from VicSuper come out to talk with people about their retirement plans. VicSuper is the default retirement company for teachers, so the vast majority of staff are with them. I don’t have my superannuation with them anymore, but I booked a half-hour slot during my lunch hour to have a chat with someone anyway. I thought that they wouldn’t be able to talk in detail, but I could at least have someone more mathematically gifted than myself to have a look at what I’ve set up and tell me if I’m on the right track or not.

Let’s call her ‘Ms VS’. It has a certain ring to it.

  • For the non-Aussies: Superannuation is the name for our retirement funds. Every employer is required to pay in 9.5% of every employee’s wage into a super fund of the employee’s choice. It guarantees that by the time people reach retirement, they’ll have at least some money behind them, instead of solely relying on the Age Pension.

When we first starting talking, I said to her that although I’ve been working full-time, I’m dropping back to part-time next year as a sort of glide-path towards retirement. I said that retirement might be 3 years off (when I can access my super) or it could be as soon as 1 year off, if I find that I’m still hankering towards total freedom over my days even with the reduced hours.

Apparently, from what Ms VS said later, this is pretty standard. She said that she normally doesn’t have people book a time with her unless they’re very close to retirement, when they suddenly become aware that they’ll have to rely on what they’ve put away in their super. She clicked her pen, leaned forward and asked me if I knew what I have in my investments.

Did I know what I have in my investments?!? Little did she know that she was talking to Frogdancer Jones. I’ve been reading blogs about net worth, share portfolios, savings accounts, superannuation and the like for YEARS. Hell, with all the US blogs I’ve read, I know more about American retirement accounts than you could shake a stick at!

I was primed, ready and prepared.

I had period 1 off that day so I had time to make a full list for her. Well, to be honest, I just took all my numbers from the ‘Net Worth Table’ I have in the cloud, which I update at the end of every month. Took me less than 5 minutes. I flipped open my notebook at the correct page and passed it across.

I don’t think Ms VS meets a lot of FIRE-y people in her line of work.

She was pretty surprised, not so much at my figures, though she said they were unusual, but by how I’d thought about the share market ups and downs and where I’d pull money from when the market tanks. She didn’t need to explain how the share market ebbs and flows; how risk can affect people in different ways depending on how close they are to retirement; how, if I retired earlier than 59, how I’d have to find the money to fund my lifestyle and what a safe withdrawal rate was, etc, etc.

Thank you, blogs and books in the FIRE movement! I looked like I had a financial brain!!

The talk about my actual figures only took up about half the time, so we moved on to talk about other things, which is why I wanted to write this. Some of what she said was scary, particularly for women.

I guess when we’re interested in FI and we read all the blogs and books and start to absorb the knowledge, we assume that most people are more financially literate than they really are. According to Ms Vs, this is far from the truth.

She said that when I mentioned that I was looking to pull the pin in the next year or two, she thought I’d be like most of the people who come to see her. They give no thought to their retirement, assuming that the compulsory 9.5% of our wages that our employers are legally required to put into Super is enough. Then, a year or two out from retirement, they decide to look at their figures, they have a heart attack at what they see and they come running to see what they can do about it.

I guess that’s not so much of a surprise – we hear this a lot about huge swathes of the population not getting ready for retirement in time. At the risk of sounding like a Nelly Know-it-all though: I just don’t understand that mentality. When I was in my 30’s and 40’s I deliberately ignored putting extra money into my retirement account because I made a conscious choice to pay off my house first. Security for the boys and I was my paramount objective. But 3 weeks after I’d made that last mortgage repayment, I was stressing over what I had to do to get my Superannuation account looking more lively. Maybe that’s the blessing/curse of being a long-term thinker??

“I see a lot of women in their 50’s and 60’s who come in after a divorce,” Ms VS said. “They’ve only got around 70K in their Super and they still have a mortgage. They’ve never dealt with finances in their lives before and it’s a scary time for them.”

I smiled. “I went through the divorce thing twenty-two years ago,” I said.

“You’ve had time to recover,” Ms VS said. “It’s really good to see a woman as well-prepared as you. Though I suppose you’ve had to be organised, being on your own.”

“I wasn’t on my own!” I said. “I also had 4 kids under 5 with me.”

Photo of my mini wire-haired dachshund, Scout.
Miss Scout – anyone who’s owned Dachshunds, like Ms VS and I, are part of a special club. 🙂

We talked a bit about where the boys and I started from, veered off into talking about dachshunds, (because why wouldn’t we?) then back onto finances.

“Have you ever taken what you’d consider being a financial risk to get into the position you’re now in?” she asked.

“OMG, yes,” I said. “Years ago, back when the boys were still in school, I decided to take a 15K pay cut from teaching by dropping a day and using that time to run a group of Thermomix consultants as a team leader. 15K was a lot of money to me back then… well, it still is!… but I was assured that if I worked hard I could pull in 30K. Turned out to be true, so I kept doing that for 3 or 4 years.

“Then, when I decided to go into partnership with a developer and draw up plans to put a couple of massive townhouses on my property, I took on a 750K bridging loan when I bought The Best House In Melbourne and still owned the original place. The interest payments took up over 70% of my take-home pay. I thought it’d be for 6 months or so but the council took so long to approve things that it was 18 months before I was able to sell the property with approved plans and pay off my new place. I was terrified the property bubble would burst, but it turned out that I sold at the peak of the market so, in the end, it worked out. It was a calculated risk – but it paid off.”

We talked about whether I’d seen a financial planner. I said I hadn’t and she said, “You’ve managed very well so far, so why would you hand it all over to someone else and pay them a fee to look after it for you? “

I said that before I leave work, I want to see someone to stress-test my plans in case there was something I’ve missed, and she thought that was a good idea.

As the bell for the end of lunchtime rang and I got up to go, she said, “It’s rare that I see someone who’s all over it like you are – and if I do, they’re usually Maths teachers.”

I’m glad that I was able to fly the flag for the Drama and English teachers for a change!

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