Making it all Work Financially; How Do They Do It?

What do you have to show for all of the money you have earnt over your working life time?

I found myself pondering this question the other day on the way to work.

Let's face it, we spend more time with the people we work with then with anybody else, and we spend more time trying to earn our keep then any other activity, so what's the point?

Why do we work so hard? Why do we bust our guts working 40 + hours a week, and often trying to score as much overtime that we can for some extra cash, or taking on second jobs just to be able to have a few more pennies to our name?

I guess the answer is to have a better life, or, for some, to be able to afford to live, and to be able to obtain all of the commodities that we'd like to make our lives comfortable.

So why then, is it, that we often get to our tax return, and scratch our heads over the amount of money that we have earnt, versus what we actually have to show for it. When we look back over the year that was, sometimes we find ourselves laughing at all of our drunken nights, or big retail therapy splurges, but are these the things that we really work towards?

Then, when we start thinking about what we really want, we find ourselves getting nervous, wondering how on earth we'll ever be able to afford to manage our spending or squeeze in repayments for that brand new car, or flash new house, on an already tight budget, that you have to work 40+ hours a week to have in your bank account.

From my own experiences, I truly believe that it's not much how you earn that dictates what you do or don't have in your life, it's more about how you choose to spend your money that counts.

If you really want something, then you will learn how to go without other things, in order to be able to afford that special purchase.

So what on earth am I talking about? Of course it matters how much you earn!

Well true, some people do work full time and still manage to be below the poverty line, struggling to pay rent, but I would argue that the majority of people, would earn roughly $40,000 plus a year, and could therefore afford to go on a holiday, or pay for a house, if that is what they really wanted.

My experience

Lately, my partner and I have been asked, how do we do it financially? We are both 25 and we own 2 properties, one in which we live in, and the other an investment property in an Australian capital city. Last year we performed some serious DIY and added an outside area to our investment property, as well as turning a shed into a granny flat with an ensuite.

At the same time as managing repayments, we are also paying for a wedding, we still manage to have a social life, and we can still travel overseas.

So how we do make ends meet? How do we manage to have any money left in the kitty after the bills?

Well, my partner and I am super lucky and we both work. We have always shared our money, in a joint bank account.

Our secret is to live off of one wage, and save the entire other pay packet.

When we bought our first house, the loan was a super small $60,000, just so that we could get in the market. Yes the house is very average, and yes, many people have told us that it needs a bulldozer, but at the end of the day, the repayments that we make each fortnight are less then the amount that we would be paying for rent, and we get to keep the house! It is going to need some tender loving care and money spent on it to bring it up to scratch, but it is a renovators delight and we're super excited to work on it next year. The fact is, that it's affordable, liveable, and gave us enough equity to be able to buy our house in Adelaide.

Which leads me on to our investment property. Luckily for us, my fiancee was always a forward thinking man, and when he bought the first place, he knew that one day we'd be able to use the equity on that property, as part of a deposit for our next big buy.

When we were looking for our second house to buy, we knew that it was only for investment proposes, and therefore, we had to firstly check out how much on average, people would pay for rent in the city that we bought. Once we learnt that, we knew what kind of a price tag that we could look for, as we knew that the repayments would have to be close to the amount that we could charge the house out for, for rent, so that eventually, the renter's could pay off our property. It wasn't an easy task. On average, fortnightly rent in the city we were looking in was roughly $600 to $700. At the time that we were looking for property, interest rates were quite high, which meant that we would've only been able to afford a house for around $280,000, with repayments that would be covered by our rental income. An evaluation of our first property, confirmed the amount of equity that we'd have, and as a result, we only needed to save $10,000 for our next property. As we were keen to buy a house over a unit, we had to do some serious researching in newspapers and on websites, for property that met our criteria (3 bedrooms, large backyard, low maintenance gardens, little to no renovating needed on the inside, ability to add value with extensions, shed, parking, close to shops and public transport, safe location etc). We ended up finding a house that ticked all of the boxes, and fortunately enough, it was close to our budget. In the end, we spent $320,000 on our investment property. As the interest rates dropped, so did the repayments.

Now we have renter's in our investment property, who fortunately enough for us, cover our repayments. All we need to pay for is water, council rates, maintenance and a real estate agent who manages the tenant and the property to ensure that both are looked after, and repayments are made on time.

One of our wages pays for these additional costs, and the repayments on the house that we live in, as well as all of the bills (food, electricity, gas, property insurance, car insurance, car registration, food, water, council rates on both properties, phones, emergency services levy, income protection, mainytenance etc).

The entire other pay we save.

That gives us enough money each year to be able to afford a holiday, or renovations to improve our properties, or to pay for the wedding, as we are this year.

We have managed to cut down our living costs to be bare minimal, so that we can still afford to buy new cloths, go out for dinner, holiday, renovate and enjoy life.

We probably spend $50 per week, if that on food. We buy a meat pack

once a month for a local butcher worth $100 and that lasts us. We buy meat on special, frozen vegetables, tinned foods, pasta, tuna, potatoes and food that is filling, yet delicious.

We have some fairly basic foods that we eat regularly ie pasta bakes, tuna mornay, baked potatoes, home made pizza, roasts, stews, soups, curries, bbqs, gnocci, and the such, that are all very cheap to make and last a couple of days.

We turn switches off at the powerpoints, and rarely use the heater and airconditioner unless it's ridicously hot or cold to save power.

We only run one car, so that's only one lot of registration and insurance, tyres, services and petrol per year.

We use our mobile phones are wi fi hot spots, instead of paying for the internet sperately.

We are both on $59 a month plans, that we never go over as we have chosen plans that suit our needs.

We buy clothes at factory direct outlets so that we still score the big brands and decently made clothes, but at a fraction of the price.

We give ourselves a budget when we go out, and we make sure that we don't go over it so that we don't regret it the next day when we've got major hangovers and can't afford rent because we over spent on beverages.

We allow each other a certain amount of spending money per week, which can be used at our own disgression, but we don't go over it ie Mick buys a carton of beer and I might buy a jumper or have a massage. 

When special events come up that require spending out of the ordinary, we look at our budget and shuffle things around so that we don't miss out.

We try to pack our lunches for work instead of buying them (but we do splurge occasionally).

It's not really a matter of being tight asses, it's just a matter of knowing where your money is going, and where you can save, so that you can afford to live the lifestyle that you want.

In no way are my partner and I expert budgeters. Of course there are nights when we get carried away with friends and spend way too much that we're scared to check the bank account the next day. We've had to borrow money from our parents from time to time to get through the end of the month, and we've had to take out a loan to help pay for our verandah extensions when we performed major renovations last year that we pay off each fortnight.

But what we try to do is always be mindful of the life that we want to live, when making big purchases. Do we really need to buy surround sound on an interest free loan? Probably not. Do we really want to have a credit card to be able to afford that amazing honeymoon? No. Do we really need to sign up to every online website and spend money on deals that are too good to be true on items that we probably don't need anyway? Certainly not.

What we do want is to be able to eventually afford our dream home and reliable car, while still travelling the world and having an active social life, and to do that, we must be mindful of our wants versus our needs.

Do you have any tips for budgeting?

Look after yourself and those around you,

Kirsty xxx