About MoneySecrets: MoneySecrets offers a peek into the financial lives of our fellow Kiwis. The story below was written using pseudonyms to remain anonymous. When commenting, please remember that the writer has laid bare their financial life, which can be a scary thing to do. Please be kind, and enjoy!
INTRODUCTION
Hiya! I’m Angela. I’m 33, single, and work full time in project management for an engineering company. My side hustle is working with horses, one day a month.
I live in a main city 4 or 5 days a week for work reasons, and spend the remaining 2 or 3 days in my home town, on mum’s small lifestyle block. My two horses and my cat live with mum.
In the city, I live close to my work with a minimal commute. I spend about 4 hours on the road every week commuting “home” and back.
| Earning and spending summary | |
|---|---|
| Annual income | $106,450 |
| Less tax and payroll deductions | -$20,915 |
| Less annual spending | -$80,833 |
| Equals remaining income | $4,702 |
| Net worth summary | |
|---|---|
| Total assets | $1,189,800 |
| Less total debt | -$507,250 |
| Equals net worth | $682,550 |
FINANCIAL GOALS
I want to increase my property portfolio to increase my passive income.
I want to continue my career development - a side effect of increased qualifications, responsibility and accountability will be increased income. However I believe my company will instigate a freeze on salary increases to help them navigate the COVID fallout - the other possibility is reduced hours and pay.
I want to buy mum’s property when she no longer wants to live on the block.
I don’t have a “number” that I’m aiming to save in order to retire. I don’t want to live extravagantly - I want the freedom to do the things that make me happy.
Assets
| Assets | |
|---|---|
| Cash | $25,800 |
| Kiwisaver | $24,000 |
| Real estate | $1,100,000 |
| Shares | $5,000 |
| Vehicles | $35,000 |
| Total assets | $1,189,800 |
I have a tiny bit of money in shares, which returns dividends of about $250 pa. I am ambivalent about this and have very little interest in sharemarkets / investing.
My Kiwisaver balance is just shy of $24,000, in a growth fund with ASB. I contribute 3%, which my employer matches. I used $49,000 from my Kiwisaver when I purchased my first property three years ago which was a huge help. The total balance dropped with COVID but I wasn’t concerned as I’m 30+ years from retirement – it has completely bounced back now.
I own two properties: a city apartment and a rental in my home town. The combined value is $1.1 million, and I have 54% equity.
I have $25,000 in a savings account. This is my “safety net” - enough to pay my mortgages for a year.
I own my 3 vehicles outright. Combined value of car, motorbike, and horse float is $35,000. I have never financed a vehicle as I prefer the security and certainty of it belonging totally to me.
Debt
| Debt | |
|---|---|
| Credit card balance | $1,250 |
| Mortgages | $505,000 |
| Other | $1,000 |
| Total debt | $507,250 |
I use my credit card like an eftpos card. I also have a fuel card (joint account with mum) - this is the "other" debt in the table above. I pay these off in full each month.
The city property has a large bill looming for major building repairs/renovations. Mum is going to fund this (not a loan).
The two mortgages are fixed until December 2020 at 3.95%. I recently stopped the offset account to save bank fees as it was in credit, but will start this again at re-fixing time.
Income
| Income | |
|---|---|
| Salary or wages | $80,000 |
| Investment income | $250 |
| Rental income | $24,700 |
| Other income | $1,500 |
| Annual income | $106,450 |
| Annual take-home income | $85,536 |
| Total weekly income | $2,047 |
| Weekly take-home income | $1,645 |
I earn $80,000 as my base salary.
My rental property is tenanted at $475/wk.
I’m especially proud of achieving what I have with properties, despite not ever earning “tons of money.” I’m thankful my then-partner convinced me to be ruthless when I applied for my city job 5 years ago, as this resulted in a large salary increase and the freedom to invest in property.
The investment income is a small dividend stream from shares.
The "other income" is my side hustle job. At the moment that income stream is small because I'm stretched for time. But it could be (and has previously been) a larger income stream.
Expenses
| Expenses | |
|---|---|
| Housing | $52,700 |
| Groceries and home supplies | $2,600 |
| Eating and drinking out | $1,300 |
| Transport | $6,455 |
| Utilities | $2,928 |
| Sports and hobbies | $1,700 |
| Health | $1,000 |
| Shopping | $1,500 |
| Personal care | $1,500 |
| Travel | $1,500 |
| Pets | $7,500 |
| Fees and charges | $50 |
| Gifts and donations | $100 |
| Total annual expenses | -$80,833 |
| Total weekly expenses | -$1,554 |
I’m frugal, and do things on a thin shoestring. Some info about my spending below.
Housing: Mortgage on the two properties is $750 + $700 each fortnight. Home insurance is $2,500 per annum. I rent the two spare rooms in my city apartment to cover the expenses including body corp, rates, maintenance, power, internet, cleaning and household supplies. This comes to around $20,000 per annum, which is basically identical to the rental income so my profit is $0 and I don't end up paying tax on that income.
Groceries: I spend ~$50 per week on food. I love cooking and this saves me a TON of money, as I cook well enough that I don’t miss out on ‘going out.’
Utilities: Internet $74 per month. Mobile $20 per month (work pays this). Power is $150 per month on average.
Sports and hobbies: I attend two exercise and wellbeing classes a week ($20 each). These run 40-45 weeks of the year.
Health: Dentist, doctor, physio, osteo come to around $1,000 per annum.
Transport: Fuel is around $50 per week. Vehicle costs (insurance, registration, WOF, maintenance and repairs, x 3) are about $3,000 per annum. This can be higher, depending on what needs doing/any major problems.
Pets: Horses! I do a lot of my horse care and maintenance myself, which a normal owner would pay a professional to do. I'm lucky to not pay grazing costs. Costs run to the tune of $5,000-$10,000 per annum for the two horses.
Donations: I donate $50-$100 per annum to an animal welfare charity.
Remaining income
| Earning and spending summary | |
|---|---|
| Annual income | $106,450 |
| Less tax and payroll deductions | -$20,915 |
| Less annual spending | -$80,833 |
| Equals remaining income | $4,702 |
No structured plan - I wing this.
Money from my side-hustle is only “pocket money” or “play” money. I use it to pay for related expenses and on-going certification costs for continuing education, plus travel and accommodation (approx. $1,500 per annum). If there is any leftover, I use it to pay for something to do with my horses.
Inviting feedback from readers
My next financial goal is to add a third property to my portfolio. Mortgage serviceability is the biggest hurdle to buying a third property and so, instead of hanging onto cash savings and trying to buy, I chose to repay a family loan when COVID restrictions hit, which means another property has moved out to the “3+ year plan".
As a single person, I can’t “split” or share expenses with my other half, nor can I tap into another salary for serviceability. I am prepared to take risks but need to have an exit plan.
Both mortgages are due for re-fixing at the same time in 5 months (combined value 500,000). I prefer to have a revolving or offset facility to maximise interest ‘savings’. I cancelled it as I was in credit and it was incurring bank fees without providing benefit. I will set this up again when I re-fix (10% of mortgage value). How should I split the remainder (timeframes vs interest rates) - ‘long and low’ or ‘split and buffer’ against future rate changes?
I don’t want to stay in the city long term. I am unsure whether I will sell the apartment after renovations, rent it out as a whole, or continue to live there with flatmates/airbnb guests. Any thoughts?
Are there any areas where obvious improvements could be made? I don’t tend to scrutinise the numbers in detail, I run on gut feel of “money in” being more than “money out.”
