DINKs in Christchurch in late 30s

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

Kia ora koutou! We are Priscilla and Jake in our late 30’s. We immigrated from elsewhere to Christchurch in 2013. We love our life here, and our city, and we cannot rave enough about how our lives have turned around.

We build software to put food on the table and we both feel grateful and privileged to be in tech for satisfaction, balance, and remuneration.

We want to be financially independent by 45, and would like to work a few years after that in other cities with friends and family around before we make a call on retiring.

We come from an upbringing where the materialistic display is everything. We spent mindlessly, spending before we had the money on things that we did not need. Living paycheck to paycheck was the way of life. We maxed out credit cards, had an expensive personal loan, and had to borrow from colleagues and friends for the flights and expenses to move here. We arrived in NZ with a personal debt of $20,000, no house, no vehicles, no student loans, and an attitude which prioritized materialism over anything else.

Some cultural differences we noticed/had when we arrived:

• Colleagues at work did not share food with each other in NZ. (We felt guilty eating our lunches without offering it to others at the table. This was a norm for us with colleagues/friends/family.)

• It was rude to ask about personal things in NZ. (One of the most common question from family and friends is ‘What is your earning like?’.)

• Colleagues and friends did not fight to pay the whole bill in NZ. (You showed off by paying the entire bill for your table. It was a status thing.)

• I almost took an empty plate, when someone invited us for a ‘Bring a plate’ party in NZ. (Well, we assumed, they have just moved in and do not have enough plates at home yet.)

• Meeting someone almost every time is in a bar/pub in NZ. (We went to movies, food outings, trips, etc with colleagues/friends/family.)

• You don't need a wardrobe full of clothes, shoes and handbags in NZ.

• There is fun in walks/ tramps. You spend more time conversing and knowing in NZ. (I was raised thinking walking is something people who cannot afford vehicles do.)

• No big brand label is common in NZ.

• Its normal to buy a used car in NZ. (We were always pushed to buy new.)

7 years later we are actively trying to remove from our lives everything we do not “WANT”. We want to progress to getting rid of everything we do not “NEED”. This has been influenced by the people around us, and the ‘number 8 wire’ thinking of colleagues who we interact with every day. We are lucky to be around people who have materialism as their last priority. It might be a tech industry thing. We feel that the expression “you are a reflection of the company you keep” has worked in our favor.

FINANCIAL GOALS

We were introduced to the FIRE (Financial Independence, Retire Early) movement 2 years ago. We thought that’s a good goal to have and started working towards it.

Here’s what we believe is right for us:

• Get rid of all bad debt.

• Have an emergency fund.

• Invest for wealth generation and wealth retention.

We now have no bad debt and have an emergency fund for 6 months in an offset account.

What we want to do:

• Pay off the mortgage overseas to avoid the high interest of 11%.
• Pay off the NZ mortgage in 5 years from now.
• Grow our investments (excluding house and Kiwisaver) to a value of around $685,000. We expect that would generate our estimated living costs of $24,000 a year, assuming a "safe withdrawal rate" of 3.5%, so that we can be financially independent for the remainder of our lives if we choose to retire.

Assets

• Cash: 6 months expenses sitting in a revolving credit mortgage account.

• Real estate: We have 2 houses. We aim to have both mortgage free within 5 years. The NZ house is worth around $400,000 and the overseas house is worth around $120,000. In NZ we bought based on the following criteria:

  1. We bought the least house necessary for us instead of the most house we can afford.

  2. Future rentability (We bought very close to CBD)

  3. Low maintenance, lock and go

  4. Close to health, groceries, parks.

  5. School zone was not a factor in our purchase

• Kiwisaver: Both of our Kiwisaver accounts are in Simplicity’s Growth Fund. We regret not joining Kiwisaver earlier, as we missed out on 2 years of monthly contributions. But as a silver lining we were less than 3 years in Kiwisaver when we bought our house, so we were not eligible to withdraw our Kiwisaver and that meant we did not touch it and have seen it grow significantly.

• Vehicles: NZ car is worth around $1,000. It's from the 90's and takes us from A to B which is enough. We would like an electric. We also have a newer car overseas worth around $5,000 which is currently used by family.

• Managed funds: The rest of our money is tied in equity index funds and bonds in NZ and overseas. This is where all our investments will be from now. We would like to have it all tied up in Vanguard where we can, according to the asset class allocation we are comfortable with. This will be where we will be building our entire retirement corpus. Current holdings are as follows: $20,000 in overseas index funds. $8,000 in Vanguard Unhedged through InvestNow. $2,000 in Simplicity NZ Share Fund. We have ongoing monthly contributions to the above totalling $3,000 a month, starting from October last year.

Debt

We are happy that all our debt of $20,000 to friends and family was cleared in the first year in NZ.

We are on track to get rid of our overseas mortgage by the end of this year. We are paying more than required on our NZ mortgage. The plan is to pay this off in 5 years. Our NZ mortgage is $310,000 @ 2.65% fixed for 1 year. Our overseas mortgage is $50,000 @ 11% floating.

Priscilla previously had a credit card and decided it's not for her and stay away from them. Jake has never had one.

We don't have student loans thanks to the bank of mum and dad.

Priscilla had a personal loan of $4,000 that took her 3 years to pay off at 18% interest. She never wants to touch one again. Jake has never had a personal loan.

Income

Jake is on $95,000 and Priscilla is on $110,000.

We were lucky to each start off with a good salary of $70,000 when we first got to NZ. We have made good progress with periodic increases in knowledge and remuneration to where we are now. There is a potential for this to double in 10-15 years if we focus on learning and gaining knowledge. However we hope to have the ability to retire before then.

Expenses

We feel we are ‘ok’ with our expenses.

• Housing: This is mostly mortgage cost. Both houses are new builds with almost no maintenance costs.

• Groceries: We average $100 a week for all groceries.

• Eating and drinking out: We go out drinking 2 to 3 times in a year so we do not spend much on this. We enjoy meals with friends so takeaways are a big cost for us and we normally get together at each others' houses rather than outside. We could cut down on our takeaways but that is also where we socialize with friends so we like the ‘returns’ on that.

• Entertainment: "This would be books mostly. No subscriptions, movies or concerts. We avoid media consumption wherever possible. This has double benefits with zero subscription costs and more time to cook, clean, read, and step out.

• Transport: We have one car for the household which is mostly reliable and is enough for our needs.

• Utilities: Internet is $75. Mobile is $40 for 2 of us. Power averages at $100 per month.

• Sports and hobbies: We play some team sports and outdoor walks and biking.

• Health: We're lucky to be in good health. This is the yearly or bi-yearly Dr checkups. Some over the counter medications like creams, pills, lozenges.

• Shopping: "We replace if our exisiting clothes/shoes become unusable. Our phones get replaced when unusable. Our phones are bought new and last 4 to 7 years.

• Kids: We do not have children by choice and this we are told/reminded, makes us rich financially and in time gained but not in experience. :)

• Personal care: Basic haircuts and grooming.

• Travel: We have 7 to 10 short trips locally and 1 overseas trip every 2 years.

• Insurance: Health insurance covered by work. We pay $220 per month for life insurance and some trauma / disability cover.

• Gifts and donations: Gifts for birthday parties. Some donations for charity.

• Other: There will a big spend every year about this amount. This year it was a new laptop. Last year it was a bike. The year before was a camera. This is like our splurge amount.

Remaining income

We have a monthly investment of $3,000 with the following spread:

• $1,000 into Vanguard Exclusions Unhedged through InvestNow.

• $2,000 into overseas equity index funds and conservative funds at a 80/20 split.

If we can cut some more living costs or increase salaries, we will direct that through Hatch into Vanguard’s VT, VTI, and BND funds.

The above monthly investments will be supercharged after our mortgages are gone.

Inviting feedback from readers

I am sure there will be insights from readers which we wouldn’t have thought of will be useful for us. We would like and welcome all feedback.