FREE Qantas Frequent Flyer Membership - Save $90

I have some great news to share! Until the 31st of December, it is FREE to become a Qantas Frequent Flyer member. Normally it costs $89.50 to join. I definitely recommend it. Qantas has partnered with a load of businesses to offer you points for doing every day things. Some of the big partners I can think of are Optus, Visa, Woolworths, eBay, Apple, BWS, Budget, NAB, Commonwealth Bank, ANZ.... There are heaps more. 

Sign up for FREE online here with the FAMILYFREE promotion code. 

This code is only for people in Australia or New Zealand. If you are in another country, I have some more great news! I found out today that it is actually FREE to join any time (no code needed) for any country other than Australia and NZ. The regular sign up page is here.

Please like and share!

Happy travels.

Habits that lead to early retirement

I'm sure many of you are familiar with this guy.

For those of you who don't know, this is Sheldon Cooper. Sheldon is a fictional character on the CBS hit series called "The Big Bang". Sheldon is a theoretical physicist with a genius level IQ but displays an almost total lack of social skills and displays quirky behavior. One of his "quirks" is how routine makes up a large part of his life. This, along with the long list of his other characteristics, are the foundation of much of the humor involving him. Interestingly, having a set routine and automating some decisions actually frees up your mental capacity, increases the time available to you, and allows you to achieve more in your life.

Saving for early retirement is hard work! Every day we are faced with decisions on how we should spend our money. It can be tiring and stressful to be constantly thinking about money, but by making smart decisions and building habits around those decisions, the benefits will compound over time and you will be retired before you know it.

Save part of your pay cheque every week.
This might sound stupidly obvious, but I think it needs to be said. Set aside a set percentage of your pay check to save and invest every week. This single choice is the biggest factor that will influence your ability to retire early. If you can save 50% of your income, you could potentially retire in 10 years. That's a fact. Just like the junk we fill our houses with, our expenses have a habit of expanding until there is no money left. We have all heard the stories about people who win lotto and become millionaires only to be broke a few years later, or people that earn big dollars working on remote mine sites for years but still be scratching around to find enough money to pay the bills. Why are they broke? Because their spending habits expand to consume their entire income. By setting a hard limit to how much you spend and sticking to it every week, you won't even notice the money "gone" from your budget and you will be able to tap into it when you actually need it.

Wearing the same clothes every day?
Is there anything wrong with wearing the same thing to work every day? Steve jobs did it and president Obama does it. There is nothing inherently wrong with the idea, but there is a social stigma attached to it. Why? Because people view it as being either boring or poor. Limited stagnant wardrobe options typically is the domain of men rather than women, but this strategy is something for us all to consider. We don't need to continually spend money on new clothes for the sake of achieving a new look. The only reason to spend money on new clothes is if the old ones wear out! This task is made easier by not concerning yourself with fashion trends. If it is functional and appropriate, it is still O.K.

I myself have one pair of black pants that I wear to work every day in conjunction with a couple plane coloured shirts I cycle through during the week. My weekend wardrobe consists of clothes up to 10 years old or birthday gifts. If you can cut just $10 from your monthly wardrobe spend, over 30 years you could retire 1 month earlier. If you're a big wardrobe spender (ladies, i'm looking at you with your dresses, shoes, pants, blouses, handbags, hair bands, rings, bracelets, hats, etc) and can cut $100 a month from your wardrobe budget, you could (depending on your income and expenses) retire a year or more sooner. When coupled with other positive saving habits, you can knock years or even decades off your working career.

Buying groceries
Go shopping on a full stomach. Get in the habit of always eating something before you go shopping. This will help you to stay on task and not be tempted to deviate from your shopping list.

Certain vegetables are always cheap, so make a habit of buying them every week. Obviously if you don't use them and throw them away you are literally throwing away money, so the key is to work them into your weekly meal rotation by modifying existing recipes or looking for entirely new ones. A diet high in vegetables will have the added bonus of keeping you healthier, which will save you money in future years on your health care costs.

Other foods to work into your weekly grocery shop are rice, pasta, noodles (not instant noodles) and bread (I'm talking your simple loaf of bread, not fancy pants pastries covered in sugar or cheese). These are all great ways to add some bulk to your meals and help to fill you up faster, while simultaneously being cheap and healthy.

The fourth and final grocery shopping habit I want to mention is never go down the junk-food aisles. I think saved me thousands of dollars over the years, it's kept me healthy, and saved me a lot of time (my local supermarket has 3 aisles dedicated to junk-foods and softdrinks). Almost 25% of the shop is dedicated to junk food. Even if you just spend $10 a week on junk-food snacks, that adds up to $15,000 over 30 years, or (depending on your income and expenses) 6 months of working.

Don't buy lunch
Isn't it wonderful to have enough money to pay others to perform the most mundane every day tasks for you? Please stand still while I punch you in the face. Stop being lazy. Stop wasting your money. Take your lunch to work every day. It isn't difficult. Cook a little extra for dinner the night before, make a sandwich or take some fruit and wash it down with (free) tap water. This one decision can save you tens of thousands over the course of your career and allow you to retire years earlier.

Don't buy coffee
Similar to buying lunch, just don't do it. Don't form this bad habit. Not buying coffee from a cafe will save you thousands of dollars over your working career, which could slash as much as a year from your working career. If you "need" coffee, get in the habit of having a quiet coffee at home before leaving for work, or getting in a little earlier to make a (often free) coffee at your place of work.

Sleep on it
This age old idiom is relevant today more than every. I often read stories about people who purchase crap on the internet at 2am while sitting in their underwear drunk after returning home from the pub. Between credit cards, the internet, international package delivery, next day delivery, etc it's dead easy to purchase just about anything you can imagine.

The great thing about "sleeping on it" is you still get to enjoy the wave of positive emotions that come from clever marketing and thinking about the product in question. This is actually a really important step in the process, because during it you are going to spend a lot of time thinking about the product and be in a better position to logically decide if you need it or not.

I like to use a sliding scale when implementing the sleep on it rule. If it is under $50, I'll give it 24 hours before I push the button and buy it. If it is under $1000, I'll wait a week before buying it. Over $1000, I'll push myself to wait a month before I buy it to ensure it is something that I really really need, and not just a passing crush.

The above are just suggestions. You can take them and apply them to your own life, or come up with your own!

What are your habits for saving money? Please leave a comment below.

Pay off your debt!

Imagine you are at work and you boss calls you into his office.

"I'm sorry, but we are going to cut your pay."

What would you say? What would you do?

You are the boss of yourself, and every time you make choices that lead to you not paying off debt or taking on unnecessary debt for assets that depreciate in value, you are giving your future self a pay-cut.

"WHAT???" I hear you say. Allow me to explain by means of a hypothetical example.

Mrs Buyeverything can't be bothered to make her lunch at home to take to work. Instead she likes to buy lunch every day. She spends between $10 and $20 on lunch each day, but for simplicity lets say she only spends $10. Mrs Buyeverything also has a credit card (@ 15% p.a.) with a perpetual balance because "payments are small and I can't afford to pay it all off right now". Little does he realise her $10 lunch actually cost her $11.50 and will cost her another $1.50 every year until her credit card debt has been paid off. Mrs Buyeverything is a good worker and goes to work 5 days a week, or 260 days a year. By buying lunch every day, she is giving herself a recurring pay-cut of $390. Throw in coffee, a weekly drinking session at a club, etc and the numbers quickly add up. For the sake of simplicity I've ignored compounding, but I promise once compounding is factored in the reality is actually worse!

If you were to go back in time far enough and tell people that you borrowed money to buy things that depreciated (go down) in value they would do one of two things. 1) Punch you in the face for being a moron or 2) try and scam money from you because, clearly, you are a moron.

Maybe (hopefully) you are asking yourself "so how much of a pay cut am I giving myself?". The answer is really easy. Look at your depreciating asset debt (credit card/car loan/financed furniture/etc) and calculate the interest paid on the debt. The interest you pay each year is the value of your pay-cut.

Once your debt is paid off, you can turn this idea of "giving yourself a pay-cut" on it's head and instead "give yourself a pay-rise". How? Easy! Invest the money. Buy property, buy indexed shares, put it in a savings account, educate yourself, make extra superannuation payments. All of these strategies will, in the long run, result in YOU having more money in your pocket and allow you to retire years or even decades earlier.

One of the great misconceptions in life is that banks lend you money. They don't. You are actually borrowing money from your future self. When you take out a loan banks literally create money out of thin air by adding a few zeroes to your account, which you promise to pay for with your future income. The banks are also kind enough to charge you interest to borrow money from your future self. Aren't they nice? This video explains in detail how money is created in our modern financial system. It's an excellent video I highly recommend watching.

Need vs Want

Whether you are aiming to retire early, pay for a good education, buying a house, or just get your budget and credit card debt under control, the first step on the path to achieving these goals is to identify what your needs and wants are. Identifying what your needs and wants are also has the added bonus of helping you to nail down your own path to happiness.

I still remember laughing uncontrollably with my friends as I
struggled to zip up my life jacket while treading water. 

How often have you heard someone say "I need to go and see that movie", "I need the latest iPhone" or "I need a new pair of shoes"? Are these really needs? No, they are not*.

By separating our needs and wants, we can stop chasing that feeling of satisfaction we so often try to fill with superficial useless crap and other junk. There is a finite number of things we need, but there is an ever growing list of things we want. Once we get what we want, we immediately want something else. By separating needs and wants, we can get off the consumerism hamster wheel, save money and enjoy life to its fullest.

I can already hear the keyboard worriers warming their fingers up getting ready to post a comment. Ease up a second and let me finish. The inherent meaning of the word "want" is to not have something. As long as focus on what you lack, you cannot feel fulfilled.

Filling the necessities in our lives is what makes us happy, and it is necessity that drives us to accomplish great things. Now, does this mean that we should all be hermits and focus just the bare essentials (food (2minute noodles) and shelter (cardboard box)? No. We are human beings! While food and shelter are at the core of our needs, we also need healthy relationships with the people around us, we need to communicate with others, we need to exercise and stay healthy and we need to keep our minds occupied.

My blackbelt grading.

Let me try and illustrate my point with an example from my own life. There was a time when I would have classified Taekwondo as a need in my life. I wouldn't have died without it, but it kept me sane while I studied Engineering, kept me fit, got me out of the house, helped build my self confidence and gave me a daily sense of achievement. Taekwondo was the catalyst that fed my needs as a human being and even ultimately lead me to meeting my wife! It also didn't cost much which fitted my frugal nature well. I would often help out in class, and for that my instructor gave me a discount. I could also attend an unlimited number of classes each week for a flat fee, and by paying months in advance my instructor gave me a further discount!

How does money and early retirement work into this theory of needs and wants? Some people see retirement as the happiness light at the end of the tunnel, but because of how they live their life they continually push retirement further and further away by spending large sums of money on their wants in pursuit of quick happiness fixes. There is a sad paradox here. By examining what their true needs are, they could live incredibly happy lives now while simultaneously chipping away at saving for early retirement.

1. You don't need to buy lunch, take it from home instead.
2. You don't need to buy coffee, make it yourself.
3. You don't need someone to clean your house, clean it yourself and get some exercise at the same time.
4. You don't need that $3000+ handbag. The $300 one on special looks just as good and is just as functional. 
5. You don't need to replace your 12 month old phone with the latest model.
6. You don't need a 5+ bedroom multiple bathroom multiple living room with formal dining room house for two people.
7. You don't need a brand new $60,000 car.
8. You don't need that expensive foreign holiday.
9. etc

The list really is endless If you spend your life pursuing wants thinking they will make you happy, you will die an unhappy poor person. 

I'm not here to judge you or your lifestyle. Hell, I like to indulge in the occasional want like a hamburger, video game or overseas holiday. It is your choice and it is quite OK to satisfy a want**. The point I am making is be conscious of the fact that it is a want, not a need, and how it impacts your financial or life goals (whatever they may be) and that filling wants is only a temporary happiness fix. Like so many things in life, it is about finding the right balance.

This is an early retirement AND happiness blog. The two are not mutually exclusive and can be achieved by anyone who recognizes the needs and wants in their life. Once you have identified your needs, the path to early retirement will be much clearer.

If you have something you want to add, please leave a comment below. If you would like to receive updates, hit the subscribe button.

*unless your only pair of shoes are falling apart.
**provided you are not breaking any laws or causing anyone distress or pain.

How to retire early

Allow me to start by asking these two questions. They represent the extreme ends of the scale, but take a moment to think about them.

1. If you spend 100% of your income and save nothing, at what age would you be able to retire?
2. If you spend 0% of your income and save everything, at what age would you be able to retire?

Taken a moment to think about these two extreme situations? Good. Lets discuss.

In the first scenario of spending 100% of your income and saving nothing the answer is quite simply you can never retire. Now before you stop me and say "what about government pension payments" remember you have come here seeking advice on how to retire early, not retire when the government says you can retire which is getting pushed back every year as we live longer and longer. Putting government pension payments to one side for the moment, I'm sure we can both agree that if you save nothing you will never be able to retire. Now, lets examine the second question I asked.

The answer to it may not be as intuitive as the first but is surprisingly obvious once it is pointed out. If you spend 0% and save everything you earn you can drop everything and retire RIGHT NOW! As I touched on earlier, this is at the extreme end of the scale and spending 0% isn't possible in the modern world unless you live on the street picking half eaten hamburgers out of the trash. Obviously, we need to find a balance between spending 100% and spending 0%. What is the balance? Well, it will change depending on your situation and what your goals are. Lets continue the discussion and hopefully by the end you will be able to see the big picture and be excited to begin planning your early retirement.

Every dollar that you save and invest becomes a worker making more dollars. The best thing about these workers are that they never take a break. They keep working 24/7 and before you know it the results snowball thanks to a mathematical marvel known as compounding.

We have all learned about compound interest in school, but very few of us take advantage of it and some are actually the victim of it when they run up large unpayable credit card debts or take out ginormous home loans. By contributing to our savings early we can make the power of compounding work for us rather than against us when we take out loans for things we can't afford, which has the side effect of making us debt slaves.

Now, the secret to early retirement actually requires a strategic operation on two battle fronts. The first, as I have touched on above, is save save save! Save your dollars and get those workers producing more of themselves by compounding every minute, of every day of every year. The second part of the battle plan is cutting your expenses. As I alluded to in the second question I asked above, it is ultimately your level of expenditure that determines when you can retire. Since in the real world we can't survive on $0 a year, we need to combine this idea with a save save save mantra in order to retire much earlier than we otherwise could.

Lets create a hypothetical case study to examine this in closer detail. John and Jane Frugal are just starting out in life. They are 25 years old and have completed their university degrees and have a combined household income of $80,000 a year after tax. For simplicity, lets assume the Frugals exclusively invest in an indexed fund. These have low management fees, are proven to outperform managed funds in the long term, and see a long term average return of 7%. If we then assume inflation (the rate at which money loses its purchasing power over time) is 3%, that leaves us with a inflation adjusted return of 4% per year. This 4% return is going to help slash the time until you can retire AND also be the SWR (safe withdrawal rate) once you do retire meaning you could live for a thousand years and still have a nice nest egg to leave your children.

Assumptions Summary

1. After tax household income is $80,000p.a. (adjusted for inflation) for their entire working life.
2. 7% average investment return p.a.
3. 3% average inflation p.a.
4. 4% SWR (safe withdrawal rate)
5. The amount saved each year increases at the rate of inflation (in line with the inflation adjusted household income)

In our first projection, lets say they live on $50,000 a year ($1000 a week) and save $30,000. How long until they can retire? Mr and Mrs Frugal could retire in 26 years (at age 51) and continue to spend $50,000 a year FOREVER, leaving a nice nest egg for their children to inherent.

Now, as you can see they have built up a very large nest egg (2.7 million dollars), they have been living a comfortable life on $1000 a week and managed to retire at 51 years of age with enough money saved to continue to live a very comfortable lifestyle in their twilight years.

What if your living expenses were lower? How would that impact the time until you can retire or be financially independent enough to pursue your passion without worrying about paying the bills. Lets look at 3 more projections and overlay them on the graph. Just to re-iterate, these projections are using the same assumptions stated above.

1. If you only spend $35,000 p.a. then you could retire in 15 years with a nest egg of $1.35 million.
2. If you only spend $25,000 p.a. then you could retire in 10 years with a nest egg of $857,000.
3. If you only spend $15,000 p.a. then you could retire in 6 years with a nest egg of $500,000!

So, "where is all this going and how does it apply to me?" you might be asking. We can then take this hypothetical case study and go one step further. By changing the y axis from dollars to % of salary saved we can draw a graph that allows anyone, regardless of their income, to quickly project the time until they can retire based on their level of saving.

And here is the same graph again, minus the 5% return data.

As you can see, it's not rocket science. The more you save, the earlier you can retire. Everyone has different goals in life and for each person the balance of saving vs spending will be different, but as you can see it is possible to have a comfortable life and retire early. The important thing is to start saving early which can easily be achieved by making a few small changes to your life and setting realistic expectations.

I'm not the first to ponder this kind of early retirement philosophy. There are others like me who think in this way, but in this modern crazy materialistic consumerism driven world I feel like we are a minority. If I struck a chord with you, please subscribe or leave a comment below for me.

About me and this blog

My name is Phil. In Australia I worked as an Electronics Engineer, but as fate would have it I met a Korean woman and am now in Korea teaching English at a public school. If all goes to plan we will be moving back Australia where I will return to my Electronics Engineering career. I like the outdoors (gardening, hiking, camping, fishing), photography and kicking back to watch a movie at home with my wife. 

Me fishing on a hot summers day in Australia.

So, why am I writing this blog? I have a couple of motives. 

First and foremost is to help me stay focused on the end game... early retirement. There are a lot of balls up in the air for me at the moment, but worst case scenario I plan to retire at age 50. Best case scenario I plan to be able to retire by age 40. 

Secondly, I hope that through this blog I will connect with other like minded people and share ideas. 

Finally, I hope that I will have a positive influence the way others view the march of consumerism and materialism. 

My wife writing on the beach in Australia.

I like to think of myself as a frugalite. What is a frugalite? It is a word I made up which, to me, means someone to makes conscious decisions every day to be frugal in how they live. It might be as simple as turning lights off as you leave the room, or as radical as never buying a car. 

A persons reasons for living a frugal life vary. Below is a brief (incomplete) list:

1. A path to early retirement.
2. A responsible way to live on a planet of limited resources.
3. A way of pursuing happiness by focusing less on material goods.
4. Part of a larger strategy to achieve a better work/life balance.

Being frugal isn't about being cheap. It is about being prudent about how you spend your money. Some people may miss label you as "cheap", but it's only because they have a warped sense of what it means to be frugal, or sadly in some cases the word "frugal" isn't even part of their vocabulary. 

When I am faced with a purchasing choice, the first question I ask myself is.... 

"Is this a need, or a want?". 

Is it actually a burden in disguise? Is it something that will make me lazier, reduce my health and, consequently, quality of life. Will I be forced to buy a bigger house to store this "thing" to impress people that may or may not visit. 

Be wary of wolves in sheep's clothing. This is an ancient proverb that still has relevance today. The difference between then and now is thanks to the internet, TV, radio and smartphones we are constantly bombarded with manipulative messages to buy crap we don't need... or (if we stop to think about it) sometimes even want with money we don't have. 

Sometimes the wolves will also manipulate the social fabric of society and, in the process, turn you into a social leper. Just, for a second, consider diamond rings. Where did this tradition of buying a diamond engagement ring originate from? A company many people have never heard of, De Beers. For a very long time they held a monopoly over the diamond trade. Thanks to a hugely successful marketing campaign, De Beers was able to make two changes to our social fabric which would ensure they would be rolling in money for decades to come.

1. They were successful in making woman believe they were worthless or not loved if their man didn't buy them a diamond, 
2. They made men believe they were inadequate or poor fiancé's/husbands/girlfriends if they didn't buy diamonds for their fiancée's, wives and lovers. 

Apparently their monopoly, after over 100 years, has finally been broken. Unfortunately the result of their hugely successful marketing campaign remains. Even though diamonds don't hold their value, look the same as cheaper man made diamonds and serve no purpose other than to look pretty, they are still considered a must have by many brides to be. 

I've singled out diamonds because they are, in my opinion, a symbol of the materialistic society we have become. Expensive designer handbags, designer dresses, iPhones, super sized houses, expensive cars, fancy pants, watches, more shoes than a reasonable person could wear in a lifetime. These are all the result of society being manipulated into believing that happiness can be found through materialistic possessions. The sad truth is, these are all burdens in disguise which lead to us becoming slaves to debt and the feeling of always wanting more. This ultimately leads to unhappiness. 

Please feel free to leave a comment below or subscribe.