My expense calculator confirms I am stuck in the wheel
Over the last month I have been capturing data to get a better idea of my expenses. You see the bank balance has been heading in the wrong direction and I wanted to give myself a mini health check. The prognosis was bad as I expected, and I pretty much confirmed that Money Outgoing = Money Incoming. Yep, this is a clear indication that you are in the rat race when you begin to live to your means, the bigger trap is when Money Outgoing > Money Incoming which is a clear indication you are on a slide to poverty. However, when you put these figures into a spreadsheet and shake them up a little to produce a graph, you can see some interesting results.
Let’s start with the chart of ‘Wheel Expenses’, that is those day to day expenses that just keep coming despite your efforts to scrimp and save. You see I consider myself to be reasonably frugal, and over the last month I failed to be super tight with my money because I was renovating (improving capital value) and preparing for my life outside of the wheel. The expenses you see in the image below are the best case scenario without actually changing anything in my current life. However, I should include clothing and replacement costs on my stuff but as you might have gathered I’m living life more minimal now and still have plenty of stuff I no longer need.
So the big ticket item for me is debt which again is no surprise. I have a home loan for the house I live in and are currently renovating, then there is an Investment Loan for a property I own and my parents are care-taking, which is a little more complicated, but suffice to say I don’t earn any revenue from that property so it is 100% debt. Anyway let’s call that one a weekender because ‘Investment’ kinda’ sounds like I am expecting to make some money from it. This was my intention but now it’s kinda becoming an anchor in my life as my circumstances have changed. So debt repayments accounts for approximately 50% of my outgoing expenses, yikes! However, I don’t consider housing to be bad debt because over time it should appreciate in value.
Rent Money is Dead Money
I looked at the figures for selling my house with the idea of becoming a renter in the hope that it would reduce my overall expenses. Rattling the numbers around I could only see a $20 improvement to my bottom-line, but more importantly some capital would be freed up that I could use to pay off other debt, like the Investment Loan. I am now busy finishing my renovations to give me some flexibility after I leave the wheel, just in case I want to go down the selling for capital path. I’ve also considered building and moving into a Tiny Home, because with minimal stuff I really need less space, but finding somewhere to park the Tiny Home is still a work in progress. For now, life outside of the wheel is going to include my modest home, but I’m not attached to it, so on to the Weekender.
The Weekender was purchased over ten years ago and was debt free until a recent divorce settlement which backed me into a corner and I was forced to take a loan out on the property. I wanted it to go in trust for my kids, but that wasn’t how it ended up so we deal with the hand we are dealt. I still like the place because it has some history and it’s a great relaxing place to get away if you have the time. I’ll spend some time there after I leave the wheel and get started on my first book, but this is still months away. Until then it remains an expense that I need to service.
The third biggest expense I have is child support, and yes it’s almost the equivalent of paying another loan, yes another loan. It’s quite a hit for me even though I’m maintaining about 33% contact time and I’m still paying for other expenses during the visitations. There is nothing I can do about this number while I continue to be the primary bread winner in a relationship that I don’t participate in, but this anchor disappears in life outside the wheel as I’ll reveal later on.
Food or should I say groceries, is next on my list and I budget for around $100 a week which seems excessive to me. But I am introducing some super foods into my diet and you can’t possibly expect to buy something with ‘super’ in the label at a normal or discounted price. I do shop the discount price cycles so it keeps my budget in line but this habit might also change as I become more minimalistic and remove items in my life that have guilt attached to them. I know I could live on less if required, but for now I’m happy it’s just $100 and not some of those $200-$300 weekly shopping trips I see some people do. Ouch!
My Health Insurance is now excessive for my needs and is a legacy from the private hospital cover we pumped up to ensure childbirth was a pleasant experience (as it turned out, the private health system under-delivered on that particular night). I haven’t realised too much other benefit from it but have been getting a few health issues sorted out, so it stays for a few more months yet. Although, I’ll be happy to release this financial burden and expect fewer health troubles while I’m leading a healthier less stressful lifestyle.
Utilities are another interesting ongoing expense. I had considered Solar Panels but after I did the sums, I just wasn’t using enough to justify the costs (see below). Although, I do see the positive environmental benefits to solar, the costs still has to be factored into the equation when implementing something like this on a small scale. Currently in Australia there is solar rorting going on and in my state you need to pump 5 KWh into the grid to earn enough for a single KWh in peak times. Whilst other states have feed-in tariff incentives to pump solar into the grid, I’m only asking for a fair one to one exchange of power. Fortunately, I’ve found a balance between reusable energy and lower costs with Red-Energy (use this referral code – 907406 – if you want a $50 Coles voucher when signing up) who operate the Snowy Mountain Hydro Scheme. Finally, I’m not a big user of water or gas either, and most of my bills seems to be weighted towards the network infrastructure related costs.
My electricity usage is the bottom stuff, the wiggly line above in the neighbourhood average
Entertainment has it’s own category because although I’m predominately an Introvert, I do like to enjoy myself when I leave the cave. It’s never higher than this amount and could be less if I tightened the wallet. Life is for living so I am not expecting to spend much less, unless money is really tight.
So what to do with the low mileage car. I’ve been walking a lot more for the last 9 months and look at the car as a waste of resources. However, it doesn’t cost me that much and if I wanted less convenience I could hire cars and use taxi’s but it’s not on the radar right now. I use my car when needed and I plan to make a few interstate trips this year because I enjoy driving and it gives me some good periods of thinking time.
I’ll skip into the work related expenses because there isn’t I can do much about property rates, unless I get rid of the properties. So I identified a few direct work expenses like the commute and work specific attire. I haven’t included things like work related education because generally I expect work to pay for that or to at least reimburse me later.
Finally, the telecommunications or commonly known in Australia as the ‘blower’. I pay for home phone and it’s not even plugged in and have ADSL internet with Exetel because they are the cheapest for my moderate needs (I’m not a big downloader even though I seem to watch more Youtube and TED lately). It’s a fairly low bandwidth plan, but shaped so I don’t incur more charges than expected.
So that’s my reality in the wheel. Now, what changes after I leave the wheel.
As you can see my two property debts still make up more than half of my ongoing expenses, so it’s going to be important to focus on reducing the costs of getting a roof over my head. As previously mentioned one option was to build a Tiny House, and another option is to actually move interstate to live in my weekender. The downside to this is I’ll have less access to my kids who aren’t likely to be moving from Victoria anytime in the near future. My kids are really the only thing keeping me tied to this current location. Regardless, if I can eliminate this property debt then I am only looking at $30K for living expenses and this is without any substantial change in behaviour.
Gone are the child support payments, but leaving the wheel allows me more time to be with the kids if that can be negotiated. I expect this will be a temporary hiatus because if I use my time productively, post-wheel, I’ll be back paying direct child support expenses again in no time, the government will hold me to that.
The only other major change to this expense chart are the work related expenses which is the cost of commuting and the cost of looking like you belong in the wheel. I do understand why you must keep up appearances but on the other hand it’s just a load of BS and people weren’t born with suits, ties and business skirts. This is something I won’t miss outside the wheel and I’ll be getting rid of most of those corporate factory related clothes at my first opportunity.
So that is the chart with no other substantial changes after leaving the wheel. But I am much more resourceful than that (like my idea to generate free heating during winter) and leaving the wheel gives me back my time. You know ‘time’ is the thing we use to have before we began in the wheel. I’m expecting to get around 60 hours a week back to allocate to tasks that I enjoy and the only challenge will be to ensure I never waste this time again. Of course I’ll need to earn some sort of living and I’m currently working on a mega-list of money making opportunities, that I’m hoping to publish soon.
Passive income will be my ultimate goal, but without a substantial amount of capital, it rules out the easy money in the share market. I’ve tried this before and was easily making 20% annually on my money as a day trader. I have since learnt to apply this day trading concept to other markets as I’ll outline in that mega-list. With time on my side I’m looking at trying my hand at a number of money making ideas, and not necessarily to become rich but to learn the best methods so I can share these ideas with you.
Hopefully, this mini health check of my personal budget inspires you to do the same because until you know something is broke, you can’t fix it, and I know if you are still in the wheel then you are unlikely to have the time to do so either. I’ll be posting more regular tips on saving money in future posts because the less money you spend translates into more money you can save and gets you closer to financial independence.
If you find this post useful please remember to share it with the links below because the journey of ‘Leaving the Wheel’ is much more fun when it’s with someone else. Life is a journey, not a destination.