This post is based on an interview we conducted with Rick in September 2021.
Real Money Talk is our series where we interview Australians from all walks of life about their personal finances. The views expressed are those of the interviewees, based on their experiences with money, and as such are not necessarily representative of Spaceship's views.
We have changed the name of the interviewee for their privacy.
Overview
Name: Rick
Age: 43
Where do you live? Country Victoria.
Please tell us a bit about yourself.
I'm a twice divorced 43-year-old male. After each relationship breakdown I lost all of my assets and savings. Now I'm staring down the barrel of being halfway through my working life with little to show for it and retirement on the horizon.
What's your current net worth?
$53,000
How does it break down?
- Cash: $7,500
- Shares: $6,500
- Car: $8,000
- Superannuation: $45,000
Do you have any debts?
Personal loan: $14,000
How did you build your net worth?
A year ago my net worth was $24,000 post divorce with superannuation as my only asset.
I was living hand to mouth working odd jobs week to week under mounting debt.
I went through something of an epiphany ten months ago. During that time I've been through three positions, upgrading to better working conditions and remuneration each time. The latest position is a 64% increase in annual salary over the first. During that time I've also constantly revised my budget and reduced monthly costs. So it's been a simple equation of increasing revenue and reducing expenditures, using the surplus to buy a car, build an emergency fund, invest in shares, and pay down debt.
Earn
Tell us a bit about your career.
I've mostly worked in the security industry, which is notorious for low pay and terrible conditions. My work/life balance has been non-existent and surplus income to invest in myself or other assets has been meagre. Now I'm transitioning into a position with the public service.
Do you have any income sources outside your job? How much do you earn from each and how did you develop them?
No. The small distributions I get from my shares are reinvested.
What advice do you have for other people who want to earn more money?
Know your own worth. Improve your own worth by investing in yourself and your skills. Then make sure you're working at your worth. Don't be afraid to move on if you feel like you're getting a poor return from your employer. Complacency is a killer. Wage growth in the same position can be minimal. Someone once said to me "the best way to get a raise is to get a new job."
Save
What's your savings rate? How has it changed over time?
It's approximately 30%. I have a fixed portion that pays down debt and goes into investments. The cash savings fluctuate based on my surplus week to week. The cash savings have probably changed the most, growing over time as I set goals for emergency funds and mortgage deposit.
Do you have a budget?
Yes. I'm working toward investing in property again. Without a budget that would be a dream, not a goal.
I have multiple accounts for different purposes. From time to time I rebalance them. But in general they're only to be accessed for their specific use.
I have an Ad-Hoc account for irregular expenses that a portion of my weekly budget goes toward so my regular budget is not disrupted by unexpected costs or special occasions. I guess it's what most people would call their emergency account.
How much do you spend per year?
About 70% of my income. 50% goes toward weekly expenses. The other 20% is for my personal spending.
Do you make purchase decisions carefully, or are you loose with your money?
I'm loose with the money I've allocated to myself, but I'm careful with the allocations I make. So I know I'm free to spend on whatever I want without disrupting my overall budget and goals.
How is your work-life balance?
It used to be terrible. I worked nights, weekends and public holidays my whole life until recently. Now it's fantastic. I only work days and spend weekends with my children. I'm always in my own bed every night. Investing in the quality of your life is about time and not just money. It took me too long to realise what my family time was really worth.
What's your favourite thing to spend money on?
My family. Gifts and other treats for my partner and our kids are easily my biggest personal expenses.
Invest
How do you invest?
I have fixed weekly amounts that transfer into several investment accounts.
What's been your best investment?
Myself. Realising my own value and seeking out employment appropriate to it. I spent a lot of time complacent in jobs that I was comfortable with but was not getting a return appropriate to my education and experience.
What's been your worst investment?
Both of my marriages. I sacrificed far too much financially both times during the relationships and divorce settlements. I don't regret my choices but I do recognise the position they've put me in.
What's been your overall return?
Twelve months ago was basically starting over for me at everything in life. In that time I've had a 120% increase in my net worth. I know I won't sustain that kind of growth long term, but it sure feels good for now.
How are you building wealth?
Increasing income through higher quality employment. Cutting expenses through regular budget reviews. Investing the surplus. It's simple, but it works.
What are your main roadblocks to building wealth? How are you addressing them?
Balancing my goals and priorities against a realistic expectation of the working life I have left. Rising property prices were a particular concern given mortgage duration at this time in my life. To address that I'll be looking at more rural areas to reduce price.
Do you have a target net worth you want?
Not exactly. I do have a target passive income though it's a long way off yet.
Behaviour
When did you make your first significant behavioural shift towards wealth building?
Toward the end of last year. I was finally ready to move on from my divorce and realised I needed much more than just a shift in relationship status.
If you could start again, what would you do differently? What advice would you give your younger self?
I would have started learning more about financial literacy at a younger age. I'd also be more careful about the ties between family, relationships and finance.
What mistakes have you made along the way that others can learn from?
Start younger. Retirement seems so far away when you're young so you don't really think about it until it's much harder to prepare for. Don't get too comfortable. The way you change phone or energy companies to get a better deal can be applied to your labour.
How are you learning about building wealth?
Definitely not from family. My family is great, don't get me wrong. But they didn't know any better than I did about long term financial security. I read voraciously. Books, blogs, websites.
One of the best things about investing is not just the money but how much it forces you to learn. Every new opportunity I see leads me to look at the company, the sector, political events and policies that shape or affect it... and it just goes on.
Do you give to charity? If so, what percentage of your time/money do you give?
Yes, less than I should. I'm still stabilising my situation and plan to expand on this when my finances settle into a regular pattern again.
We want to hear your Real Money Talk
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