Wednesday, 27 March 2013

Should I move out of home?

When I was setting my financial goals for 2013, I mentioned that I was not sure exactly what my living situation would be as I was considering moving out at the time.  I will be doing a mini-series of posts on the pros and cons of moving out of home, the various options available to you, how you can save money and also tracking my journey (and the mistakes I make).

This post will cover the most basic question - 'should I move out of home?'. Everyone will have different reasons for wanting to move out of the family home and strike out on their own. No reasons is right or wrong however your circumstances will determine whether you need to move out of home or whether it is a choice.

Common Reasons People Move out of Home (and what you need to be careful of)

Below are some common reasons people move out of home.  You may fall into one of these categories or you may fall into none of them.

  1. Your family situation requires it
    • Let's be realistic - not everyone has the best home situation and sometimes it is better for your own sanity and well being to move out of home
    • If this is the case you need to be careful that you are not acting in the moment or over-reacting to a perceived wrong.  
      • The danger in moving out for this reason is that you do not really consider whether you are able to move out of home
      • It is one thing to get out of a crap family situation and quite another to get into financial difficulties where you have no one to rely on
  2. You are moving out with a spouse, partner or significant other
    • This is one of the most common reasons for moving out - we have found 'the one' and want to start making our lives together and the natural step is to move in together
    • What you need to be careful of is that you're thinking clearly when you're making this decision
      • It's true when they say that love is blind - it is one thing to meet a person every second day and hang out all the time versus having to split who cleans the bathroom and who does the washing - is your relationship ready for this?
      • Have you been together for long enough to make an informed decision.  The amount of couples that I've seen who move in together after dating for ~6 months is staggering.  How many relationships have you had that have lasted longer than 6 months but less than 18 months (given you'll probably be signing a one year lease)
  3. It's 'time' to move out
    • Everyone has a different perception of what age this is but I think that all of us will look at people of a certain age (e.g. mid 30s) and if they have never lived on their own you wonder what sort of life skills do they have...and more to the point - why are they still mooching off their parents?
    • If you are in this boat you need to consider where the 'pressure' to move out is coming from
      • If it is coming from you parents the chances are that you are outstaying your welcome or where your parents think you should be in life.  Whilst you may disagree it is hard to argue with the fact that you have been mooching off them for your whole life and if they want you out - you're going to have to go at some point
      • If it is coming from yourself (inner pressure) then you need to think about why you are feeling the pressure to move out.  Sometimes there are good reasons to move out and sometimes it is a little superficial.
        • Is it that you have gotten tired of having members of the opposite sex react badly when you explain that you live at home on a date?
        • Do you want to party all the time?
        • Do you want to learn life skills?
  4. You are moving for work
    • This is probably the reason with the least 'risk' associated with it.  If you want the particular job that requires you to move - you have to move - there really isn't an option
    • However if you could stay at home and commute a longer distance to work then it becomes a time versus money trade off and is probably the easiest one to assess because there is so little involved emotionally
      • As a side note I was thinking about moving out several years ago when I started in Investment Banking for this reason.  I didn't because the time I saved travelling would have been taken up with chores and the cost would have been much higher
The decision is never purely financial

If it was a purely financial decision you would almost always choose to live at home.  The fact is that most parents cover their kids (including adult children) for most of the cost of having them at home.  In addition it is always cheaper sharing expenses rather than paying for individual items (assuming that you do contribute an equal share to the household living expenses)

However as outlined above the decision is almost never financial.  What you need to think about when deciding whether to move out of home is whether you have fully considered your motivations and factored in that you may be making bad or irrational decisions that you may later regret.

I decided to move out of home for reason 3 above - it was the right time.  I am in my late 20s, have never lived on my own (other than several stints travelling) and really needed to learn some life skills.  In addition I am newly single and even though I have the coolest parents on earth - bringing a girl home was never a comfortable experience.  Perhaps I made the decision for the wrong reasons but with the benefit of a some hindsight I'm not disappointed at all.  Maybe in a years time I will be writing a different post.

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Tuesday, 26 March 2013

February 2013 Expenditure Tracker

As outlined yesterday in my January 2013 expenditure tracker post, I am updating all my regular series (net worth and expenditure tracker) after getting back on deck after a brief hiatus from posting.

In February 2013 I significantly underperformed my personal expenditure target and although it looks like I underperformed on my share investment target and outperformed on my home loan savings account target, this was more due to a transfer of funds between the two accounts which I will outline below.

ItemFeb 2013TargetOver/(Under)
Share Investments-$8,147+$2,000-$10,147
Offset Acct.+$11,217+$3,500+$7,717
Personal expenditure+$3,551+$2,200+$1,351

The major causes for the movements in the 3 accounts are outlined below:

  • Share investments
    • The significant decrease in my share investments was due to the sale of my employee investment plan shares.  As these shares carry a guaranteed return it makes sense to sell them almost straight away which is what I did this period
    • Offsetting this was my regular investment in the employee share plan for the next period 
    • The strong run in the share market has meant that I am finding it harder and harder to find shares which offer me the kind of returns that I had seen in the weak share market.  In February I did not find any opportunities and so I kept more funds than I would like in cash
  • Home Loan Offset Account
    • The strong performance in the offset account was due to the sale of the employee share plan shares outlined above
    • I also saved a fair amount this month which all went into the offset account rather than shares for the reasons listed above
  • Personal expenditure
    • As in January 2013, my credit card bill for February exceeded my total expenditure target for a few reasons.  
    • Whilst last month this had to do with my trip overseas, this month it was related to a high level of expenditure trying to save a relationship.  I will do a post on this in due course but it was really amazing how much money I was willing to spend in the last few weeks of my previous relationship
    • I also unfortunately had my first ever driving infringement notice which cost several hundred dollars and which really is a complete waste of money

On a cumulative basis my performance can be seen below:

ItemJan 13 - Feb 13TargetOver/(Under)
Share Investments-$7,115+$4,000-$11,115
Offset Acct.+$12,499+$7,000+$5,499
Personal expenditure+$7,565+$4,400+$3,165

As you can see above I am significantly behind already in my share investment performance as well as my personal expenditure.  As we are already a significant way through March I know that this is not going to be any better.  Around this time last year I reassessed my goals to see whether they were reasonable.  I do not want to give up these goals so quickly as I think they are reasonable but I have been less disciplined than I should be.

Anyone who has read my expenditure tracker posts over time would have seen that I almost invariably blow my personal expenditure budget whatever it is.  To that end I'm building a detailed spreadsheet to keep track of exactly what I spend my money on.  If much of it is essentials then maybe I need to reassess my goals however I suspect that much of it is entertainment.  Once I have a bit of data I will do a post on this

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Monday, 25 March 2013

January 2013 Expenditure Tracker

I haven't posted my expenditure trackers since the start of the year for a variety of reasons (some outlined before - see my posts on travelling to India and my blog posting hiatus) however as outlined last week I shall be catching up on all those regular posts over the next few days.

I originally started doing my expenditure tracker posts as a budgeting exercise.  It provided discipline for my spending and also forced me to think more carefully about how I was allocating my funds.  In my 2013 Financial Goals I outlined what my expenditure tracker goals were for the year.  As a refresher they were

  • Invest $2,000 per month in the stock market
  • Pay my home loan down by $3,500 per month
  • Limit my personal expenditure to $2,200 per month
In January 2013, I underperformed against all my targets.  My Share investments and home loan accounts were both significantly less than I had budgeted for and I had spent much more on personal expenditure than I had budgeted for.  This was for several reasons (some of which I outlined in my January 2013 Net Worth post)

ItemDec 2012TargetOver/(Under)
Share Investments+$1,032+$2,000-$968
Offset Acct.+$1,281+$3,500-$2,219
Personal expenditure+$4,014+$2,200+$1,814

If I look at the 3 accounts in turn over the month:
  • Share Investments
    • In January the only share investments that I did were as part of my regular employee share investment plan
    • As I was overseas for much of the month I did not have time to find or research other opportunities
  • Home Loan Offset account
    • As I had over-spent on the personal expenditure front, I did not have as much money to save into my home loan offset account this month
  • Personal Expenditure
    • A significant portion of my expenditure from my overseas holiday was put on my credit card and this fell due in January 2013
    • In fact, my credit card bill alone was higher than my target expenditure for the month and this does not include the amount I transfer for my rent and other personal expenditure
Normally I would include a cumulative table for the expenditure tracker but as this is the first month of the new period it is identical to the table above.  

I confess that I am slightly disappointed at the start I had to the year - it never feels great to set a goal and then have trouble achieving it from the outset.  I will be posting my February 2013 expenditure tracker performance tomorrow and it does not get any better from there.   However that is the purpose of these posts - to highlight what I am doing with my money and show that you really do need to keep track of your funds on a pretty regular basis to know where they are going

Have you ever set a budget and then had it blown out of the water very soon?  I don't think I need to reset my expectations just yet but I certainly hope to get it back on track within the coming months.

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2013 Financial Goals
Expenditure Tracker Posts - All
January 2013 Net Worth: $346,000 (+3.8%)
Profiting from your employee share plan

Thursday, 21 March 2013

February 2013 Net Worth: $355,000 (+2.6%)

Value% Change
Net worth$355,000+2.6%

I must admit that February's performance surprised me on the upside.  Rather than any one big impact it was actually a combination of several small factors that made the performance much better than I was expecting.  In my January 2013 net worth post I was hoping for my net worth to reach $350,000 and as indicated above I managed to do much better than this.

Some of the things which impacted the result included

  • The allocation of my employee share investment plan shares from the previous 6 month period.  I sold these very soon after issue.  The way it worked out for this period, I made almost a 50% gain in the 6 months that I held the shares.  The minimum guaranteed return is 15% over the six months so this was a significant out-performance.
  • Very strong equity market returns.  Even though I sold my employee share investment plan shares during the month my share investments actually increased on an absolute basis.
  • A fall in the AUD / USD exchange rate.  A significant amount of my investments are in USD investments.  I did this when the currency was particularly strong and when US investments were trading very cheaply.  This has been a tactic that has been paying off for me in spades
  • An increase in my employee share investment plan:  As I have said before this is an automatic increase that happens and is a great savings tool.
  • On the downside my credit card debt increased dramatically:  I had several big expenditures which I put on my credit card which showed up in my credit card balance.  These included my car insurance as well as signing up for the CFA course (more about this in days to come)
Overall I was particularly happy with this months performance.  For March, however the outlook is much more bleak.  I will have to pay off my credit card balance and suspect I will not have much left over to save or put into my home loan (as of writing I have not put anything into my home loan account). Also (as flagged in my 2013 financial goals) I ended up moving out of home which has increased my expenditure dramatically - I will do a post on this shortly.  

I think March may be the first month since I started tracking my Net Worth that it decreases dramatically.  My goal for the month therefore is to keep my net worth flat at $355,000.  Given I am 2/3 of the way through the month and I already know what much of expenditure has been I think this may be a challenge!

As an aside:  This post was late (compared to the usual timing on my net worth posts for the reasons outlined in my Back on Deck post yesterday.  Thanks once again to all the support from my readers.

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Wednesday, 20 March 2013

Back on Deck

Thanks to many of my readers who have posted comments and sent me emails encouraging me to continue posting.  As regular readers would know I have been on a hiatus for the last few months (without explanation).  As I said in posts earlier this year, the first part of this was due to limited Internet connectivity during my overseas holiday.

For the last 2 months I have not been posting however for an entirely different reason.  You may remember some time ago I did a post on 'How much do I tell others about my personal finances'.  In it I cover my personal view of this very sensitive issue

  • I personally do not talk about my finances very much at all
  • There are very few people who know what I earn
  • Further, due to how much I disclose on this blog, I had not told anyone what the address of this site is (although some of my closer friends knew that I did have a blog)
However towards the end of January I broke my cardinal rule about this blog and gave the address to my (now) ex girlfriend.  I trusted her completely and it was one of the crazy things we do in relationships.  

Anyway, as these things do, our relationship ended for completely different reasons.  It then struck me that a person, who presumably did not like me very much any more, had access to information that I shared with no one else who knew me personally....and it terrified me

I stopped posting for fear that friends would come up to me and know way too much about me and what I spend my money on and how much I make and all those other things that you really should keep to yourself. I didn't want to take down the information that I had already posted because people seemed to be getting good use out of it and I was proud of what I had built.

Two months on however, and none of my fears have come to fruition.  I will be eternally grateful to my ex-girlfriend for not telling anyone about this site so I can continue to post on here and build it up as a resource (or just an entertaining read) for anyone that likes it.  In the unlikely event that my ex-girlfriend is reading this - I just want you to know how much I appreciate that fact.

So I am now back on deck and will be (hopefully) posting furiously over the next few days.  I have had several huge changes in my financial situation and goals which I hope to share with you all.

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