No Pants Money Man’s Story So Far
By now you’ve read a few of my articles. I’ve been talking about this weird financial independence idea, how you can start controlling your cash to reach financial independence, and all the awesome things you can do after financial independence. That’s all well and good, but what about some real examples? You know, someone that is actually controlling their cash, saving a tonne of money and actually working towards financial independence?
Well, here’s my story so far to see how it’s done.
My own Story
When I was growing up, my parents never let my siblings and I go without. My parents had their own business in the construction industry that provided quite well. So, they made sure their children had all the opportunities that money could provide. We had everything we needed and almost everything we wanted. It was a very loving household, but by no means frugal.
However, my parents instilled in me a strong work ethic and I was flipping burgers at 14 years and 9 months old for $5/hr. My second job was as a lifeguard during a break from schooling at 17 – 18 years old. During this time I was still living at home, and my parents let me have it easy.
I had no expenses to cover, except for the cost of running my own car, mobile phone and social related stuff. I was a blissfully ignorant middle class teenager, firmly living in the now and enjoying a life of hedonism. Attending parties, working out, and driving cool cars was my life. That year I brought in $22,000 before tax and I spent almost every cent of it on my 70’s muscle car.
Although, my parents were still watching my back. At 18 years old, I bought my first property with my sister. The folks were building a new house and we needed somewhere to live in the short term. Instead of forking up rent money, they thought it would be a great opportunity to get their kids into the property market. Hence, with their help towards a deposit, my sister and I were homeowners. The timing was perfect, as the local property market had started to boom.
Once my parent’s house was built, my sister and I put our house on the market and I pocketed a cool $13,500 from the sale proceeds. I wanted to start investing in the stock market, but I had no idea how to get started. The money was burning a hole in my pocket, the temptation to spent it was so great. In the end, I blew it all on my muscle car.
Lesson number 1, remove the temptation – make your money work for you but keep it slightly difficult to access.
By now, it was 2006 and I had started a carpentry apprenticeship, earning a minuscule $300 a week. I was still a ignorant brat living at home and having all my expenses covered. But, I had started to save a small amount of money, about $5,000.
Six months into my apprenticeship, I bailed and spent the next 7.5 years at university earning two degrees. I opted to go to a local university and stay at home. The low income of the carpentry apprenticeship was replaced with part-time jobs, study assistance and a growing HECS (HELP) debt. I also decided I didn’t want to park my pristine muscle car in the university carpark. Therefore, I bought a near new Mazda 6 with $20,000 of borrowed money.
At the ripe age of 19 – 20 years old, I actually had a negative net worth!
The following months after the car purchase, I had my first hard lesson in finance. The impact of interest. That $20,000 of debt was going to cost me $5,000 in interest payments over 5 years. Fuck that!!
I made the tough decision of selling my muscle car below cost for $11,500. And, combined with some motivated saving, I had that car loan paid off within 1.5 years of purchase, saving myself $3,500 – $4,000 in interest payments.
Lesson number 2, stay away from consumer debt. If you can’t buy non-appreciating items with cash, you can’t afford them.
It was now 2009 and I was 22-23 years old. My first degree was almost finished. It had given me a broad education and started to lift the lid off my general ignorance. My major was Psychology, but I had taken quite a few units in economics and business. I was re-introduced to the world of the stock market and investing. I began reading books like Top Stocks, Value.able, Master the Markets, Australian Residential Property Developments and reading all the online investing forums. I finally knew how to begin investing in the stock market and property.
At the time, I had managed to save about $10,000 through part time retail jobs and construction work in my father’s business. I used the money to invest in individual stocks. But, I was too impatient for buy and hold investing. So, I mixed it up with attempts at short term share trading and I managed to make a bit of money for a while.
By the end of 2009, I had finished my Psychology major. Although, I didn’t want to become a Psychologist. I began to form the realization I wasn’t going to find my dream job, which had been my core strategy until now. Hence, I decided to chase career opportunities that would pay well. I heard that corporate construction were paying big bucks for graduates with management degrees specifically tailored to their industry. Therefore, I returned to the construction industry, enrolling in a construction management degree. I figured it was an easy route to make some good money, since I already knew a fair bit about building.
That course was rather straightforward. I managed to complete it with honors and an overall course average of 78% while hardly attending class. By second year, I was working full time, which was convenient as I was getting more serious about investing. By 2011 I bought my second property, a ‘set and forget’ inner city apartment and my share portfolio was growing nicely.
Over the next 2 years, my assets continued to increase and I continued to trade in the stock market. By the beginning of 2013 I had managed to save about $60,000, and including the investment property, my net asset value was about $85,000 – $90,000. Not bad for a university student who was worth -$20,000 5 years earlier.
I also met the to be Mrs No Pants during this time. To be precise, it was on the second last day of 2012. Mrs No Pants was very much like myself. She had purchased her own home at age 25 on a first year Registered Nursing income of $49,000. She had saved her $25,000 deposit while she was completing her nursing studies.
Together, we started to formulate a joint financial independence plan. We began reading books like Early Retirement Extreme: A philosophical and practical guide to financial independence and blogs like Mr Money Mustache. We worked out a budget of $40,000 a year, including mortgage payments and a house renovation fund. We didn’t know if we could stick to it, but it turned out to be easy. There was no negative change to our lifestyle, in fact our lifestyle got better. Investments and savings were both going awesome.
However, by the end of 2013, I had a hard lesson in risk, losing about $40,000 in a single stock trade. A company I had successfully traded over the past few years went into administration and was deregistered from the market. It not only hurt investors, but thousands of employees, and partnering businesses. Wipe out.
Net asset value now worth about $70,000.
Lesson number 3 – It’s easy to get stuck on the possibility of earning big. But, think hard about the bad shit that can happen when you make investments. Do a risk analysis if you’re inclined. Weigh up the pros and cons. It’s worth taking a more conservative investment approach, with smaller more reliable returns with a much lower risk of a major wipe out.
The end of 2013 saw my second university degree finished and starting a FiFo construction job on a major project for $135,000 a year. With a few words to management, Mrs No Pants followed me onto the project 6 months later for $112,000 a year. They liked having couples working on the project, as it helped with staff retention.
During the FiFo stint, we managed to save a shit load of money and saw some good performance on our existing investments. With a net income of around $180,000pa, we were saving $140,000 a year.
Also in mid 2014, we bought an investment property together that we got for an absolute bargain. It needed a lot of work. So over two weeks, and with some much appreciated help from family, we put in back to back 14 hour days fixing it up and got a tenant in the place. We were sitting on almost an instant $100,000 profit.
Mid year 2014, Combined net asset value, approximately $350,000.
By the middle of 2015, we had enough of FiFo and headed back home. We both got jobs straight away, but had to take a pay cut. I took a construction job for $100,000pa and Mrs No Pants got her old job back as a Registered Nurse for about $85,000pa. Savings, approximately $80,000 – 90,000 a year.
Mid year 2015, net asset value approximately $485,000.
Towards the end of 2015, Mrs and Mr No Pants got married! We had a kick ass wedding for the price of pennies. More on that in another article.
Mid year 2016, I scored a higher paying job at $130,000pa. Mrs No Pants scored a pay rise, approximately $90,000 – $100,000 a year. Savings about $100,000 – $110,000 a year.
By the end of 2016, the local property market had tanked along with our estimated property values. No big deal, we will just keep saving money and hold onto our properties until the market comes back. However, our tenant in the bargain property decided to get addicted to meth. The house was turned into a drug barn and got completely trashed within the space of 4 months. Through much emotional turmoil, we got the tenant out, got the house fixed and decided to sell it at break even, which was the best we could do given the market. It was a bad investment move, but good mental health move. More to come in a future article. It was another good lesson in risk.
Lesson number 4 – Same as lesson number 3 (it’s a hard one to learn). It’s easy to get stuck on the possibility of earning big. But, think hard about the bad shit that can happen when you make investments. Do a risk analysis if you’re inclined. Weigh up the pros and cons. It’s worth taking a more conservative investment approach, with smaller more reliable returns with a much lower risk of a major wipe out.
End of 2016, combined net asset value approximately $515,000.
During all these changes, we have kept our yearly expenses below $40,000 despite getting higher paying jobs. People all around us were buying fancier cars, houses and other stuff. But, we remained perfectly happy in our 2×1 house close to the city and our jobs, growing healthier and wealthier by the day.
So, there you have it. My story so far. I had to learn the ropes on investing, saving and risk. I have also made some major mistakes along the way. However, within 10 years Mr and Mrs No Pants have come from a position of being in debt to having over half a million dollars in net assets (excludes Superannuation). Combined with the performance of our investments and our current savings rate, we are looking at being financially independent by the end of 2019.
If Mr No Pants can manage to plunder his way through to financial independence, I know you can do a much better job with the upfront knowledge!
No Pants Money Man
- In hindsight, selling the property was a bad idea. My sister and I could be making close to double digit rental yields on the place now. Plus, the sale proceeds would have been hundreds of thousand of dollars if we sold a few years later. Love being a hindsight hero! ↑
- It is very common to attend local universities in Australia ↑
- Fly in Fly out. You work away on mining or construction projects, living in a remote camp. You get paid a big uplift due to the working conditions (12 hour days, 7 days a week, 50+ degree celsius (122f) heat, weeks away from friends and family). ↑
- Turns out I was right about the industry paying graduates well! ↑
- Net asset values do not include our Superannuation of approximately $100,000 at the time of writing. Why? Because who gives a shit about money you cannot access for another 40 years, right? See the article – Why voluntary superannuation contributions are a bad idea ↑