As 2019 is fast approaching, now is the perfect opportunity to reflect on the year that was.
2018 was a great year for kicking financial goals. As you’ll see below, we made some great strides forward on our financial freedom journey.
However, as you’ll also see, we are still flawed consumers and have made plenty of financial faux pars throughout the year as well.
Without further adieu, here are our top 5 money successes and failures of 2018…
1. Paid off car loan and credit card
As I’ve previously spoken about, paying off high interest debt was my number one goal for 2018.
At the beginning of 2018, we had $10,000 left on our car loan and a $3000 credit card debt.
However, with determination and diligence, we paid both of these debts off in full this year!
2. Finally figured out a sustainable budget
Since commencing our financial freedom journey, we’ve struggled to create a budget that works consistently and is therefore sustainable. Traditionally, we’ve either created budgets that are too harsh and therefore not sustainable in the long term, have pushed money around from one account to another (but, not ended up saving it), or have just not stuck to them due to them being “boring”.
However, earlier in the year, we shifted to the 60/20/10/10 budget method, inspired by Scott Pape’s book The Barefoot Investor. Under this method, 60% of our net income is allocated to daily expenses, 20% to long-term savings (which we offset against our mortgage due to the interest savings impact being higher than our interest earnings potential with current interest rates), 10% to medium term savings and 10% goes to each of us to spend however we want.
Obviously, we’d like to reduce our daily expenses, and are slowly achieving this in small changes here and there. This would allow us to increase our savings percentage and help move us towards the 50% goal.
However, for now, the 60/20/10/10 method is working well for us as it allows for decent long-term savings and investment potential, whilst also allowing room for us to have some fun in the here and now as well.
3. Increased overall savings percentage to 30%
In figuring out a sustainable budget, we’ve managed to achieve an overall (medium and long-term) savings rate of 30% this year. Now, this is only a 5% increase on where we had gotten to last year (when we increased our savings rate from 5-25%), but it is an increase that is currently achievable and sustainable. This ensures that we don’t dip in to these funds.
Currently, we are using any supplementary income (such as pay increases) to increase our emergency fund. Once this fund is at a point we’re comfortable with, we will be in a better position to sustainably increase our savings rate further.
4. Negotiated better deals
In our efforts to try and cut our expenses further, we decided it was time to have some awkward conversations and try to negotiate better deals on insurances, phones and electricity.
The first cab off the rank was electricity. In June, I did my research, found a good local deal, and called my electricity company to see if I could negotiate my way to a better deal. I thought I might struggle to negotiate a better deal, so I made sure I had all the details of the competing deal on hand to quote.
As it turns out, my electricity company was well aware of its competitor’s deal… So, all it took for me was “X are offering a 28% discount off usage charges, what can you offer me to keep me?”. And, just like that, I was offered 21% off both usage and supply charges; which worked out cheaper than the competitor deal anyway!
Off the back of that win, we negotiated a better car insurance deal, saving $350 over 12 months; and, better mobile phone deals, saving $860 over 12 months. All up, negotiating better deals in 2018 has saved us $1418 so far.
5. Doubled our net wealth
After having the above successes throughout the year, I thought it was time to do some net wealth calculations.
As it turns out, by getting rid of a decent chunk of debt, increasing our savings percentage and establishing an emergency account… We’ve doubled our net wealth since commencing our financial freedom journey in May 2017.
Now, whilst I acknowledge that not all of this was achieved in 2018, about 70% of the increase was achieved this year alone… So, I’m claiming it as a 2018 achievement ?.
1. Being cheap, rather than frugal
Being cheap, rather than frugal is a theme that I have again repeated this year.
Last year, I did some silly things such as put off the purchase of a new pool chlorinator for several months. In doing so, we had to spend a few hundred dollars on pool chemicals we wouldn’t have needed if we had a working chlorinator.
This year, our cheapness came back to bite us in the arse in the form of our cat. We got our cat as a stray and she had been malnourished as a kitten and hadn’t developed properly as a result. One of her issues was that she had terrible teeth and we knew from the start that they would be trouble.
Years ago, the vet recommended we put her on a specialised diet for he teeth. The diet cost twice as much as her regular food and so we decided against it. However, in June, this came back to bite us when we took her for her annual checkup and the vet said she needed 5 teeth out.
$1100 later, we learned from our mistake.
2. Unrealistically budgeting for overseas holiday
When we first started planning our epic European adventure, we set a budget of $10K for both of us for the trip.
However, as it was our first trip to Europe, there were plenty of places we wanted to go and lots of things we wanted to do… So, it quickly became apparent that our budget was unrealistic.
In the end, the total trip cost was $14K for the both of us. Fortunately, through some serious saving and selling of our unwanted stuff on Gumtree and Ebay, we had enough cash for the trip and didn’t need to put anything on credit… But, given our financial goals, if we had of been more realistic with our budget to begin with, we may have chosen a cheaper trip.
3. Being disorganised
As I outlined in September, we are now subject to the Medicare Levy Surcharge, unless we have comprehensive private hospital cover.
We’ve known this since June, but tried to figure out alternatives to avoid the levy. However, we soon figured out that there were no lucrative loopholes that would enable us to avoid this tax. So, our only options were:
- Pay the tax; or
- Get private health insurance.
Given that both of these would have similar costs for us, we decided that we should just get private health insurance as it at least afforded some value for money. However, it is now the end of December and we still have not taken out private health insurance. This is because it always seems like way too much effort to figure out what policy to get… So, we’ll be getting slogged with at least half a year’s worth of MLS at tax time this year!
4. Spending too much on takeaway/eating out
Last year, we cut right back on takeaway purchases. However, when we figured out a sustainable budget a few months back, we included a spending allocation each pay. Since doing so, our consumption of takeaway has increased substantially.
Now, whilst we’re allowed to spend this amount on whatever we want, I’d prefer it if we allocated this more to fun experiences rather than lazy food nights!
5. Didn’t put aside money for Christmas throughout the year
Every year, Christmas time blows out our budget and we end up broke for the month of December. So, last year, I said to myself that I would save up for Christmas throughout the year this time so that we wouldn’t have the same thing happen again.
However, I swiftly forgot about this intention and did not save a cent for Christmas throughout the year. Consequently, we have spent the majority of December broke… Ergh.
So, I’ll openly admit that I’m still a flawed consumer in a lot of ways… And, still make many spending mistakes!
However, overall, 2018 was a great year for us. We have taken our wins from 2017 and maximised them… Significantly!
Despite this, we still have a long way to go in order to achieve financial freedom… And, I look forward to kicking more goals in 2019 and beyond!