0 – 300k in 7.6 years
Our first $300k
Up until this point, it was just me, Mr MoneyPlant, living the dream (And from the outside, looking super poor haha)
Unknown to me at the time, Mrs MoneyPlant was also saving and investing. We were dating and weren’t aware of each other’s finances in detail, but I was starting to be quite aware of how money-smart she was, Now that we’re married I’ve collected all the data and this update is specially dedicated to the time between when I hit $200k as Mr MoneyPlant alone, to $300,000k as Mrs & Mrs MoneyPlant combined.
If you just read the $200,000 post then this update is going to seem quite ‘short’, and that’s because I wasn’t including Mrs MoneyPlant’s personal saving/investing journey in any of the previous write ups. From now on however, all figures will be combined, and since Mrs MoneyPlant already had around $60k, my wealth increased significantly when we merged the two figures together. So with that, ignore most of the ‘time’ and ‘income’ figures in this post as without the context of this, its a bit odd.
The big takeways:
- $300,000 combined net wealth
- It took 92 months from when we both started at zero to reach $300,000
- Total combined gross income of $503,274 (Including interest and diviends)
- Outside of super, we held 34% in cash, 47% in shares and 19% in super
Let’s explore this short journey below!
Mr & Mrs MoneyPlant
April 2016 | $200,000
Carrying on from April 2016 when I hit $200,000, I had changed my living arrangements and moved in with some friends closer to the city as the commute to the far northern suburbs in Brisbane was getting pretty long, and the living situation with my ex-best mate and ex-gf was no longer working. This is a finance blog so I won’t go into detail here, but for those who can read betwen the lines… haha
I was a little bit more then before, but I moved in with two friends and split the $450 weekly rent 3-way. Going from $100 a week to $150 wasn’t too bad, and this time I had an ensuite, yew! I was 24, and had just started to date this incredible young women (Mrs MoneyPlant for those guessing along!) Now don’t worry, this won’t turn into a romance novel, and we took long walks in New Farm parks and had picnics and… oh yeah, MONEY!… Let’s get back on track.
I haven’t touched on Super much before and since this is a short time period now’s a good time… Oh.. super!
I didn’t really care too much about super, in fact I actively despised it. I thought I could do more with the extra 9.5%, and the fees that were getting taken out of my account were criminal! (And since my super holds shares, why was the growth so poor compared to investing in shares outside of super, where were all my dividends!?!! Daylight robbery !)
Anyway, investments held within Super are really tax effective but since the retire age is around a billion years old (well it’s 65, but close enough) I really don’t care for it all too much as I’ll be too old to enjoy life by the time I get it, but.. it’s part of my finances so I include it. Contributing to super depends on your own situation, and for those nearing 65 (sorry I said you were a billion years old) then contributing into Super can be the best tax effective investment you can make! For those planning on retiring way before the retirement age however, then you may need to weigh up the options and consider if you want to put extra into super or not. For us, we don’t contribute more to super then what we need to as I really want to build up our wealth outside super so we can access it when we need to and not be restricted to the governments retirement age.
About being Tax Effective..
Don’t get suckered into the phrase ‘tax effective’. You’ll probably hear it all the time but if a investment is ‘tax effective’, then what it usually means is that it’s costing you cashflow and operating at a loss. For example:
- Say Bob owns an investment property (yes, he’s a boomer haha).
- The property makes him $50 a year in rent
- The property costs him $100 in fees, body corporate, expenses, loan repayments etc.
At the end of the tax year, say bob makes $200 and is set to pay $74 in tax,
When he calculates his property ($50 profit minus $100 loss = negative $50). Because it’s a negative, he can reduce his taxable income by $50!
With that $50 deduction (loss), bob’s taxable income is now $150, and he is set to only pay $55.50 in tax (Instead of $74)
“WOW BOB, you are paying $18.50 LESS in tax, that’s amazing, what a tax effective investment” – Most people.
This is why people call it ‘tax effective’. Yes Bob is paying $18.50 less in tax, but that’s only because he’s LOSING $50. Now I don’t know about you, but If someone took $50 from my wallet and gave me back $18.50, I’m sure as hell not celebrating.
You want to seek out investments that MAKE you money, so be cautious weavy travaller of the ‘Tax effective’ lingo, you want to PAY more in tax instead, let’s give an example of this because you’re probably thinking I’ve gone mad but hear me out…
- Suzy owns a share portfolio
- Shares make her $50 a year in dividends
- Shares cost her $0 per year in fees, expenses, etc
At the end of the tax year, say Suzy makes $200 (same as bob) and is set to pay $74 in tax (same as bob)
When she calculates her shares however…$50 profit minus $0 loss = positive $50) and it works out that her taxable income increases by $50!
With that $50 gain (profit), Suzy’s taxable income is now $250, and she is set to pay $92.50 in tax.
“Gee suzy, you are paying $18.50 MORE in tax, that’s terrible, you need to be more tax effective like Bob” – Most people.
Yes, suzy is paying more tax, but guess what… AFTER all taxes are paid guess who’s ahead?
- Bobs net income is $94.50 ($150 mines $55.50 in tax)
- Suzy net income is $157.50 ($250 minus $92.50 in tax)
Would you rather have $94.50 in your wallet like Bob, or $157.50 like Suzy?
Anyway, I kind of got carried away and went off track but hopefully that made sense? For those who are familiar with these examples already then yes, I know Bob could potentially be doing it for a range of other reasons and there are complex investment structures that potentially favour his approach but at the end of the day, Suzy’s making dough and bobs not, keep it simple.
May 2016 to September 2016 | $300,000
On September 2016, I had around $243,000, and Mrs MoneyPlant had $64,000, so as a future couple, this period is when we hit the $300,000 mark. It wouldn’t be until the next $400k post, that we fully combined our finances, so be sure to check out the next milestone on how we navigated joint accounts and investments.
This whole period between $200k – $300k lasted 6 months, but there were plenty of lessions being learnt!
My job was quite stable and Mrs MoneyPlant was studying her Masters. I was incredibly impressed by the face that she had over $60,000 in cash, and was studying her masters with NO student debt. She worked her butt off whenever she could and always paid upfront. Maybe that’s one of the reasons we got along so well! It’s a finance blog, but according tothis article from SMH, financial stress is one of the leading causes of relationship breakdown, so for all those singles out there (or those in a relationship already) don’t understimate how significant financial compatibility is.
We both love hunting for coupons, deals, and never paying full price on anything comes with a lot of joy, it’s kind of our ‘thing’. If one of us was a saver and the other a major spending, then I honestly don’t know how we would have managed that. Money is such an important part of life, so whoever you decide to choose in life, make a ‘Money Datenight’ where you both talk about
- Saving Money
- Spending Money
- Income and expenses
- Luxury funds and hobbies
- Equality in purchase decisions with respect to all the above
It’s just another compartibility test, but I personally think it’s a pretty major one.
Alright, I’m Mr MoneyPlant, not Dr Phil, so lets dive into the figures!!
Show me the Numbers!
Return on Investment
This was a short term frame, but even so we made about $5,200 in returns ($3,500 in Dividends and $1,700 in interest)
What is worth noting is that 58% of our wealth (outside super) and contributed 70% of our total investment returns. $5,200 for 6 month was getting high enough to warrant some further attention… It wasn’t just a few dollars a month year now so I was getting pretty excited by the future potential!
How much did I earn?
Combined, we earnt $61,000 over this period. Usually income is a really good indicator for how much we increased our net wealth by, but this particular post it doesn’t matter too much. During this period however, I was working full-time in a stable position, and Mrs MoneyPlant was studying her Masters part-time and working part-time when she could. I’ll talk about how having dual income affected our wealth building a bit more in the $400k update.
Notable achievments during this time
- Reaching $300,000 was pretty amazing! Wooho
- Nothing too major or eventful during these 5 months, just working and study 🙂
I think I used up my qouta writing about the importance of financial compatibility in a partner haha. If you really like this concept, though then here’s some further reading that you might be intersted in 🙂