Investing on a low income

Hi I'm 32, I earn $600 after tax a week, around $690 with overtime.
I pay rent of $867 a month.
My girlfriend does not work and is on parenting payments.
She takes care of our baby girl of 15 months.

As the sole breadwinner I'm finding it very hard to save a cent and get ahead.
We both smoke and thats about $70 a week.
When I think I'm ahead after I pay rent, a bill shows up and on and on.
I'm finding it damn hard to budget.
Before the baby came along, when we both worked.
We banked one wage. Saving was easy. Now I find it a pain in the neck.
We had around $7000 saved, then both our cars needed new engines.
I'm not here to sob about my predicament, just to see if others out there where in my shoes 5 years ago or whatever and are now ahead and have a few properties.
Did you go for your own house first or an IP.
Tell me a story so I can follow and get ahead in life.

So any advice on this would be greatly heard..

Thanks Joffa...

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I would just like to say so far that the response from you guys has been aw some and very helpful, some of you even take to time to do some quick budgeting, thats above board and worth a lot to us.
There are other figures such as rent assistance and all that.
Over the next week I will be reviewing my entire budget and looking at swapping cars, since one is on gas and ways to quit smoking.

But for now keep the stories coming, as for every story there is a another piece of the puzzle of life I can make reference too.

Thanks and talk to you soon..

Joffa...

You can turn your life around quickly if you try.
I'd assume most people would ask if you really both need to smoke, especially with a baby around and the money it drains along with other health problems it may cause.

If your girlfriend goes back to work, it will be easier for you.
Can she do some sort of work from home while looking after the baby?

I would suggest investing more into self development rather than financial investing right now.

I only started saving about 5 years ago with my wife, I'm 31 now and just starting to get the momentum going. I was just a builders labourer until a couple of years ago but was working more on myself than my job. Now it is starting to pay off and I'm just starting to look at getting an IP soon, probably 2. I figured why should I struggle trying to invest on low income when other higher income earners could have a nice comfortable lifestyle and also comfortably invest.

Create some good habits now and change what you have been doing for the last 5 or 10 years if you want to get different/better results.

Good Luck

If you are paying $200 per week rent, your smoking is over one third of your rent payment.

Give up the smoking for your own sake and your baby's health and save that money. Set up an automatic credit for $70 per week and in a year you have saved $3,640 without giving up anything other than a dirty habit.

If you could buy somewhere cheap and and rent it out, stay where you are on $200 per week, that $3,640 may be enough to service any shortfall and you have your first IP.

I realise this sounds simple, but you have to be prepared to take the first baby steps. You sound like you are getting into the right mindset already. Keep going, be tough on the smoking (easy for me to say as I have never smoked) and you will get there in small steps.

My hubby has never been on a high salary, but we have scrimped and done without for years at a stretch in order to have what we have now. There were times when he'd put in a long day renovating and say "can I afford to buy a beer?" Many, many times I'd say "sorry no beer, we have $50 in the bank to last over the weekend until your pay comes in on Tuesday".

I don't believe it now, but we lived that way for a long time.

Don't give up, keep the goal in sight and you WILL make it.

Wylie

I clear $400 a week with overtime.
Believe it or not, here, that' a pretty good wage.

When my babies first started coming along I worked opposite shifts than my (ex) husband. Did that for a year then decided to quit work.Eventually I ran a home based day care.

Maybe get rid of one of your cars?
We only have one car now.

Like others said, give up smoking.
Buy second hand clothes, especially for baby.
Shop for food specials.
Set a budget.

If all this was easy,everyone would own IP's.

Good luck.

There's some helpful tools here Sorted ! that are worth a look..here's a few more:

Financial Plan Budgets 1

Microsoft Template Budget

Wikipedia Budgets


I’ve used ‘envelope budgeting’ in the past and can tell you that most budgets I did showed I couldn’t afford to live as I currently was..so I had to change and plan long term to avoid the short term “ups n downs”.

I'd drop down to one car as well and agree with the smoking (I’m a non-smoker though) are there any other areas to save money?

A $1 saved is $2 earnt

Maybe use the Family Assistance money solely for the babies needs/clothes etc and start a regular savings plan again from your wages; I used to put 10% of my wage away, then every time I got to $1,000 I'd purchase some shares, this eventually became a deposit for a property.

Sharing accommodation with others is also a way to reduce costs, not much fun, but I’ve lived in a caravan and even slept on a blow up mattress in a spare room in a 2 bed unit in the past when funds were low.

Can you get the FHOG?

Just thinking of ideas.............everyone's different though; however, i'm suremany here suffered at the start for long term goals/gains

Hi all I guess the main message has already been said and you even identified a main area of money waste. Have you considered patches nicotine gum etc. Redwing provided some great budget calculators we have a rather simple one on our site which you can visit from the signature, on the free tools page.

I wish you all the best I know giving up is hard to do but worth it in the end

One thing I noticed was that you said you think you are starting to get ahead and then a bill shows up.

Bills don't have to knock you backwards so much. They can be big but when you look at it most of them come around at a regular interval. Take the time and look at all the bills you get in a year. Add all the totals together. Then divide this total by 52. That will then tell you how much your bills for the year will cost you per week. Then every time you get payed put that money aside in a seperate bills bank account. If you do this then every time you have a bill to pay the money should be sitting there waiting.

In regards to saving. Nearly all people get payed, go abount their life, spend what they need or like, and then save what is left over before the next pay check. That's if they save at all. You are worth more than what's left over. Pay yourself first.

Joffa,

You're living hand to mouth because you choose to. Gotta change that mindset. People in worse postions than you financially have managed to achieve financial freedom, there's no reason why you can't either. I hate budgets, they really piss me off! I don't use them, as far as I'm concerned they can go to hell. This what I do:

- determine how much I bring home a month (or fortnight, whatever)
- set aside what I need to pay for rent
- keep a set amount that I need for everyday expenses for the month - this money gets spent on whatever I want, but it must last the month
- put away a set amount for bills
- the rest goes into savings

If I was personally in your position, I'd be doing the following:

- selling one of the cars and looking at the option of selling the other one and getting something smaller/more economical (assuming this fits your situation).
- moving to cheaper digs, you're paying too much rent, possibly think about moving in with your or her parents

The smoking? Well... everyone has a vice or two *wink*.

Mark

Well I was a bit shocked reading some of the responses, they seemed slightly condesending. I think we all have our little vices, but I'm not going to say any more on that topic.

I'll give you a little bit of a background about me, I'm a single Mum of 3 girls, aged 9,4,2. I work full time ( for a year and a half now) on a fairly average wage and get family assistance.

Although I've got some assistance from my mum for a deposit for the house I'm building, the house that i will build is going to cost $380k, but i believe that I could probably do something much cheaper on my own.

The plan is that I will move in for 6 months to get the first home buyers grant, then move out and have a tenant, the result will be neutral- possibly positive property with at least about $70k of equity straight away.

I think what I have focused on over the last year is to get rid of any debts I have, to make sure I know what my bills are and when they are due and allow enough for them.

I know how hard it is to go back to work with a little one. daycare is quiet cheap if you are only using it 2 or 3 times a week, so maybe a part time job would be great or a weekend job so you can care for your daughter, but I don't want to comment to much on this as going back to work/staying home thing for mum's is a personal issues.

Goodluck with your goals, hopefully someone else will be able to share their story also and give you a little bit of inspiration.

Joffa said:

Hi I'm 32, I earn $600 after tax a week...

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Joffa,

How much tax are you paying? About $10k per year?

Cheers,

The Y-man

There are certainly things you can cut back on. Stop smoking. You could service the cash shortfall of my whole portfolio on what you guys spend on cigarettes. Also, you can't tell me it's good for your kid to have both parents smoking.
Alex

Joffa said:

Tell me a story so I can follow and get ahead in life....

Click to expand...

We savagely cut our spending early on - I reckon we were the tightest tightar... uuurh... tightwads around (this was 10 years ago - we are probably still the tightest tightwads we know - no, make that the second tightest).

$80 per month paid our utility (gas, electricity, water, phones)

$100 per week paid our grocery.

We carefully calculated the amount of fuel being consumed by our cars (we were also roadblocks on "economy runs")

We rented a small 2br unit - it was plenty big enough coz we had nothing to fill it with.

We didn't go out (no movies, no dinners)

We didn't eat takeaway food (much more expensive than you think) - we preferred to grow our own food (would have converted the lawn into a vegie patch if the landlord allowed)


Cheers,

The Y-man

p.s. 10 years down the track, could "retire" very comfortably, BUT we still don't go out much, still grow our own food, still calculate fuel consumption down to the last drop, and still don't have any new fangled doodads to fill the house! What the... ???

alexlee said:

There are certainly things you can cut back on. Stop smoking.

Alex

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Actually, is it legal to grow your own tobacco?

Cheers,

The Y-man

The Y-man said:

Joffa,

How much tax are you paying? About $10k per year?

Cheers,

The Y-man

Click to expand...

Around 10K...

The Y-man said:

Actually, is it legal to grow your own tobacco?

Cheers,

The Y-man

Click to expand...

A truckie with chop chop on his rig can lose it (the rig, that is). The prosecution does not need to prove knowledge.

ps Did I miss the bar tab bit? A lot of us old pharts gave up smoking ages ago but still enjoy our XXXX but booze & baccy go hand in glove. Please tell me you don't drink 'n smoke AND hope to save.

I was 27 when first baby arrived. We took in a uni student in a spare room who paid $100 per week, while I fed him. I always planned ahead and prepared cheap nutritious meals. He was hardly every home or studying in his room. I did go back to work when bubs was 6 mths old.
We now have 2 kids, No uni student, 1 IP and 2 builds in the pipe line. My hubby is on WC and I only work part-time. We have just sold our 2nd car as a new bus service has just started up.(Picks hubby up and drops him off at the front door for $1.80per day!!)
I love kids second hand clothes and can still get a great range of "boutique" brand clothes. They wear so well. I also grow a few vegies and have laying chooks. I know friends laugh at me as I try to tell them a few tricks of the trade.....who'll be laughing in 10 years time.
Rome wasn't built in a day, get the basics sorted first i.e. savings, etc and if you have fire in your belly, you will succeed.
I also can see how Mr Costello can acutally help us purchase IP's , as far as Family Tax Benefit goes, but others may disagree

my 2c

Liz

Joffa said:

Around 10K...

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So Joffa,

What if someone could get you $190 per week pay rise?
Or if not $190, then even $100 per week?

It would make a big difference right?

Right now, it's going straight to the Government, because you are in the highest taxed circumstance - a worker with no investments.

Maybe it's time to start looking at lowering what you contribute to the country, and get some back for yourself?


Here's an idea.

Forced savings.

The PPOR may not be a bad idea, if it is going to force you to save. However, it won't do much for your tax.

Alternatively, you could perhaps contribute 10% of your pay (I know .... very scary - $60 per week.....) to a fairly stable managed funds which will pass on franking credits. This has the double effect of forcing you to save, getting some capital gain, and getting some tax benefits.

Cheers,

The Y-man

jusnliz said:

....have laying chooks....


Liz

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Ooo... my wife's been wanting those......

Cheers,

The Y-man

The Y-man said:

Alternatively, you could perhaps contribute 10% of your pay (I know .... very scary - $60 per week.....) to a fairly stable managed funds which will pass on franking credits. This has the double effect of forcing you to save, getting some capital gain, and getting some tax benefits.

Click to expand...

Are you talking about the ATO PAYG 'Section 15-15' Tax variation?

alexlee said:

There are certainly things you can cut back on. Stop smoking. You could service the cash shortfall of my whole portfolio on what you guys spend on cigarettes. Also, you can't tell me it's good for your kid to have both parents smoking.
Alex

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Hi Alex,

You must have a number of properties neutrally geared?? By my calculations $70 per week multiplied by 52 = only $3640. How did you do this???

Regards Jingo.