Rents increase over time. My first two properties are now yielding about 9% on cost. I also include the tax effects of franked dividends on this.
Alex
Investing on a low income
- Thread starter Joffa
- Start date
Rents increase over time. My first two properties are now yielding about 9% on cost. I also include the tax effects of franked dividends on this.
Alex
Let us calculate....
TOTAL INCOME = $31,200
Less Rent = $10,404
Less Smokes = $3,640
Less Food @$150/wk = $7,800
Less Electricity/Gas @$20/wk = $1,040
Less Car Insurance and Rego x 2 = $3,000
Less Petrol @ $20/wk x 2 = $2,080
Cash Left at end of year = $3,236 (did not include phone bill)
(at 6% in an ING account $194 interest per year)
My advice...give up the packaged cigarettes or consume less of it and go for the cheaper roll-your-owns. Or as other members have suggested, use only one car if you want to save a lot more in a shorter period of time. You and your partner just need to be disciplined.
Hi Joffa,
Was planning to add something actually relevant to the post, but got distracted with Alex's cash flow statement. Sorry. Here is what we experienced.......
My partner and I started on very low incomes about 10 yrs ago. My partner worked 12 hrs a week in the bank, and I worked on low wages at KFC. We rented at the time - pd $450-500 a month for a 2 bedroom flat in Nth Melbourne.
I estimate that I earnt about $24,000 a year, and my wife earnt around $10,000 a year. We had no children at the time. (Have a 3 year old daughter now). I remember that we managed to save around $1000 each month. As previously mentioned by an earlier poster, we paid ourselves first each pay cycle. (We still do this).
On the figures you provide your pay comes to approximately $31,000 take home a year. This equates to $2600 a month. Less rent of $867 leaves $1733. Are you able to:
1. Live on $1000 a month and save the $733 and the parenting payments?
2. Live on $1000 and parenting payments and save $733?
Regards Jingo.
Was planning to add something actually relevant to the post, but got distracted with Alex's cash flow statement. Sorry. Here is what we experienced.......
My partner and I started on very low incomes about 10 yrs ago. My partner worked 12 hrs a week in the bank, and I worked on low wages at KFC. We rented at the time - pd $450-500 a month for a 2 bedroom flat in Nth Melbourne.
I estimate that I earnt about $24,000 a year, and my wife earnt around $10,000 a year. We had no children at the time. (Have a 3 year old daughter now). I remember that we managed to save around $1000 each month. As previously mentioned by an earlier poster, we paid ourselves first each pay cycle. (We still do this).
On the figures you provide your pay comes to approximately $31,000 take home a year. This equates to $2600 a month. Less rent of $867 leaves $1733. Are you able to:
1. Live on $1000 a month and save the $733 and the parenting payments?
2. Live on $1000 and parenting payments and save $733?
Regards Jingo.
No, nothing even as complicated as that.
If you (or a managed fund) received dividends (a split of the profit) from shares, you will get passed on a "franking credit".
In simple terms, when a company makes a profit and pays tax, they pay at 30% flat rate.
Your tax bracket is lower than this, so you can claim back the difference on your tax return (the fund will send you instrucitons on what to fill in which box of the tax return).
So in effect, you might get a $20 dividend distribution, but in reality, you might get another $5 on top in your tax return.
I mentioned funds, as you can start many of them with $1,000 (yes, I know, it's tough to cobbble this together - it's 14.2 weeks worth of smokes!!!
) - which is still a lot less than you need to get an IP happening. Cheers,
The Y-man
I was just thinking - this new ad on the dangers of smoking - it talks about this chemical, that chemical - is that naturally occuring in tobacco, or is it added in processing? Would it actually be healthier (if there is such an option), to grow your own and get the Native American peace pipe out?
Cheers,
The Y-man
http://www.quit.org.au/browse.asp?ContainerID=1636
Quit said:
So not sure the peace pipe will cut down the amount of chemicals that much……maybe by half? Although that might be a good marketing angle.
So not sure the peace pipe will cut down the amount of chemicals that much……maybe by half? Although that might be a good marketing angle.
[/FONT]
Surely then, organically grown tobacco leaf smoked without paper and processing will carry less harmful agents that the "processed stuff".... could be a new market....
Cheers,
The Y-man
Depends on whether the 'filters' at the mouth end do anything.
They must have some effect as when I was working at railway stations I occasionally got asked for scissors.
The reason?
For people to cut the filters off cigarettes to get a bigger nicotine hit.
Peter
Hi Joffa,
Yes a lot of us have been in your shoes. It is harder in the beginning but will get easier with time. Our situation is that we had kids very early, actually probably havent stopped having them (we have 5) but also brought our first house very early. Buying your ppor can be a great start but you need to aim low (the house we purchased in 1994 was the cheapest house sold that quarter in Perth, and our mortgage was a grand $226 per month - so cheaper than renting then) and then increase equity with renovating etc, don't just sit there and wait for the market to do its work, because then if your house has increased in value so has everything else! We currently have 3 properties, and want to increase that to 5 this year, you can do it on an average wage and raising kids - and yes my husband smokes too.
In hindsight I think starting off with IPs is probably a better way to go now, but you will need to buy cash neutral, so as not to hurt the budget too much.
I havent worked consistently in the 13 years we have been raising kids, but have worked on and off as the need arises - but my advice to your wife if she wants to work would be to go back to work now, you may think working when you have one child is difficult -yes it is -but working with 3,4 or 5 is a lot harder!
Or there is an alternative - Now I am going to go out on a limb here - and suggest something which may not be that popular with the wider community - but if you really want a family why not have more kids now. As our family grew, so did the family payments - you have to remember that even though you have 5 kids you still only pay for one roof over your head, one light bulb in the room, one car to drive, and hand me downs - the economies of scale are great!
Now we have kids because first and foremost we love them, but the government does support the raising of children for the benefit of the country, why not take advantage of that.
Consider this senario - up to $40,000 pa your average taxpayer qualifies for full family payments which for 4 kids would mean an extra $680+ per fortnight, not counting the $600 per child annual bonus, maternity allowance (currently increasing to $5000) and the maternity immunization allowance, and rent assistance.
I once had a Centrelink officer tell me that "family payments was for raising kids and not for building assets" - I was very quick to point out that every day she is probably handing food vouchers to people who choose to shoot it up there arm or spend it at the TAB - at least I am trying to improve life for my family and get ourselves to a point where we wont need the governments money in retirement - I think she needs to rethink her lectures!
Anyway best of luck, and remember if you want it bad enough, it will happen!
Yes a lot of us have been in your shoes. It is harder in the beginning but will get easier with time. Our situation is that we had kids very early, actually probably havent stopped having them (we have 5) but also brought our first house very early. Buying your ppor can be a great start but you need to aim low (the house we purchased in 1994 was the cheapest house sold that quarter in Perth, and our mortgage was a grand $226 per month - so cheaper than renting then) and then increase equity with renovating etc, don't just sit there and wait for the market to do its work, because then if your house has increased in value so has everything else! We currently have 3 properties, and want to increase that to 5 this year, you can do it on an average wage and raising kids - and yes my husband smokes too.
In hindsight I think starting off with IPs is probably a better way to go now, but you will need to buy cash neutral, so as not to hurt the budget too much.
I havent worked consistently in the 13 years we have been raising kids, but have worked on and off as the need arises - but my advice to your wife if she wants to work would be to go back to work now, you may think working when you have one child is difficult -yes it is -but working with 3,4 or 5 is a lot harder!
Or there is an alternative - Now I am going to go out on a limb here - and suggest something which may not be that popular with the wider community - but if you really want a family why not have more kids now. As our family grew, so did the family payments - you have to remember that even though you have 5 kids you still only pay for one roof over your head, one light bulb in the room, one car to drive, and hand me downs - the economies of scale are great!
Now we have kids because first and foremost we love them, but the government does support the raising of children for the benefit of the country, why not take advantage of that.
Consider this senario - up to $40,000 pa your average taxpayer qualifies for full family payments which for 4 kids would mean an extra $680+ per fortnight, not counting the $600 per child annual bonus, maternity allowance (currently increasing to $5000) and the maternity immunization allowance, and rent assistance.
I once had a Centrelink officer tell me that "family payments was for raising kids and not for building assets" - I was very quick to point out that every day she is probably handing food vouchers to people who choose to shoot it up there arm or spend it at the TAB - at least I am trying to improve life for my family and get ourselves to a point where we wont need the governments money in retirement - I think she needs to rethink her lectures!
Anyway best of luck, and remember if you want it bad enough, it will happen!
Hi 1974Angela
Just keep in mind any net rental property losses (negative gearing) is added back to your income in the case of your family payments.
Doesnt make investing not worthwhile, but a lot of people dont realise in the instance of family payments, child support etc Nett rental property losses get added back on to your income which can dull the shine a bit in some cases.
Also one of the reasons people get debts.
Keep up the good work!
Just keep in mind any net rental property losses (negative gearing) is added back to your income in the case of your family payments.
Doesnt make investing not worthwhile, but a lot of people dont realise in the instance of family payments, child support etc Nett rental property losses get added back on to your income which can dull the shine a bit in some cases.
Also one of the reasons people get debts.
Keep up the good work!
You will get there!
Lots of good advice - (apart from having more kids to get more money from the taxpayer!)
We came to Australia 25 years ago with nothing.
We are still living in our first house and made heaps of investment mistakes along the way, lost thousands of dollars (at last we are wiser, after those expensive lessons)
However we have a good life and I was able to choose to stay at home to look after my kids.
So in spite of only one salary and some bad mistakes, we are now worth $2million, which some on the forum may think is not so great, but we are happy with this and hopefully we will be more successful now!
Good luck. You will do well if you CHOOSE to (and it helps if your partner thinks along the same lines)
Get help from the forum, reading books, and most of all get started.
Instead of the cigarettes you could borrow money say to buy some shares, paying back say $50 weekly, that would force you to save.
Lots of good advice - (apart from having more kids to get more money from the taxpayer!)
We came to Australia 25 years ago with nothing.
We are still living in our first house and made heaps of investment mistakes along the way, lost thousands of dollars (at last we are wiser, after those expensive lessons)
However we have a good life and I was able to choose to stay at home to look after my kids.
So in spite of only one salary and some bad mistakes, we are now worth $2million, which some on the forum may think is not so great, but we are happy with this and hopefully we will be more successful now!
Good luck. You will do well if you CHOOSE to (and it helps if your partner thinks along the same lines)
Get help from the forum, reading books, and most of all get started.
Instead of the cigarettes you could borrow money say to buy some shares, paying back say $50 weekly, that would force you to save.
As far as negative gearing goes with FTB, if you earnt $40k from work, and $10k in rent, but your expenses were $15k, your income would not be reduced for FTB purposes, but it would end up cancelling out the $10k, making your income still $40k and not $35k.
My broker commented on my FTB which is about $650 a fortnight for 3 children when I was doing finance last week, he was surprised it was so much.
I'm glad that I've had a my children young, I'm 27 and have a 9, 4 and 2 year old and I have no plans for anymore. At leats now I can focus on my career and I don't have to worry about what will happen in the future when i need to take time of for kids.
My broker commented on my FTB which is about $650 a fortnight for 3 children when I was doing finance last week, he was surprised it was so much.
I'm glad that I've had a my children young, I'm 27 and have a 9, 4 and 2 year old and I have no plans for anymore. At leats now I can focus on my career and I don't have to worry about what will happen in the future when i need to take time of for kids.
Or there is an alternative - Now I am going to go out on a limb here - and suggest something which may not be that popular with the wider community - but if you really want a family why not have more kids now. As our family grew, so did the family payments - you have to remember that even though you have 5 kids you still only pay for one roof over your head, one light bulb in the room, one car to drive, and hand me downs - the economies of scale are great!
Now we have kids because first and foremost we love them, but the government does support the raising of children for the benefit of the country, why not take advantage of that.
Consider this senario - up to $40,000 pa your average taxpayer qualifies for full family payments which for 4 kids would mean an extra $680+ per fortnight, not counting the $600 per child annual bonus, maternity allowance (currently increasing to $5000) and the maternity immunization allowance, and rent assistance.
Don't recommend this for obtaining more loans to buy more property. Bank calculators don't like it when you enter too many numbers in the children section!!!
Now we have kids because first and foremost we love them, but the government does support the raising of children for the benefit of the country, why not take advantage of that.
Consider this senario - up to $40,000 pa your average taxpayer qualifies for full family payments which for 4 kids would mean an extra $680+ per fortnight, not counting the $600 per child annual bonus, maternity allowance (currently increasing to $5000) and the maternity immunization allowance, and rent assistance.
Don't recommend this for obtaining more loans to buy more property. Bank calculators don't like it when you enter too many numbers in the children section!!!
Nice to hear from you. I saved my deposit with the proceeds of giving up smoking. $50 p/w to start with. After I started saving, and through clenched teeth with no smokes, I started to add to the savings with other parts of the budget. In no time I had a 5% deposit. I bought a house in a small regional centre near melbourne, and planned to comute to work, or find something up there. I got offered a payrise instead, and found a place to rent in the city. I wrote to the state revenue office who let me keep the first homeowners grant and rent out the property. I then levereraged the equity from the growth, and used my tax savings to buy one a year for the past 5 years. Nothing flash, but I am building my savings. As a side note, I have started saving a proportion of my income again recently, 10% of my pretax income, just for the disipline it gave me when I first started out. I have also started smoking again, this time an occasional cigar, so remember budgets arnt forever (nor is being extravagent). Keep your eye on the prize!
The Richest Man in Babylon is a good book to read under these conditions.
Donuts
I've just spent 2 days working out my cost's and averaging out my bills.
If I stop buying a chocolate jam donut for work every day I save $585 a year.
So I have been eating my rego each day, its bad when small things are added up.
My girlfriends car is on gas, mine petrol, so we'll be swapping as I do most k's.
$2600 saving a year.
Reducing takeaway from $30 a week to $10, Saving $1040
Halving our smoking from $75 to $37, Saving $1950 a year.
So far a total of $6175 a year or $118 a week.
We have surprised our selves and it has a lot to do with you guys, theres a lot of good advice out there.
We do both smoke, not in the house or in the babies face like some of you might like to imagine, but never the less we do and it is still a risk to our kid.
We do what we can to minimize this and hopefully one day we can stop it all together. But until then we do what we do...
Were paying $867 pcm for a 3 bedroom house in epping, some say it might be too much, but we like it here and this is where family is. Cheap Rental is hard to find at the moment.
Ok Bfn now and anymore people that would like to add something please do and thanks for all those that have replied.
Regards Joffa.
I've just spent 2 days working out my cost's and averaging out my bills.
If I stop buying a chocolate jam donut for work every day I save $585 a year.
So I have been eating my rego each day, its bad when small things are added up.
My girlfriends car is on gas, mine petrol, so we'll be swapping as I do most k's.
$2600 saving a year.
Reducing takeaway from $30 a week to $10, Saving $1040
Halving our smoking from $75 to $37, Saving $1950 a year.
So far a total of $6175 a year or $118 a week.
We have surprised our selves and it has a lot to do with you guys, theres a lot of good advice out there.
We do both smoke, not in the house or in the babies face like some of you might like to imagine, but never the less we do and it is still a risk to our kid.
We do what we can to minimize this and hopefully one day we can stop it all together. But until then we do what we do...
Were paying $867 pcm for a 3 bedroom house in epping, some say it might be too much, but we like it here and this is where family is. Cheap Rental is hard to find at the moment.
Ok Bfn now and anymore people that would like to add something please do and thanks for all those that have replied.
Regards Joffa.
Well done on that soul searching. Most "battlers" never get that far and indeed take some sort of perverse pride in that sobriquet!
Once you have a deposit you will easily manage a repayment on an IP.
Once you have the first you will find the second easier to buy. Getting started is the hardest part and you have yourself pointed in the right direction.
Keep it up guys.
Cheers,
Good for you Joffa,
It is the little things that add up.
I used to buy 3 coffee each day at work for 65 cents each (vending machine, not good) and when I added it up $487 year I gasped.
I now take a thermos of coffee.
Good luck
I'm sure you will find many more cost cutting areas.
Maybe make it fun... a challenge to each other ...to find others?
It is the little things that add up.
I used to buy 3 coffee each day at work for 65 cents each (vending machine, not good) and when I added it up $487 year I gasped.
I now take a thermos of coffee.
Good luck
I'm sure you will find many more cost cutting areas.
Maybe make it fun... a challenge to each other ...to find others?
Fantastic!! Just make sure you put aside what you save
For more belt tightening:
http://groups.msn.com/MoneySavingIdeas
Cheers,
The Y-man
