I’m going to try and start a regular series of Financial Updates, probably monthly for now to see if I can maintain it. It will be structured in a Profit & Loss (P&L) and Balance Sheet (BS) style in what I hope is a clear and concise manner. I will go in the following order: Income, Expenses, Assets and Liabilities and summarise the main points of consideration that impact each item. This post will cover Income and Expenses while the next post will cover Assets and Liabilities.
Salary income for my wife and I have been consistent so far for the 2016 year. However, the bad economic times have impacted my wife’s banking industry more than my accounting industry. The risk of retrenchment has increased for both of us (maybe more so for her) and we do not expect year end salary increases or bonuses.
We have always been preparing for possible job loss given my experience with unemployment and underemployment after graduation in Melbourne. In fact, my wife faced her own underemployment and unemployment issues after working for two years in Melbourne. I don’t think I have mentioned this before but that’s actually the reason we moved to Sydney. Although working overseas and facing such situations have taught us to depend on ourselves and plan for the worst, it’s another thing to have to face this increased risk of retrenchment again.
This is the first year I’m recording our monthly dividend and interest income received. The dividend amounts are greater than the 2015 year because we have bigger ETF and Share portfolios but there have been cuts to the dividends received from certain companies we are invested in. We tried to make up for it by reorganising our bank accounts and credit cards to increased the interest earned. As our strategy is to try and invest every month into ETFs or Shares (less in a good month and more in a bad month), we expect the monthly dividend income to increase over time. We plan to increase our cash holdings in preparation for the increased risk of retrenchment, which means that the monthly interest income should also increase over time.
We are on the search for other income sources as we currently rely on 3 income sources – salary, dividend and interest. It would be good for us to develop at least one more income source if possible but this will take a lot of time and effort.
Our biggest expense continues to be the mortgage payment. Staying in an apartment in the East is certainly expensive but we are closer to my wife’s parents and it’s convenient for all of us to drive in to the city for work together. It’s also nice to have family around nearby after being overseas and home-cooked food for dinner is a big plus after a long day’s work.
I will run through the rest of the expenses in a descending order: Travel, Dining, Shopping, Apartment Maintenance, Groceries, Transport, Mobile & Broadband & Cable TV and Utilities.
I must admit that Lifestyle Inflation is a real problem for us. Although our incomes have gradually increased over the years, the same thing has been happening with our expenses as well. We are more willing to spend on taking taxis after work, eating out at restaurants, short-haul & long-haul holiday vacations. It might be the additional stress at work or just having to deal with more issues in life as we grow up but it impacts how much we spend to make ourselves feel better.
With the bad economic times and increased risk of retrenchment, we are taking the opportunity to re-evaluate our expenses and find ways to reduce them. For this to work, we will have to be disciplined in making gradual changes to our spending patterns to make the reductions more permanent.