Hello Mustaches, long time listener, first time caller here. I discovered MMM about 10 years ago when I was just taking my first steps into the real world, soaked it up like a sponge, and got the partner fully on board too. We've both been lucky and made pretty good decisions before we met each other, and then spent the past 10 years together aiming seriously for FI with low incomes, and then finally ramped up as we got proper jobs in the last ~3 years. Now looking at what to do next and hoping for some advice.
Life situation: Australians, in our mid 30s, living in Sydney now, married, renting an apartment near the city centre, zero dependants (but trying to get pregnant this year).
Gross wages: me = $100,000 AUD, partner = $70,000 AUD.
Pre-tax: normal super, partner has a little bit of HECS debt that's almost paid off.
Other income: earnings from index funds and savings interest = ~$20,000 AUD last year.
Current expenses: We have tracked every cent of expenses since 2013, and these are our averages over that long term. Note, we lived in Perth all those years with extremely low rent in sharehouses, but in mid 2020 moved to Sydney (partner's family is here, plus better jobs). We're now renting a place just the two of us since Jan 2021 (absolutely BLISSFUL by comparison) so our rent and total averages will go up by the end of this year.
Needs (rent, utilities, doctors/health insurance, phones, etc. - pretty happy we've optimised/shopped around for everything we can here) = 1050
Groceries (food and toiletries, since the lockdowns we don't hold back here and buy a lot of comfort/entertainment in food) =370
Transport (car everything, bikes, public transit - with the lockdowns, this average will just keep going down!) = 360
Fun (eating out, alcohol, gifts, clothes, entertainment, etc. - might be able to reduce this some) = 450
Travel (primarily visiting close family overseas once every ~2-3 years, plus mostly cheap hiking trips around Australia, but in general travel has been important to us) = 450
Average total yearly expenses to date = 34,000
Expected ER expenses: Expect the averages above are a pretty good estimate. Therefore, we expect to need ~$850,000 in assets in order to reach FI using the 4% rule. In general, we don't plan to fully retire early, but would like to work much more part time in order to maybe have kids and/or travel the world (when it's possible again).
Assets: (all numbers below in AUD, rough round numbers, but we track everything to the dollar in a master spreadsheet)
Super partner: 100,000
Super me: 90,000
Savings, term deposit at 2.75% which is due in 2024 = 100,000
Savings for FU money/house deposit = 110,000 (this started as just emergency savings and then just kept growing as we swept the "change" into it each week from the transaction acct)
Vanguard, index funds ASX = 100,000 (that's how much we've nominally put in, it's worth ~145,000 right now)
Vanguard, index funds international = 100,000 (that's how much we've nominally put in, it's worth ~135,000 right now, opened it more recently)
Vanguard, bonds = 25,000
plus some misc accounts, small savings accounts, and a few individual shares
Total currently across all accounts = ~$640,000
No house, car is worth 2,000 but will run forever if we're lucky.
With these assets and our expenses to date, we calculate that we're 74% towards FI. Last year we were able to save more than $100,000, and expect to get close to that again this year.
Liabilities: None, hooray!
Specific questions:
Broadly: the perennial Sydney Question, should we buy a place to live and for how much? It is literally impossible to live in this bloody town without every social conversation including discussion of real estate. My partner's parents are extremely motivated to see us buy property; as people who lived their whole lives in Sydney, they reckon it's the only way to build wealth, and they feel very deeply that they need to see their children on the property ladder as soon as possible.
I would normally not care too much about other people's ideas and just focus on our MMM plans, but ay here's the rub: they are offering us $200,000 - $300,000 to us (and their other two married children, who are also considering it but haven't done anything yet) for a deposit. This money would come out of their super, but they assure us they have plenty to live on without this money and want to see it "used well" before they pass, i.e. early inheritance. They would only give us this money now for a deposit on a property, with stipulations in a contract. We have explored how we would get a formal legal contract to do this, and so far no big red flags other than my general reluctance/anxiety about mixing (in-laws) family and money. It seems stupid to not at least consider it, but no money is worth wrecking the family relationships. There are no signs so far the money would wreck the relationships, but I've read a lot of horror stories, including on these forums. My partner has a great, close and warm relationship with his family, and expects no troubles, and that's probably true. In general, he is very sunny/optimistic, and I am more anxious, and often we're both right.
For the suburbs we're considering currently (inner west, or slightly north of the Shire), it looks like a minimum $800,000 spend for a 2 or 3 bedroom unit, up to $1,200,000 for a house in those neighborhoods - you get more room/amenities for your money further out, of course. Right now, we're leaning towards aiming for no more than ~$900,000, and do: 300,000 from the parents, 300,000 from our savings/Vanguard, and 300,000 from the bank. The bank we'd probably go with is offering 1.95% fixed interest for 3 years, or up to ~2.6% interest with an offset account. We're currently renting for $400 per week, and can confirm that any of the places we're looking to buy would themselves rent out at ~$400-500 per week (if, for example, we want to rent it while we traveled abroad or something in the future).
Specific questions, any advice on any of these and/or whatever else leaps out at you is much appreciated:
1) If we buy a property, right now it feels like it sets back our FI calculations significantly. Are we wrong about that?
2) Is there a solution to the Sydney Property Mystery, i.e. why is everything so very expensive compared to what you get for it? These are not lovely apartments we're looking at for these prices, it's hard to find anything that isn't dark, noisy, and has neighbors so close you could spit from your balcony onto theirs. (I grew up pretty rural, the noise and density are weird for me, and the thought of people being able to look in my windows at me makes my skin crawl a bit - I guess I just have to get used to that if I want to live in Sydney, or I keep looking for the unicorn property that isn't overlooked.)
3) Ultimately, our goals are to be mostly FI in the next ~5 years, so we can both work part-time with a kid, and/or to spend time travelling the world (when the pandemic is no longer a factor). We want to slow travel (or live and work) in North America and Europe at some point in our lives before we get too old. Neither of us love our jobs much right now, though we're endlessly grateful we've kept these well-paying jobs with pretty good companies and can work from home. They're both just very long hours and high stress, and one day we want to be able to live more. Do you think renting vs owning offers the best chance of reaching this kind of goal/lifestyle?
4) If you were offered $300,000 from your parents under the conditions I've laid out, would you take it? Why or why not?
5) If we got a $900,000 property with a mortgage at 1.95% fixed for 3 years, we have broadly three options for deposit vs mortgage:
a) us $300,000, parents $300,000, and mortgage with bank for $300,000
b) us $300,000 and mortgage with bank for $600,000 (no parents)
c) us ~$1-200,000 (and leave the majority of our investments in the market to grow there), and then either combo of parents vs mortgage for the rest.
What would you do?
Looking forward to any facepunches, musings, or experiences you might share!