Welcome to this month’s Reader Case Study in which we’ll address Jemma’s question on whether or not she should buy a home in Sydney, Australia. Case studies are financial dilemmas that a reader of Frugalwoods sends to me requesting that Frugalwoods nation weigh in. Then, Frugalwoods nation (that’d be you), reads through their situation and provides advice, encouragement, insight, and feedback in the comments section. For an example, check out last month’s case study.

P.S. Another way to get support on your financial journey is to participate in my free Uber Frugal Month Challenge! You can sign-up at any time to join the over 12,600 fellow frugal sojourners who’ve taken the Challenge and saved thousands of dollars.

I probably don’t need to say the following because you all are the kindest, most polite commenters on the internet, but, please note that Frugalwoods is a judgement-free zone where we endeavor to help one another, not to condemn.

With that I’ll let Jemma, this month’s case study subject, take it from here!

Jemma’s Story

Jemma and Greg in their restaurant

Greetings, Frugalwoods nation! My name is Jemma, I’m 36 years old and I live in Sydney, Australia with my 46-year-old husband, Greg, our two-and-a-half-year-old son, and our two Ragdoll cats. Greg and I have been married for five years and together for seven.

We love eating good food, trying new restaurants, drinking good wine, reading good fiction, meditating, traveling, and spending time in nature and with family and friends. Not all of those things are necessarily frugal, but since we own a restaurant, many of them are a tax deduction for us – even travel in some cases!

We would both love to buy a home of our own, but we’ve always put our savings either into our restaurant business or we’ve gone traveling. We’re terrible like that: for most of my twenties I lived and worked in Germany and Mexico, and spent whatever savings I had on travel, thinking that one day I’d settle down and save.
My husband was very similar. Well, having a child made us think more soberly about our gallivanting ways, and we’re now reining in most of our travel for awhile (except for one short domestic trip each year and one trip to New Zealand every second year to visit my husband’s family) until we can get our financial house in order. 
Jemma & Greg’s Restaurant
Jemma & Greg’s son

Greg was a chef before we bought our restaurant, and it was always his dream to have a place of his own. This dream came true for him at the beginning of 2013 when we purchased a French bistro in a formerly rough neighborhood that is now very much in the process of being gentrified.

There are fancy apartment buildings going up in the area and new, trendy businesses opening up all the time. We think this will have a positive effect on our business. We have a 6-year lease for the business premises, which expires in 2022, and the landlord can increase the rent by 4% each year, but no higher.

I love learning languages, and speak fluent German, Spanish and English, having worked and studied in Germany and Mexico for several years. I studied a Master of Applied Linguistics, and up until mid-2016 I was working as a linguist for a tech company in the field of speech recognition and machine translation. I quit last July to work with my husband on our restaurant business.

I now take care of the bookkeeping and marketing for about 20 hours each week. The rest of the time I take care of our son. I work from home, and my mother comes over to watch him two days a week so I can get some work done without being distracted. We’re really grateful not to have to spend money on childcare, and it’s really lovely that my mum is able to spend so much time with her eagerly awaited only grandson!

Frugal Baby-rearing

Jemma & Greg’s critters

Our only baby-related expenses apart from his food are diapers. Our son is mostly potty-trained, but still uses them for sleeping, so we spend about US $2 a week on diapers.

We’ve barely spent a cent on clothes for him, having been fortunate enough to receive hand-me-downs from friends and gifts from my mum, who can never resist sales at baby stores.

He has been given most of his toys by family, but occasionally I buy things like Play Dough and crayons, which are dirt cheap. Thus far, much like the Frugalwoods, we’ve found baby-rearing to be quite inexpensive! Certainly much cheaper than the mainstream media would lead you to believe.

Where Jemma and Greg Want To Be In 10 Years


Jemma’s husband and son

I’ve only just started paying attention to our finances in detail since having our son. I realize I’m actually an adult now and need to be financially responsible and stop spending all my savings on travel like there’s no tomorrow! I’m sure a lot of other people get their act together before they have kids, but anyways…

I would like us to own our own home, have a six-month emergency fund and be making good, regular contributions to a low-fee index fund. If we stay in Sydney (we have often talked about moving somewhere with a cheaper cost of living, such as Canberra, where my parents live), our home will most likely be a two-bedroom apartment, as housing prices are astronomical here.

That being said, I don’t mind living in an apartment, and I’m confident we could do that even with two children, as we are quite minimalist and don’t have or need a lot of stuff.

Sydney has good weather conducive to taking kids out to play at the park almost every day, so I’m happy to let the local government pay for the upkeep of “my backyard” rather than buying a property with a yard.


We’d like to have another child and I imagine things to be quite similar to how they are now. I would be staying home with my kid(s), doing lots of outdoor activities together as a family such as going to the beach and bushwalking (hiking), continuing to travel now and then, spending time with friends, etc. I’m really happy with my lifestyle now. Although Greg works five nights a week while I’m at home with our son, I love having that time to myself to read, write, meditate and potter around, and it means our son gets to spend a lot of time with both parents during the day when he’s awake.


Jemma’s son

To be honest, I have no idea! Since becoming a mum, I feel like any career ambitions I had have gradually disappeared – perhaps because most of my mental and physical energy is taken up by my toddler! I’m sure that will change as he grows up and goes to school, so perhaps I’ll have a better idea about this in a few years.

In any case, I’m grateful to have a flexible work situation for now, so that I’m able to help my husband grow our business, learn new skills like bookkeeping and marketing, and be able to spend a lot of time with my son and not have to put him in daycare.

We would like to have a second and final baby soon, so my earning potential will be quite limited for the next 5 years or so, as I would like to keep the same working arrangement to enable me to spend lots of time with my children.

Jemma and Greg’s Finances

Note: all values are in US Dollars, converted from Australian Dollars on May 1, 2017

Yearly Take Home (Net) Income

Net Income Amount Notes
Jemma and Greg’s combined monthly income $6,846 After taxes and student loan repayment deduction for Greg’s student loan
Annual Total: $82,152

Monthly Expenses

Item Amount Notes
Rent $1,472 This rent is low for where we live as our apartment is pretty run down. We’re not a ritzy suburb by any means, but we’re close to a popular shopping/cafe district (and our restaurant), and therefore real estate is expensive here. We could move farther away, but that would mean more time and money spent on commuting to and from work and to see friends. We’d rather live in a shabby apartment in a nice area, which allows us to be close to work, friends, good schools, nice parks, etc.
Groceries & household supplies $735 Includes all food bought at the grocery store and market as well as non-food items such as shampoo, toilet paper, diapers, etc.
Vacation expenses $423 Flights, accommodations, taxis, etc.
Entertainment $261 Includes eating out, buying occasional books, hiring DVDs (we are quite old-school), the occasional toy/art supplies for our son, going to a music gig about once a year (we forked over $225 to see Adele back in March, but it was worth every cent and was on my bucket list. 🙂 ).
Bills (electricity, gas) $223
Car insurance/registration/service/tolls $161 We have a Toyota CRV 2010, which we paid cash for two years ago. We get it serviced twice a year.
Dentist $158 Two check-ups a year each plus X-rays, fillings, etc. This is after we claim expenses on our health insurance.
Gas for the car $130
Doctor’s bills $110
Clothing $97
Gifts $70
Cats $66 Includes food, de-worming every quarter, annual vaccinations, and check-ups. We have friends feed them for us when we go away, so no boarding fees.
Haircuts $54 I cut our son’s hair, but Greg and I both get our hair cut by a hairdresser. I go 3 times a year for a cut and colour, and Greg goes every 10 weeks, more or less. However, I recently purchased a pair of hair scissors with the aim of learning to cut my own hair!
Cell phone $30 My cell phone plan provider is Virgin Mobile. Greg’s phones are paid for by the business.
Donations to charity $28
Health insurance $0 My parents kindly pay our health insurance for us. It was their generous gift to us when we told them we wanted to start a family.
Internet $0 This is a business expense since we both need to work from home.
Total: $4,018  
Current Savings Rate: 41.31%


Item Amount Notes
Restaurant business $135,000 This is our restaurant’s approximate current value, although we think it will increase as the neighbourhood becomes more gentrified.
Superannuation (Australian equivalent of 401k); Jemma & Greg’s accounts combined $51,574 Superannuation is basically a way to make sure people save for retirement. It is compulsory for an employer to pay 9.5% of the employee’s gross salary into his or her chosen superannuation fund, usually on a monthly basis. The superannuation fund invests the money so that it (hopefully) grows by the time you are allowed to access it at the age of 60. My husband and I have separate superannuation accounts. It is possible to make extra contributions to superannuation, and in cases of low income, the government will match contributions. We currently don’t make any extra contributions. Australia also offers an age pension for low income earners over the age of 65.
Money the business owes us $41,870 We loaned the business this money when we bought it, but have prioritised paying off other business related debts which incurred interest.
Money in a holding account for the business $18,783 The landlord for our restaurant requires us to have this money in a holding account as a guarantee. This money is earning interest, but we can’t touch it unless we sell the business, so it’s more like retirement savings than emergency fund material at this stage.
Emergency fund $6,000 This is only enough for one month’s worth of expenses. In theory, we could simply pay ourselves back money that the business owes us in an emergency, but that would depend on the business having that money available when we needed it, so I’d rather not count on that. I want to increase our emergency fund to be $18k.
Our son’s savings $1,591 We transfer $15 into his account every week, and family members give him money for his birthday and Christmas, which we save in this account.
Total: $254,818


Item Amount Notes
Greg’s Student Loan $12,000 This is Greg’s student loan. He studied a teaching degree before deciding that teaching was not for him and he wanted to open a restaurant. The loan has 0% interest, although the remaining amount is adjusted for inflation on an annual basis, and payments are automatically deducted from his wage.

Jemma’s Questions For You:

  1. While we own our business outright, we don’t own our own home and are currently renting a two-bedroom apartment. We would both love to buy a place of our own, but the median price for a two-bedroom apartment in the area where we live is $600,000 (and it’s not a ritzy suburb, either!). My question is: once we have 3 months’ worth of expenses in our emergency fund, i.e. another $12K, should we:

a) Focus on saving for a down payment for a home (we’d need approximately US $120k)?

b) Start investing in a low-fee index fund (we’d need around US $3,700 as an initial investment in a Vanguard index fund here) and put any leftover savings each month towards a down payment for a home?

c) Take the money and go on a big vacation? Just kidding ;)…

At our current rate of savings, it’s going to take about seven years before we have enough money for a down payment unless we sell our business! And by then, inflation will probably have kicked in again and we’ll have to keep chasing the market. Then again, if we put off investing until we’ve purchased a home, that’s seven years of compound interest that we’ll miss out on.

I’m inclined to go for option b, but am not sure if I’m missing something. I’m also wondering whether the reliability of index funds as a long-term investment is only valid in bigger markets like the US, or whether they are also a good idea in smaller markets like the Australian Stock Exchange?

Finally, I’d like to offer a big thanks to the Frugalwoods for providing so much inspiration!

Mrs. Frugalwoods’ Recommendations

I am so impressed with Jemma and Greg’s low spending on their son! I love seeing other families prove that parenting doesn’t have to be disastrously expensive. And, I want to commend Jemma for taking charge of her family’s finances! Well done all around. Jemma and Greg are in a good position and we’re going to get them into a great position!

To Buy Or Not To Buy A House

Jemma’s cat snoozing after a hard day’s work

I’ll cut right to the chase: I don’t think Jemma and Greg should buy a house. My rationale for this is several fold:

1) Sydney is a remarkably expensive real estate market and it would take Jemma and Greg a very long time to build up an adequate down payment. It seems that real estate is abnormally expensive there and, given what it would cost to buy something vs. the cost of their rent, it seems that renting is a logical decision for them.

2) Jemma and Greg are happy with where and how they live right now.

They’re close to work, amenities, friends, and parks, and so I see no reason for them to move. Jemma mentioned that they’re content living in a small space and don’t really want to care for a lawn, so their apartment seems to suit their needs perfectly.

I’m going to quote Jemma back to herself now, because I think her words are very telling: “We could move farther away, but that would mean more time and money spent on commuting to and from work and to see friends. We’d rather live in a shabby apartment in a nice area, which allows us to be close to work, friends, good schools, nice parks, etc.” I think that’s Jemma and Greg’s answer right there.

Since Greg is often working late at their restaurant, it seems to me that adding a long commute just to own a home would dramatically decrease their quality of life. Plus, since so much of their time is invested in the restaurant, I’m going to make a prediction that they wouldn’t have time to do the unending repairs that home ownership entails. The beauty of renting is that tons of their time is freed up by virtue of their landlord performing their repairs and maintenance for them.

Owning a home is a time-consuming proposition and since the restaurant and travel are their priorities, I don’t see how a home fits in there. You should live where you love living, and you should do what you love doing, which is what they’ve done. Jemma and Greg have crafted a life they love and it doesn’t seem to me that owning a home would increase their happiness in any measurable way.

3) Jemma and Greg don’t have enough in retirement savings or emergency fund savings.

Jemma identified their need to build up their emergency fund, which I completely agree with. However, I actually recommend that they save up closer to a year’s worth in an emergency fund (which is more than the 3-6 months I normally advise) for two reasons:

1. Jemma and Greg both work for the same employer–their restaurant–and so, all of their income eggs are in the same basket. In the event of a downturn, a slow season, or a disaster, both of their sources of income would evaporate;

2. Restaurants are not very recession-proof and if Australia experienced a downturn, it’s likely their business (and hence their joint livelihood) would suffer.

Jemma and her son 🙂

Having a year’s worth of expenses would provide Jemma and Greg with a very comfortable buffer and would give them ample time to figure out their next move if their restaurant were to tragically go under.

In addition to their emergency fund, Jemma and Greg need to get serious about beefing up their retirement savings. The $51K they have jointly saved in their Superannuations won’t last them long in retirement. At their current rate of spending, that’d last them a mere 9.4 months. I recommend they start contributing to this fund from every paycheck to ensure they’ll be able to retire when they reach 65+.

Savings Accounts Side Note

One of the easiest ways to optimize your money is to keep it in a high-interest savings account. With these accounts, interest works in YOUR favor (as opposed to the interest rates on debt, which work against you). Having money in a no (or low) interest savings account is a waste of resources because your money is sitting there doing nothing. Don’t let your money be lazy! Make it work for you! And now, enjoy some explanatory math:

  • Let’s say you have $5,000 in a savings account that earns 0% interest. In a year’s time, your $5,000 will still be… $5,000.
  • Let’s say you instead put that $5,000 into an American Express Personal Savings account that–as of this writing–earns 1.70% in interest. In one year, your $5,000 will have increased to $5,085.67. That means you earned $85.67 just by having your money in a high-interest account.

And you didn’t have to do anything! I’m a big fan of earning money while doing nothing. I mean, is anybody not a fan of that? Apparently so, because anyone who uses a low (or no) interest savings account is NOT making money while doing nothing. Don’t be that person. Be the person who earns money while sleeping. Rack up the interest and prosper. More about high-interest savings accounts, as well as the ones I recommend, here: The Best High Interest Rate Online Savings Accounts.

4) Jemma and Greg love to travel.

Since travel is a high priority for them, owning a home would only decrease their ability to travel frequently. I’m of the belief that you should spend on your priorities and it doesn’t sound to me like home ownership is a true priority for Jemma and Greg.

I advise they instead save and invest the money that would go towards a down payment to fund further globe trotting adventures. Money should be used in service of how you want to live–not how you think you should live (more on that below).

5) Home ownership is not “the ultimate” financial destination.

Jemma and Greg’s case gives me a perfect opportunity to point out that buying a house is not the end-all, be-all of financial wellness. Owning a home is not necessary for financial stability, wealth, or any other metric of financial success. It can be one factor in a sound financial portfolio, but it is by no means a requirement. In fact, in some cases, buying a house is a massive detriment to your longterm financial future (and I tend to think that’d be the case for Jemma and Greg).

There’s a myth that home ownership provides all the financial security you’ll ever need, but just ask anyone who experienced the 2008 housing crises how that one worked out. A home might be an investment, but more often than not, it’s a money pit that’s nice to live in.

For more reading on the wisdom of buying vs. renting, may I recommend:

Is It Better To Rent Or Buy   -The New York Times

Why your house is a terrible investment   -JL Collins

Is buying better than renting?   -Mr. Frugalwoods

6) They have other goals for their money.

Jemma & Greg

Jemma has already identified two other destinations for their money: investments and travel. Investing in the market is an excellent strategy for building wealth and ensuring a secure financial future–in fact, it’s not just excellent, it’s a requirement.

Jemma mentioned using Vanguard’s low-fee index funds, which is 100% what I advise. I happen to use Fidelity’s low-fee index funds (FSTVX), but either is a great product–the key is that you want low-fee index funds.

For more on how to start investing on your own, check out this post as well as this one. Investing is easy, you can do it yourself, and it’s a crucial ingredient to building longterm wealth.

The caveat here is that I’m nowhere near an expert in the Australian stock market; however, I know we have tons of Aussie Frugalwoods readers who can lend their insight on Jemma’s question about the longterm viability of investing in the market. So please chime in with your experiences!

“Shoulds” Vs. Your Actual Goals

What I hear in Jemma’s above write-up is that she and Greg don’t really want to own a home, but feel they should in order to be financially secure. I am here to say that you do not need to own a home in order to be financially secure.

There is absolutely nothing wrong with not wanting to own a home. It’s a perfectly fine financial approach and, in fact, in a lot of cases it’s actually a better financial decision. I encourage Jemma and Greg to ignore the societal pressures they might be feeling to buy a home in order to be “adults” and instead focus their money on the things they do care about: investing, travel, and saving for retirement.

There are plenty of things–in life and in the financial world–that we’re told we should do, but in reality, few of these things are actual requirements. Many times, charting an unusual path is a more interesting, fulfilling way to live and can allow you to pursue the things you enjoy.

By divesting yourself of the “shoulds” of life, it becomes a lot easier to instead focus your time, energy, and financial resources on what you actually want. For Mr. FW and me, that was retiring early to our homestead in the woods, which isn’t a conventional path. For Jemma and Greg, I think it’s the ability to live in the city centre and travel extensively. The wonderful thing is that everyone has different dreams and aspirations and there’s no need to all hew to the same path.

There are basic premises of financial stability: saving at a high rate, saving for retirement, and investing in the market. Beyond that, how you decide to deploy your capital is entirely up to you. Buying a home does not rank as a requirement.


Since no Frugalwoods case study would be complete with a rundown of expenses, here’s my advice on how Jemma and Greg can cut back on their spending:

  • Travel: I know this is a priority for them and I dearly want them to be able to travel in the future. However, given their low emergency fund and retirement savings, I recommend dialing this back to zero for the next few years in order to beef up their savings. This’ll be $5,076 saved per year.
  • Entertainment: Here’s another one that needs to go on the chopping block. There’s so much fabulous free entertainment to be had in cities (in the country too, actually), so I challenge Jemma and Greg to scope out free concerts, free festivals, free baby & me events and more in their city. Check out my Entertainment category for ideas on securing free entertainment! That’s another $3,132 saved per year.
  • Clothing: I recommend a clothes-buying ban for Greg and Jemma. It’s totally possible to go for very long stretches without buying clothes–I’m three years in with only one pair of work boots purchased–which will save them a whopping $1,164 per year.
  • Gifts: $70 per month on gifts strikes me as quite high. I encourage Greg and Jemma to think creatively about how they give gifts and identify opportunities for homemade, less expensive options. Here’s how Mr. Frugalwoods and I give gifts frugally. That’s $840 they’ll save.
  • Haircuts: Jemma said she bought scissors to cut her own hair, which is wonderful! Greg needs to insource his haircuts as well, which’ll save the family $648 per year. Here’s my tutorial on how Mr. FW cuts my hair and here’s how I cut his.

If Jemma and Greg are able to make all of these reductions to their spending, they’d stand to save $10,860 in a single year, which will help them enormously in their need for an emergency fund and retirement savings.

It’s also true that if they eliminate these line items, they’ll permanently reduce the amount of money they need to live on. Frugality is a virtuous cycle: the less you spend, the more you save, and the more you save, the less money you need to earn because the less you’re spending, and on it goes.

In summary, I advise Jemma and Greg to do the following:

  1. Build their emergency fund up to a year’s worth of expenses.
  2. Reduce their spending in order to both save more and also permanently decrease the amount they need to save in the long run.
  3. Begin investing in low-fee index funds and make regular contributions to grow their wealth (after saving up a years’ worth of emergency fund).
  4. Make monthly contributions to their Superannuation accounts in order to ensure their ability to retire in old age.

Ok Frugalwoods nation, what advice would you give to Jemma? She and I will both reply to comments, so please feel free to ask any clarifying questions!

Would you like your own case study to appear here on Frugalwoods? Email me (mrs@frugalwoods.com) your brief story and we’ll talk.

Updated July 22, 2017 with Jemma’s decisions:

I’m now pregnant with our second child – woohoo! He/she is due in February. I’m planning to keep working for our business from home until the second child goes to pre-school (in 2022!). After that, I’ll reassess what I want to do with my career. In the meantime, we might move out of Sydney, but for now, Greg wants to keep the business and make it work as well as it can.

We are going to build up our emergency fund with the goal of having a year’s worth of expenses ($48k) saved by August of next year (we now have $10,500 saved), but hopefully we can do it sooner as we reduce our expenditures in the areas that you all mentioned. After that, we’ll start investing in a low-cost index fund.

We’re currently looking into contributing more to our superannuation funds, and are going to have a meeting with our accountant soon about the most tax-effective way to do so. As far as buying a property is concerned, we have put this idea on hold for now. I think travel will also become a lot less of a feature in our lives for a while. To be honest, it’s not that enjoyable with a toddler, and especially with two little ones, but we will continue to visit my husband’s family in NZ every two years, and will do some small local road trips here and there every now and then. We are also planning to go to Melbourne, another Australian city, just the two of us for a weekend getaway before baby 2.0 makes an appearance.

We really appreciate all the advice given by the Frugalwoods and their readers!

-Jemma & Greg

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  1. I strongly agree that home ownership doesn’t look like a good fit financially or for lifestyle for the two of you. I’d say your most urgent priorities over a mortgage are your emergency fund, and debt reduction, because you are both depending on the health of one income source for your household. If that goes away or even slumps for a lengthy period of time but not enough to feel like selling makes sense or even slumps too much to sell, you’ll need strong cash reserves to get you through.

    I’d suggest also, unless I missed this detail reading on my phone, that you make sure to have an exit plan in case business does go south. I’ve watched more than a couple business owners who couldn’t ever dream of letting go of their babies go under because they didn’t have a point where they agreed to cut their losses and walk away while still whole. A couple of them hung on til they lost everything, depleting all savings, going further into debt, etc. One friend didn’t lose everything but insisted on a sale price that wasn’t reasonable given the market conditions and ended up working a business that lost money for five years. You never want to expect failure but not planning for it means you’re making hard and sometimes emotional decisions in the heat of the moment and it’s so easy to lose sight of the big picture there.

    The lifestyle you have and the one you want to keep for the foreseeable future says that travel and family is most important to you – buying a home doesn’t align well with that combination!

    The only reason I’d even consider suggesting thinking about buying is if they have the same hot-real-estate-market problem that we have in SF: rent increases annually by 10% or more in some areas and no area is immune. More than one friend has either had to move out of the area completely or purchase to keep their housing expenses stable. That said, rental markets CAN get soft and prices can go down, so I’d still caution that it’s not a given you should buy even in very unusual markets like ours has been for a long time unless you had the cash available and plenty of savings. Aside from the time sink, home maintenance, property taxes and insurance are all huge money sinks. And I don’t know how Australian interest on mortgages works but I’d take that into account as well.

    To echo Mrs. Frugalwoods: buying a home isn’t a one size fits all symbol of adulthood.

    Best of luck!

    1. Thanks so much for your comments! An exit strategy is a really good idea. It’s something we’ve talked a bit about, but nowhere near in enough detail, so thanks for the reminder. Wow, SF real estate sounds pretty crazy, too!

    2. I completely agree! With the restaurant being the focus along with time for family and travel there would be very little time left for taking care of a home. Not often do I feel this way but homeownership does not seem right for them right now.

  2. I read through this post, and I get a feeling that while having (a) young kid(s) will reduce your travel for a while (which I understand), you love it and will want to work it back into your lives as much as is comfortable as the kid(s) grow. So I agree with Mrs. Frugalwoods: you ‘don’t really want to own a home, but feel they should in order to be financially secure. I am here to say that you do not need to own a home in order to be financially secure.’ It seems like a ‘should’ for you. Home ownership as an investment is simply a myth! It may be a better spending decision for some than renting, but it’s not an investment!

    As for expenses, she did a great job, but one still stuck out to me: The dentist! $158/month?! Wow! I am guessing it is not part of the health insurance. I don’t understand your current dental status, so if there are lingering issues that cause the need for these twice a year visits, throw everything else I am about to say out the window. You run the show with your dentist! They can be pushy, when I go in they right away want full X-rays every 6 months. But I watched what the dentist did with them, he looked at them for about 30 seconds. I now get x-rays every 2 years, for the last 10 years, with no issues (again, I have no current ongoing issues). Also, if you have a low in sugar diet, and no real dental issues, go once per year instead of two. Bottom line, like all your expenses think it through: what am I paying for, and is it bringing a value greater than it’s cost!

    Keep going, reading blogs like this and thinking like you are. 20% savings is great, and as you keep adjusting your mindset you will only creep it up, and you won’t sacrifice any quality of life, you will actually increase it!

    1. Hi there, thanks for your comments and encouragement! The dentist costs were based on what we spent last year, but I may have to revisit them again at the end of this year to get a more accurate picture of how much we’re spending. My husband and I both had to have a lot of work done for different reasons, but these are things that should hopefully last many years (e.g. crowns).

      1. Great, it sounds like you can hopefully cut that category down to! Excellent! Keep at it, hard, but also enjoy your son. I started later in life and there is a balance that those who start early don’t need to worry about. Do I tighten the screws really tight to save for the future, and then when the future comes, my kids have moved out of the house, and I wish I had done a little more with them? I think those in our shoes don’t fit any mold I have found out there, you have to figure it out as you go. Prioritizing the future when the kids are in the now creates some dilemmas. Keep going at it!

      2. Dental costs are really high in Australia. I live in Newcastle and as a person that needs a lot of dental care Jemma’s dental cost don’t seem that high to me. Last year, my husband had Periodontal disease and we had to spend over $2,000 AUD just on him. This year we are budgeting only $600 AUD for continuing care just for him. For me, I have already incurred in over $1,000 AUD and have a dental plan for the next three years totaling over $6,000 AUD. As a frugal person this might not sound particularly like a good deal but I believe it is. I specifically researched for a dentist that operates under a value approach in dentistry similar to value investing in finances. He utilizes what is called a low biological cost. Basically trying to preserve the teeth avoiding root canals and implants down the line. This should same me having to wear dentures and loosing most of my teeth when I age which can cost along $30-80k in a Western country. I choose this option after having dental work done and researching dental work vs quality across 5 continents.

        Some people (like me) have to get expensive dental work done beyond the usual check up, cleaning an filling. I’m very through with my dental hygiene and care but have had dental problems since I’m a young girl. Therefore, I’ve done substantial research on dental techniques, etc. I have come to see some painful dental costs as a future investment by taking care now hoping to save thousands in the future.

  3. Sadly this is not abnormally expensive – Perth is the same! Trying to break into the housing market as a young person is incredibly difficult without some kind of family financial backing. But I’m really glad you featured an Australian couple on here because I was going to write in for advice too!

      1. Hi Jemma! I wish you all the best if you do decide to buy a house but in the meantime, and if you don’t do it yet, enjoy yourselves 🙂

  4. I agree almost completely with the Frugalwoods suggestions, except the one about cutting travel. I would suggest reducing it, but not cutting completely. Maybe put some time into planning travel more and earlier to get cheaper tickets for example, or looking at different types of travel that might be cheaper (it is possible to camp with a baby if that sort of thing would suit you). As travel is so important to you, I worry that cutting it completely for two years would mean you have a blow out later.
    Our rent is equivalent $2260pm right now and we could not afford to buy the house we live in. I miss owning a home and being able to do what I like to it, and trust me, renting is not automatically pressure free in terms of upkeep when the landlord refuses to do anything! But I value this property in lots of ways, garden space, close to work, space to have an office and do crafts. You’ve been clear it seems to me that you value what your rental property gives you in terms of freedom and location so accept that renting is right for the season you’re in. If your business were to struggle, you may find yourself having to manage loss of business and selling property at the same time.
    I also think the advice above about an exit plan for the business is a great idea. Better to plan and never need it, than to struggle. And I would say that an exit plan is a little like going to an auction. There will always be a reason to go higher than the price you absolutely promised yourself would be your top offer, so if you make a plan, add some contingency but then stick to it! Hopefully it won’t ever be needed. However, you might find that planning an exit strategy helps you plan for business growth too and highlight some objectives for your business.

    1. Thanks for your comments, Victoria. Good idea about looking for cheaper, smarter ways to travel. I hear you re. landlords not wanting to do anything! We have that battle quite a bit, but, like you, try to focus on the good aspects of the property.

  5. Australian here too! Real estate here is absolutely insane, I think it’s a good idea to keep renting. I feel like we’re at the peak of the market right now and it would be a risky time to buy, especially in Sydney and especially an apartment (which will be in oversupply in a couple of years time) – right now rent is ridiculously cheap compared to the cost of owning a place with all the associated costs.
    I would recommend opening a trading account like commsec (plenty of other options around too that may be better value, just research a bit) and buy vanguard etf shares that way – the fees are too high here to invest in vanguard directly unless you have at least $AU100K (then you can buy wholesale funds which are cheaper). I don’t think there’s a minimum to invest at all that way and commsec sometimes even offers the first few trades free. Also buying as an etf means you have access to all the funds americans do like the us total stock market index!
    Can you add dental coverage to your insurance? You might save some money that way too.
    Also if you’re not working (or earn under a certain amount) your husband can get a tax deduction for putting some money into your super.
    Good luck!

    1. Thanks for the tips, Clare! I will look into that. Yes, our dental work is covered by insurance, but it was still a lot of money! Since we had a lot of work done on our teeth last year, I’m hoping that our dental costs will be a lot lower this year.

      1. Vangaurd ASX 300, annual fee of 0.75% and minimum investment of AU$5000.
        Annual fee is more expensive than equivalent US Vanguard fund I think do to less assets under management to cover the fixed costs. Also note 30% of the weighting of the fund is comprised of the big 4 banks, which of course are heavily tied through lending to the local real estate market.

        I also live in Sydney in one of the Eastern suburbs.
        Comparison for you, we pay $2300 per month for our one bedroom apartment.
        Around average to slightly under average for our area.
        Myself and my wife (who is actually on maternity leave now) walk to work, the supermarket and everywhere we want to get to. We dont own a car or pay for commuting etc so figure this lifestyle choice evens out for us.

        Finally, agreed, Sydney is hell’a’expensive and we will move back to NZ when we have reached our FI target.

  6. Thanks so much for your amazing advice, Mrs Frugalwoods! Lots for me to think about there. I just wanted to clarify something from your 4-point summary at the end: would you recommend saving up the 1-year emergency fund *before* starting to invest in low-fee index funds, or doing it simultaneously?

    1. You are so welcome, Jemma! Thank you for being such a wonderful case study subject! I recommend saving up the one-year emergency fund first and then starting your index fund investments. I’ll edit the post to make that clear 🙂

    2. I noticed that your expense report only totals $4,000 / month … but then it seemed you were counting your $6,000 income as your monthly emergency fund requirement.

      I’d suggest sticking to your actual expenses: 12 x 4,000 = $48,000, rather than 12 x 6,000 = $72,000 … over $20k difference 😉

      Not to mention that the ideas shared should bring that $4,000 down some — and that in the event of a loss of income, I’m sure you’d find even more ways to bring it down even further.

      IOW, ~$50k in your emergency fund seems extremely safe and sufficient to me 🙂

  7. Given the fact that your family will be down to one income in the near future, I would suggest the following:
    – Pay off the student loan and stay out of consumer debt
    – Build your emergency fund to at least six months.
    – Invest your money in an Index fund to build up your down payment
    – Start looking at cheaper areas in and near Sydney where you can get more bang for your buck. A little research on the housing market will go a long way.

    I wouldn’t buy a house immediately since it will put a lot of financial pressure on you and your husband. Having a house is great. But it’s not always the best option.

    1. Since the student loan has a 0% interest rate, there’s really no reason to pay it off ahead of time. Jemma and Greg’s money will be better utilized in an emergency fund, retirement savings, and low-fee index funds.

      1. I agree with Ms. Frugal Asian Finance. I would pay off the student loan as soon as possible. Even though their interest rate is 0%, when a person is debt free, you will make different life/work decisions. I’m speaking from experience. My husband and I are 100% debt free and sacrificed immensely to get here. We have chosen to pay off our house early, even though we could have invested the money elsewhere. Yes, I understand we’ve missed out on some money in the market. But there is a mental clarity/freedom feeling you get when you are debt free, and there are absolutely no chains around your neck.

  8. Can I just say *phew* as a 30 something property valuer in Australia I am so glad you have a provided a response like you did… there’s a reason why I love you guys!! Property makes people go cray cray over here … it’s not mandatory

  9. The largest thing that struck me was that in the assets column you had the value of the business and then you had money that your had loaned the business. I don’t see how these are both assets. To my way of thinking, the value of the business is $135000 Less the money loaned $41870. That is a big difference.

    1. Hi Lori, yes, I think you’re right! I guess I was thinking that the business would pay us back that money over time and still be worth X amount of dollars or more, but at this point in time, the value would be $135k less the $41k, as you said.

      1. Oh good, I woke up the other morning suddenly thinking about this point. Glad someone raised it

  10. I agree with everything except cutting travel completely. The recent trips have been to family- grandparents and extended family will not be around forever.

  11. Another Aussie here! I agree with the other comments for the short term but as another option could you look to buy an investment property elsewhere that is a bit more affordable (like in my hometown of Canberra!) and rent it out with the view to move into it later down the track or sell once it’s got some equity behind it? This way you might be able to make some good equity at the same time as saving money.
    Also, Canberra is the best place to raise kids!

    1. Hi fellow Aussie! That might be something to consider once we’ve got our emergency fund sorted. I would personally love to move to Canberra. It’s my hometown, too, and ever since having a child, I’ve been having serious nostalgia about it!

      1. Come to Brisbane, it’s warmer. Don’t you wish we had a crystal ball and bought in Sydney maybe 10 years ago. Brisbane still has some pretty affordable suburbs to buy for an investment. Don’t rely on your Super even though I know we are suppose to. Ours is not very large either because we only returned to Australia from The Netherlands 12 years ago so we haven’t had time to build a good balance and hubby is already 53 so we are never going to make the magic $1m. Besides it seems as though governments can’t help themselves and keep changing the rules.

        1. Brisbane is an awesome city! I hate sweating, though, haha. I find Sydney’s summers hard enough.

          1. Buy in Tassie! House prices are cheap as chips, and it’s a fantastic place to live.

    2. An Aussie-Canadian here… you might not be aware the ACT has a crazy land-tax rule for rental properties. When my father-in-law passed away in Curtin (suburb near Woden) last year, we wanted to buy out my sis-in-law and keep the property. Since it was a rental, there was an extra land tax per year, ON TOP of the regular land tax (which was already steep because of the value of the property. Plus the rent would no where near cover the cost of the building. Partly it was an old unrenovated property in a suburb that was WAY out of town when they bought it but now is considered inner suburb, but the rent you can ask for it was not much comparative to the mortgage of half the value. Might be different with a smaller newer condo, but keep the extra land tax in mind!

    3. We are also ex-Sydney ppl that moved to Canberra as we saw we had a better future here. I agree Rachel, it’s the best place ever to raise kids. I wish you luck Jemma-once you’ve decided, don’t look back and second guess yourself!

    4. If you can find a good investment property in Canberra then that is a great way to get into the market. Sit on this for 15-20 years and it could become your home when you want to retire. Or you can sell it and pocket the growth and equity. Any trips you make to see your parents in Canberra would be tax deductible as you would be ‘inspecting’ the property. Interest rates are historically low at around 4.5% in Australia. If it were rented out then the rent might cover most, if not all, of your repayments. You would need to do the maths to work out a good deal for house price/repayment vs realistic rental income. I did this in Darwin 10 years ago and has been a reasonable investment. Bear in mind capital growth is not assured, vacancy is a risk, and there can be unexpected large expenses as a landlord which can be stressful, which is why I sometimes think buying index funds for the long term might just be the easier option.

  12. I mean, if you’re satisfied with your current living situation, why buy a house right now? I’m normally all about home ownership, but since you’re in such an expensive market, it might not be a great idea to own instead of rent. I’d also recommend cutting the entertainment/eating out budget. We used to spend a good chunk on entertainment as well, but now we get free DVDs from the library and go to free local events to get out of the house. Just an idea!

    1. Yes, we definitely need to cut down in that area! I hadn’t considered the library for DVDs, but that’s a brilliant idea.

  13. This has been delightful to read! Love your son! (and the cats) I’d suggest developing a backup plan to owning a restaurant. What you have is good and may get better as the neighborhood grows but the whole world’s economy is fragile. Think of what your second choice might be and how you might follow it if it became necessary.

    1. Aw, thanks! We haven’t talked much about what we would do in the worst case scenario, but I think it’s a conversation we really need to have.

  14. I agree with the things already said. Just one idea for income generation, as you speak other languages fluently, is there any potential to teach languages? You could do this as well as the book-keeping for the business but you may not have the time. In that case, can you earn more from your languages than book-keeping, if so would it be advisable to pay someone else to do the books and for you to keep your language skill set current?

    1. I was thinking Jemma could use her language skills as a side hustle too, for a little extra income to put towards savings (or whatever). Small contracts for document translation, etc? Tutoring, online or in-person? All can be done from home, all have great potential for high hourly wages and extra income is always awesome. Just a thought!

      1. Good suggestion, Sharon and Lee. However, I find it hard to squeeze in enough work as it is, and usually have to do a bit at night after my son has gone to bed. So, it’s not something I can see myself having time for right now, but I will definitely be looking into this once my kid/s are in school.

  15. I’m in the US; I once worked with an Australian who was married to another, and they both desperately wanted to go back home to be closer to family, but simply couldn’t afford a place to live in Australia– and that was 10 years ago at least. It seems the housing situation hasn’t improved.
    I agree almost 100% with Mrs. Frugalwoods, with the exception being the temporary travel ban. It may be that Jemma and Greg might be able to handle that ban easily and that possibly family can come visit them instead of them visiting family, in which case, the ban is fine, then. But I will say, as someone who lived over 700 miles from her family as a late-20’s aged wife and mother, who couldn’t visit home but rarely for several years due to finances, I regret not seeing more of my grandparents before they passed away. They were simply too old to make the trip to see me, even with someone else taking them, as they were already in their 60’s the day I was born. That’s my personal experience, of course, and it won’t be the same for everyone. I’m not trying to induce guilt here! But overall, yes, I agree with Mrs. FW’s financial plan.

    1. Thanks, JD. My mother-in-law is turning 80 this year, so I think we will still continue to go over to New Zealand to see her regularly, although our accommodation is free over there, since we stay with family, so it’s just the flights we need to pay for.

      1. can you get a credit card that will give you miles, and use it for all the restaurant expenses? i’m guessing that then the miles to travel will add up in no time!

  16. I’m from South Africa,and this post has been an eye opener for me – I’ve been “obsessed” with buying a house, thinking that would mean financial freedom in a sense our country is currently in resession, downgraded to “junk” status, so defnintly not a good time to buy property!
    Thanks for the great insight Mrs Frugalwoods!

    1. Saying that, (another South African HI!) if you have no desire to leave and want to live in a certain area / or close to it, there are worse things than property to invest in, here in dear old SA. I’m in Cape Town, which is a little like another country, but our home has massively appreciated in value, so it absolutely depends what your goals are going forward. Where we are, rent is extortionate. We could 100% never afford to rent a place even approaching our house (which is nice, we love it, but it’s hardly a palace). Of course priority should still be emergency savings and paying down debt, but property can be good in the right circumstances.

  17. Are there any tax breaks associated with homeownership in Australia? Here in Washington, DC, renting costs are pretty equal to mortgage costs, which means I come out ahead by owning, even though I had a small down payment. My total morgage/HOA fee comes to $1800 a month for my 1 bd condo, which is the going rental rate as well. The difference is I get a huge tax deduction and save about $8k a year. If it is similar in Australia, buying would be in your favor.

    1. No, not for your principal residence. There are tax breaks for investment properties; some people will buy an investment property for that reason. They live in a rental property (no tax deductions possible) and receive extra income from renting out another property. If the investment property expenses exceed the income received, the resulting loss is applied against their other income, reducing it for tax purposes. This is a popular strategy with high income earners.
      Doing this would get Jemma and Greg into the property market, though it still doesn’t answer the dilemma of how to get the deposit together in the first place. Sydney is a tough place to buy (I’m glad I live in rural Tasmania – I built my, admittedly tiny, house for $70,000 seventeen years ago!)

  18. Lovely child, Lovely cats, lovely family, lovely place to live. I am astounded at the real estate prices. Who can afford those prices??? I would not buy there, especially since you may move closer to your mom, and if that happens, then you could consider buying there. Best wishes!

  19. Another Australian reader here! I was SO excited to see the heading of this post as I am grappling with the very same issue at the moment. I’m also looking at investing in low-fee index funds instead of purchasing real estate. Unfortunately, Vanguard retail fund fees are 0.9% in Australia so I echo Claire’s comment to investigate the ETF option. There’s also other options like Listed Investment Companies, or robo investment services like Quiet Growth (free until reach 10K) Clover and Acorns (clover and Acorns fees seem higher). Also keep in mind that many Australian dividends come with fully franked taxation credits. All worth researching/investigating.

    Another suggestion that I would add is that I think you get your grocery/household supplies costs lower. We used to spend $800 per month on groceries/household supplies (currently living in Perth, which has one of the highest costs of groceries in Aust), and were able to get it down to $400 per month (for two adults) and we eat a healthy whole foods diet buying local and humanely raised meat. We did this by meal planning, buying in bulk from bulk food stores where cheaper, taking advantage of Coles/Woolworths weekly half price specials and stocking up, buying a chest freezer, and buying more frozen veggies. Also, Aldi is your friend if you have one nearby.

    The $110 monthly doctor’s bills also jumped out at me. This seems quite high, unless you have an existing medical condition but their was no corresponding medicine line item. Are you able to seek out medical centres that bulk bill, or investigate whether there are any medical co-ops in your area? Just a thought, forgive me if this is a sensitive topic.

    1. I just have to chime in on the grocery costs–if Jemma’s toddler is anything like my toddler, they eat almost as much as adults do!!! Quite a bit more expensive for our little family of three than when it was just Mr. FW and me :).

    2. Thanks for the info about investing, Laura. Yes, like Babywoods, our toddler eats pretty much the same amount as I do. My mother also eats at our place the two days a week that she babysits, which adds to it. However, I also agree that I could still lower our grocery costs more, and am currently tinkering with meal plans and ingredients, less meat consumption, etc.

      1. Just also wanted to add (like many others) that I lived in Canberra for four years and loved it. My partner and I plan to move back there to raise children eventually. I grew up in Sydney but I think the quality of life in Canberra is hard to beat, especially for families. The foodie scene is pretty great there now as well. Good luck 🙂

        1. Thanks, Laura! Interesting to hear a Sydneysider say they love Canberra. I think if people haven’t lived there and have only visited, they don’t realise how awesome it can be. I’d move back in a flash if we didn’t have the restaurant!

  20. Oh my gosh, those property values! Here’s my thoughts: why not start socking away in an index fund now, consider it your emergency fund and a maybe buy a property some day fund too? My thinking is that saved money can be flexible. Sure, you can intend it to be for x, but if it really comes down to it, it could be for y instead. I have a 13 month old that my mother watches some, too. (Yay for family!) But she’d never travel to me…. I end up going back and forth to her house. All that to say that your mum may come to you now, but may in the future decide it would be better for you to come to her, and if that is the case, then living near them may suddenly be much more attractive than it is now. Also, schools and stuff. It’s fairly common where I live for couples to live in the city center until their kids are school aged, and then decide they’d prefer to live in the ‘burbs for the schools. Having money available to potentially buy a property, and just keeping an eye on the market for something that would be potentially awesome in one way or another (a skirt walk to a great school, or a block or two from where your parents live so your kids could easily go back and forth) could be a good thing down the line, but don’t feel like now that you’re a mom you suddenly have to do the expected thing. (Funny story: I had my first at 19 when no one age was having babies and thought moms wore pastel colors. So I bought clothes that fit my idea of “mom”….. And pretty quickly decided that that wasn’t the best idea! Not as bad a mistake as trapping yourself in a suburban model if it’s not your thing. Enough to know that there are a bunch of right ways to do this mom business.)

    For me, I like owning my home and knowing my rent won’t skyrocket. Feels secure. But I also got a great deal on my post-boom foreclosure because of timing and because I was pretty content where I was– I didn’t feel the need to buy a house in a 3 month or even 1 year window, so I got to kind of casually shop around. I recommend that kind of approach, and since you seem content it seems like an approach you could take off you decide to buy at some point in the distant future.

    1. Also potentially awesome: a deal on a condo in a vibrant urban neighborhood! Can’t believe I left that potentially awesome option out…

  21. Jemma, you are getting such great advice from everyone that it seems hard to add to the conversation. But throughout the article and comment responses, I wondered what are your future plans aside from another little one? The great thing about being a restaurant owner is that you can up and move it to Canberra or New Zealand. Where do you see yourselves in 5, 10, 15, 20 years. Maybe an investment property that you rent out initially may be an option. Where do you want to raise your children? I always look to land purchases as long term investment. Where do you want to be in the long term?

    1. Thanks for this question, Caroline. It’s funny, neither Greg nor I are from a big city originally, and we often get pangs of nostalgia for a small town, less hectic life. It might be a case of the grass being greener on the other side, though. In any case, we may decide to move somewhere quieter in the future, but at the moment we are so focused on running the restaurant that we usually don’t think that far ahead. I think it is an important conversation to have, though.

  22. I agree with Mrs. Frugalwoods’ advice, except maybe plan for one or two vacations a year to visit family. Your little boy is so cute!

  23. You are so fortunate, right now, to be happy with your living situation. That is a really big plus. You still have some debt and you plan to have another child. Travel will become harder and more expensive with children. Become debt-free, take day trips, live simply(as it seems you already do that), enjoy your life as it is right now and take Mrs. Frugalwoods advice! Wish I had been as savvy as you at your age. Times have changed so much in the last few years. It is wonderful to see ‘young folks’ starting to see consumerism for what it has become. Scary, though, because our society is so dependent on retail.

    1. Thanks very much for these words, Karen! Just regarding the debt, we are not really worried about this because there is no interest owing on it. To quote “Adventures With Poopsie”, who commented below “our HECS debts are very, very different from American student loans. There is really no benefit to paying them off early and they’re guaranteed through the government. While you’re working on your other financial goals, I would not recommend paying this off. Just leave it. To be honest, I wouldn’t even count it as a “debt”. You’re not required to find money to pay it down, it is based on the income your husband earns. If his income goes down, so too will his HECS payments. You will get a lot more bang for your buck by focussing on your other financial goals.”

  24. Wait a year or two until that neighborhood is more gentrified, sell the restaurant, and move out of Sydney! That cost of real estate/living is absurd. You are obviously quite worldly people. Why subject yourselves to the second most expensive real estate market on the planet (per your article)? Especially with your language skills and your kid still young, you seem ripe for a move in the near-term. I was just reading a profile about moving from my hometown (Washington, DC) to Berlin, which is supposed to be a very affordable city. Certainly your Spanish opens up many options as well. Not saying you necessarily need to go that far, but think creatively about your options. Throwing 43% of your monthly income down the rent hole, never to be seen again, is far too high in my opinion.

    1. Actually, I just realised that I made a mistake with the rent figure. Not sure how that happened – maybe something weird happened when I was converting from AUD to US dollars, but our monthly rent is actually US $1472 – quite a lot less than the figure I quoted above! Thanks for bringing my attention to that.

  25. Wow that rent is high! And I believe you when you say it is adequate, not fancy. It sounds like staying there is the right choice.
    Your son is beautiful, and spending time with him, and any future children, is great. Thanks for sharing 🙂

    1. Thanks, Rebecca! Actually, I just realised that I made a mistake with the rent figure. Not sure how that happened – maybe something weird happened when I was converting from AUD to US dollars, but our monthly rent is actually US $1472 – quite a lot less than the figure I quoted above!

  26. What a sweet crew! I would like to offer a small nugget of thought for you to chew on.
    Babies, as you have noted, are low maintenance little creatures. Love and attention are free, and food is low cost. Please don’t make the mistake of believing that this is a situation that will continue indefinitely. Providing enrichment opportunities for your older children does, unfortunately, cost money. Sometimes quite a bit, depending on their area of interest. It is a wonderful gift to provide your children with music, or sports opportunities, and if they are fortunate enough to be quite good at what they love, it can take a financial toll. Piano plus 0-1 sport (depending on the kid) for my three kids adds up to the third most expensive budget category each month for us.
    My advice would be to plan for this. What did you and your husband enjoy as kids? What does your little one gravitate to now? Next, look online and talk to other parents to find out the monthly cost of a likely sport/activity. A bit of planning might help to guide your financial decisions now.

    1. Thanks, Lisa! It’s good to hear from a parent with older children. The third most expensive category in your budget? Yikes!

    2. This, completely. I totally agree that babies are NOT expensive by necessity (I’m assuming no massive health problems of course and this is a whole other issue), but we found our cheapest times were when the babies (I have 3) were tiny. You don’t go out much, everyone buys you stuff and it’s a financial breeze, even factoring in being pretty much unpaid for months! Then they get bigger. Even though we are very budget-conscious and absolutely do NOT buy into ridiculous parties or gifts or lavish anything, the fact is, the eldest is extremely gifted at and adores robotics. Is robotics free? No. No it is not. It’s extortionately expensive. The other one is very arty and is very, very into pottery and cookery. The third one is not yet 4 but UNDOUBTEDLY he’ll have some very expensive thing that it would be awful to deny him. Then there are things like OT, braces, remedial stuff that many kids need, even just for short periods, nothing too horrendous, but they aren’t cheap and often involve co-payments. Babies are cheap as chips, the older they get, the more they cost, even being frugal and resourceful.

      1. Oh no! Sorry, but your comment about robotics made me laugh. 🙂 My son will probably also choose some ridiculously expense hobby as a karmic payback: I was horse crazy as a kid, and I have no idea how much my parents forked out for riding lessons, equipment, etc., but that is also not a cheap hobby where I live.

  27. Great job so far!
    Also keep in mind that since you own the business, business expenses are YOUR expenses. Every cent you can save there is another cent coming home to your pockets.

    1. This is not quite true. Depending on the business’s tax structure, it could be that every dollar saved by not spending on the business results in only 70 cents extra in the hand. And it’s not only the quantum of tax, there are other taxation decisions to be considered re business v private expenditure. I hope that Jemma and Greg have a good tax accountant helping them to make these decisions (which is not to diss the fine Frugalwoods community wisdom!)

  28. Wow for once I’m actually lost of words. 40 grand a year for rent and at that not a terribly nice place that is absolutely nuts! Even beyond that it represents nearly 50% of their income. In 20 years they will be facing both retirement and college costs for the kids and if rent would continue to rise at 2% a year they’d be looking 60 grand in rent year. I don’t think Australian pensions are that generous! At with a mortgage one day it will be paid off. Of course the market could correct but they’ve been saying that for the last 10 years, it simply can’t go any higher.

    How does renting vs owning compare. Typically it’s far cheaper to rent than to buy but in this case my impression is they could buy for what they rent. How do mortgages work there. Of course the other option is to simply move somewhere cheaper, that’s what the wife and I did.

    1. Hi Rob, actually, I realised that I made a mistake with the rent figure. Our monthly rent is actually US $1472, so $17664 a year. (I must have made a mistake when converting to US dollars somehow.) And that brings our savings up to 40% of our income – woohoo! Still room for improvement, though.

  29. My family of four is able to travel cheaply by using credit card rewards. I’m not sure if this is possible in Australia but it might be worth looking into. We also do a lot of camping. Here’s a link to the free class I took to learn about earning points: http://www.travelmiles101.com/

  30. The other alternative is to buy a property where they can move to when they do retire. That’s what my wofe and I did. Of course you have to be aware of taxation and landlord tenant rules.

  31. I’d also want to take a peek at that grocery budget – I imagine that it wouldn’t be much of a struggle to trim an extra $100 off, and with some more care, you could halve it pretty simply. While you build your emergency fund (and possibly while you get retirement savings on track), you might also want to reconsider the weekly savings for your son. I know you want to set him up for future success, but that’s going to be of less importance if you end up in a worst-case scenario as a family in 6 years, or if he’s having to support you financially in his 40s (with a family of his own?) because you haven’t invested enough for retirement. Good luck!

    1. I have often wondered if chefs and/or restaurant owners have lower grocery bills because you can eat at the restaurant, if you own it, at cost. Or at least that’s what I’d do, LOL.

      1. Hehe, I do eat there a couple of times a week with my son, but I actually prefer simple, home-cooked food for everyday meals.

    2. Thanks, Helen. Yes, I’m pretty sure we can trim it down a bit, and I’ve recently started buying less meat and having more vegetarian days, which brings the costs down.

  32. I am under the impression that Australia and UK has an open-ended mortgage like HELOC(home equity line of credit) as opposed to the US conventional mortgage which is closed-ended; the benefit of that is you put all of your income into an HELOC type checking account and interest on the mortgage are calculated on daily basis. So the longer you keep the cash in your account( vacation money/entertainment, escrow on taxes etc), the lower the interest you pay on the money you pay. Plus you can apply for a couple of credit cards which can give you 45 days of interest-free money provided you pay the bills in full every month(bonus you can collect rewards points on top of that). This itself can turn a 30 years mortgage into 7-10 yrs. I myself is thinking about replacing my 30 yrs conversion mortgage into an HELOC as 1 st lien position. I would like to know if anyone has elected this option?

    1. Here in Australia, many mortgages (but certainly not all) have offset accounts linked to them. What this basically means is any money in there is offset against your mortgage when calculating interest. Eg. if you have a $100k mortgage and $10k in your offset account, you interest will only be calculated on $90k.

      It’s a great idea to keep as much of your non-invested money in the offset account, as it will help you save on interest. It does require discipline though, as it’s just like a normal bank account, you can pull money out whenever you want. If Jemma has this option, I would definitely recommend saving all of her budget categories into the offset account.

    2. In the UK, most mortgages have a 20-25 year term. You can get offset mortgages like the one you (and AdventuresWP below) describe here but these are not the norm, especially for first time buyers. And you’ll still need the deposit/down payment, which seems to be the issue for the OP. Lots of people take a fixed rate for a certain number of years (2-5) and there are penalties for “early repayment” during that time – usually more than 10% of the outstanding balance. If you take out a variable mortgage, or wait until the fixed term is over, you can pay off the mortgage in full with no penalties. .

  33. I’m a small business lender, and so I was wondering what your long term plans are for the business. I can’t speak to how the banking and lending system are in your area, but in the Boston area (and I expect for a great deal of the US, due to regulations from the agency that insures deposit accounts), it can be very difficult to obtain a loan for a restaurant and if you can, it will most likely need to be secured with real estate. It is not uncommon for small business loans here to be secured by the personal residence of the business owner.

    I like the idea above of growing the business for a couple of years and seeing if you can sell and then resettle and start something new in a more affordable area.

    1. Hi Deidra, yes, I think we will keep trying to grow the business for a few years and reassess then. The area we are in is really taking off, and we might kick ourselves in a few years if we sold too soon. (The median house price there has increased 106% over the last 5 years!)

  34. Not sure I can add to the great advice readers have posted here, but I’m wondering if Jemma is able as part of travel to do a housing swap? Something like, “my apartment is available these 2 weeks in exchange for 2 weeks in Canberra” or whatever. This carries legal risk so it may not work, but sometimes it’s worth throwing out an idea for consideration even if it’s not totally feasible. Maybe housesit for someone as part of your travels? Maybe you have other barter arrangements open to you – your translation of documents in exchange for something else?

    I do agree that it’s important to factor in costs for older children – are the public schools decent where you live or will private school be a necessity, and what programs might you consider enrolling them in? The latter can be expensive but can also be quite manageable with some planning.

    And I’m not surprised that rents and buying is so high in a major city like Sydney; I live in Boston and it’s wretched here too. We did want to buy and lucked out; our mortgage costs about the same or less what it would cost to rent. BTW, I agree with Mrs. Frugalwoods and the others who suggest that home buying is really not a great priority for you and you’d be best off saving, traveling, and putting money into your business. Good luck!

    (And your son is really really cute!)

    1. Thanks, Laura! Housesitting is a really good idea, and definitely something to look into. A few other people have also commented that children are cheap while they’re little, but can become more expensive as they grow up. Good for me to know now so I can plan!

  35. I’m not as familiar with what’s feasible in Australia, as far as what options are available so my suggestions will be limited. But what I typically suggest to people (at least here in the US), is that if they’re not already maxing out their Roth IRA ($11K as a married couple), and they have no emergency fund (or lacking). They should max out their Roth IRA and that can serve as an emergency fund since you can take out the principal without any penalties (just not any of the gains). Again, not sure if Australia has something equivalent. But either way, I think having adequate emergency savings (in some form or another), should be a top priority. Especially more-so with an increase in probability for unknown variables that can come up for a growing family. You need to be at a place where you can handle unexpected bad situations; so that foundation needs to be firmly set before you go about using leverage (buying a house). Because once you get locked into a non-liquid asset, it removes quite a bit of your flexibility.

    1. Australian retirement accounts (called superannuation) can’t be touched until retirement age which, depending on when you were born, is around about 65. There are extremely limited circumstances where you can access the money before then, such as being diagnosed with a terminal illness or bankruptcy. As such, Australians can’t use this option to save for an emergency fund.

  36. I agree, moving out of easy range of the restaurant will make life harder. I suspect that’s not worth considering further.

    Bumping up the retirement funds, or investing generally, means figuring out how to bump the net profit drawn from the business. That’s probably marketing more than anything else.

    Counterpoint to “gotta have a house” : Wanderer and FireCracker over at Millenial Revolution blog. http://www.millennial-revolution.com/ Been FI and traveling because they did not buy a house. I love their descriptor, “house horny”, for folks who gotta buy a house because … because … well, because.

    Counterpoint to “cannot travel with kids” (and “gotta have a house” too, come to think of it): Jeremy and Winnie (and son) over at Go Curry Cracker blog. http://www.gocurrycracker.com/

    1. Thanks for the links to those blogs. I’ll check them out. Yep, figuring out how to increase sales and bump up our business profits kinda falls in my department, being the head of our (one-person) marketing department. 😉

  37. Hi Greg and Jemma!! Your family is adorable 😀

    As a fellow Sydneysider, I can tell you that buying a property right now is not the best idea regardless of your current savings rate. Economists everywhere are arguing over whether this is a bubble or not, and when they argue like this, it generally means no one knows what’s going on. If you are happy renting where you are, and can beef up the savings rate a little, perhaps you could invest in some indexes or wherever you like to put your money and wait for the market to become a little more favourable. Your savings will (hopefully) earn a decent interest rate, and that money can be ready for a deposit when the time is a little better.

    Good luck with your housing situation and your restaurant!

  38. Jemma
    I’m concerned that you are building a business in premises which only have a few years left to run on the lease. If it does become a success, you are likely to be renegotiating your lease as success hits, and your landlord will factor that in. Might be worth having a discussion with Greg as to whether you should sound out the landlord soon about an option to extend/renew the lease.

    1. Hi Denise, yes, that is also a concern for us, but our business landlord won’t budge on that issue. I guess he wants to be able to put the rent up a lot higher once the lease is up. We have been talking about possibly looking for a different premises in the same area, but it’s not so easy (or cheap) to just up and move. 🙁

  39. Hi Jemma! It’s so nice to see an Australian featured, thanks for selecting her Mrs Frugalwoods!

    You have received some great advice here, particularly from Mrs Frugalwoods herself. Some of the commenters are providing advice from an American perspective, however, so the advice may not be relevant. For example, as you know, our HECS debts are very, very different from American student loans. There is really no benefit to paying them off early and they’re garunteed through the government. While you’re working on your other financial goals, I would not recommend paying this off. Just leave it. To be honest, I wouldn’t even count it as a “debt”. You’re not required to find money to pay it down, it is based on the income your husband earns. If his income goes down, so too will his HECS payments. You will get a lot more bang for your buck by focussing on your other financial goals.

    I don’t have a toddler, and I hear they eat like crazy, but your groceries do seem a little bit high. There is probably room here to save some money. Do you have an Aldi near you? Just a few days ago they were revealed as Australia’s cheapest supermarket. Even if you don’t purchase everything from Aldi, you can save significantly on the products that most people don’t really care too much about (toilet paper, cleaning products etc). Aldi have also regularly been voted highly when it comes to baby products, including nappies, so you might save some money here.

    I tend to agree with the general consensus here to not purchase a place. Sydney is just ridiculous at the moment. We are hoping for a significant price correction in Sydney, so it might be best to wait for one. Sure, it might not come, but you seem quite happy to continue renting.

    I invest directly with Vanguard, but ETFs are also a very good option. If you want to start small (eg. not save up the $5000 needed to start a retail fund with Vanguard), then ETFs are definitely the way to go. It may also be worth opening one for your son so family and friends can contribute to that instead of a low interest savings account.

    I hope these suggestions have helped. I look forward to hearing what you decide!

    1. And one more point on the HECS debt (which you have summed up so well, Poopsie): they are written off when you die (all except what is calculated owing on the final tax return).
      As a small business owner myself, and a strong believer in education as a public good (especially when those who invented the HECS rules were the recipients of free education themselves), I have been able to manage my taxable income so that I minimise my HECS repayments, with the goal of dying with it intact.
      I have a policy of doing ongoing voluntary work for a range of non-profit organisations as my contribution to society, as compensation for receiving my university education – which has probably saved the government far more $ than they ever put into my uni degree.

    2. Thanks so much for all your suggestions! I love your blog, by the way. I think we could save some more money on groceries. My toddler does eat pretty much almost the same amount as I do, so I would say we are a house of 3 adults when it comes to eating, plus my mum eats with us the two days she babysits. I’ve just started cutting down on meat consumption in our house, which makes a big differences. Now, instead of having meat nearly every day, we’re having it 3 times a week. We do have an Aldi fairly nearby, and I do use it for quite a few things – yes, their nappies are great – but I tend to buy organic fruit and veg from a local co-op. However, it’s a place where everything is sold is bulk and comes from fairly local producers, so it’s a cheaper option than buying packaged, imported organic produce.
      That’s a really good idea about opening an ETF for my son instead of a low interest savings account. I might just do that once he has $5k in his savings account to go towards it.

  40. I wouldn’t buy property in Sydney now, or in the next 5-10 years, not a chance! When it’s making international news that we’re crazy overpriced, you know it’s crazy overpriced. In a year the prices climbed a friggen ridiculous 10%. There are people in the States buying (slightly run-down) triplexes for less than the deposit of a Sydney home.

    Take a $125,000 deposit and invest it in low cost index funds. $125,000 invested would give you a safe withdrawal of $5,000 per annum – aka enough to cover your travel costs! 😀

  41. Hello, great to hear an Australian perspective! I’m a fellow Australian Frugalwoods reader too. I had two comments to make: first – it’s so great that you are saving your son’s monetary gifts and putting a little aside for him each week. I wish we had done that from when our kids were babies (now 8 and 5), they get showered with money from grandparents and putting it aside could mean saving so they don’t have to incur a student debt if they choose to go to university. Very smart!! Secondly, I know Mrs Frugalwoods recommends contributing more to your superannuation funds but it’s slightly different in Australia – the government has full control of how and when these funds can be accessed. For example they are ever increasing the age at which you can access your funds… my husband and I recently had this same conversation about saving for retirement and decided something more liquid like a vanguard index fund would be smarter purely based on the fact that the government can’t decide when and how we access and contribute to it… all the very best!!!

    1. I hear you, Megan. Super is a great idea but when you have governments that can’t help themselves and keep changing the rules etc it makes it seem less and less attractive. My husband and I came back to Australia only 12 years ago so our Super balances are very low and we are never, ever going to make the magic $1m balance experts say we need as hubby is already 53 and I’m a (little) younger. He salary sacrifices a little extra that is matched by his employer but you really need something outside Super. Actually I often wonder how many people will actually make that magic million on average wages?

    2. Hi Megan and Christeen, thanks for your replies. I also find it annoying that we don’t have much control over the super. That’s why Vanguard index funds seem quite exciting and empowering to me.

  42. Thank you for sharing your story. Your family is lovely. I agree with the Frugalwoods that at this time, in the market you are in…apartment ownership doesn’t sound like the best option. I hear the freedom and wanderlust in your post….sometimes it takes the outside nonbiased review of others to remind ourselves of what is most important to us.

    Travel and exploration sound like your passions. A home is where your family lives. The abode is just the walls that hold the substance. Rented or owned. Home ownership is both a blessing and a curse. We wrap a lot of emotion to our “houses” but they can tie us down in ways we never forsee. Example: My mother has owned her home for years but the majority of her networth is tied up in her home. This straps her financially now that she is retired.

    You should consider what happens if you buy a home and own your business in the same area and something unforseen happens. What if you decide to sell the business or it goes bankrupt? Your ability to move is also limited to selling your apartment.

    Also, a side hustle suggestion…in the US it is popular to teach (read as….your husband is a teacher and chef) cooking classes or to have after hour specialty meals where the chefs prepares food with wine or beer pairings with limited seating. This can become quite exclusive and sought after…. Just a thought 😉

    As for finances, I have lived through two recessions and a market crash….the only advise I have is to build your fortress…a large emergency fund. How large depends on your risk tolerance.

    1. Thanks for your comment, W.G.! It’s funny, I hadn’t thought that I was placing so much emphasis on travel until I saw all the replies to the post and Mrs Frugalwoods’ advice, but I guess it must come through quite strongly. Interesting ideas about the cooking classes/after hours meals. It’s something we’ve talked a bit about, but it could be a really good thing to do.

  43. Hi, its great to read an Australian case study (as a fellow Aussie). We live in a regional area of Australia, where houses are significantly cheaper. In the long-term I would think that a move to Canberra is a great idea (and do it before your son starts school, and doesn’t want to leave his friends). I think you should try to make home purchase a priority (long-term stability and wealth production), but not in Sydney (if 600k is too much).

    Perhaps you need to find a new dentist, or look at a better ‘extras’ health insurance product? I also know family who have discovered that it is cheaper to fly to Thailand and have dental treatment, than get it done locally.

    The other alternative to a low cost index fund, is to invest into tax effective insurance bonds (this is for savings that you intend to keep for more than 10 years). You pay 30% tax (inside the bond), but nothing to declare on your tax return during the investment term, or after 10 years. If either of your tax rates are under 30%, I would buy shares directly. The franking credits are a huge incentive.

    Also think about the new government scheme that allows you to save for house deposit inside super. I know that there are rules, and details regarding this.

    Don’t worry about your HECS/HELP debt, that will eventually take care of itself. 0% interest is attractive.

    Travel (I understand) is best tackled with frequent flyer points collecting. I love this hobby – we use it for business class flights for family holidays (at least 1 a year). Look at point hacks and the Australian Frequent Flyer forum.

    Think strongly about salary sacrificing into superannuation. This is important. In my family, my husband and I both do this to the maximum allowed (25k each). The 15% tax makes it very tax effective.

    Good luck!

    1. Hi there! Thanks for commenting. Very good points here. Actually, I have friends who have flown to Hungary to get big dental work done, and they said it was cheaper than doing it here, even with the airfare. Crazy!

  44. while a 20% savings rate will get them to retirement when they’re old, it will take them a long time to reach other short-mid term goals which can be discouraging. I’d suggest saving another 10% in any account that will keep up with inflation (In Mexico CETES are a great option, but I have no idea what is good in the US or Australia. Although they don’t really have a need to buy right now, their priorities and goals might change after they have their second child or perhaps they’d like to retire before they’re both 65 and that extra 10% a month could give them OPTIONS and OPPORTUNITIES. I is nicer to have the money when you need it than deciding years from now what you want to do and have to wait even longer to carry it out.
    I’m especially confused on why they spend so much on gas if they live in the middle of everything and work from home. why not walk, bus, bike, etc..
    and well that also seems like a lot for vacations every month as well as a lot of money for entertainment considering how they only have enough to survive for about a month if something happened to the business. Better yet, if they live close to work and everything is close by, they could sell their car which would eliminate several bills which could go right into interest earning savings. 🙂 along with a reduction in entertainment and travel or entertainment and household expenses would get them there….
    on the other hand they could consider what their savings would be if their business stopped covering some of their expenses. since everything is linked to the business it is crucial they increase savings as soon as possible.

    1. Hi Christopher, thanks for your comment. I actually realised that I made a mistake with the rent figure. Our monthly rent is actually US $1472. (I must have made a mistake when converting to US dollars somehow.) And that brings our savings up to 40% of our income! The money we spend on gas also include weekend trips.

  45. Hello fellow Aussie Frugalreader! This may have been said already, but just be wary of diversity of investments when buying into whole ASX index funds. The financials (banks, etc) represent a massive portion (~44% I believe?) of our stock market, so if you were to only invest in an Aus whole ASX index, you may be over-exposed to fluctuations in the banking sector. So, do your research and consider investing in different index funds/shares etc 🙂

    1. Hi Sarah, thanks for this comment. That kind of answers my question about whether the reliability of index funds as a long-term investment is only valid in bigger markets like the US, or whether they are also a good idea in smaller markets like the ASX. It sounds like diversifying is key!

  46. Super cute family! *waves from Perth WA*

    Everything I read says that Sydney and Melbourne are currently experiencing a housing bubble. I would really not recommend buying anything until it bursts. If it does crash, perhaps that would be a good time to negotiate a lower rent?

    Also, don’t pay off your HECS early unless you’ve got everything else squared away. It’s not like a US student loan, is basically just indexed to inflation and if your income drops your repayments drop. My husband paid nothing for a few years when he was taking paternity leave. It’s pretty much the best debt you’ll ever have.

    1. Hello Perth! Thanks for your comments. Yes, we’re pretty lucky with HECS compared to the student loans in the US. Those debts sound really crippling for a lot of people.

    2. Yes, I totally agree that they should not pay off that student loan at an accelerated rate!

  47. I grew up in Sydney, but recently bought a house in the outer suburbs of Melbourne and moved there. The pain is real for Sydney property.

    Having said that, if I was you I would definitely not buy property now. Lots of parts in Sydney are gentrifying, and Sydney is full of cashed up boomers/tourists/urban professionals who love dining out. I think you’re well-placed to benefit from this. If you buy property your capital (and time for commutes) will be locked away when it could be used to grow your family business and take it to the next level (maybe options for marketing/expansion?). I think that’s your best bet to one day own a lovely property in Sydney.

  48. Hi Jemma and Greg! Greetings from Sydney, Australia as well! Land of overpriced inner-east apartments.

    My advice to you as a fellow Inner East Sydneysider:

    1) do NOT pay off your student debt. HECS is interest free and it increases on the Consumer Price Index annual changes, which is about 1.5% increase (or ‘interest’) per year. The minimum payment thresholds increase depending on your income anyway. Pay of the CPI increase per year but that’s it. Instead, use the money to invest and get a higher return.

    2) do NOT buy an apartment in Sydney! Assuming you life in the Inner East of Sydney, prices are so inflated. If you follow the news, there are public studies on the evident housing price bubble in Sydney. Just look up reports from ANZ, UBS, RBA – they all talk about the Sydney housing bubble which will pop soon, and bring down the house prices as well as banking shares (due to high mortgage debt).

    3) save, save, save. Discretionary spending is the first to go when a recession hits, and many reports say we’re well into one. That means people will go out LESS for dinner, i.e. less revenue from your sole income – your restaurant.

    4) Cut down on your lifestyle expenses. I know how much it costs to live in Sydney and your lifestyle costs seem pretty high. Look at cutting out the high spending on groceries, entertainment and vacations. If you live inner city you don’t need a car either.

    5) Good luck!

    xx Miss Piggy

    1. Hi Miss Piggy! Yay, another Aussie reader! Very good advice – thank you. We’re in the Inner West, and prices here are really high – sometimes even higher than more upmarket suburbs on the Lower North Shore, even being under the flight path. 🙁

  49. Hi Jemma. I’m also an Aussie and I agree with NOT trying to buy in Sydney. Just too much financial stress. I live on tne Sunshine Coast, about an hours drive north of Brisbane. You wouldn’t believe the number of Sydney people moving up here and to Brisbane. Sure it’s stinking hot for about three weeks in summer but autumn, winter and spring are beautiful. I’m Caloundra you can still buy a unit close to the beach for under 300k. I’d be aiming to save a deposit for an investment property with a view to living in it on retirement. As for investing I like ComSec to buy shares and even though shares can be volatile they are very liquid. At the moment Telstra pays about 7% fully franked (so the tax is payed) and there are quite a few blue chip companies paying between 5 and 6% which is much better than bank interest. I think buying an investment property somewhere with a rental yield over 5% is well worth considering as it can guarantee you a retirement home paid off a tenant. Tasmania is very affordable and that is why Hobart has seen some capital growth recently. Too cold for me but if you can relocate your restaurant to the Sunshine Coast I’ll be there!! You’re lucky to have free accomodation in NZ as it’s a beautiful place and tne airfares are cheap. House sitting is also worth looking at – try Trusted House sitters dot com for au. You are definitely young enough to turn your finances around but don’t leave it too much younger. Understanding the time value of money is really important. Google home loan and investment calculators and have a play around – they are a great tool to help with goal setting. Also are you aware that the thresholds for HELP (HECS) loans are changing from July 1? The government wants the debt repaid faster so you will be paying more soon. Good luck and it’s great to see so many Aussies on here!

    1. Hi Katie! I love Caloundra. My uncle and aunt had a holiday home there, and we spent quite a few summers up there as kids. Thanks for your comment and the information. No, I didn’t know the thresholds for HECS loans were changing… I’d better check it out. Yes, it’s really nice to see so many Aussie Frugalwoods’ readers coming out of the woodwork!

  50. Ps I really should have read that again before hitting send. Hope you can read past all the typos!! House paid off by tenant I meant.

  51. Hi! I’m a Sydney sider too!
    Some suggestions:

    Haircut- look up ‘free haircut’ on gumtree and you will see heaps of apprentices that will cut/colour for free if you’re available during the day and can get someone to watch the little one for a couple of hours.

    Super (like 401k in the USA): look at ATO website, there are tax deductions available for spouse contributions and if you are a low income earner you can get a government co-contributiom for making a personal contribution. Also the business could pay your contributions if you are an employee. Have a go at an Australian retirement calculator it will model how much you need for retirement (at 60+!) including government pension.

    1. Hi! Wow, that’s such a good idea about the free haircuts. Although I bought myself a pair of scissors, I don’t really trust myself, and I still like having my hair coloured, so that would probably be a good solution. I’ll check out the tax deductions for spouse contributions – thanks!

  52. You live in a 2 bedroom apartment, and are planning another baby sometime in the future. Have you thought about your housing plans if your future baby is a girl? As they get older, would your son and daughter share a room? It would certainly be ok in the early years, but as teenagers they might not like it so much. Just something to think about with future housing plans. If you stick with renting for now, it would be easier to change later on if you so desired.

    1. That’s a very good question! My husband and I have joked that we could sleep on the sofa bed in the lounge room, and the kids could have a room each, but somehow I think the novelty would wear off quickly. 😉 My feeling is that we would probably have to move somewhere cheaper (probably Canberra, my hometown where my parents still live), so that we could afford something with 3 bedrooms. I think they could share until my son’s a teenager, but then they would probably need their own space.

  53. Hi, you have got great advice here. Another person cautioning buying right here. I’m Irish and we bought in 2007 and the housing/banking crash happened a year later. At the time it was ‘you must buy a house!’ Anyways 10 years later, our house is still not back up to what we bought it for though hopefully will be in a year or two. At least finally, we are out of negative equity. Ireland 2007 sounds similar to Sydney now so I would urge caution. Nothing worse than paying back a big mortgage when your house value has almost halved.

  54. Another Sunshine Coast person here (north of Brisbane, Australia). I have only quickly read through the answers, but no-one has seemed to have said this so far. Congratulations for deciding to have one parent to stay with your child (possibly children). Yes, it may limit your income somewhat, but the advantages are huge – don’t ever doubt that. Good luck!

  55. I found projecting life events into the future then working out where you roughly need to be by those dates has been a real help in making big life decisions. For example, I knew in 2015 my daughter would be 18 and perhaps going to university or needing help starting life. I knew i would need to retire by 2027 (when i’m 60), as my profession is very demanding and the vast majority of people leave much earlier.

    I had my daughter at 30 (20 years ago) my husband was 28, so in theory we had plenty of time to see her start in life (she’s currently at university) and have enough time (just) to build up enough retirement funds to be able to retire plus pay off mortgage based on rough annual salaries.

    It became very obvious doing this exercise, that we actually had quite a big hole in our finances mainly caused by years of not saving much. We could not really afford more children and moving to a bigger property would have been a bad idea unless our finances dramatically changed.

    Years later I’m glad we made some sensible decisions back then, as life dealt many unexpected blows. I love my one amazing daughter and with 10 years more of following frugalwoods blog i should still be able to retire at 60!

    1. Thanks for commenting, Jane. Planning ahead like that is a really good idea. It sure beats feeling around in the dark and being shocked when big expenses come your way. I’m glad it has worked for you. Good luck with your retirement plans!

  56. As another Australian – in Melbourne – I commend you for your relatively low costs. I think you could trim things like haircuts, clothes, gifts and food – but really, you are already doing quite well.
    As a parent I would encourage you to take advantage of your child’s young age and start researching a longer-term base before they start school. Yes, you can move with school age children but it is so much harder once you start making friendship connections – you and your child! I am a big fan of Canberra but also look at other big regional cities which I would think might offer your family business opportunities too. Good luck!

  57. Hi Michelle, thanks for the encouragement! I’m totally with you re. finding a longer-term base before the kid/s start school – which is only 2.5 years away. Time flies! I really don’t want to disrupt my son’s schooling if I can avoid it, so I really want us to be somewhere where we are going to stay for a long time by then.
    It’s nice to see that so many Aussies who have commented are positive about Canberra. My Sydney friends think I’m crazy for considering moving back. I just smile and think of the saying “Sydney: it’s a nice place to visit, but you wouldn’t want to live there. Canberra: it’s a nice place to live, but you wouldn’t want to visit.” 🙂

    1. I actually moved from Sydney to Canberra and I loved it. The mountains, bike paths, lifestyle – so close to so many great things . Not cheap now though !

  58. Another sydneysider here! Yes it’s pretty crazy right now, median house prices are well in excess of $1mill for your average 3 bedroom single storey home. We are thinking of doing the same (renting and investing our capital). Question please, Vanguard Aust seems to have a dozen or more ETF’s one can invest in, any recommendations for which one/s to invest in with approx $500k?

    1. Hi Maryanne! Sorry, I can’t recommend any, as I haven’t looked into it enough yet. Sydneygirl below says: “There’s an Australian Investing thread in the Money Moustache forum , the general consensus is investing in the Vanguard Aus Shares/International shares ETF, if you have more than 100k to invest then the Wholesale fund is an option too.”

      1. Also, Hurrow below says “As far as ETFs goes I use STW for Australian shares, VGAD/VGS for Intl shares and IVV for the US market, but there are plenty of other options out there.” Maybe check out that Australian investing thread mentioned. I’m sure there’s lots of good advice there.

  59. What a lovely family! Definitely don’t buy, Jenna!

    There is this myth that renting makes you poor. Well it ain’t true. Like you, we live in a high cost of living area, and it just doesn’t make financial sense to buy here. Renting provides so much more flexibility, less headaches, and in HCOL less cost. We’ve managed to accumulate 7 figure wealth while renting. From outward appearances, our rented somewhat dated home and older cars, hand me down clothes for the kids might suggest we are middle class. But I’m not interested in impressing people. I find great comfort in our large nest egg which is getting close to covering all our expenses. (Financial freedom!)

    Good luck to you

    1. Hi there! Thanks for that. Yes, renting is making a lot of sense to me now. Well done on your financial achievements! Cheers

  60. Another Aussie here. Given the current unaffordability of buying a house you can pretty much rule that out whether you would like to or not. That’s not to say that you shouldn’t save the money for it, it just doesn’t seem realistic anytime soon. This leaves investing as the most realistic option for you. I would be building up your emergency savings to 6 months or so of living expenses, and then looking at something like Stockspot for investing the balance or investing directly via ETFs. As far as ETFs goes I use STW for Australian shares, VGAD/VGS for Intl shares and IVV for the US market, but there are plenty of other options out there. There is essentially no difference in terms of the principle of using low cost index funds to invest in Australia or pretty much any other developed market so don’t worry about that too much.

    Also assuming you earn less than $13k this year I’d be contributing $1,000 to super in your name to get the government co-contribution of $500, next year the $13k goes up to $37k or so in which case you should almost certainly be eligible for this co-contribution.

    Other things I would be looking at:

    1. Your grocery bill seems a little high, particularly given you own a restaurant and can presumably either get meals from there or write meals off as a business expense? Are you shopping the specials at Coles/Woolies and getting the everyday stuff at Aldi?

    2. Your entertainment bill should be able to be reduced pretty substantially in a big city like Sydney with plenty of free entertainment available, and your dentist and medical bills both seem quite high unless you have some sort of ongoing problem?

    3. If you’re not going to be needing access to your savings for a while and decide not to buy a house, think about having Greg salary sacrifice money to his super to save income tax. You can only do a max of $25kpa (including SG contributions) but you save the difference between your marginal tax rate (likely 39.5%) and the contributions tax of 15% which adds up to a decent amount each year.

    1. Hi Hurrow, thanks for your comments and for the information about investing here in Oz. Yes, I think our grocery bill is a bit high, but we’ve recently stopped eating meat every day, and that is already making a difference. We both had a lot of dental work done last year, but that was for big things like crowns, which should hopefully last 10 years. We will definitely be looking into contributing more to super and how that can work in our favour tax-wise. Cheers!

  61. There’s an Australian Investing thread in the Money Moustache forum , the general consensus is investing in the Vanguard Aus Shares/International shares ETF, if you have more than 100k to invest then the Wholesale fund is an option too.

  62. Hi, another fellow Aussie here. Living in Perth. Having lived in High housing areas in Japan the US and now back to Perth where I am from. The best advice I can give is to try to buy a property, even an apartment. Perth has crazy property prices, but my experience has been that in high cost of living areas you are better off buying or you will be priced out of the market. Property tends to appreciate in Australia. It is also a hedge against inflation. You may feel that 20 years down the track that you are tired of paying rent and the same apartment will cost you a fortune. We purchased a block as an investment in 1997 in Perth for 73000 Aussie dollars, today it is worth 550000. Even if we had invested the 72000 we would not have made this return. My advise would be to lower the entertainment and grocery costs and try to save some more for the deposit. Otherwise I think you are doing great..

    1. Thanks for your encouragement, Silvana! Wow, well done on your investment – that’s a good return.

  63. I don’t think anyone mentioned this already, and it’s probably a bit late. But you can actually by us vanguard index funds very easily in australia (and the UK for that matter, assuming other places too). You can do this directly or through an online broker. The Aussie index is heavily weighted to finance and mining so not as diverse.

    1. Cool, thanks for that info, Asa. Definitely not too late, as we’ll be saving up our emergency fund for another year or so before we are ready to invest. Cheers

  64. Hi Jemma,

    Your son is adorable! I am a small business owner in Melbourne. We are fairly recent home owners. There are certain perks to owning your own home, however, the home can also be a money pit if the house is not a brand new one.

    I thought I’d just say that the good thing about Superranuation is that in case of bankruptcy, if the fund is a regulated fund (most are) the Super money is safe.

    1. Hi Mel. Hehe, thanks, we think so, too. 🙂 Very true what you say about Super. Congratulations on buying your place!

  65. I’m going to suggest some different advice, from another Aussie who is also married to a chef. Although he is not self employed. We’re now in our early 40’s and with two children (teen and toddler). What is occurring to my husband, is he cannot keep up hospitality work forever. He’s getting RSI, and now has to go to a gym, to work all his muscle groups. Just because the nature of the job, is to stand on your feet all day, using your arms a lot. What we thought was a stable means of income, has now changed as we’ve aged. We’re now having to plan to transition to a different industry.

    So my point is, while it’s awesome for your husband to own his own establishment – how will it age with him, and will you incur more health associated costs, because of it’s grueling nature of work? Rather than keep the business and deny yourselves a house – I’d prep the business for sale, and put that money on a house in Canberra. Your husband will be snapped-up in a nanosecond, in that location. He would have his pick of jobs, just because his previous experience was in Sydney. That’s actually how my husband and I were able to buy our first home. He worked in Brisbane for years, and then we moved inland to a smaller, rural city. He had his pick of jobs, and they were offering him top dollar. Because they knew his professional standard was higher than the locally based chefs. We bought a cheap house in an area we were told had the worst reputation – but it was in the process of being gentrified too. Five years later, we almost tripled the value of what we paid on the house, and were able to sell and move to five acres, a little further from town.

    I actually don’t agree with advice that purchasing your own home, is not a good investment (sorry frugalwoods – I mean no disrespect). As a couple who has mostly lived on one income (never over $55,000 p/a) for the nearly 20 years, the only way we’ve been able to defeat the cost of inflation, was by owning our own home. Our minimum mortgage repayment, continues to go down, while the price to rent, continues to go up. I was shocked when I saw the cost of rentals recently. $350 a week for a 3 brm house, when we were only paying roughly $250 p/w on our mortgage for a 4 brm house on five acres. Imagine, instead of having to pay your landlords the 4% increase in rent they’re entitled to, every year, you were actually decreasing your rent by that much? That’s what owning your own home is like. You’re decreasing your minimum mortgage repayment, the longer you hold the investment.

    Some only look at the money goes in, versus money returned on a home investment – and don’t take into consideration the gouging effect of inflation, on the cost of living. The landlords pass the cost of inflation onto their tenants, via rent increases, so they’re not losing out. But the homeowner, who pays their mortgage repayments, reduces their minimum payment the longer they hold the investment. We, only reduce ours by a minimal amount, as we still want to pay our mortgage off early. So we pay as much as we can afford – but we have the ability to reduce it, if we needed to. Can you tell your landlord, I want to pay $10-20 less, per year on my rent? Can you tell your landlord, I’ve had an accident and I need to halt paying rent – like you can a bank, if you’re ahead in payments and encounter temporary hardship?

    The investment in your business is a high risk investment, which is why you’d have to convince your bank to give you a home loan. It’s not easy when you’re a small business owner, to get a home loan. The banks understand the higher risk, your business investment is. Investing in the stock market, has a higher risk too, than investing in buying a home. Because paying off a mortgage, the risk reduces over time. Buying a modest house, in a crappy area, with access to transport for high paying employment, has it’s virtues in 5-10 years time. It might seem like it’s increasing your expenditures in the short term, but long term, it reduces the cost of inflation and frees up your income.

    It would have to be something your husband would want to do though. It took about a year for me to convince my husband to move. In the end, it wasn’t me – he was bypassed for a promotion, and decided to get out of the city -tired of the fiercely competitive industry, where he was. Which was the best thing we ever did. Of course, you don’t have to replicate our experience, decision for decision. But understand, there’s a finite amount of time, your husband can physically work like that, in the kitchen. He’ll develop injuries, and you’ll be spending money on preventative treatments – possibly for the rest of his life. At that point, you’ll have to start thinking, change of industry.

    1. Hi Chris, thanks for taking the time to comment. Interesting point about inflation. Actually, Greg is no longer a chef, but instead runs the front of house, so it’s not quite as gruelling as working in the kitchen, and he does get to sit down and chat with customers at the end of the shift. That said, there is still a lot of stress involved in owning a restaurant. I’m glad that getting out of the city was the right decision for you. It definitely sounds attractive.

  66. Great to see an Aussie on here! I agree with what Mrs Frugalwoods has said. Our emergency fund is a bit smaller because of my husbands secure employment.

    The only thing I would suggest is when you do look at the stock market here, is doing some good research on which fund to invest in. There has been some commentary lately that our index’s are over priced due to australian jumping on the index bandwagon.

    Also we have saved a bunch of money on using vinegar and bi-card soda for most of our cleaning. Not buying expensive cleaning products. I also regularly make Mrs Frugalwoods’ lunch recipe, which saves us a tonne of money.

    Also we use PocketSmith to track our expenses. Its worth looking into as it’s a NZ company. Cause I think it’s more difficult for us Aussies to use personal finance and mint.

    1. Hi Darwin! Thanks for your comment. I love using vinegar and bi-carb, as well! I buy it bulk from a local co-op, so it works out even cheaper and I can reuse the jars each time.
      I haven’t tried their lunch recipe, but I’ll check it out.

  67. Wow, encouraging to read the many Australian readers to the post.

    Yes – home owner in Sydney is fading fast. I’ve been in two minds about whether to purchase or not. I’ve been thinking of purchasing recently, but with the prices as they are I think I’m better served dumping the $150 k plus into the stock market. However, the rent in Sydney has increased significantly – so much so I sometimes think it might be just as economical for me to buy a place and rent out the spare bedroom and do so in a more affordable suburb. I must say though, I think the property prices are going to increase for a while yet and probably settle around an average of $1.2 million.

    I too love travel and experience – unfortunately this year my emergency fund has taken a massive back slide by about $18,000.00 to pay the mortgage for an investment that the tenant has not paid, litigation costs to remove the tenant, funeral expenses for a sudden death of a loved one, and moving costs as the place I have rented for the past 4 years is to be renovated and the landlord wants me to relocate.

    I want to cry when I think how much I have spend of my emergency fund in the past 3 months alone!

    I suppose the only positive from this is – I still have no debt, I was able to go to Fraser Island for a weekend trip earlier in the month and ……..yeah, it has taught me the importance of an emergency fund. My budget for Christmas is still unscathed (sitting at $800.00 this month), and I can pay my utilities off easily enough. I suppose I feel sick knowing that if I loose my job today, without that emergency fund I’m pretty much done for – scary feeling.

  68. Reading my post I realise it was simply a bit of a whinge. I hope this is more helpful!

    Being a Sydney sider, I only ever hear how hard it is to save for a deposit. Hear me out – assuming a despoit of $180k (including stamp duty and fees), that is insignificant (yes I said it) – insignificant compared to the $850,000.00 (plus interest) you would have to pay for the remainder of your life. The medium property price is $1 million, I have deducted $150,000.00 as your deposit (as the $30k will be stamp duty payable to the NSW Govenment) to work with the figure of $850k being borred from the bank. You may have a less expensive place in mind, but I am working of the medium Sydney figure.

    Jemma, I hope this doesn’t sound too harsh, but in considering whether to purchase, in my opinion, it is crucial to consider your ages and income and how much saved for the deposit – a bank surely will because the maximum loan term is 30 years for secured lends.

    So, even if you did had a deposit today together with stamp duty and lawyers fee ($180, you would be 66 and your husband would be 72 when making your final payment and you’ll be paying approx. $4,000.00 per month towards the mortgage (Principal & Interest based on one of the bank’s repayment calculator for the sum $850,000).

    Given your priority is to travel and to have another baby, and rather than focusing on the short term the deposit, in my opinion, the question is are you prepared to pay $4,000.00 towards your mortgage per month? The question is, in addition to the $4,000.00 mortgage repayment, are you prepared to pay the strata levies (for the 2 bedroom unit – which can be in excess of $2000 per quarter) per quarter? utilities? insurance per annum? in addition to your current expenses (excluding rent).

    You will see I have specifically asked, “are you prepared to…” as opposed to, are you financially capacable of doing so. You will see that my question “are you prepared” speaks to you personally and requires you to make an assessment of your current goals, long terms goals (the reason I mention age) and priorities. The second is based purely on figures, which you should also do (and the banks will do when assessing the lend)

    Ultimately, asking whether you “are prepared to” will help me identify the actual IMPACT this financial decision will have in your life and that of your lovely family BOTH financially and lifestyle wise – it may mean that something you love and enjoy – travel will be a thing of the past… is this something you’re prepared to sacrifice?

    Also, the mortgage menas a bigger emergency fund, by my calculation based on the $4,000.00 monthly repayment, that is a minimum of $48,000.00 to cover 1 years worth of expense (if you decide that is okay; you might want $30k easily accessible with the remainder in shares or whatever you decide for your familities situation).

    Also to my fellow Aussies, Australian interest rates are at an all time low – so is there room in your families current income should the interest rate increase by 2 %? (I think banks recommend that buffer).

    In our view, this is what needs attention – the complete cost of purchasing on your finances, lifestyle, and future (as opposed to isolating the decision to saving for the deposit or keeping the question general like should I purchase). Get into the details of the finances and you will see how that will impact on your lifestyle, if it requires a lifestyle change you’re not prepared to part with…. perhaps that answers your question …I hope that is helpful

    1. Hi Wendy, yes, that’s helpful, thank you! There are definitely a lot of extra costs attached to home ownership, and it’s certainly a huge commitment in a place like Sydney. I think we will just keep saving and trying to be more frugal for now, and once my kids are in school and I am potentially working/earning more, we can reassess then.
      Sorry to hear you’ve been through some tough times lately. Hope the rest of the year pans out better for you!

  69. I very much relate to this family’s situation. We live in a pricy area, too, and if we want to purchase a home here, we will need to save (and pay down debt) for the next five or six years. We, too, love to travel. We, too, feel pressure to purchase – though we’ve owned once before and realize it’s not as romantic as it’s cracked up to be. It’s refreshing to hear others say that home ownership does not have to be the end-all, be-all financial goal for every family. When it’s what everyone else is doing and urging, it’s easy to think we’re behind in life because we don’t own our own home.

    1. Hi! Thanks for commenting. Yes, I agree that it’s very refreshing to hear that owning a home is not a necessary financial goal for everyone.

  70. Hi there. I’m a fellow Aussie, but currently live in Europe where it’s a lot more culturally acceptable to rent for your whole life, rather than buy – and also live in a small apartment (my partner and I have our bed in the living room, divided by a curtain, while our two young girls share the one bedroom). My partner has never been interested in buying a property, unless we had a really decent deposit, as he doesn’t like the idea of paying so much in interest.

    However, we plan to move back to Australia soon, and I have been doing a bit of research on home ownership. I definitely agree that you need to focus on building up an emergency fund, and not locking yourself into an extremely high morgate which will actually give you less financial security right now (what happens if business goes under, or interest rates increase – which is likely and you can’t afford the repayments?). But, just in case you weren’t aware, Centre link does NOT count a home as an asset when you retire, and may want to apply for the aged pension. So, you could save $1million for retirement in cash, investments etc, and you would be above the threshold for receiving the pension. If you owned a home and had less assets in other areas, you may qualify for a full or part pension. Obviously not everyone wants to rely on the pension, or they would prefer to be independent of it for other reasons, but just something to think about.

    If it’s any consolation, we are not in a position to buy but it feels like nearly all my friends have! I just remind ourselves that our lifestyle / priorities have been different (travel, moving overseas, loss of income so one parent can stay at home with the kids etc). Our goals are to live frugually and save for a deposit, so we have the possibility of buying (at the right time), investing more into Superannuation (mine is low and my partner doesn’t have any!) to provide some peace of mind for the future.

    1. Hi JF, thanks for your comments. Interesting about Centrelink not counting a house towards assets… I’m curious about your living arrangement, with you guys sleeping in the lounge and your kids in the bedroom. That’s something my husband and I have talked about, as well, and I’ve found blogs written by families with 5 kids living in a one-bedroom apartment who do the same. It’s definitely something that the minimalist in me finds very attractive.
      I lived in Germany for about 4 years, and their lack of obsession with buying property was certainly very refreshing compared to Australia!

  71. So much social ‘guilt’ in Australia for not buying a house. Australians nearly feel obliged to go into astronomical debt.

    Stick to your plan folks. You’re doing great.

  72. This post was very helpful for me. We bought a property that was too expensive for us 13 years ago, and it has often felt like a burden rather than the joy we hoped it would be. We are looking forward to selling. It’s good to think about renting, and how that compares to owning.

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