What does DDU want in life?

By | June 25, 2017

Author: Mr & Mrs DDU.

It’s a very important question that we are asking ourselves a lot recently.

On the planning spectrum of couples, we are big planners. We like to plan ahead about what movie we might see at the cinema, what shares we’re considering next, where we want to roadtrip next etc. Those are all short term plans and goals.

We also like to plan and talk about our long term goals. Having a baby, financial independence etc.

With most things we know what we want and plan how to get it.

Now that there’s a baby on the way we are reassessing and questioning ourselves about what we want out of life.

Ultimately, the goal is to be financially independent and live off the income that our investments produce. But when do we want to try to make that happen? 50? 40? 35? What are we willing to do to make that happen?

Every month we are saving money. In some months we have saved over 50% of our net income. That’s great, but what do we want to do with the savings?

We are putting a large amount of it towards investing in shares. But we are also contributing $200 a month towards our IVF baby #2 fund. We are contributing $200 a month towards our growing emergency fund.

Being pregnant has made us question where we want to live. Do we want to rent forever? There are plenty of FIRE bloggers out there who have never bought a house, built up their investments and made it work. When we didn’t have a baby on the way we thought we could go for 10+ years before considering buying.

Australians and Canadians can attest to how high property prices are. On a price to income ratio and gross yield on a rental property comparison, Australians have some of the ‘worst’ cities in the world. We calculated that our annual rent would be around a 3% gross yield of how much our current home would be to buy. 3%! That’s before interest and all the other expenses.

Do we want to try to compete with foreign buyers, investors and Keep-up-with-the-Jonses/leverage-as-much-as-possible-to-afford-a-house-s? It’s really hard to make that financial decision stack up when it seems like such an illogical move, particularly with interest rates starting to go up again.

Perhaps we should wait for this impending crash that may or may not happen. Even so, if we are to buy we would still have to put up a hell of a deposit to buy something. Any cash we put towards a house would mean less for investing and extend when we can achieve financial independence. First World problems eh? All this thinking is making us hungry, where’s some avocado on toast?

It comes back to the original question. What is important to us in life?

We want to reach financial independence, so we will keep contributing a monthly investment amount, currently at least $1,000, hopefully that monthly figure can grow.

We want a strong emergency fund so we can deal with whatever comes up. So we will keep contributing $200 a month and receive interest.

We probably will want a second child, so we are now adding $200 a month (and interest) to our IVF fund that we had after being successful with our first.

We probably want to buy a house at some point in the future. We have just started a new savings account and will start adding $200 a month as a starting point. Once we have stopped acquiring the expensive baby items and hopefully increased our earnings, we will grow this monthly figure to $500, $750 or perhaps even $1,000 in the future. We may end up having to decide if we want a house or second child first if an opportunity arises to buy property at a cheaper price in the next two or three years.

Lots to ponder, no decisions but we are saving and the money can go towards our goals when we want to action them, or at least we’ll be a lot closer to completing them.

Final thoughts

This post wasn’t meant as a big reveal or anything like that. We started the blog to share our journey towards financial independence and having a baby. Where we live is a big part of our financial picture and we thought it would be good to share what’s been going through our minds recently, particularly as it’s a blog right?

Ultimately all this planning comes down to wanting a happy life and trying to make choices that will maximise our happiness. We are feeling very happy lately with the path our lives are taking, and that’s all we could ask for in the end.

Are you in a similar position where you are weighing up saving for a house versus investing for financial independence? What are your thoughts and the choices you’re making?

29 thoughts on “What does DDU want in life?

  1. The Wealthy Bogan

    I bought the house first. I am now in the process of reversing that decision! Much better to invest first (money is worth more to you now, and all that) and buy the house with cash towards the end of the journey, especially with rates on the way up and the economy on the way down

    Reply
    1. Dividends Down Under Post author

      That has always been our thinking too – keep the cash freed up to make more money and then buy later when the cash is really flowing from investments. We have started a savings account towards one day buying a house at least, it feels good to be slowly contributing to it even if it’s a long way off 🙂

      Mrs DDU

      Reply
  2. pia

    I don’t buy into the idea of Keeping up with the joneses and actually think that the media blows the whole ‘foreign buyer’ thing out of proportion, but that’s my personal view as a foreigner who decided to make this country my forever home. While there is definitely some truth and that prices have gone up on housing as a result, I think ultimately the decision should lie with other factors like: do you want a steady roof over your children’s heads?

    That was the one of the biggest reason I bought a house, if not the reason. I moved house so often while renting over the course of 13 years due to various reasons like crazy landlords, terrible real estate agents, rent hikes etc. I found there to be no sense of home and no security. The 3-6 months property inspections drove me nuts as I would have to make an extra effort to take the day off and be home for them since I don’t trust them to just come into the property by themselves. And when we had a private rental, the landlord disappeared for months on end and never answered any of the requests for maintenance until we got fed up and rocked up at his house.

    I have done a lot of reading into the idea of rentvesting and I just cannot stomach it. Because as you yourself have put it, it boils down to what is important to you. I’m not sure if anything I said is of any worth to you, but I think ultimately you guys will make the best decision down the path for you and your family.

    Reply
    1. Dividends Down Under Post author

      Your reasons for buying is exactly why we have caught the itch for it too – having a baby on the way just completely changed our perspective of ‘home’ and wanting more control over it. Renting sucks especially when you get those unexpected “give us access to your house for xyz” notices on top of the regular inspections, it can feel quite invasive.

      Balancing working towards FIRE with investing and putting money away for a house deposit is a tough balance to master – but we are getting more comfortable with holding more cash and owning a home sooner rather than later without too much sacrifice to increasing our investments.

      Mrs DDU

      Reply
  3. Cath @ Get MoneyWise

    As someone with two kids of our own it is an interesting one to ponder. We luckily started investing in property 5 years before our kiddies came along.

    We actually did property hacking before it was a thing that had a name. Lived in part of our house and rented out either a granny flat or a portion of our place. Gave us the best of both worlds.

    So with the capital gains happening we are in the position The Wealthy Bogan mentioned where we would be able to buy a main residence with cash. We are selling 2 of the 4 properties in our portfolio and moving to a regional town (big, only like an hour from a major city) in order to be able to do this.

    Like Pia mentioned the security of our own place is super appealing since having kids, and to own it mortgage free seems like the dream. But I am always thinking of is it the best way to spend our money and logically it is not.

    But for me at this point in my life, the boost to the cash flow of a few thousand a month (after paying out these mortgages) is what is most important to me at this point in time.

    Reply
    1. Dividends Down Under Post author

      Sounds like you guys are in a great position, big decision to move to a regional town to achieve more financial freedom too. This is something we have considered as well but Mr DDU’s job ties us to being a certain distance from work, we already are living just over an hour commute each way so would have to have a job overhaul to move out further without sacrificing our (and especially his) daily life.

      By the way, thanks for stopping by – I have added you to our RSS feed of blogs to keep up with so I will definitely be stopping by your blog from time to time 🙂

      Mrs DDU

      Reply
  4. Income Surfer

    Nice discussion DDUs. We already have teh Little Man, and are hoping for another in the next couple years. This morning Ms. IS and I had a very similar discussion about housing. I would prefer to get creative…. and rent out part of a house to one of our friends…..but Ms IS is not comfortable with that. Financially, buying a house just doesn’t make sense at the moment…..so we are going to sign another year lease next month. Renting costs a chunk less than buying, and historically has only risen at less than 2%. We can do better, and have decided to take the chance. That being said….buying would be easier and less hassle. Oh well, like you said these are “first world problems”.

    Hope you guys are doing well and have a great week
    -Bryan

    Reply
    1. Dividends Down Under Post author

      I’m definitely with Mrs IS on this one – I would not be cool with the idea of renting out part of our house haha, unless it was a completely self-contained flat or something.

      I hope things are going well for you guys, sorry it’s been a while since I’ve stopped by your blog – I really have to get around to keeping on top of some of the blog stuff, life is just taking over!

      Mrs DDU

      Reply
  5. Amber tree

    In Belgium, we are born to own a house! We have one now, the monthly payments currently have less than 100€ interest, so the bulk goes toward the principal. Another 7 years and we are done. At that point, we will be happy.

    There are many others that decide to rent longer. When the ration pay rent vs mortgage is ok, then renting is an alernative.

    Reply
    1. Dividends Down Under Post author

      Wow, I’m impressed Amber tree! Where you are born/live really does play a big part in lifestyle/financial decisions it seems. 7 years until your home is paid off is really exciting!

      Mrs DDU

      Reply
  6. LadyFIRE

    We’re weighing up whether we should be investing in shares, or buying an investment property. Mr. FIRE makes a lot of money (it’s ridiculous!) which means he pays a lot of tax – so for us an investment property makes sense, but it’s a scary big investment.

    If you spend $5k on the wrong shares, it’s $5k down the loo. If you buy a bad investment property it’s easily $15-20k A YEAR…

    Reply
    1. Dividends Down Under Post author

      Ah yes, that tempting negative gearing – great way to do it if you’re in an insanely high tax bracket and are happy to sit on the property hoping the value will go up (which it probably will!). I don’t foresee negative gearing being in the cards for us, we want to make our investments cash-flow positive to reach FIRE faster, but buying our own home completely goes against making all of our cash work hard and make us money..

      Buying a house is definitely scary! I’m sure you guys will choose the right one though 🙂

      Mrs DDU

      Reply
  7. Mrs. ETT

    The most important thing is that you are thinking and talking about what you want. You aren’t jumping in to anything, and you are covering all possibilities. Who knows how you will feel once baby DDU arrives? (Surely that must be soon, it feels like forever!) Keep on keeping on, and with time hopefully the answers will become clearer.

    Reply
    1. Dividends Down Under Post author

      Thanks Mrs ETT. You always have the wise grounding words :). I feel better just from reading them.

      Baby DDU could be any day now.. or you know, a month… the whole “babies come when they’re ready” thing – I’m distracting myself by catching up on our comments! haha

      Mrs DDU

      Reply
  8. Buy, Hold Long

    Nice work and thanks for the update. Sounds like a lot of work you guys are doing now to reach financial independence later in life. Well done to you!

    Reply
    1. Dividends Down Under Post author

      Hopefully it won’t be too “later” in life when we get there! Juggling the lifestyle choices could stretch out the timeline a bit though.

      Hope you’re doing well! I haven’t seen any updates from you recently – but maybe Mr DDU has been commenting on your posts first and hiding them from our RSS feed..

      Mrs DDU

      Reply
  9. Divnomics

    Although there aren’t any concrete goals, I think you guys have made up a pretty decent plan. We are always wondering on how we would move forward and what would make a better investment. We don’t know when we reach FI and such.

    We did bought a house a couple years back, before we started our journey towards FI. We have been thinking of paying off early, but instead choose to invest that money. Simply because when invested, the money will be working for us. Later on we could always sell part of our portfolio to pay of a big chunk when our fixed rent will expire.

    The best thing to do is don’t rush things. Think everything through and get into action as soon as you both are 100% standing behind it.

    Reply
    1. Dividends Down Under Post author

      I’m glad we aren’t alone in not having solid plans – we also have no fixed plan for FI date and all that either, but that doesn’t mean we can’t work towards it :).

      At least we are saving towards a house now, which we weren’t doing before.. So I’m just going to be happy that we are slowly working towards it and re-evaluate things periodically as we get closer to having a house deposit.

      Mrs DDU

      Reply
  10. MrSLM

    We bought a house, but rent out the upper units and basement (only occupying the main floor). It’s nice to have your own place, but there’s also a crazy amount of responsibility with maintenance and assorted other headaches. There are honestly a lot of days where I wish we had just stayed renters and invested the money. I’d be hard pressed to definitively say one choice is “better” than the other.

    Reply
    1. Dividends Down Under Post author

      Your last sentence is exactly why it’s so hard to make a plan/decision! It’s 6 of one, half a dozen of the other!

      As long as you guys have your own completely self-contained house, it sounds like the perfect set up 🙂

      Mrs DDU

      Reply
  11. Team CF

    You have got lots of time to think and make a decision. As long as you have funds and a strong plan (which you guys are good at making), you guys will be fine, whatever you decide.
    Best of luck!

    Reply
    1. Dividends Down Under Post author

      Thank your CF, your vote of confidence in us is very kind! No solid decisions yet, but slowly saving towards a house deposit now whilst still balancing adding to our investments.

      Mrs DDU

      Reply
  12. Troy @ Bear Market

    My goal in life is to be a billionaire by the time I’m 40. It sounds ambitious, but I’ve done the calculations and I think I’ll be able to get there. What happens after that? I don’t know. Maybe start a rocket company like Elon Musk haha

    Reply
  13. J @ Hey, It's Just Money!

    I really like this post, it almost feels like I wrote it (sans the baby part). I relate very well with your thoughts/sentiments. We are currently looking into buying a house – a place for us to live in – despite all the depressing news/articles/predictions about the housing market. We know it’s scary and other investments are probably a better choice, but we made a decision based on what we both want (in life). We aren’t looking for anything fancy but something we can start a family in. This is the reason why we haven’t been investing much in shares – we’ve been putting everything in the house deposit account. Hopefully that will change when we finally buy one and start paying for a mortgage.

    Reply
    1. Dividends Down Under Post author

      Thanks J, I kind of wondered if our post sounded like we were rambling on without any clear direction.. I wouldn’t be surprised if that’s how it sounds because that’s kind of how we are feeling haha.

      I really hope your house hunting is going well, we are rooting for you to find one that you love and are successful in your offer!

      Mrs DDU

      Reply
  14. Strong Money Australia

    One important point is where you want to live in the future. If you think you might move away from the city upon reaching financial independence, then it wouldn’t really make sense to buy. Buying and selling costs are extremely expensive.
    I can’t comment equally since I don’t have kids, but I would either buy a low cost place, or rent out rooms in a more expensive place, or just invest fully in shares until later on.
    As you know, the numbers are in favour of renting + investing right now.

    You guys are saving quite well, so at least you have plenty options available to you, which is awesome.
    I wouldn’t expect a crash, but I wouldn’t expect prices to run away either, so it’s likely you won’t miss out in that regard. At least you’ll be cashed up if something does happen!

    Reply
    1. Dividends Down Under Post author

      totally agree with you – at least we are opening our options up by saving some cash instead of just plunging it all into shares (which a big part of us would love to do!).

      We have toyed slightly with the idea of moving further away from the city to a regional area – but ultimately we already live a decent distance from the city and love the area, we would mostly just be moving away from here to get a better house for our buck and balancing the lifestyle/FIRE/house choices… no concrete decisions yet!

      Mrs DDU

      Reply
  15. Andrew from Oz

    Thanks a lot for your transparency and sharing of your thought processes. I had kids late in my 30’s and now in my 40s. Have lived and worked in a few cities globally and now back in Oz. That means nothing other than to say, I continually had this discussion over the last 20years of my life. I can clearly tell you that of my friends who have rented and invested, owned and bought invest properties, owned and paid down mortgage -> the clear winners have been those with either the IPs or the owner occupier. Frankly I think it’s not for any reason other than the forced saving.

    However, I would very strongly advocate purchasing a home. There’s two reasons.

    1) With kids, you need to not be forced to move (due to schools, friends, and frankly the hassle – let’s say it’s 2 weeks per year of hassle of a rental property – 1 week for packing and 1 week for inspections/other random). The peace of mind needed when everything else in your life is crazy cannot be underestimated. Kids will suck out all the spare time you have now (in mostly a good way)

    2) Forget about it appreciating it value. In fact you should assume it will be worth $0 in 40years time. Then at 3.7% interest + 2.5% capital loss = 6.2%. Would you pay 6.2% for two things
    1) your accommodation – let’s say someone indicated that’s 3% to live in the same property
    2) so you’re paying 3.2% per annum for the most risk-free investment you have made. Even more risk-free than 30yr Australian govt bonds according to Maslov’s hierarchy of needs. But wait, there’s more. Your break-even on the bonds is pre-tax, and your return on your home is post-tax (as no CGT on the PPOR). With Govt bonds at 3% now, this is 4.3% at average person’s tax rate of 30%.

    I’ll add a 2b) for the Australians reading this. Mortgage is not deductible (and you would pay tax on any income or CG on your rentvesting. Where you have a free option is you can draw down on your mortgage and invest in IP or shares. Not that I advocate it, but this is where a home owner will destroy a non-home owning share investor. The cost of debt is much much lower. Have a look anywhere at margin loans vs home loans. For the Americans it actually works in reverse (deductible while working …)

    In conclusion you are not only emotionally better off, you are actually financially better off – on a risk vs return analysis. For sure you could invest those funds in the stock market with a higher implied return – but that’s not the analysis. The analysis is over a risk-free asset.

    Anyway, thanks a lot for the blog, good luck with it; and most importantly, I hope the baby starts sleeping through soon for you!

    Reply

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