If you’ve been reading here for a while, you know that Poopsie and I don’t budget in the traditional sense of the word.
Instead, we try and keep our spending as low as possible and everything left over is either put into our offset account or our Vanguard Index Fund.
However, I do keep a Retirement Budget. This is the only way we will know, in six years time, if we are ready to retire. Do we have enough money, through passive income and the selling of a small parcel of shares, to fund this budget? Do we have enough to live?
This budget is based on our current spending, so is evolving all the time. It used to have $400 a month budgeted for groceries, but now that we are spending closer to $500 a month for the last six months or so, I have adjusted this amount. We want to ensure we’re not selling ourselves short in what we intend to spend during retirement.
One of the lines on this Retirement Budget is “Bills”. These are those non-negotiable things that we have to pay, usually on a monthly or quarterly basis. I keep these amounts updated and divide the total by 26, so we know how much we will need each fortnight to cover our bills.
Currently, our “Bills” category is made up of: internet, mobile phones, car service, electricity, gas, car insurance, car registration, water, council rates, home insurance, charitable giving, blog hosting, accountant fees (for tax time) and university textbooks for Poopsie’s Masters. This is an ongoing list that we add to each time we acquire a new bill and that we alter each time we’re able to reduce a bill.
Recently, we received our end of financial year dividends from our Vanguard fund. And this dividend payout allowed us to meet an enormous milestone.
Our July dividend payout from our Vanguard fund was enough to fund out yearly “Bills” category.
Just one of our quarterly dividend payments is enough to pay for our “Bills”. The other three dividend payments we receive throughout the year are not needed for us to be able to pay our bills. We could just collect our July dividends every year and never have to worry about paying those bills again.
To us, this is amazing!
If you’d asked us just six months ago if we thought we’d achieve this milestone this year, we would have said no. It’s amazing how, investing a little bit of money every month can so significantly impact our returns. Little efforts really do add up.
There is no magic formula for this. All we do is spend less than we earn and save the rest- sometimes in our offset account and sometimes in our Vanguard account. I can’t even imagine what our dividends would be like if we put every cent into Vanguard, rather than working to pay off our mortgage.
I encourage everyone on this path to keep going. It’s amazing the progress you will make and I can assert that you will reach your goals quicker than you expect (once you’ve set your goal that is) and the momentum will carry you onward to early retirement.
Have you reached any milsetones, big or small, lately? Share in the comments below!