Keeping your living expenses low (#166)

The downside to doing my job is that I don’t get many opportunities to talk about my own financial insecurities. As with most things, there’s a distance between theory and implementation. I have my bad habits and anxieties around money as much as the next person.

Billy’s question around minimalism and frugality gave me an opportunity to talk about some of the things with which I struggle. An ever-present challenge is finding a balance between spending and saving. I’m always too far in either camp. You can accuse me of many things, but lacking the courage of my convictions is not one.

Far be it from me to tell you what to take from these episodes, but I do hope our conversation sheds some light on the importance of the process. It’s a lifelong journey, full of surprises and challenges and new joys. That’s what makes it fun.

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Win of the week: Billy

I saw Simon in Woolies the other day (I was like a silent groupie lurking in the shadows). Next time, I'll buy you guys a bottle of bubbles to say thanks for the awesome work!

I'm a 30 year old engineer (another one for Kristia's collection!), and in great part thanks to you guys, I recently moved to a smaller place, got rid of a bunch of useless kak, and also scaled down on my car. This also extended to my finances, where I scrutinized all my financial products, cut unnecessary costs, negotiated better insurance premiums, and started to actively put money away in cheaper investment vehicles (such as Easy Equities).

I know that both of you have decided to actively keep your living costs low, and I recently read an article where Simon mentioned that he decided to scale down a lot and move to a smaller apartment with his wife. The idea of having very few possessions to tie me down, whilst having plenty of money put away appeals to me quite a lot. I've realised more and more that having lots of things means having lots more to worry about. Physical clutter, financial clutter and emotional clutter are different sides of the same die. As much as we like to think finances are separate from other aspects of our lives, everything feeds into our overall well-being, freedom and contentedness.

So, thanks to you guys, I've developed a bit of an aversion to unnecessary "kakkies" - specifically financial and insurance products laden with complex "kakkies" that only serve to obfuscate real costs and returns. I like Kristia's idea of investing in one ETF (or at most very few), and not over-complicating my portfolio, as more products could mean more blind spots.

To get to my question: Being minimalist seems like a full-time struggle - an active raging against the beast of financial dependence. What are the principles you both follow to keep your living costs low? What did you cut down on that made the biggest difference? Also, how do you prevent the activity of keeping costs low from becoming a cumbersome penny pinching exercise that ends up defeating the purpose?

Donal

While all this was going on, I was also busy researching possible brokers that I could use to purchase Vanguard All World (taking Patrick McKay's advice!).

I ended up with a company called Degiro. While their fees are low, they are nothing like the "easy" I'm used to with Easy Equities. Their registration process is a bit of a pain in the ass and their online trading platform is not as user friendly.

I jumped through all the hoops and signed up for a Basic Account. I made my first lodgement and did my first Vanguard purchase. I did a small amount first to test the water. All went well and I was ready to plunge all my funds in.

At this point I got a little nervous and did a bit of triple-checking online just to make certain that there were no negative comments out there about Degiro.

Apparently, when you hold a Basic Account, they have the right to lend out your shares to other investors who use them for the purpose of short selling. I guess it's their way of making some cash on the side using my shares. If you don't want to allow this, you need to open a Custody Account, which means that they cannot lend out your shares. The catch is that they charge 3% on all dividend payouts for a Custody Account - compared to 0% for a Basic Account.

Is this type of lending out of shares by a broker commonplace? Do you know if EasyEquities do it? If they do, then I would feel a lot more reassured to carry on with my Basic Account. But if you guys think it's unusual for a broker to do this and it carries a high risk, then I’d rather close my Basic Account and sign up for a Custody Account and take the 3% hit on dividends.

Captain Pants

I plan to pay off my bond wi...