Reader Case: Can a New Immigrant with Debt, Kids, and College Costs Still Retire Early?

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Hey guys! I got a special Reader Case for you today. This so-to-be Australian reader has LOTS of head winds like immigration hurdles, debt, one kid’s college costs, another’s school costs, and wants to know if early retirement is even in the cards. Let’s see if we can make that happen:

Hi FIRECracker and Wanderer!

I discovered you guys through the ChooseFi podcast. I’ve been reading and thinking about financial independence the past couple of years but don’t feel I’ve really gained any traction.
For some reason I’ve also been holding back from engaging with and asking for advice from the FI community. When you mentioned in the ChooseFi podcast that you did case studies my brain decided that this was the time for me to finally suck it up and get some help. (And reading through the blog it looks like I’ve come to the right place!)

Why We Want FI
There are a few reasons why we want FI to be more than just an idle daydream. The first is that we’ve been hit with medical issues in the past and I don’t want the family’s well-being dependent on our ability to work into our 60s or 70s. Another is I want to be able to give back my time, money, and effort to help people in our home country. Specifically I think I can help by teaching financial and computer skills and donating to effective charities. And of course I would love to be able to spend more time with my family.

Our Situation
My family and I recently moved to Sydney, Australia from a Third-World country. I’m 39, and my wife is 41. We have one college-age kid and one in primary school. We are here on temporary visas but plan to apply for permanent residency soon. That’s going to cost around 15k AUD. We’d also like to figure out paying for tertiary education for our oldest child. We haven’t done much research but it seems that starts at 20k a year. I’ve read through the reader case studies you’ve done and I realize that most of them are in the US or Canada. I thought you might find doing one on Australia interesting.

Finances (all figures in AUD)
Gross income: 90467
Net income: 72995
Monthly spending:
rent: 1776.67
groceries/household: 450
phones: 90
Internet: 60
electricity: 100
transportation: 205
health insurance: 403.08
eating out: 100
primary education: 450*
miscellaneous: 100
Total monthly spending 3734.75
Annual spending: 44817

• non-permanent residents have to pay an annual fee of 5200 plus miscellaneous expenses throughout the year, we got a fee waiver this year, which means this is free until October 2018

15600 owed to my parents to be paid over the next 12 months
Fixed assets: none
Investments and savings in Australia:
cash: 20200
superannuation: 2200 (can’t touch until 65 or we leave Australia)
Investments and savings overseas:
cash: ~1900
equity mutual funds: ~5100
fixed-income securities mutual fund: ~1270
We’ve been here about half a year so the figures above may be slightly too optimistic. For example it doesn’t include emergencies nor trips to our home country to see family.

How do we make this work? So our questions are:
• How can we improve our savings rate?
• Is there a way to afford tertiary education for our older child (and set aside money for the younger one ~11 years) without giving up on early retirement?
• I know geoarbitrage is an option but is it possible for us to save enough to retire in 10-15 years in Australia?
I’m both nervous and excited to see what you guys’ll say. Thanks for reading and more power to you!
Well, AFM, how could I say no to someone who wants to help his home country by “teaching financial and computer skills”? You sir, are a saint. This is exactly what I was talking about when I said your path to FI should be based on what’s important, not what’s fun.

So, let’s see if we can help AFM get to FI so he and his family can do the important work to help others, shall we?

Net Income:$72,995 AU/year
Spending:$44,817 AU/year
Debt:$15,600 AU
Investable Assets:$20,200 + $2200 + $1900 + $5100 + $1270 = $30,670AU

As it stands right now, If you were pay off the debt you owe your parents + the $15K to apply for permanent residency, you’ll end up using up ALL of your savings. So with an expenditure of $44,817 and net income of $72,995, you currently have a savings rate of 38.60%. That’s quite good, considering you JUST recently moved there from a 3rd world country AND you have 2 kids. I know people who’ve worked for decades with much lower savings rate, despite having a head start. So kudos on that!

If you were to tack on the college costs of $20,000 for your 2nd kid, that would drop your savings rate all the down to 11.80%, which is not great, but it would only be for 4 years. Let’s come back to this situation in a bit.

Without paying your kids college costs, you have a savings rate of 38.60%. So after you pay off your debts and PR application costs with your savings, you would be able to retire in:

YearBalanceSavingsPortfolio GrowthTotal

21 years, at the age of 60. Still 5 years ahead of the normal age of 65, but not great.
BUT, when I look at your monthly expenses, the two categories stick out at me:

Health insurance: 403.08
Primary education: 450

Since, AFM is planning to apply for PR now, in 2 years they shouldn’t have to pay for private insurance and education costs anymore. So that would remove $403.08 + $450 = $853/month from their expenses. So in two years, their expenses drop to $2881.75/month or $34,581/year. This increase their savings rate goes up from 38.60% to 52.63%. And we know, reducing expenses has the double-whammy effect of shortening the distance to the finish line while ALSO helping you run FASTER.

So his case, their TTR gets reduced from 21 years to:

YearStarting BalanceAnnual ContributionReturnTotal

Slightly over 15 years! And that’s assuming no promotions, no extra side income, etc. If just one of them increases their salary during this time, they’ll shorten their time period even more!

So to answer AFM’s question, you don’t need to decrease your spending farther, as it’s already really efficient. The temporary costs that are inflating your expenses are the private insurance and education. Once you become a PR (assuming that it’s successful), you’ll be able to automatically cut those costs from your expenses and raise your savings rate to 53%.

Which leads me to your next question. Can you retire in 10-15 years. Assuming that your PR is approved in 2 years, after paying off debt, your PR application cost, and no longer have to pay for private insurance and education, yes you will be able to retire in 15 years! And if one of you picks up a side gig or gets a promotion, you’ll be able to get their even faster (assuming you don’t inflate you cost of living to match your raise)

Paying for Kids Tuition

You also asked me if you can cover your kid’s college costs of $20K/year. Assuming you’ll only need to cover this cost while they’re in college for 4 years, let’s see what that does to your TTR:

YearStarting BalanceAnnual ContributionReturnTotal

So instead of retiring in slightly over 15 years, you’re looking at slightly over 17 years. So paying for your kid’s college costs of $20,000/year for 4 years causes you to push back your retirement by 2 years. That’s assuming that after 2 years, your costs drop because you get your PR and you STOP paying the tuition costs after 4 years.

So there you have it! Despite having 2 kids, debt, and being an new immigrant, AFM is STILL just 15 years from retirement! The secret? This family is great at keeping their expenses low, especially considering two of those expenses are temporary and will go away once they get their PR. And if they decide to help their kid out with college expenses for 4 years, they’ll still on track to retire in 17 years.

Well done, AFM!

What do you guys think? Is AFM on track to retire? Any Australian readers want to weigh in?

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51 thoughts on “Reader Case: Can a New Immigrant with Debt, Kids, and College Costs Still Retire Early?”

  1. That was an awesome read, thank you!

    We are new immigrants to the US, will be retiring early in 9 years after we got here. It was hard being a new immigrant – whatever we had saved earlier was peanuts after converting to dollars and paying income taxes again – In fact, we still haven’t moved any of that money here.

    We had no money, no credit history, but had to get two cars – There was no public transport where we lived. We started from absolute zero in 2014.

    The biggest issue we now have is that we will not be eligible for social security when we retire. We wouldn’t have worked long enough. We will probably work longer just to become eligible. Even then, it is going to be pretty low because they are going to have 0’s to average for most of the years.

    I agree, we are paid better than the case study you have. That made it easier.

    1. I hear you on the savings being peanuts when converted! I’m curious though why you’d need to pay tax on it. If I understand it correctly Australia doesn’t tax you on the money you bring over since it isn’t income. I imagine it would be similar in the US.

      1. We have it invested in real estate. And it went up, but only as much as inflation. But we will have to pay income tax on the difference, and that is huge. Plus the buying power is different

    2. That sounds challenging, BusyMom. As an immigrant myself, I know how hard it is to adapt to a new country, figure out the language, building a network, etc. My parents also had sticker shock whenever they bought anything because of the currency conversion rate.

      The good news is that it does get easier over time and you have the benefit of having a different perspective. I’m glad your pay is good though.

  2. Kudos to you for living at AUD 450/month on groceries for a family of 4 in Sydney! That’s one of our challenges to bring down our grocery from $1,285/month to a more reasonable level for a family of 4. Would love to hear how you do it.

    1. I did wonder how they managed such a low grocery bill in Australia. Would like to know how they do this. This is definitely a huge expense in our household.

    2. Hi, thanks for the comment! It may have to do with our diet. We eat a lot of carbs (rice, pasta, and bread) which tends to be cheaper. We also don’t get enough fruit and veg so fixing that may bump up our costs a bit. Not sure what the average is for Aussie households but we don’t buy sodas nor alcohol.

      We shop mostly at Aldi and Coles but we also check out Woolies for specials.

      1. @AFM Do you also use also use credit cards to get more points when you do your grocery shopping? I’m contemplating whether to get Coles MasterCard for this purpose.

        1. Yes, we do! I only have one credit card currently but I recently applied for a Coles MasterCard to take advantage of a $100 offer. We only apply for zero annual fee cards and are careful to pay off balances in full every month.

  3. Are you sure the health insurance gets removed upon receiving PR? He didn’t seem to stipulate that in the email, only the education. That would have a bit of a dent in the years to retirement I’m sure.

    These guys are living pretty bare bones though I won’t lie. Certainly not a lot of room for trimming costs in those numbers, especially considering they live in Sydney.

    I can’t help but feel like there are some expenses they aren’t thinking about. What about things like entertainment, gifts, meals out, clothes/shopping in general, vacations, insurance etc. Perhaps they do go without all of these but most people have SOME sort of discretionary spending that I’m not seeing anywhere in their budget. They don’t seem to have a car of any kind, which I believe is difficult in Sydney but I may be wrong.

    Something tells me their third world background has given them the ability to forego most of life’s luxuries without any care. In fact, maybe their current life is already a luxury for them. Would be curious to hear their back story.

    Anyhow, they’re doing a great job.

    1. Hi thanks for commenting! Regarding health insurance, receiving PR will make us eligible for Medicare. That doesn’t cover everything though, so you’re right in that we may still need get a certain level of private health insurance.

      We’ve only been here a few months so we haven’t spent much on non-essentials. We are only human though so stuff like that isn’t going to be zero forever. We don’t plan on getting a car anytime soon (maybe not ever) since the public transportation system here is SO much better than what we’re used to (I know Sydneysiders love to complain about it but we’re still in the honeymoon stage). Our apartment is a few minutes walk from the train station so we just take the train/bus or walk everywhere. There’s definitely an element at play of the difference in living standards allowing us to be more frugal. Not to get political but I think quality of life is something that citizens/residents of developed countries should work to protect and not take for granted.

      Definitely a lot of good points here that we need to address when we re-crunch our numbers!

      1. I think you are doing great! I love that you are content using public transit and eating low cost starchy plant foods. This is what we do (in Canada) and it has given us the ability to pay off our house on one income, and sock away more than enough for retirement. I hope you keep it up so you get to early FI and stay healthy! Congrats!

    2. I read that residents would be eligible for Medicare in Australia after they receive their PR. However, if that doesn’t cover all medical costs, AFM could recalculate the numbers to reflect that.

      You hit the nail on the head when you say “Something tells me their third world background has given them the ability to forego most of life’s luxuries without any care. In fact, maybe their current life is already a luxury for them.”

      I can’t speak for AFM but this was the immigrants experience for me. Having lived in much worse conditions, it gave me a ton of perspective.

      1. We can definitely relate to this coming from the Philippines and moving to Sydney in 2014. My wife gave birth here in Australia last year and since we are Permanent Resident when we entered Australia, we didn’t pay anything for my wife’s giving birth by cesarean section (except for $12 parking). We stayed in the hospital for more than a week while my wife is recovering and my daughter being treated for Jaundice. If we give birth in the Philippines it will cost us lots of $. Thank You Australia!

  4. Once you are permanent residents, you can get a medicare card which means you can access public healthcare and private health insurance will be an optional choice for you.
    For your kids’ university savings, there is a product in Australia called Education Investment Bond which allows you tax-advantaged savings as long as your withdrawals are for education. There are only a few providers of this product and one has much higher fees- shop around.
    If your children become Australian citizens before they go to uni, they will be eligible for government tuition loans which are indexed each year to CPI so they have no real interest accruing. You pay them off once you have a full time job with a payroll deduction. Of course, this could change and privatisation of the loans has been discussed recently which would probably result in the low/no-interest going away.

    15K sounds like a lot to get permanent residency. If these fees are for a company to ‘help’ you, it would be wise to visit a not-for-profit migrant legal services centre first to get their advice. You might be paying for something you could do yourselves, or be paying to speed up the process which could be a trick.
    Finally, if you get a job with some types of non-profits, you get an extra tax break here. These organisations are called Public Benevolent Institutions (PBIs). Instead of about 18K of tax-free income, you are eligible for about 36K of tax free income. If one or both of you works part-time or in the social sector, this is something to seek out- it could make a big difference to your take home pay. It might not work out if you are a professional who would need to take a pay cut to work in the non-profit-sector. The pay cut could wipe out the tax savings.
    Good luck.

    1. Hi Melbourne gal! Lots of good information here, thanks! Regarding the agent, everything is above-board, if a bit expensive. We used the same firm for our current visa. I know it wasn’t the best objective financial decision as we could have figured it all out ourselves but it was one less thing to deal with mentally.

    2. “15K sounds like a lot to get permanent residency”

      This is what I was thinking too since I read $3000-$5000 on the Aussie immigration page, so good to know there are other options.

      Great to know that medicare will replace health insurance costs once the PR kicks in and there are options for the kid’s education too.

      Thanks so much for sharing, Melbourne gal!

      1. 15k is just about right. We spend around 10k (which includes everything from IELTS fee to medical assessment fees to Visa fees) when we apply for our PR in 2012 and once that’s granted in 2013, we move to Sydney in 2014. 10k also includes payment for an immigration agent (I think we paid close to AUD4k to him). But during that time you only pay one visa fee per family. Now, you got to pay per head (e.g. different fee for the main applicant, spouse and kids) so it’s more expensive now. At that time, We felt that it’s already too expensive, but we glad we did spend that money. We just treat that as an investment for our future and future of our kids. It would pay high returns in the long term.

  5. I would have thought the tuition costs would only be around $8000 per year. Although the 20k per year may also take into account additional living costs if the eldest kid needs to move out of home to go to the uni. Would be worth double checking those costs.

    Once they get PR they should get access to Medicare which is a yearly cost of 2% of taxable income . This means they will also not be required to have the private health cover (people on temp visas need to take out their own insurance). It may be worth reviewing their private health insurance when this happens as for higher income earners it is more tax beneficial to still hold basic private health insurance so if they get a pay rise over the next few years that’s be one thing to consider.

    1. Hi Ben! I guess that 8k/year is for permanent residents? Thanks for pointing that out, we still have a lot of research to do!

      1. Hey AFM, well depending on the uni the cost of each subject is usually around $800-1400. This varies depending on the degree and the uni – where I went the international students paid the same as permanent residents. They couldn’t take on the HECS/HELP student loan though so they just had to pay it upfront. Alot of students came from the USA as i recall some of them saying it was cheaper to get their degree here in Australia.

        Back to the cost, most uni’s are 8 subjects per year at the rate of $800-$1400 per subject. Most of the ‘in demand’ things are the $800. Engineering and Science subjects are around the $1000 mark and your accounting, economics type subjects are the more expensive $1400. So could range from $6400 – $11200 per year.

        This is all course work only though and doesn’t take into account the cost of living, text books etc which could easily bump the cost up to your estimated $20,000 per year depending on whether they need to move closer to the uni and rent there.

        Best of luck to you guys too!

  6. AFM+family knows how to live well within their means. Its also awesome that AFM is thinking about FI early on because that will greatly influence how they handle money going forward…for 15+ years.
    They should have an estimated annual expense amount in mind for the retirement phase and work backward from there….to see if the above mentioned total amount of $800K+ will support their lifestyle during retirement phase.

    1. Good point, MMM. Sometimes the cost in retirement will be even lower, considering how you no longer need to pay for daily transportation, work clothing etc, so it’s a good idea to work that out. This family clearly knows how to live within their means.

  7. I would wait until you have PR for your oldest to go to university- not sure exactly what type of visa you’re on, but a temporary resident has to pay international fees, which is more like 30k a year, compared to about 8-10k a year for a permanent resident (also a standard bachelors degree in Australia is 3 years, not 4.)
    You could look into TAFE – there are some really good courses (especially at the sydney campuses), and even the full fee cost is a lot less than uni, and it all counts towards a degree if you want to change to university at a later date.
    Very impressed with the low grocery bill! We’re a family of 5 and I’m struggling to get it below $AU900 a month ?

    1. Hi Clare! That 8-10k per year figure is very interesting. We haven’t done much more than cursory Google searches so we’ll definitely look into that. We’ve also been looking at TAFE, I guess it depends on what our kid wants to do.

    2. If the standard bachelors degree is 3 instead of 4 years, that’s even better! And thanks for sharing the info about TAFE–definitely something they can look into.

    3. @Clare You’re a family of 5 and your grocery bills is only around $AU 900/month? Tell me what’s you’re secret?

      1. Aldi shops and we don’t eat a lot of meat! (Black beans are the best) this figure does not include the alcohol though 🙁

    4. OK, I’m speaking this out of ignorance, but is your kid who’s going to University allowed to work part-time (e.g. 20/hour/week)? Because if your kids are allowed to (as per you’re visa), then let him/her work while studying at the university. It will ease the burden of you paying for it and help you reach FI sooner. I don’t know about you, but some Gen-Xers like you and me work while studying in the University in our respective 3rd-world countries and we turned out just fine.

  8. Hi all,

    This is a good example of living within the means. The most important thing is not to take more debts. I believe that their children will be able to handle their financial matter from them.


  9. Nice one AFM! I am also looking to move to Australia in the next few years. A couple of points to consider down the line is to consider franked dividends. In Australia, dividends are taxed at a corporate level. So you only pay tax on dividend income if your marginal tax rate is great than the corporate tax rate. structured properly and your dividends could be tax free. note that interest income is taxable similarly to salary income.

    another point is that (if i recall correctly), government jobs attract higher levels of superannuation (retirement funds) compared to private sector jobs. Not sure if they still have the scheme, but at a certain point, you were able to provide a private contributions to your superannuation and the government would match dollar for dollar.

    As i am looking to also get a PR for my wife, i’m aware that your number sounds about right – 7k for the PR application and 5k for migration agent if you choose to use one. the issue for PR is that the laws and timeframes keep changing. my cousin has been trying to get PR since 2010.

    best wishes and merry christmas to you and your family, firecracker, wanderer and millenial revolution readers!

    1. Good point about the franked dividends, spoonman! Hopefully your cousin will be able to get their PR soon.

      Merry Christmas to you and your family too!

    2. @Spoonman Not all companies in ASX (Australian Stock Exchange) pays Franked dividend. International Companies most of them their dividends are not franked so you got to be very careful with that. I recommend checking Vanguard Australia website for you to get more information on which of their ETFs/funds issue fully/partial franked dividends.

      With regards to superannuation, not all government jobs give higher level of Superannuation (retirement funds). Lots of government jobs still give the base 9.5% of ordinary time earnings as retirement contribution to Superannuation. If you work for Department of Defence then I think you’ll be paid for 16.4% of your ordinary time earnings.

      By the way, I’m speaking out of my experience as a new migrant (3years in Australia) working in the Australian government sector.

    3. Hi spoonman, thanks for pointing that out. These details are often easily missed, especially if you don’t know what you don’t know. Hope your move and your wife’s and cousin’s PR applications go well!

  10. A big, big, thank you to FIRECracker for reading my email and writing this case study! Lots of practical, actionable information in the article and the comments. I’m so glad this community exists! More power to everyone and I wish you all the best success, financial or otherwise.

  11. Couldn’t their daughter enroll in a commonwealth supported place ($8-10k a year) which would make her eligible for a HECS loan? This is what most Australians do (including myself). It’s a CPI indexed loan repaid one you start earning over a certain amount. I realise they are looking at changing the laws but this is how it currently stands:

    “A Commonwealth supported place (CSP) is a subsidised higher education enrolment. CSPs are available at all public universities (and at a handful of private higher education providers in national priority areas like nursing and education).”

    “The Australian Government subsidises a CSP by paying part of the fees for the place directly to the university. The subsidy amount is not a loan and students do not have to pay the subsidy amount back. However, students are also required to contribute towards their study and they pay the remainder of the fee known as the ‘student contribution amount’ for each unit they are enrolled in. Universities set their own student contribution amounts (within limits set by the Australian Government).”

    “To be eligible for a Commonwealth supported place, you must:
    – be an Australian citizen, a New Zealand citizen or the holder of a PERMANENT VISA;
    – meet the relevant citizenship and residency requirements;
    – be enrolled in each unit at your university by the census date;
    – read the relevant edition of the HECS-HELP and Commonwealth supported places
    information booklet;
    – submit a valid Request for Commonwealth support and HECS-HELP form to your
    university by the census date (or earlier administrative date); and
    – finalise your payment arrangements for your student contributions with your university
    by the census date.”

  12. Quick question to FIRECRACKER, I am new to your blog. So, my apologies for being ignorant. How do you calculate the return on the Retirement Tables above?

    1. No need to apologize, Dan! Welcome to the blog.

      To answer your question, I use a conservative 6% annual return.

  13. All good things are possible to those who believe and turn faith & works into success. They too can be a side hustle millionaire. 🙂

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