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Tuesday, January 27, 2015

Forget The Empty Inbox and To Do List

Posted by Tim Stobbs on January 26, 2015

I’ve now read this in several different places over the years, but I recently been thinking about the idea that when you die your inbox will never be empty and your to do list will never be complete.  Rather both ideas are merely a way to help sort out what to do with your time and your life.

Lists, calendars and emails can be tools to help your life or they can turn into your life into hell on earth by being a slave to them.  Instead of resenting these productivity tools I’ve learned over the years to just embrace them for what works for me and not to worry about them taking over my life.  For example, I’m not entirely logical on how I use my tools.  For example, at my day job I tend not to use to do lists that often, but I commonly use them at home.  Or the fact, I really do need to use my calendar for both work and home things or I will forget appointments or meetings (yes, confession I have forgotten to attend a meeting before…and guess what no one died.  Shocking I  know).

I accept I’m a bit of numbers geek (from the guy with a early retirement blog, you don’t say ;) ), but in the end I know I won’t ever get every done that I want to in life.  Regardless of how much you earn, or what you save you still have the same number of hours in the day, days in the week and weeks in the year.  So accept now that you can’t do it all.  Some things won’t get done and that is ok.  It took me a while to really accept this concept and not to over book my time, but eventually I’ve gotten around to making a life that I feel is fairly manageable and still productive.

Perhaps the biggest thing was to understand you don’ t have to be productive all day long.  There is a deep satisfaction that comes from spending a Sunday afternoon in comfortable chair with a sunbeam on you and reading a book for hours on end.  Or just playing building forts with my kids for a few hours and taking over half the family room with piles of blankets. Or heaven forbid, talking with my wife for an hour before supper over a glass of wine.  Life is about living and that isn’t typically on anyone’s to do list or calendar.

This is why I think I enjoy not working full time.  Since I tend to notice the average person finds a typically two day weekend far too short for their taste.  After all once you have slept in a bit, d0 your errands, cleaning and a few kids activities you end up with next to no time to actually relax.  So you end up over valuing things that you perceive to save time like fast food (which ironically doesn’t always work – I can cook some thing faster than going to pick up fast food), when in fact you could actually enjoy your life a hell of a lot more if you just stopped trying to cram so much into your two days off.

Yet that would mean accepting you can’t do it all.  You can’t have the career, be the perfect parent, have the house out of magazine, great friends, volunteer at several organizations, write that novel you always wanted and binge watch that entire new series on Netflix.  In fact you likely can’t even do half of that list.  Reality sucks eh?

So rather than fight it, I accept it.  I have and now my inbox is never empty and my to do list is never done.  Yet oddly enough I’m happy that I’ve leaned to let go of being perfect.  Odd how that happens when you stop setting yourself up for failure by trying to do too much.

What have you given up on doing in you life? For me I’ll given up on: painting (I like writing better), being the best dad (I settle for being a caring one instead), watching everything the looks interesting for movies and TV shows (my Netflix queue will never be empty), and reading magazines (I prefer books instead).

Odd thing in life is you remember those happy little moments that don’t appear in your calendar more than that important meeting last month with your boss.  Which one do you think should be more important, but often isn’t?

Saving Contributions 2014

Posted by Tim Stobbs on January 23, 2015

So this week I should have finished maxing out one of our TFSA already.  If you recall in December’s net worth update I pointed out I put some of that money aside.  Then by Feb we should finish off the other TFSA account contribution for the other account.  So where do I put the money for the other 10 months of the year?

Well you see that is actually turning into a small issue as I’m running out contribution room on where to put it.  We made an effort last year to finish off as much as my RRSP contribution room as possible into my wife’s spousal RRSP.  Now the only tax sheltered account contribution room we will have left is about $20,000 in my wife’s name.  So I have to play around with the tax implications of her buying RRSP in her name as she doesn’t make much money per year so I’m not sure if the tax savings are really worth it.  After all if we drive her income to zero with RRSP contributions, I don’t know if her basic income deduction will transfer to me…I’ve literally never tried that before.  So if anyone knows, I would appreciate some advice.

So we will be back to non-registered investment accounts at some point in the year, which is just fine. Overall I expect by age 40 we should have approximately $100,000 in non-registered savings (give or take a bit). The longer term plan for the non-registered money is fairly simple, after I stop working at my day job I will drawing down the non-registered accounts first and also move what we can over to our TFSA accounts for anything that produces taxable income (like a GIC).  The idea is to keep our income tax bill as low as possible so we will likely keep dividend paying companies in the taxable accounts and any cash savings will eventually end up the TFSA (even if they don’t start there).

Perhaps the only thing I’m debating in my head is where do I open up the non-registered accounts?  On the one hand I like to keep our fees low and the other hand there is a certain ease of access if I put the accounts with our existing bank.  So I’m curious what other people have done and why did you pick that option?

Freedom 40 in 40 – Part VII

Posted by Tim Stobbs on January 21, 2015

Ah money, the beloved discussion point on this blog.  Today we will have a look at my plan around the money to leave my day job at age 40.  Perhaps the key thing here is to keep in mine I can’t possibly be fully financially independent at age 40, instead I’ll have to accept a semi-retirement option.  Which works just fine for me anyways.

So with that in mind I took at look at our spending and broke out what our baseline spending would be without including money for my wife’s Rider season tickets, gifts and donations, our annual vacation and half our normal spending cash per month (or $100 each per month).  The total for this came out at around $22,000 a year.

Then if take my investment net worth at the end of December 2014 of around $329,000 and add $4000 month for three years at 5% return you end up with: $537,000.  But then I still have four more months to save which should add another $25,000 to that total bring it up to $562,000.  Which at a 4% withdrawal rate would net me just over $22,000 a year.  Ya, I’m good right.

Uh, no.  There are a few holes that kick in around all of this.  First off, if I leave my day job at 40 I still have kids in the house who need RESP funds to pay for some school and I need some cash to cover their day to day costs.  Their RESP current has around $52,000 already in it.  I’m targeting having at least $80K in it.  Between our contributions and their grant money we put away about $434 per month.  So in three years we should have saved about $75K in total, which leaves me $5000 short.  Then we typically spend an additional $140/month on the kids for activities, clothes and other stuff that comes up.  So I figure I need to have that extra money for another 9 years or so at that point, which leaves me with another $15,000 hole.  So in total the kids are missing about $20,000.

Yet on top of that I still need to save about two years of spending for one of my backup plans which puts me in the hole for another $44,000.  So grand total I’m short on just the obvious stuff by $64,000, which if you divide that by 40 months would mean I need to save another $1600/month or $19,200 a year.  So in short, I’m screwed.  I can’t make this work with my current assumptions.  So is the dream dead? Not yet.

So what can I do to make this work?  Well this is where I step off my usual assumptions for a moment and consider a few adjustments like: am I comfortable with slightly higher failure rate of my plan if I go with a slightly higher withdrawal rate of 4.5%?  Given I plan to do some work for income anyway at this point, I would say yes.   Well working backwards then if you want $22,000 of income at 4.5% that means a starting pot of cash of at least $504,000.  Compared to my expected savings of $562,000, that cuts down my hole to just $6000.  Which is a lot more reasonable to save.

Another adjustment that I can consider is the fact I have always beat my assumption of a raise equal to inflation.  I only assume I’m contributing $48,000 a per year to the plan when in fact I routinely contribute over $50,000.  So in that case if I can push the upper end of my normal amount of contributions for the next 40 months I think I can average saving $5000/month.  At that rate I could potentially have just over $600,000 at age 40.  So if I back out my missing $64,000 and times the remainder by 4%, I get $21,444 a year which is almost on target (or a 4.1% withdrawal rate).

An additional factor also kicks in here.  My wife always planned to keep working for a while even after I left my job which I have never really added to these numbers.  So between her current work and some minor income from me we can easily bridge that missing spending money, vacations, gifts and her Rider tickets which comes out to about $8000/year.  This also provides some extra spin off benefits when it comes to collect our Canada Pension Plan as we won’t have a this huge string of zero income dragging down our benefit calculations.

But in general the margin on this plan is noticeably thinner so I may have consider cracking open the house equity to shore up the plan in the long term. Which I can live with as I did plan to downsize the house someday, but I might just consider doing it a bit sooner overall. Yet with our winters in Regina there is an additional motivation to move somewhere else in Canada. ;)

So overall I have several different ways I can try to make it work.  In the mean time, I need to save as much as possible push to average about $5000/month in contributions.  Then towards the end I need to see exactly where my numbers are falling out and determine if I’m comfortable with that level of spending and also what amount of work I’m willing to do to make up the short fall.

Questions?  By the way, this is also the end of this series…I return to my normal posting as of this Friday.