The Money Panic

The other day for no apparent reason I sudden had a shock of fear go down my spine that I didn’t have enough money for my retirement.  I worried that I had made a horrible mistake and that I should have worked longer  and saved more money before quitting. There was no particularly logical trigger for the feeling of mild panic that passed through me and the feeling left me shortly afterwards.  Yet it did make me double check a few numbers to prove to myself (again) that we had enough money for years.

So as I looked at my account balances and faced the fact that I am in fact fine for the next few years then I relaxed back to my usual state of calm.  In reality nothing had changed about our situation during this episode, it was merely a bit of doubt stuck in my brain and likely the result of me adjusting to our changing sources of income.

Previously with my old job, I knew there was risks with a job as your major source of income.  I knew you could get laid off, shifted to another job, or have a rollback in wages or cut in benefits (I honestly had experienced all of those during my career at some point).  Yet I understood those risks because I had been living with them for a long time.  So oddly comfortable with those risks.

Now that we are mostly living off our investments I have a different set of risks.  We could see a stock market correction, cuts in dividends from companies we own or drops in our bond portion of our investment portfolio.  These aren’t new risks but I honestly didn’t pay as much attention to them in the past because with my old job we had other sources of income to cover expense when those events occurred.  Now I’m feeling those risks more acutely than in the past.

The reality is you don’t have less risk once you retire.  You just changed which risks you are managing.  Yet oddly some of the same principles  you learned getting to retirement still apply such as it is better to have multiple sources of income (not just investments or  just a job).  Which is why partly my wife continues to run her daycare from our home and I continue to run my little publishing business.  Neither produces much income but it does help balance out the risks of sudden investment swings.  Also both businesses give us something to do and provide options for socialization with others.  We do them because we like to and less because of the income they produce.

One other things that hit me during my little panic feeling was I asked myself the following question: what is the worst thing that could happen?  This is a great question to force yourself to face what you are fearing.  And in my case the answer was simple: get a job.  Notice the word ‘job’.  I don’t have to go back to my old career or employer begging for a job.  I can find something, somewhere that I might enjoy a bit and brings in some money.  Honestly with our relatively low expenses making even $10 to $15K a year makes a huge difference to balancing out our spending.  And if that truly became required it isn’t really the horrible of a fate…hell it’s sort of normal for most people my age (including myself until recently).

In the end, I’ve come to realize these little flares of panic or worry are just me adjusting to my new normal.  Nothing on a fundamental level has changed in my situation other than my thoughts and luckily those can be changed rather easily.

So do you think you would have problems living just off your investments?  What would you do to help balance your risks?

Nov 2017 – Net Worth

This posts are in a transition phase, so please be patient as I work out the changes over the next few months.  In that end, the focus of these posts will now shift from increasing our net worth to balancing our income & investment gains versus our spending.

The following is an update of Tim’s early retirement.  Please note we are mortgage free and our goal is have our income/investment gains exceed our spending on a 12 month rolling average but I’m just starting to track this as of last month.

Investments

Accounts

RRSP $64,000
LIRA $17,380
TFSA $87,390
Pension $172,130
Wife’s RRSP $91,190
Wife’s TFSA $81,630
Wife’s Taxable $53,010
High Interest Savings Account $53,130

Investment Net Worth $619,870 ($4,780 increase over last month from $1700 contributions, and investment gains $3,080 )

Home Equity

Estimate $395,000

Income

To keep things simple I’m only going to track what income comes into our main ‘house’ chequing account.  I won’t be tracking my wife’s or my businesses income as those don’t really matter until the money moves over to the ‘house’ account. Also I won’t track investment gains since that is covered above.

  • Tim’s Vacation Income: $1700
  • Wife’s Monthly Payment to House: $2015
  • Child Tax: $310
  • Total Income: $4025

The high transfer from my wife’s business was her annual payment for her football season tickets which are due on Dec 1.

Spending

Last Month $4515

Christmas shopping was in full swing in November which consumed around $1300 and we did our annual visit to the dentist which was another $880.

As I mentioned last in previous updates I’m breaking out the renovations separate from the rest of our spending this year.

Trailing Last 12 Month Renovations $9254

Trailing Last 12 Month Average Everything Else $2891 (or $34,700 for the last 12 months)

Results

Net Worth ~$1,014,870

Investment Gains & Income/Spending Ratio = (3080+4025)/4515 =1.57 (Target 1 or higher)

Commentary:

So by the way, yes I was ignoring this blog mostly this month.   I was working on my novel and wrote 52,000 words or so (which would be around 208 pages or 70 blog posts…aka over a year’s worth of posts in a single month).  I’m still not done the novel but I am scaling back on the writing pace so you should see more blog posts in December.

We did a bit of financial house cleaning and drained the excess cash off the TFSA and taxable accounts and moved that over to our savings account.  I had planned on looking at if we need to rebalance the index funds in the RRSP accounts but didn’t get around to that yet.  So that will be a December project.

I’m pleased to see the investment net worth is still going up even with us now taking money out for our expenses.  As I mentioned in my previous post we got a bit of extra cash from my old job this month and that just got dumped into savings as a contribution for now.  Once we get to the New Year it will likely get dumped into a TFSA account.

Any questions?

(click to make bigger)

Life After FIRE – Two Months In

Pardon? Two months…I have been off work for two months already?!? Where does the time go?  Seriously, the last 60 days have just flew by.  It feels like I got to financial independence/ early retirement (FIRE) just last week.

So you can likely tell that the idea of being bored isn’t an issue for me.  As I was telling a friend recently I still have the same problem I did at work: more stuff I want to do than time to do it all.  I took the first six weeks or so as a relaxing break where I didn’t expect myself to do a whole lot and I still got a lot done.  Most of accomplishments were a backlog of little items that needed to be taken care of like some home repairs, renew the passports and do some planning for my novel.

Now in November I’m focusing on writing the first draft of a novel which has seemed to solve one of my earlier issues of not feeling productive.  Writing every day has provided a nice outlet for getting something done but I have noticed that some other things have been sliding a bit longer than they should.  Mainly I think that is because I’ve averaging 2000 words a day which is a good pace to get a draft of the novel done quickly but it seems to be cutting into getting some other items done around the house like I’m behind on my wine making (my wife gives me a year end deadline to clean out the freezer of fruit we collect during the summer and I should be further along on my batches of wine at this point).  Longer term I think I will scale back that daily writing goal a bit but for now I’m giving myself permission to focus on the novel for the month.

I think something else that has helped me feel more productive is learning more on my newer hobby of beer brewing.  I started a beer appreciation class  this month focusing on craft breweries in town which has been both educational and fun.  I’ve also gotten involved in a local brewing club which has given additional insight on brewing from grains (rather than the pre-made wart kits I’ve been buying).  I’m now starting to think about making the jump to that process but I need to price out some equipment first.  All of this is of course leading to meeting new people and getting out of the house which is also healthy.

One particular lesson that has really hit home for me since I early retired is this: FIRE doesn’t change your core personality.  You see I had this lovely fantasy in my head that I would be more active and perhaps start exercising regularly when I left work. I would like do running or yoga like every other day.  Of course, I’ve never made working out a priority earlier in life so this really hasn’t changed that much once I retired.  Yes I get out for more walks but I still don’t step inside of a gym and I won’t start either.  Yet on the other hand I plan to start doing more yoga at home this winter since it is hard to get a walk in on those really cold days (ie: lower than -30C).  So overall I have improved, but just not that much as I fantasized about.

On the money side of the life things are going well.  The investments shot up in the last month which helped put my mind at ease.  Also my old job paid out a small amount today which I had thought should have been on my last cheque so it was a bit of a surprise to get it.  Of course it still feels weird to not be increasing my net worth by huge contributions each month.  I occasionally get this brief bursts of worry about having enough money but then I remind myself I’m in this for the long haul.  So I shouldn’t worry too much about the month to month shifts in our investments.  I’m also happy that I’m not frighten to spend money so far.  While I’m aware I shouldn’t be making large unnecessary purchases, I don’t worry about buying something little for myself like a coffee or a snack.  I just keep to my usual habit of not doing it all the time.

Then finally, the last insight I’ve noticed is I don’t miss work at all.  Like none, zero or nothing.  I don’t miss the meetings, the people that don’t pull their weight, the internal political stuff  or even my work tasks.  All that low level stress is just gone.  It’s odd that I really didn’t notice that stress until it vanished.  If anything, the only thing I sort of miss if some of my co-workers who I used to chat with on a regular basis.

Any questions?

A blog about early retirement and happiness