Posted by Canadian Dream on February 2, 2012
I’ve recently just started to admit to myself that I have a new habit and its measured in grams. No, for the record it is completely legal. Yet I do get a little thrill paying for my little bags of black, green and multiple colours looking mulch. It also involves varies types of compounds steeped in hot water at precise intervals…yes I have a loose tea habit.
For years, I’ve been mostly a coffee sort of guy and yes I’m ok spending $10/lb on decent coffee. So you might think this new habit must be expensive, but I recently worked it out and no it really isn’t much more money. I’ve spent perhaps $30 total over the last three months since I already had most of the equipment. Instead it is a shift in spending, which actually happens fairly frequently around my house. You see I don’t believe in being purely a creature of habit. I change my interests in reading fairly regularly, as do I on my eating and drinking habits. I consider it an ongoing evolution.
So the point of the matter isn’t that fact I have a not habit, but rather what am I reducing my other spending on to support the new habit (mainly through less coffee drinking). You can have anything you want, just not all at once. The fact of the matter is if you really want to retire early you will have to master this concept. The overall level of your spending needs to stay fairly constant, but that doesn’t sentence you to a boring life or the exact one you have now. Feel free to splurge once in a while on something or try something new. Just remember that something else is going to have to give to support that.
Overall this isn’t a bad thing if you keep in mind your level of satisfaction/happiness from your spending on something. You need to get something out of your discretionary spending, and if you aren’t getting something positive out of it you need to reconsider what you are spending it on. Or another way to free up cash is to look at some frugal ideas around your fixed spending. There really isn’t a wrong way to do this, but rather find out what works for you.
After all spending money is the easy part, as I can always find something to spend money on. The trick is to keep the total the same, which involves a balancing act.
Posted by Canadian Dream on February 1, 2012
Unless you have been ignoring the media for that last few days you are likely aware of the buzz going around the media about the federal government plan to reform the Old Age Security (OAS) program. While the details of the reform is outstanding the current thinking is they will likely go with an increase the age requirement from 65 to 67, but in reality they have other options too like increasing the claw back provisions.
First a little history, what is Old Age Security? Well despite being called a pension, it really isn’t one at all. First off there is no money saved for this program despite being around since 1952. It is paid for entirely out of the General Revenue Fund by the federal government in the current year. Thus our 2010 tax dollars paid out our 2010 OAS benefits that year. The programs needs an overhaul…badly. How so? Well there are a few interesting facts like the taxpayer to retiree ratio is currently 4 taxpayers to 1 retiree, which will decline to 2 taxpayers to 1 retiree by 2030. Add in the program is expected to cost $108 billion by 2030 up from $36.5 billion in 2010. So if you have three times the cost and half that taxpayers that means you need to increase taxes or cut service by six times today’s payments just to fund this program. I don’t know about you, but I’m not prepared to pay that much more tax just to keep the status quo.
The other thing people tend to forget is what is the program supposed to do? While some people do think of it as a pension plan I personally tend to think of it as a social safety net. It provides a basic income to seniors while some additional funds for low income people with the GIS or Allowance programs.
So what will changing the age requirement for OAS do? It delays the problem some what and reduces a little bit of the cost, but if you really want to have significant cost savings the government is going to have to do more. So what is a likely target, in my mind, if you want to be fair about it you start by increasing the claw back provisions. This way the basic function of the program can stay in place while we take the extra money out the hands of retirees that need it the least. By the way, the claw back starts when your income hits about $67,600 and by about $109,000 you have to pay all of it back. I don’t know about you, but if your making over $75,000 a year in retirement, I don’t really think you need the OAS.
So how would you deal with this huge cost increase to the OAS program? Raise the age, increase the claw back or something else? For US readers, the problem is similar for the Social Security program, so feel free to rant or make suggestions.
Posted by Dave on January 31, 2012
This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.
I previously wrote about problems I was having with my back. At the time, I decided to go to a chiropractor and physiotherapist in order to attempt to rid myself of the back pain I was experiencing. I did this for a few months, and the outcome was somewhat unsatisfactory. Rather than continuing to spend money (well, my benefits provider’s money) I chose to go another route.
Starting about this time last year, I worked to get stronger and more flexible, rather than focus on having a chiropractor or physiotherapist work on little muscles. I have been able to almost triple the amount I can squat, approaching almost twice my body weight (along with increasing my strength in other ancillary exercises) – in the process, my back pain has essentially disappeared. I’m no doctor or anything, but I don’t think it has hurt me by getting stronger.
I plan on maintaining this level of strength as far into the future as possible in order to stay as mobile as possible for as long as I can. This, along with a healthy diet will hopefully give me a good chance of being mobile into my 80′s.
Similarly, I have attempted to build a strong core financially. I am repaying my only outstanding debt (my house) as quickly as possible, and I am going to invest as much as possible in order replace employment income with investment income. At the core of my financial plan though is the simplicity of keeping my expenses low.
Low expenses, as a part of my financial plan has provided me with more financial independence than anything else I have done. I make pretty good money right now, enough that I can keep my goal of retiring at 45 in my sights. If I decide that I don’t want to do the job I’m doing right now (or something like it), I could find a job that pays minimum wage and I’d be fine financially. Working a minimum wage job would limit my early retirement opportunities but it does provide a certain amount of security knowing that I won’t be on the street if my company decides they don’t like something I’m doing or I decide I don’t want to work there anymore.
Much like building my core muscles in my body, I constantly maintain the core of my financial plan by monitoring my spending. I don’t consider myself a miser or anything, I just ensure that if I’m going to spend my money on something, it’s not a waste.
What do you consider to be the core of your financial plan? How do you maintain your focus on this over time?
