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Friday, April 28, 2017

Peak Earnings

Posted by Tim Stobbs on April 25, 2017

I was chatting the other day with someone about my plan to retire early and they noted that if things go wrong that “You may never earn this much ever again.”

To which I frowned and then replied, “But that doesn’t matter.  I’ve NEVER spent my entire salary, so who cares if I fail and go back and earn less? I don’t.”

You see that is perhaps why I’m a LOT more relaxed about my plan to retire early than most people.  I’m not obsessing about the fact I’m currently at my peak earning potential in my life.  That I believe is the logical flaw that sucks in a LOT of people who fall into the one more year syndrome.  They erroneously assume you have to keep working since you can potentially never earn this much income again.  They confusing having to work again in the future with having to have the same income and/or career.

The issue comes down to this, even if things go horribly wrong and I have to go back to work for a while I am under no obligation to go back to my current career or pay range.  Honestly, I earn currently north of six figures and only spend a bit over $30K a year.  So in reality if I have to go back to work to save some more money my actually target is to earn more than $30K a year to allow some savings while paying the bills.  So any job that pays $31K or more will work.  It’s just a matter of how much do I want to save and when I quit again.

Of course this ignore the reality that we already have substantial assets and I would likely notice things going wrong sooner than later.  Thus in fact I won’t even need to earn more than $30K to pay the bills, the fact of the matter is earning ANYTHING would result in me saving some money.   So even some mindless minimum wage job at half time would be enough to help build up my savings again.  It would just be at a slower rate than I’m doing right now.

So yes, I’m currently riding my peak earnings towards my early retirement date and if that is the case, so be it.  I can give up the really high saving rate and roll the dice on my current plan.  Yes, I may lose and have to go back to work at some point doing something, but if I win I will have an additional 25 years of time to do things that interest me.   I know what I’m choosing.

So what about you?  Would you spend an extra year or two working at my current job to buffer against ever working again or take the risk of having to do some work in the future? Would you care if you worked again in the same field or not?

March 2017 – Net Worth

Posted by Tim Stobbs on April 3, 2017

The following is an update of Tim’s plan to retire early.  Please note we are mortgage free.

Our ultimate goal between investments and the home equity is a net worth of around $1 million.  The investment part of that target is $582,000.

Investments

Accounts

RRSP $58,330
LIRA $16,340
TFSA $84,740
Pension $158,220
Wife’s RRSP $86,420
Wife’s TFSA $79,170
Wife’s Taxable $51,380
High Interest Savings Account $26,200

Investment Net Worth $560,800 (increase of $10,880 over last month)

Home Equity

Estimate $395,000

Spending

Last Month $3434

The renovations continue.  This month was the new water heater for ~$1200.  The other odd bit was I took spending cash out at the start and end of the month making this month look worse than it really is.  It should balance out with lower spending month in April.

Trailing Last 12 Month Average $2707 (or $32,490 for the last 12 months)

Results

PF Score: 29.4 {Target 31}

Net Worth ~$955,800

Commentary:

So for those of you keeping score our investments are now at 96% of our target amount of $582,000.  Oddly enough, I’m not that excited about it.  Why?

I’m focusing more on the little things.  Getting stuff done around the house like the water heater.  Cleaning up the yard now that the snow has melted.  Hanging out with family and friends.  I want to live my life rather than stare at numbers that will get where I want them to be without any effort on my part.  Also I have learned over the years that fixating on the numbers isn’t helpful.  The point of financial independence is to give you more time to live your life, not fixate at getting there.  You have to remind yourself about that at times.

Any questions?

March 2017 Investment Net Worth

(click to make bigger)

Spending More on the Right Things

Posted by Tim Stobbs on April 1, 2017

I swear some people think my life must be like a monk.  They confuse the fact that I don’t spend a lot with not spending anything at all.  So to clear that up: yes I spend money.  When you think about it, everyone does it so that isn’t so odd.  Yet perhaps the major difference between a lot of my spending and other people’s spending is I’m usually thoughtful on what I spend my money on.

Yet this does not mean I never impulse buy.  In fact, yes I splurge on impulse items once in a while.  Just once every few months rather than twice a week.  For example, my latest one was I was at the bank to deposit a cheque and I recalled that the local HMV location near me was shutting down soon.  So I wandered over there saw a sign stating that it was it’s last week and all the DVDs and Blu-rays were 50 or 60% off.  So I walked around the store and found a few items and bought them (Mr Robot Season 2, Contact and I Robot..if you were wondering).  Did I need them? Nope.  Did I plan for them? Nope.  Did I want them like a two year wants a piece of candy? Hell yes!  Yet prior to that I really can’t really recall a similar impulse spending event for the last six months.  At the very least I usually have a 24 hour cooling off period prior to buying something.

Then on the other hand I sometimes think things out too much.  I recently had decided to seek out a faster internet speed package from my telecom provider since after months of trying to deal with the issue I came to the conclusion: our internet is too slow for what our house uses it for.  Prior to that I had done numerous technical troubleshooting sessions to see if I could squeak more speed out of out internet, but didn’t improve things all that much. Yet in the end I decided I wanted a faster connection it comes down to this…my kids grew up and spend a lot more time online and my wife started to watch Netflix more.  So I was increasingly battling my family for times to download some files or watch Netflix myself.  So I called in and confirmed my options and found out that I could increase my internet speed from a max speed of 1.5 MB/s to 5.0MB/s (yes nearly 3 times faster)  for an additional $3/month.  After that I turned to my wife and said, “I’m a bloody idiot. I should have found that out ages ago and just upgraded.”  Now I can download a large file in a fraction of the time prior and while my wife watches her show on Netflix.  I was just in the habit of making do with what I had that it took me a while to realize the solution would be to pay the extra monthly fee and upgrade.

So in the end there are two sides of spending: the not thinking about it all all for impulse buying and over thinking something for months that costs next to nothing.  Either end isn’t particularly useful so try to stay somewhere in the middle to achieve a happy balance. That is usually where I spend the most of my time but even I screw up. So where do you tend to fall on that scale for your spending?