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Friday, March 31, 2017

Why a Personal Finance is Important to Me

Posted by Dave on January 26, 2010

18,533 – this is how many days I have left if I were to live to the current life expectancy of a Canadian Male (Currently 80.4 years).  When a lifetime is put into days that can essentially be ticked off rather then years which are large incomprehensible chunks of time, money decisions can really be put into perspective.

My end goal is retirement at 45 – this gives me a specific number of days to achieve my two-parted goal of minimizing expenses and saving enough money to live off of to support the lifestyle I want.  Every spending decision between now and that deadline can be assessed against whether or not this is going to assist or hurt the attainment of that goal.  For example, a couple of weeks ago I wrote about a vacation and how it is essentially a waste of money.  Even though I am excited to go someplace warm and drink pina coladas for a week or so, the trade off is that my house is not getting paid off and my savings are not growing, (my two primary goals of the moment) all for a week away someplace warm – which, if this were something I did a couple of times a year would have a significant impact on my end retirement goal.

I have family members who are in their mid-to-late 50’s and have plans of continuing to work for several more years.  All of these people are relatively well off, and to my knowledge really have no reason to work other then to maximize their pension money, or top up their retirement funds.  The mindset of trading time in my 50’s because I have to work is foreign to me.  I realize that my opinion on work may change at some point, but thinking that I have to work at 55 is a situation I don’t want to be in.  At 55, with less then 10,000 days of expected life left (some of which may not be at optimal health) the last thing I would like to be doing is worrying about making more money.  I’ve spoken with these family members and asked what they really want to do, and in general they don’t really have a plan.  I think if they had a plan and knew what they wanted to do, they might realize that grinding their time away at work may not be the best thing they could be doing now, and they may have enough money to afford to retire.

I also know people who refuse to create a plan and “live for today”, which (from my observation) generally means living paycheque to paycheque (and going into debt when the paycheque isn’t enough) and justifying the lack of financial responsibility by thinking they may die tomorrow, which means these people don’t bother saving, paying off debts, creating a spending plan, setting goals (essentially everything that a site like this and a majority of readers of personal finance sites follow).  What I see this attitude leading to in the long-term is a lack of freedom.  Eventually (unless the people do die tomorrow) the debts that are being taken on need to be paid (or they increase exponentially), savings need to be created (or the person would have to work forever), and the “fun” that is being had today turns into tomorrow’s problem.  I “live for today” as well, I just choose how I “live” so that if I am still around in my 80’s, I don’t have to be working.

I realize that this post is a little morbid in nature, but I think everyone needs to think about the future, and how much future is left.  If you think of your life in (average) days remaining (for me anyways), it puts spending and financial decisions into perspective.

Am I the only one who thinks in this morbid manner, or are there other people out there that weigh money decisions in this frame of mind?

Comments

11 Responses to “Why a Personal Finance is Important to Me”
  1. Dana says:

    We always had a goal to retire around 50. Now that my husband is less than 10 years away from that goal, he can’t imagine not working. Our plan is still to be able to stop working, but he plans to continue working as long as he is content at his job. He really feels that he has just hit his stride in the past few years and still has career ambitions he would like to realize.

    Same thing happened with my Dad. His magic number was 50. After a few months of living what he thought was his retirement dream, he started picking up contract work. He has been doing contract work for 15 years now.

    Aside from my grandparents, I don’t think anyone in our families has retired according to their plan.

  2. Jon_Snow says:

    Kudos to those who choose to work when they really don’t NEED to, in a financial sense.

    But I have to say, this is INCOMPREHENSIBLE to me. The world is too full of wonders waiting to be discovered to be tied to something like a JOB. When my portfolio can generate around $50k, I’m out.

  3. Robert says:

    Jon: I’d like to know if there is ANY way you could combine your passions with a way to earn income? Is there some way that discovering the wonders of the world could be combined with creating value for others? Otherwise, it seems like a bit of a selfish goal.

    It sounds like Dana’s family found that they liked the feeling of contributing to society in some way. My dream is to live in Asia (and probably in Europe after that), so I’m seriously considering becoming a teacher. That way, I can combine my dream with a useful role in society. Sure, I’ll have retired and I won’t NEED to work, but I expect that will mean I’m working for the love of what I do, and I won’t be held hostage by the promise of the next paycheque (or threat of being fired).

  4. Jo says:

    I used to think like that–I would rather make a lumpsum payment on my mortgage than go on vacation. But then two years ago my sister (and favourite travelling companion) was diagnosed with cancer, and I realized that we might not get to visit all our “must see” destinations together after we retire.

    Since then we’ve gone Scuba diving in Costa Rica, to a cooking school in Tuscany and taken our dream trip to Egypt. She’s currently recovering from her second battle with cancer, and we’re already planning our next big holiday.

    Sure it’s going to slow my retirement planning down–but I think it’s essential to find a balance between planning for the future and enjoying and being truly grateful for what you have now.

    If we keep taking a big trip every year, I’ll probably be retiring a few years later than I originally hoped, but I would never say a single penny I’ve spent on vacations with the people I care most about has been wasted.

    Of course, it also helps that I have a job a love, and I don’t think I’ll much mind the extra years of work.

  5. Dave says:

    @ Dana – I have other things that I want to do besides make money. There is a lot of stuff that I want to learn and do that I can’t do while working 40+ hours a week. The work week eats up the best day-time hours that at some point I would rather be doing other things.

    If you like your job enough to continue working past the magic number date, it would definitely help retirement planning to keep doing it.

    @ Jon_Snow – Totally agree – I like my job and could probably do it indefinitely, but there is other stuff I would rather do while I still can.

    @ Robert – I’m not sure what you mean when you say “creating value for others” – the work I’m doing now is creating really no value for others, other then my managers. At the end of the day I haven’t really created anything other then a few bits of data – it’s not like I’m leaving a legacy at my workplace and I’m not sure how continuing to do what I’m doing and extra couple of decades, even though I like what I do would do to move society along.

    Maybe I’ve misunderstood your meaning, but that’s my take.

    @ Jo – So sorry to hear about your sister, I hope she is doing well.

    I can see where you’re coming from, if for example my wife (my traveling companion) was in the same situation, I might do the exact same way. There’s not really anything that I’m “putting off” right now travel-wise, we plan one big trip a year in our budget now to go on, but if the clock changes from the 18,000+ days I’m expecting now, then my carefully designed financial plan will probably change as well.

    Until I’m shown otherwise though, I’m going to assume I have 18,000+ days left and do what I can do during that time – to do some of it I’m going to need money, and I’m trying to get that portion out of the way as soon as I can.

  6. @Jon_Snow When my portfolio can generate a good income, I’m out too… Invest in Dividend Growth Stocks…

  7. deegee says:

    I simply got sick and tired of my job and my awful commute so I retired in 2008 at age 45. Instead of me working for my money, my money works for me (and it doesn’t get nauseous during the commute LOL!).

    Just a few years ago, I thought I’d be working part-time until I turned 50. But some things worked out better than I expected in 2005-2007 and I was able to get out in 2008.

    I don’t necessarily think of things in ters of number of days like you do. But knowing I will spend far more of my adult years not working than I ever did working is indeed very comforting.

  8. Canadian Dream says:

    There seems to be two general camps on work in retirement: how can you not do some work (regardless of pay) and others that have too many other non-work items they want to do.

    The reality is both are fine. I don’t buy the argument that people need to ‘work’ to contribute to society. There are plenty of things people can do that are not paid yet help others. I don’t think people turn that selfish when they retire early.

    I suppose of this discussion comes out of what is “work”? Is it just about the pay or is it anything that someone could be paid for but you might just volunteer for? Also how much do you enjoy it? Since goodness knows some items don’t even feel like work (ie: me with writing some days). Also what happens with the little things: helping a neighbour with a stuck car in the snow or cut their lawn when they are on vacation in the summer. Is that “work”?

    So I suppose we all need some common language on what is work. I personally tend to think in terms of if you get paid it is work (regardless of amount).

    Tim

  9. guinness416 says:

    DeeGee congrats on escaping the rat race so early and may you continue to love your early retirement, but I’m a bit baffled about the glaring bitterness about your old commute in all your comments/recent post. Couldn’t you just have reduced the commute and thereby increased your quality of life while you were still working? I used to love my 20 minute commute from Astoria into Manhattan. Not judging, just curious.

    I absolutely agree with Tim’s “I don’t buy the argument that people need to ‘work’ to contribute to society” by the way, and frankly find the people making those arguments a bit naive and starry-eyed.

  10. deegee says:

    Guinness, It was my company which made my barely tolerable commute worse by moving from Manhattan to New Jersey (75-90 minutes each way, door to door). I also had a mostly telecommute gig from 2001-2003 which was working fine until my company changed its overall policy and pulled the plug on it.

    After 15 years riding on the Long Island Rail Road (LIRR) and subway (later, the PATH trains to New Jersey, resulting in a more tiring overall trip), I simply could not stand it any more. It made me somewhat ill for the first hour being at the office. Then came the increased use of those annoying cell phones on the LIRR in the last 10 years, turning what was a pretty quiet ride into a yakkety-yak train ride. Just a horrible trip from here to there every damn day I had to make it. “Bitter” is an understatement in describing just how much I HATED the commute. It was reason #1, #2, and #3 I told HR in my exit interview.

    I did look into getting another job with a better commute in the late 1990s while I was still working full-time, but nothing panned out. Once the ESOP took off in the 2000s, I knew that would be my eventual ticket to ER so I just had to hang in there for a few years. Working part-time reduced the number of trips to NJ but each one sucked. I reduced my number of weekly trips from 3 to 2 in 2007 and shortened my workday by an hour but it still did not help.

    I had no choice – I had to leave. And I could take the money and run!

  11. Jon Snow says:

    I bristle a bit at the suggestion that retiring early is somehow selfish. I can tell you with certainty that my retired lifestyle will do much more to enhance our world than my working existence does…

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