Why Does it Matter?

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.

Over the past few years, I have changed the way I look at money.  When I got out of school and got my first “real” job, the money that I made bought me “stuff”: lots of video games, some fancy toys and other things that I don’t remember and really have nothing to show for it.  Now, the money I make from my job is used as a tool – the majority of income I make is ear-marked for debt repayment (mortgage) and the rest is either saved for longer-term savings, for purchases such as cars, vacations or other “wants”.

The difference between past years and currently is that I now have a buffer.  I don’t necessarily need to work at the job I currently work, in fact I could probably live comfortably on approximately ¼ of what I currently make, it would just mean I could have to work until I was around 60 instead of being able to stop working in my mid 40s (which still seems like a long way away).  I have prioritized my spending to reflect things I really like and value rather than spreading my spending around until there is nothing left.

This more focused and thoughtful spending provides a peace of mind that I really didn’t have previously.  I know that even though I have to work at something, I’m not necessarily “trapped” at my current job because I could quit and find something else to do if I wanted to.  The flexibility, even if not utilized (I like my current job) makes waking up in the morning easier, the difficult days I do have while working are not the end of the world – it’s generally just a less stressful lifestyle.

If I were to live like a lot of people I know and not have savings, if I “needed” 100% of my paycheque to make it through the month I think I would be significantly more stressed on a day-to-day basis.  Money, rather than something that my wife and I discuss once a month or so would be something that we’d be battling or worried about constantly.  I know many people that live this way and I really don’t know how they do it – if they missed even one paycheque, they are at risk of falling behind on several debt obligations and not really able to make this up anywhere.

So, even though I am not currently financially independent of my job, and will have to continue to work somewhere for the foreseeable future, having a financial plan and prioritizing my spending has lead to a much easier, less stressful lifestyle.  The end result of living the way I am will hopefully be retirement at 45, but on the way there, I am enjoying the way I currently live.

What would you change with your current spending?  How much less could you earn and still maintain your current lifestyle?

8 thoughts on “Why Does it Matter?”

  1. Dave, my own situation is very similar to your, except that I am probably several years older than you – my retirement at 45 is only seven years away.

    Basically, my wife and I made a decision several years ago to not follow our friends and buy new cars and “McMansions”, and instead drop our excess funds into savings. Virtually nobody we know has made the choice to live below their means… many have confessed to me that they live paycheck to paycheck – with big mortgages no less. Not the way we want to live.

  2. What a fabulous situation to be in! Beware of your ‘Expense Complacency’ now that you seem to have your ‘Wanter’ under control. Critically evaluate what you are getting for your money for things like internet, cell phone, landlines etc… Its remarkable how the service options change and you can get exactly what you have for much less money. Keep it up! Next goal – passive income 😉

  3. Being married with a newborn, we could maintain our lifestyle with 50% of our current earnings.

    The fundamental difference between your strategy and mine is that I’m focusing on building passive or automatic income by the time I’m 35 (currently 25) so that, even though I won’t have enough saved to retire, I’ll have enough monthly income from different assets (businesses, dividend and rental properties) that I can “retire”. I know this strategy calls for managing my business in retirement, which calls to question whether or not I’ll actually retire at 35.

  4. I wouldn’t have changed too many things either in my spending. What I would have changed would have been only a few things – getting house cleaners earlier is one of them. 🙂 I think I would have considered myself not so indispensable in work situations and taken more time off – even unpaid if necessary.

  5. Hey Dave, make no mistake about it, passive income is my strategy and I live it. I’m 51 and live off dividends and rental property net income. I own a business SO! Financial Renovation to help others get there too. The key is that you have to have an asset or cash that helps you build an asset that can provide you with that passive income. Usually cash you’ve earned ‘doing’. Building the cash to be able to get to this place is always the trick. So anyplace you can save cash and expressly re-direct it to savings the sooner you’ll get to a passive income goal.

  6. @ Jon_Snow – I would find it really stressful to live in a lot of debt – maybe it’s just my mentality but I just don’t understand how others can do it.

    @ SO! Financial Renovation – Yah, lifestyle inflation does come in sometimes, but if I find something I really really want, there’s usually something else I can cut to balance my expenses.

    @ Dave – If I hadn’t bought a house I would be doing the same thing as you. As it is though, my wife and I decided to take on a mortgage in buying our current home. Once this is paid off we will be concentrating on passive income.

    @ Jacq – I am coming to realize the same thing about work. In the next few years I hope to take much more time off, whether it’s paid or unpaid.

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