Posted by Robert on March 14, 2011
This is a guest post by Robert, who lives in Calgary and works as a financial adviser. He is married, has three kids and plans to retire at age 35. Robert and his wife then plan to return to school and become teachers, eventually living and working overseas.
I recently sold my practice and have started collecting an hourly wage instead of the net profit from my practice. The income is roughly the same, but I’m now reminded of the fundamental exchange of time for money. In the past, if I came in late or if I missed a day of work, the profits would be unaffected (assuming all the work got done). But now, if I arrive half an hour late, I’m expected to update my time sheet and I receive less money in exchange for contributing less of my time. On the other hand, if there’s more work and I stay an hour late, I’m paid more for putting in extra time.
Time and money are both scarce resources. Although no one knows how much time they have left, none of us will live forever. And, despite the fact that money creation is theoretically unlimited, in practice each person can only accumulate a certain amount of money. When we work, we exchange time (and effort and creativity) for money at the defined rate of our salary or wage. Everyone’s rate is different, but each of us goes to work to earn money. Money, of course, is a means and not an end in itself. It can be used to provide the necessities of life or luxuries or experiences. But money itself serves no other purpose.
When we retire, we reverse the equation and exchange money for time. I spoke with a couple yesterday who prepared very well for their retirement. When we meet with them, we ask them if the income they’re receiving is adequate and if we should be sending them more. They always decline, saying that they’re doing all the things they want to right now and more income wouldn’t make a difference. They enjoy traveling and have toured Egypt and Europe and even took a cruise to Antarctica. The money allows them to spend their time doing things that they enjoy. In this way, time, like money, is a means and not an end in itself. It can be used for work or play or to build relationships, but has no inherent meaning otherwise.
People with the goal of retiring early seem to value time more than money. We will use money to pay for a vacation or a sabbatical (mini-retirement) or to exit the “rat race” early. Exchanging money for time allows us to do the things that make our lives meaningful. Whereas the people who find fulfillment in their job, like my father, seem to have little desire to take time off and are in no rush to retire. Whether we value time or money depends in part on what we do with them.
What will you do with your time, once you can retire and can use it in whatever way you choose?
Posted by Canadian Dream on March 11, 2011
If anyone has any doubts about why I am trying to retire early, might I present a micro story. Our youngest is now ready for a ‘big boy bed’ (aka twin size), so we have put some money aside over the last few months, but only recently started looking. My wife and I were easily disgusted with the high prices ($1000+ for a suite) and crap you would find in most stores. So I did a little search in the used market to find something that will work for us: a loft bed for our oldest. That way we swap beds for the kids. The bed frame in question costs $300 in the store and I’m picking it up today for half that, but it was only used for a total of four weeks by the owner’s grandchild. Just because I can easily afford $1000+ doesn’t mean I think it is always a good deal.
Onto the links:
Ottawa warns about Mint Canada?!? (Globe and Mail)
I love this list of excuses for not doing your taxes (Walletpop.ca)
Apparently most people think they are retiring at 68 or later…obviously they aren’t reading this blog. (Wealthy Boomer)
1st Annual PF Bloggers conference…we have conferences now? (Give Me Back My Five Bucks)
I like this one on why so few succeed. (Early Retirement Extreme)
Apparently she is just happy eating pizza at home…and sending half her pre-retirement income. (Retirement: A Full Time Job)
An investing strategy that I never heard of until this post: barbell investing. (Thicken My Wallet)
Posted by Canadian Dream on March 10, 2011
I was reading a book the other day which had an interesting scene between the villain and the heroine where basically she was offered anything and everything she could want to which she replied: “I don’t want everything that I want. Nobody does. Not really. What kind of fun would it be if I just got everything I ever wanted? Just like that, and it didn’t mean anything.”
That scene struck a chord with me in regards to how a lot of people approach retirement planning. They plan to have everything they want in their retirement. They want two trips a year, a summer cottage, a bigger boat…and so on. The build a fantasy of what they think they want, but here is the kicker: the don’t even really want it. They just think they do.
For some people their retirements have become substitutes for everything that we don’t have in their lives. They place every desire they have ever had there so it becomes a place of ‘wants’. Yet most people don’t connect the world of wants to the amount of work it would require to get there. We live in a perpetual disconnect between this fantasy of wants and what people really need.
I suspect that this disconnect more than anything separates early retirees from the rest of the world. We aren’t interesting in playing the same game as everyone else and thus appear to ‘throwing it all away’ in the conventional sense of giving up our highest earning years complete with higher level jobs because we really don’t want everything that we want. Instead we often are on the hunt for meaning in our lives which often can’t be obtained with just money. Often that meaning involving going after dreams of working in another field, starting a business, or helping others.
In the end, I suspect most people would find both retirement planning and life in general a lot easier if we all stopped wanting it all and settling for wanting more meaning. At the same time, I don’t think that will happen anytime soon.
