Posted by Robert on June 27, 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.
It was a sad day for me when we bought a minivan. We had a third child on the way and, logically, buying a minivan made sense. We sold our compact car that fit only two carseats in the back and bought a used Honda Odyssey that was a couple years old. There were more benefits, too. I once fit a 13′ ladder in it. Another time, I brought home a 3-piece livingroom set in one trip. And it sure is nice having the kids more-or-less separated from each other while we’re driving. The major drawback is that we now spend twice as much on gas. I console myself with the thought that it’s still cheaper than owning two cars.
When we took a 10-day vacation, we rented a sedan. It was a late model Toyota Camry, and I realized how much I missed driving a sedan. I guess I’m just not a minivan guy, and I really wouldn’t mind trading down from a minivan to a full-size sedan. It wouldn’t really be trading down, because we could probably buy a Camry or an Accord for the same amount that we could sell our Odyssey for. It would cost us less in gas each year, a recurring savings. But other than that, there wouldn’t be a lot of benefit.
As I was looking through the classified ads, I realized just what a pain it would be to sell our van and buy a car. First, the time it would take doing research to find the right model for us. I would want to read Consumer Reports to find out which make and model and year is best on gas, with the lowest maintenance cost and is the least likely to require repairs. Then, after narrowing it down to two or three models, I’d have to watch the classifieds to find one that is for sale and decide whether or not it’s a reasonable price. (I found www.vmrcanada.com to be helpful.) But after that is the riskiest part, in my mind. I’ve only bought three cars in my life. Could I really tell, by test driving it, whether or not it’s mechanically sound and likely to stay that way?
In the end, I know my van. I know that it’s not much to look at, but it runs well. I have a set of winter tires on rims that I can change myself. I know what maintenance has been done and what is likely to be needed. I have a very good idea how much it will cost me to own each year. I know how much it’s worth to me, but I’m not sure if someone else is willing to pay that price. And so, even though it’s rare that I need the extra space, I decided not to trade my van for a sedan. The potential cost-saving in gas wouldn’t be worth the risks of buying an unknown vehicle. And if we needed to rent a minivan or full-size van for a week for whatever reason, it would cost around $850, almost the entire amount saved over a year.
What money-related decisions do you put this much thought into? Did it pay off?
Posted by Canadian Dream on June 22, 2011
One of the issues I struggle to explain well on this blog is the fact of you can’t plan your retirement well without knowing what makes you happy. It becomes pointless to plan your savings for retirement based on your current spending habits if in fact your not happy with your current life. You need to know who you are and what you want from life to plan a retirement that allow you to be happy most of the time.
This is critical since you might discover a passion for helping others in the third world, so you might end up downsizing your house to a condo since you are traveling for almost half the year. This could end up saving you hundreds of thousands off your initial retirement plan as you realize you don’t need the same clothes anymore or even care about some of your previous shopping habits. Who has room for a new couch when you are moving to a condo with half the square footage of your house?
In the end we all must discover that fact you don’t have to live your life the way others tell you to be. If you want to achieve an early retirement or anything else significant you are going to have to live life on your own terms. Which frankly is an intimidating concept at first as often we have grown up and we still don’t know what we want to be when we grow up.
Ironically, I recently got some help sorting this all out for myself from a course I took at my day job. It happened to be when I took a course on career management and as part of the course took an interest inventory.
It was amusing to me that my top job according to the inventory would be a librarian, which of course made no sense to me at first. Then I read the description of tasks done and skills required and got the reference. Take highly math interested person with a creative bend who loves books and drop them in a library. They will likely be happy working there. Of course as I went through the results of my inventory during the course it did occur to me that my top interests are actually all being used in some way at a job, just not all at my day job.
Which was an interesting point of the instructor, you don’t have to get all your interests met from your day job. A second job or hobby or volunteering might also help you meet your interests. Which of course is why I write this blog and also work on the School Board, I get different levels of satisfaction from each thing I do.
An also somewhat odd thing people don’t consider is how much of their identity is tied up in their habits. People often assume their personality is set rather than realizing a good lot of your personality is just automatic responses to specific stimulus. You hit a specific stimulus and you play your pre-recorded response tape of your personality and don’t realize that it is an automatic response like developed from childhood and not really part of you. If you can objectively review that habit of your personality you can change your automatic response and become more of yourself rather than a previously learned behaviour pattern. As an example, I never considered myself an entrepreneur during my adult life, but the reason for that had to do with a childhood experience.
I had been given a scooter as a present and I was riding it around the bay where we lived. As it had been one of the first on the bay other kids wanted to try it. So I let them, but I got tired of giving other people turns so in frustration I had said to someone that if you wanted another turn pay me for it. I was a little surprised when the agreed and I started getting other kids pocket money in exchange for turns on the scooter. When I got home I told the entire story to my mother who promptly made me give the money back. So I also had this idea that I wasn’t suited for self employment which is ironic because I know own a publishing company and do freelance writing. In the end I have to face the fact, I am an entrepreneur despite the fact of my childhood experience, so to keep thinking otherwise is wrong.
So in the end you always have to keep learning about yourself and what you want. The answer will keep changing as you get older, but in the end you will find out who you really are in life and what you want. This is critical to your happiness and your retirement plan, so don’t be ashamed to keep learning about you. Just consider it an investment in your retirement planning.
Posted by Dave on June 21, 2011
I recently got my 2010 pension statement from work, which showed a somewhat dismal balance, although a reasonable cash-flow for when I turn 65 (2045 seems like a very long time from now). Tim posts his net worth every two months, but I never have, mostly because I really don’t have much in the way of assets. I’m 31 years old, and I really don’t know what I spent my money on for about the first four or five years of my full-time working life.
If I knew then what I know now, I would (hopefully) have invested a considerable amount of money in income-producing assets, which would have reduced my time at work by a considerable amount of time.
Looking at my balance sheet from the age of 23-28 though, I basically had $0 in the asset column and $0 in the liability column (after paying off my ~$25,000 in student loans), and spent everything in the middle, with very little to show for it. Over the past 3 years, I have added a large amount to both columns with the purchase of a home (for good or bad depending on your thoughts about home ownership), but at least I seem to be adding more in assets.
At some point (hopefully at or around the age of 45) my goal is to have enough income-producing assets to cash-flow my lifestyle needs. This was never a goal previously, but has become one of my new considerations before I make a significant purchase, for example – should I be saving money now to purchase the new iPhone, or should I be adding this money to my bi-weekly mortgage payments? The iPhone will add to my general life-enjoyment (until the next version comes out), while the mortgage payment puts me closer to my end goal of $0 owing on my mortgage and the start of building assets.
I think most people who read this blog would at least weigh the pros and cons of a major purchase and realize there is an opportunity cost to most purchases. Personally, I learned about this by reading different books and websites and coming to the realization that I would like to be financially free more than I would like to have every new toy that comes out (I still get some, but I will probably wait until the iPhone 6 or 7 comes out to upgrade my phone, if I decide I need one by then).
Looking at what I have now and what I spent money on in the past, even without accumulating debt I basically gave up a year or two (at least) in purchasing “stuff” that I really don’t have much to show for. Electronics go obsolete quickly, books collect dust, cars die. Reading Robert’s post from yesterday about the mistakes he’s made investing , I wish I would have made those kind of spending mistakes (where I could have learned a lesson and still had an asset worth something) than buying ”stuff” that I can’t even give away.
How are your assets looking these days? Do you have any spending regrets or tough financial lessons learned from your past you wish you could fix?
