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Friday, March 24, 2017

Over Saving and Fear

Posted by Tim Stobbs on July 29, 2016

I read a lot of stories in forums and blogs about people who retire early.  I often notice is in a few years after they leave work and they reflect back on what they did to retire early they often conclude they over saved.  So if this is often the case, and people know this, why do people who pursue the early retirement goal keep over saving?

While I’m not a mind reader, so I actually don’t know I think the thoughts in peoples head I think it goes something like this: they are afraid.  I think fear is driving many of them to keep working past what they actually need.

Now what is causing that fear can obviously very from person to person.  For some it is the fear of losing their primary identity (aka: their job),  while others it is fear of not having enough saved (or running out of money).  Yet I think the biggest fear of people who do early retirement is having the plan fail and then having to go back to work.  That scenario chills their blood in their veins and drives them to keep doing the very thing they are afraid of work.

Sort of ironic right?  That a fear of working, causes people to keep working longer than they need.  So why is that?  Well I would guess their thoughts go something like this:

Once I stop working I’m going to fall in love with all that free time and after a few years I don’t think I could even entertain the idea of coming back to my job to earn more money.  So I rather spend another year working now and be sure I never have to come back.

I actually understand their logic, but at the same time there is a bit of flaw to that sort of thinking.  Who said you ever have to go back to your current job?  Even if you retire and the stock market tanks 20% and you need to go back after two years, you are not required to go back to your current workplace.  Actually depending on how fast your particular industry changes you may not even be able to go back.

Instead you can likely pick up some other kind of paid employment, and with your current savings you could likely do very well on a term position or even part time hours.  If you are 80% financially independent you have a lot more options than most people.  And even if you for some reason came back to your current workplace you would know going in it won’t be forever.  Heck you might even be able to estimate down to the month how long you have to be there.  My point is work itself isn’t evil.  Granted your current job may feel that way, but like I said you don’t have to go back to it.

Once I realized this myself I actually went back to my assumptions in my calculations for early retirement and cut back a lot of my padding based on fear.  This is why I shifted my aim to doing semi-retirement sooner rather the putting in the extra few years to be fully early retired.  I don’t fear work anymore.  I understand it is me trading my time for money and all the emotional baggage about work: disliking paperwork, tasks I don’t enjoy or working with people I don’t care for all exist in my head.  I can let it bother me or not.  I can always quit at anytime.  So with that particular safety cord in mind, just about anything gets easier to deal with.

So do you fear work?  If so, why?

Canada Child Benefit – Update

Posted by Tim Stobbs on July 25, 2016

As you may recall I have a long history of taking any government issued money for my kids and putting it into their RESP account.  Yet as we started to make more income over the years and the kids got older, we slowly got less money and I just decided to top up our monthly investments of $334 to their RESP account to make up the short fall.

Yet now the Federal government has revamped the old Child Tax Benefit and Universal Child Care Benefit into the Canada Child Benefit and everyone found out this week our new amounts and I have to admit I was a bit surprised to see our go up and be higher than I thought it would be.  We previously got just slightly over $200 per month combined on the old system and I had used the online calculator to estimate our new benefit to be only a bit higher at $220 per month.  Of course even if it had been slightly less we would be a bit better off since the new payment is now tax free.  Needless to say I was a bit shocked to see our official letter come in stating the new amount would be just over $350/month.

So what the heck went wrong?  So I went back to the online calculator and read the fine print at the bottom to notice it says “A different definition of income (adjusted family net income) is used to calculate actual entitlement, and would generally be lower than household income.”  So basically, everyone who previously used the calculator got a low ball estimate and got more than they were expecting.  Nice surprise.

This also means that I likely won’t have to put any money aside to top off my kids’ RESP account going forward as I previously thought I would have to do for the initial year after I left my job.  Instead the amount we get from the Canada Child Benefit should be enough to cover the entire $334 to their RESP account every month and even have some leftover to cover other kid related costs.

The side benefit of using tax free money to pay for the RESP contributions is they also get topped up by 30% (10% is from the Saskatchewan government and the other 20% is from the federal). So with very little money from us over the years my kids have over $60,000 put aside for their post secondary education already and we should easily be able to hit my $80,000 target in just a few years and then with investment returns exceed that amount.

Overall the new Canada Child Benefit was a nice surprise for us.  Did anyone else notice the same issue of under estimating how much they would get?

What I’m Going to Do With All That Time

Posted by Tim Stobbs on July 22, 2016

Oddly, I’ve noticed that number one question I get from someone when I mention my early retirement plan is: what are you going to do with all that time? Which I find odd, since I would likely ask: how do you make that work?  But anyway, I thought perhaps I should address the first question on what are my plans around my bucket loads of extra time when I no longer have a day job.

To address the issue I’ve considered that a person needs a bit of balance to your life.  You can’t just do one thing and do it all the time.  As I’ve already noticed in my life I go through periods of heavy interest in one thing for a month and then that drops off as I pick up something else for a while.  I tend to cycle through my interests on a regular basis.  So I need a few interests to allow me to cycle through them and so far here is a list of ideas broken out by some rough sections.

House projects – painting, new flooring, refinish kitchen cupboards, minor repair jobs, new front patio, expand the garden plot, replace patio doors with garden doors, new front door…really this doesn’t end.  I also want to look into perhaps designing and building a tiny writing studio in the backyard.

Writing & Reading – My want to read list for books is well endless, I’ve never managed to clear it off.  Then writing wise I, of course, have this blog and about five different novel ideas which I have developed into some general plot planning. Then I would like to do a follow up to Free at 45 book on the actual transition from work to retirement.

Friends and Family -Hanging out more with my own immediate family, since right now it feels like we are just barely managing to squeeze in some time on a weekend to do something together.  I would also like to get better at visiting my friends and extended family or just having more time to help them out with their projects.  But some of them require some long trips to see which I will suddenly have lots of time to do so.  Some of this will overlap with my next point.

Travel – My kids love to camp and I think it would be fun to start of list of places in Western Canada we want to try out and work our way through that list. Not to mention getting back to places we have seen, but want to go back and of course everyone has a list of international locations they want to see.

Gaming – I’ve always loved games (tabletop, or video games), but I don’t have much time to play them currently.  So I have developed a nice stash of ~30 video games I would like play for longer than an hour or two a week. And I won’t mind getting in some more board game time in with friends.

Movies and TV: I have always loved to watch movies, but do you think I have ever gotten close to finishing My List on Netflix..nope.  Then add in my library account holds and well I might catch up…someday (well at least for a day until something else gets my attention).

Learning: I have a serious thing about learning new skills or expanding my own knowledge base.  So given lots of free time I could do more online learning, workshops and other learning options. For example, I have never taken a class on economics, but I would like to learn more.  I would even have time to get a certificate or another degree if I really wanted.

Physical – You know how it is hard to make time for your workout every day.  Well imagine if that isn’t the case? Hello running, yoga, roller blading, swimming and perhaps learn a bit about something fun and out there like sword fighting.

Work – As I have stated more than a few times, I don’t mind work.  I just don’t particularly enjoy full time work.  Some places I plan to look into are: libraries, bookstores, micro breweries, micro distilleries, publishers, an election worker and well just about anything else that catches my interest.  Part time hours and short contracts would actually be ideal.

Then of course I have my current pile of interests: brewing beer and wine at home, cooking, and managing the investments.  Then add in the usual stuff you need to continue to do like cleaning, yard maintenance and guess what I’m more than filled up my 40 hour work week.  If anything, I expect the same problem I have now: too much to do and not enough time.

So what would you do if you didn’t have to do your day job?