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Thursday, September 18, 2014

Ready for Hibernation

Posted by Dave on September 16, 2014

I spend most winters doing almost nothing. Last winter was incredibly long and brutal, and rather than making any social plans, we generally just looked outside and returned to our couch to watch Netflix. The upside of this kind of empty social calendar is that I was able to accumulate quite a bit of spare cash that was a huge help when we made our final payment on our mortgage. In addition, I made it through a pretty good chunk of books I wanted to read (at a pace of about 2 per week) with all the free time I had.

After an extended break, my wife and I made up for our lack of visiting and social interaction over the summer. I golfed around 25 rounds over the summer, we went to cottages, and re-did our backyard patio. All of this stuff was budgeted (as best as it could be with some unplanned stuff that came up). We still have some savings left right now, but I’m almost ready for a break from “society” again.

One of the benefits of having only one main hobby that I’m really into is that it’s easy to budget for. I know the start and stop date, as well as how much money I have available to take part in it for the summer. Now though, as my golf savings have waned, I’m ready to start building up for next year again (it also didn’t help that I just lost in my “final” tournament of the year).

I’m not sure how long my interest in golf will remain. I’ve been playing for almost 25 years now, and can’t see my interest in being constantly annoyed and confused while playing decreasing too much in the next decade or so. I realize that the ~$1000 I spend on this hobby could be used to invest into my retirement. Additionally, I realize that $1,000 at a 4% withdrawal rate in retirement will cost me about $25,000 in additional savings at retirement to fund the hobby, all so that I can bang a ball around some chemically assisted manicured lawn.

So, after a really busy summer, my wife and I are both looking forward to recharging our batteries over the cooler weather months. I’m hoping to be able to get some minor home renovations done, which will finally make our basement a usable portion of our house. Financially, I can re-fill my “fun money” savings account to play again next year, which will hopefully be before the middle of June, like this year.

It’s these times of years that I realize that by choosing an Early Retirement Stream, I can’t do everything – I can do most activities I want to do, but there are definitely limits if I want to make my Financial goal a reality.

A Perspective From the Wilderness

Posted by Dave on September 9, 2014

I spend a lot of my life dealing with really small details. My entire work life is spent analyzing and reviewing numbers and coming to conclusions which I report on and defend to my employer. I enjoy this kind of detailed work, which I feel achieves something at the end of the day, solving number puzzles and coming to conclusions based on the evidence I reviewed. My financial plan is much less detailed, but still entails (at least the planning level) quite a bit of minor details.

This past week, I spent 4 days in the bush with 8 other guys. Over these 4 days, I was up to 40 kilometers away from civilization, only reachable by canoes and leg power. I love these trips, which I’ve taken almost every year for the last decade. I seem to always come back to “the world” completely exhausted, but with a much different view on life.

In the bush, everything the 9 of us need for the period we’re in the wilderness, we need to carry on our backs, whether it’s water filtration systems, food, first-aid supplies, or shelter. We hauled seven 70 pound backpacks and 4 canoes on treks between lakes, around waterfalls, and over beaver dams to ensure we could survive in a comfortable manner. This kind of trip forces a focus on the daily event ahead, rather than planning too far into the future, which is the reason I think I love the trip so much. There’s no way I can be overly worried about work, or house stuff, or whether what I’m doing with my money is the best thing I could be doing. All that really matters at the moment, is pulling water with the paddle, or moving the pack with my feet.

I’m sure everyone would benefit from some level of rough living, to provide a bit of change of perspective from their everyday life. I live fairly sparsely, when compared to most people in my North American demographic. There is a realization when you have none of that “stuff” around you, or even any use for the vast majority of your worldly possessions that these things you’ve purchased are nothing more than “for fun”. This kind of realization allows for more appreciation of what I do have, and makes me think more about the “Wants” on my list.

It’s trips like these and the realizations that come from them that allow me to maintain my current path towards early retirement. The realization that I don’t need more stuff, I just need to be able to afford the stuff and activities that are most important to me, along with (more importantly) the time to enjoy them.

Is there anything you do that keeps your financial plan in-line?

Long-term Insurance

Posted by Dave on August 26, 2014

One of the things that I enjoy when I write for Tim’s site is the feedback I get from readers on my financial plans. While I joke around, for the most part I’m a guy who kind of pretends to be a grown-up, who kind of has his stuff together enough to discuss my plans of early retirement. I enjoy the exchange of ideas that has happened between myself and everyone who takes the time to comment on some of the schemes I have put forth.

Leaving the workforce 20+ years before “normal” retirement age is something that not very many people have done in the past, or if they did, it wasn’t really written about widely. Not many people know if the plans they set out will work in the long-run, because the long-run takes so long to test for. I can run my average investment returns through prediction machines and compare the returns against all sorts of potential expenses. I can have a certain amount of assurance that the financial “plan” I have in place will work out okay in the long-term, but who knows? I may go broke and be scrambling for any type of job I can find 5 years after I quit work for the last time – this is the major risk of this kind of plan.

My wife and I both know the risks that may come from exiting the workforce early, and have discussed the possibility of insuring that we have enough money to make it through. One of the possibilities we’ve talked about is working at a subsistence level, in order to allow our investments to compound for another 5 to 10 years.

Given our low annual budget, it might be a good time to learn a new kind of trade – whether it’s an actual trade, or just something interesting to do. Given the fact that we won’t have debt or savings requirements, we could live a basic paycheque to paycheque lifestyle, while gaining a bunch of free time in a semi-retirement stage.

We just don’t know how any of our financial plans will turn out though. I have no idea how my current investment plan will work out over the next 10 years pre-retirement, or the 50 years after retirement. I can be pretty sure we’ll be okay with the goal we have, but a few extra years of compounding might be beneficial, for very little “pain” on our end, besides having to get to a job sometimes. The benefit from this type of arrangement is that we could spend with comparative “reckless abandon” compared to the savings rate we are employing these days.