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Saturday, April 18, 2015

What’s It For?

Posted by Tim Stobbs on February 18, 2015

You have likely already been reminded you should be investing some money in your RRSP today.  How do I know that?  It’s the season for it so most people via the 1000s of ads out there are told they really should be investing their money.

Yet I’ll offer you a more basic question than: RRSP or TFSA, stock versus bond, or even index fund or actively managed…..the question is: why?

Pardon?!?

Why are you saving and investing the money at all? What is the purpose of the investment?

*silence*

Need a hand? Perhaps the answer is: to retire.  Which is a good idea, but what does that look like?

*longer silence with confused look*

Far too often we save blindly because we fail to really understand what sort of lifestyle you want in your retirement.  After all, depending on the lifestyle you want that will drastically change how much you should be saving and how early you can retire.

For example, let’s say you have a couple who is in their 50s and they have been really good savers and have $500,000 in investments and a paid off house.  Do they need to work any longer?  Perhaps it depends on the lifestyle they want.

If they choose a modest life of mostly hanging around the house, being involved in the local community helping out with a few organizations, reading a lot of books and playing with the grand kids, they don’t really shop a lot and when they do they tend to buy high quality items that last a long while…well depending on the exact numbers they could retire in a just a year or two.  Yep, if they don’t need much income, perhaps $24,000 a year, they could potentially retire shortly.

But if they want to travel the world for four months of the year, enjoy shopping a lot and are real foodies that enjoy all the finer things in life.  Again it depends on the exact number, but if they spend like $5000/month.  They may very well have to keep working until they turn 65 or later.

It all depends on the why.  Why are you saving?  What sort of life do you want to lead and what is stopping you from doing that at least in part right now before you even consider retiring?

The illusion is that someone one choice is better than the other, when it fact, what matters most is which one appeals most to you.  If you have never really spent on $5000/month when you were working, what on earth do you think you will be doing when you retire?

What do most retirees end up spending? It varies but on average they spend $30,000 to $40,000 a year.  That’s it.  No huge lifestyles of the rich and famous, but rather a modest but happy life having lots of time to do those things you enjoy.

You could do less than that if you want, especially if you consider your mortgage was paid off.  So if you aimed for $30,000/year target you could be retired rather easily on $750,000 in investments.  Yep, that’s it. Forget about the million dollar mark, you don’t need it.

So if someone tells you they need at least $2 million or more to retire…I would ask why?  It won’t change the answer in some people’s cases, but more often than not they don’t understand the why and end up with overly large targets.

Instead, take the quicker way out…think about what you really want from your retirement and then plan around that.  The more detail you can provide the better plan you can make.   It won’t also be easy to do, but in the end you at least know exactly why you are putting money into your RRSP or TFSA.

What are you saving for?

The Winter Blues

Posted by Tim Stobbs on February 11, 2015

It’s been cold and dark for weeks now and it is started to impact my mood.  I realized just the other day my capacity for enjoying life seem lower than normal.  It was like the sun had been put on a dimmer and everything just looked a bit more gloomy. Or that things at work that would normally slide right off me have been pissing me off.  I’m not even going to suggest I was anywhere near depression, but rather just a mild seasonal case of the winter blues.

For me this isn’t a normal occurrence, but rather the result of a series of unrelated events that created a perfect storm for me to feel a bit down.  Individually these are all minor events, but they all compounded to make me feel down:

  • My work has several tight deadlines towards the start of the year.
  • Everyone around me at work keeps telling me about their trips to somewhere warm such as Florida, Dominican, Hawaii, California…you get the idea.
  • We have had a few recent periods of extreme cold where basically I’m rarely outside for more than 15 minutes in a day for a week straight.
  • I haven’t taken much time off since getting back to work after the New Year.
  • Our weeks have been a bit busier than normal between kids events and volunteer commitments, so I’m not getting my usual amount of downtime in a the last few weeks.

So what changed to break me out of this?  Well the first event was realizing that I was feeling down.  Odd as that sounds realizing that I do have an issue is half the battle.  After that I could actually take some proactive management of the issue.  I’m not suggesting any of the following will work for everyone, but rather what I’m doing to help me get back more to normal.

  1. Stop focusing on the negative.  It can be easier to get sucked into a world where all you seem to do is focus on what isn’t going well in your life.  The reality is that my situation hasn’t really changed, only my approach to things.  So first up was try to consider the positive of the situation rather than jumping to the negative.  Life is actually fairly damn great for most of us if you think about it.
  2. Do something I enjoy.  Read a favorite book, watch a great upbeat movie or go play with my kids (like build Lego, go sledding or skating).  Don’t just brood in front of the computer reading the new headlines or think about my taxes.
  3. Take some time off.  I’m coming up at a long weekend right away so I’m planning on making sure I structure my weekend to maximize our free time.  Also when I can I’ll try to take an extra day off soon to make a random long weekend.
  4. Get outside.  Over a long cold snap it is easy to hide indoors for a while, but when we get even a moderately nice day I need to go head outside for a walk. Since the sunlight and the exercise will do wonders for me.
  5. Celebrate something.  Perhaps an unbirthday, or maybe this Wednesday needs a little party in the house.  It doesn’t have to be anything meaningful, but rather just a reason to eat a good meal, laugh with some friends and have a good time.  Heck, even having a movie night with the kids can be a great time.

The trick for me overall is to break out of the cycle of feeling bad.  I find it just turns into a endless cycle of feeling worse and worse if I just let this condition fester.  Negative feelings can just feed on itself if I don’t interrupt the process.   Just making an effort to change things often can help me move on to feeling better about life.

So do you ever get the winter blues? If so, on a regular basis or just once in while?  How do you break out of it?

The End of Worry

Posted by Tim Stobbs on February 4, 2015

Did you notice that the other day?  That people around you seem to be suffering from near permanent low level anxiety or worry about everything?  They have problems falling asleep and even if they do that they wake up in the middle of the night thinking about things.  They worry about their losing their jobs, paying their bills, making sure their kids get a good education or even their next vacation.  There is a lot of worry in the world.

Or not.  It is possible to have a life where you rarely worry about much of anything.  I live it most of the time.

No, I don’t drug myself to hit this state of bliss, or learned some secret meditation, but rather I control a few inputs into my life to achieve a lack of concern about the worry that haunts a lot of people.  I find the following are the key points that work to kill worry for me: I have a financial cushion, I know what I can’t control and I control the amount of media I consume.

The first one is rather obvious when you think about it.  Concerns about losing your job, paying your bills or the economy in general can all be put to rest just by having some money put aside for those unexpected things in life.  Every year I track my spending the same thing happens…something comes up I didn’t expect.  It could be a broken fridge, a vet bill for the dog, an extra trip we weren’t planning on taking for a wedding or whatever.  Yet it always happens, so rather than freak out about it and worry…just keep some savings around to cover the costs that come up.  Shockingly easy when you think about it, but so many people don’t have some kind of savings to cushion them when things go wrong.

Next up, if you pay attention to the media via the evening news on TV, the newspaper or even magazines you might very well think the world is going downhill all the time.  Yet in fact when you look into some statistics you might find the very opposite to be true.  A classic example is crime.  If you want the news you might think things are getting worse out there with stories coming out about crime all over Canada, this is also fed by our politicians ‘tough on crime’ agenda.  But in fact since 2003 in Canada the Crime Severity Index has decreased by 36%.  In reality things are getting safer, but due to the ability to push a story out from anywhere in minutes we might be left with the impression there is something to worry about.  So the solution to this is just consume less media.  I now only skim the headlines daily and skip the vast majority of coverage around crimes.  I realize I just don’t care about 95% of it.  It doesn’t impact my life unless I let it, so why even worry about it.

Which brings me to last point, learning to accept what you can control in your life.  You might have noticed your lack of control on the following: other drivers on the road, the weather, your duties at your job, your family, the stock market, the price of just about everything in your life…well when you really come down to it you don’t control just about anything.  Except your head.  That you do control.  So let go of trying to control things that you can’t control anyway.  Accept the fact you can’t control the vast majority of your life external to you, but you can control how you feel about things.  You do control your feelings.  So when a driver cuts you off you can be angry or feel pity.  Your choice.  Fear, anger, hate, worry….don’t seem to help much (and can lead to the Dark Side of the Force…Yoda is on to something I tell you).  So try to be positive about things and accept your lack of control.

In the end, most of your problems in life really just exist between your ears.  Your perception of your world is your world so don’t under estimate the power you have to change your life.  Recall that only 10% of your happiness comes from your circumstances, so take some control of that remaining 90% and stop worrying about things.  It doesn’t really help you in the end, so let go of it and try to move on.  It isn’t a easy thing to change and yes it does take time, but the rewards of changing it are priceless like good sleeps just about every night and not worrying about things most of the time.

How do you stop worrying? I’m curious what others have found helpful.