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Friday, April 18, 2014

Some Compromises

Posted by Dave on March 18, 2014

My wife and I are generally joined at the hip on weekends, this past weekend being one of the few we’ve been apart over the 5-years (this week!) we’ve been married. I went to visit friends in Toronto, while she went on a “girls weekend” to Buffalo (which seemed to be a shopping trip more than anything). People who have read this blog for a while might realize that a trip focused around shopping is my own personal hell.

In our household, I am the main driver of our financial plans. For a 15-year plan to work, some compromises needed to be reached. Mostly, these compromises center in on me butting out of her business most of the time, as long as she has done what she needs to do on a monthly basis to maintain our financial plan. This method is done by design in response to the statement “This plan seems like a good idea – tell me how much I have to give you to make it happen and then leave me alone” (or something like that). So, she essentially writes me a cheque once a month and I minimize the amount of negative complaints around her purchases (but really, who needs 3 pairs of boots that look exactly the same?)

If we made our budget tighter, and left less money for shopping trips to Buffalo (or trips to microbreweries in Toronto for me), we would be able to retire a few years earlier. It is our choice to “ease back” on the intensity so that we can spend money on some stupid things that would probably be ridiculous to hardcore Early Retirement people.

Left to my own devices, I would probably lean less into silly spending, and more into exiting the workforce as quickly as possible. Easing back on our savings and spending allows my wife to buy the vast majority of things that she wants to buy, while dealing with a super fiscally conservative husband. I think we have both compromised to achieve the balance we are at today. I am less of a stick in the mud around money, and my wife is not constantly being harped at for her excessive purchases of $8 “girl shirts (which are basically disposable clothes).

Are you the “driver” of your financial plans? Were you able to meet in the middle with your significant other, or are did you do it on your own?

Contingency Plan

Posted by Dave on March 11, 2014

The basis of my entire Early Retirement plan is that I will be able to achieve enough in the way of investment returns over 10 and a half years to live off for 55 years (which will bring me to age 100). Both my wife and I realize that this goal is aggressive, and may not be doable – depending on both our investment returns, as well as our spending patterns over the next decade. If either differs significantly, our plans could change.

Although our day-to-day life is relatively stress free, due to my inherent nature as a financial worry-wart I do get concerned at times about our ability to maintain the lifestyle we want to have after retirement. I get troubled about the possibility of health problems, of market crashes, and many other things that could possibly go wrong – sometimes in excess.

The thing with most of these negative thoughts is they would be an issue whether I was retired or not. I don’t get insomnia from these kind of dark thoughts, they just exist at the back of my mind sometimes – a part of my “personal finance” brain that won’t shut off. I have (to a certain extent) included contingency plans into my financial “base”.

I haven’t included either my work pension or any government money into my financial plans. My defined-benefit work pension is not inflation-adjusted, which will obviously leave me much less buying power at retirement. I would prefer not to depend on CPP coming through, as I don’t have a lot of faith in my government to pay up 30 years from now (whether right or wrong – as noted I’m a bit of a pessimist).

Either of these sources of income will provide a boost to my available dollars from age 65 – 70 onwards. This is the period of time that I am most concerned about – an age where it would be much more difficult to find a job anywhere, at any pay, and also an age range where the probability is high that health problems will become an issue and an additional boost to retirement funds will be welcome for peace of mind.

Both of these pension plans act as a savings plan that I really had no choice but to become involved with. I would have preferred to have control over either of them to do as I liked, but as a part of my overall plan, it seems like this buffer will add some insurance to my overall aggressive plan – beyond the obvious working for additional years.

Do you have a contingency in your personal finance plan?

Living (Relatively) Stress Free

Posted by Dave on March 4, 2014

About a month ago, my workplace laid off around 15% of the employees in my 400 person company, with no warning to the staff of the company (as is usual in these type of circumstances). I was not affected by this move, but it created quite a lot of anxiety internally with my company, as there were very few departments which weren’t impacted by the corporate “shuffle”.

Due to our fairly low monthly spending amounts, compared to the amount of money we bring in, my wife and I are able to cover all “fixed” expenses through either one of our salaries. We set up our budget like this purposefully, as in the past, my wife has had a couple of terrible jobs. I would rather she (or I) have the flexibility and freedom to leave this kind of situation, instead of feeling stuck due to our lifestyle requirements.

Stressing over money (or anything really) isn’t healthy. I recently read a book called “The Cholesterol Myth” – in it, the author described two kinds of stress. The first kind of stress is the kind you’d get being chased by a lion – once you lose the predator, the stress is removed from your life and you go back to “normal”. The second kind of stress is the dull, persistent stress experienced through work and personal relationships – the kind of thing that doesn’t have an easy fix and stubbornly nags at the back of your mind. It’s the second kind of stress that leads to health problems and is one of the main drivers of heart disease today (besides terrible diets being consumed by most people).

My wife and I would rather not have to worry about money. We think it’s healthier for our relationship and allows us to enjoy our daily lives much more. There are some things we do that would seem ridiculous to others – like having a bunch of money sitting in a high interest savings account rather than being invested, but these are done to reduce the impact of major life occurrences to our normal spending “curve”.

We are also responsible only for ourselves – we don’t have children, or even any pets that are dependent on our ability to create wealth in order to eat every day. This type of arrangement also offers some additional flexibility in our financial decisions – we can act more selfish in our spending and saving.

I am by nature a bit of a worry-wart when it comes to money, perhaps borderline paranoid when it comes to the possibility of extended unemployment. The benefit of our goal of Early Retirement, is that even if we only get part way to the goal by the time we reach age 45 (our hopeful date of financial independence) – we will hopefully continue to live a financially stress-free life.

Do you stress about money? Have you in the past?