Category Archives: Spending

The Christmas Budget

“Sorry.” My wife says to me.

“For what?” I ask.

“I over spent on your Christmas present.” She replies.

I shrug my shoulders, “It happens. I’ve done it for you on the odd year. How much?”

“$7.” She replies with a slight grin.

You see why I love this woman right.  She feels the need to tell me she went over budget by $7.  Not because she feels guilty, but we just have a long standing policy of being honest with each other.  For the record, I under spent on her by $5 this year.

Yet to me that is a perfectly normal part of our Christmas budget.  Yes you will over spend on somethings.  That is entirely okay to do, as long as you are under spending on other presents.  So for us, this has been the rule of thumb for years.  Just because you have $5 left over in the budget doesn’t mean I NEED to spend it on one more item for their stocking.  After all do you really think buying that one little thing will make or break their Christmas? The answer is no (and if not you have an entirely different set of problems).  The result of this long standing rule, well we usually come under our Christmas budget.  Which is good because some years we have made mistakes like forgetting to include mailing gifts to the other side of the family.

What also helps is we always set the budget prior to starting to shop and limit our gifts to mostly family.  I don’t give gifts to our kids’ teachers, I don’t even know my mailman’s name and I don’t buy anything for a co-worker.  We will bring a small gift is invited to a party or supper but usually the consumable kind (like wine or dessert).  It also helps that both of our families have started gift exchanges for the adults.

In the end, I believe Christmas is about being together with people.  I like getting a few gifts (I won’t lie) but really I don’t need much to be happy.  I rather spend an afternoon drinking coffee and visiting than get another present.

So how do you keep your Christmas spending in check?

Non-Linear Spending Models

‘I’m wrong.’ I thought to myself the other day as I was building out a more detailed model of our spending for the next five or so years.

The reason was for a very long time I had always done my spending models based on a linear spending plan and ran the calculations on an annual basis.  Basically I just assumed I would spend $30,000/year regardless of the year. The year 2020 was the same as 2021 or 2022. It was a conscious choice to simplify things when I started but now that I’m looking at modelling my spending but as I looked closer I realize that assumption really doesn’t hold up.

Spending is actually a non-linear function.  Some months are higher and others are lower, that I’ve always know from my previous net worth posts where I track our spending. Yet what I didn’t consider is how that applies to years of spending as well.  This became particularly obvious when I ran a test case where I assumed I started my early retirement in 2018 and after adjusting for other income sources (like my wife’s business and government benefits) I ended up the the following planned investment withdrawals by month (assuming I don’t bring in any income from a job).

non-linear-withdrawal

So you can see it, while I still averaged our monthly spending over the calendar year the requirements to take money from our investments isn’t a constant stream on a year to year basis.  This is partly why I started down the idea of semi-retirement since because of our non-linaer spending our investments should actually continue to grow even after I’m not at my day job. In fact we will be pulling out less than $1000/month for a period of about two years. This becomes a bit of neat trick as it allows us to keep saving towards full retirement even when we are only semi-retired. Of course any additional money I earn other than investments will further drive down those numbers and allow us to shift to full retirement sooner if we wanted.

Overall I estimate that because of this fact we only need to be semi-retired for about five years or so and then we have the option of shifting to full retirement.  Or alternatively we could keep working beyond that time and put the money into a slush fund for travel or other fun things.  The point would be we really don’t need the money for day to day spending.

In the end, it was nice to know that my idea of semi-retirment looked more than reasonable and put my mind at ease with the entire plan, all because I stopped thinking about things in a linear fashion.  Have you ever had an ‘ah’ moment with your retirement planning?  If so, what was it?

Don’t Like Your Cell Bill, Then Buy Stock

Perhaps the issue is Canadians are too polite? Or more likely we have a market so dominated by a handful of companies that the telecoms can and do charge what they want for your cell phone.  A fairly good analysis of the issue is available in this story.  Yet the author missed one entirely major point in the story in my mind. If you can’t beat them, just buy them instead.

At least that is part of my own strategy when it comes to dealing with high telecom bills.  Rather than complain, we took a two fold approach.  First up was buying all you actually use.  For example, my wife almost exclusively texts with her phone (rarely a call and no data as she usually uses her tablet at home instead).  So we got her a prepaid phone and signed up for a basic plan with Rogers.  So for $5/month she gets enough texts to be happy and has a bit of cash on the account if you wants to make a call.  It works for her at the moment.  As our needs change we can look for something else.

I’m not saying we are perfect here, I still pay too much in my mind for cable and internet, but overall we have made some progress over the years getting a handle on what we actually use and then buying as close to that as we can.  The trick is to come back to the issue every once in a while and see if any changes could help you lower your bills.  I’m currently keeping an eye on the ‘skinny’ cable packages and playing around to see if we could use one of those to help lower our bills a bit.  The bane of my existence right now is getting CFL games on some kind of steaming package, then I could get rid of our cable bill entirely, but alas that doesn’t exist yet. Sigh.

The second part of our plan was to buys some shares in those previously mentioned telecom companies and get a nice stream of dividend income form everyone else paying too much for their cell phones.  After all a few hundred shares at a yield of 4 to 5% (which is roughly where we bought in with Rogers and BCE) and you suddenly have some income to help pay those cell phone bills with money for the very company that is sending you the bill.  I sort of enjoy the irony that Rogers pays us money to help pay our bills.

In the end, I’m happy with our current setup.  It’s not perfect, but I don’t feel so bad about paying my bills when they keep sending dividends to our trading accounts.  So how do you cope with your cell, cable or internet bill?  Any other ideas on how to save money?