Posted by Tim Stobbs on January 29, 2014
I started to reply to a comment from Paul N and quickly realized I needed an entire post to answer it. Here is part of Paul’s comment and question.
I read a few lines on another blog, ” Depriving yourself of everything you enjoy is not a formula for long-term success”. It leads to “Frugal fatigue”. How does one find that balance between?
This reminds me of my early experiences on spending less and saving more. Way back when I started this mad journey to retire early I was entirely focused on cutting back on our expenses. Then after my first son was born 10 weeks early and our house needed its main structural beam replaced (in the same month) we ended up with pile of debt. So in response I cut to the bone for spending and we poured everything into paying off those debts.
I can assure you that hacking expenses to the bone is an effective short term measure but I agree entirely with the quote from the other blog that it is a recipe for disaster in the long run. Why? In summary, you learn to dislike your own life and begin to resent your plan regardless of how attractive the outcome is. I experienced it first hand and so after some of the initial debt repayment I eased off the other savings and looked at our spending carefully then expanded the spending again, but only in certain key areas.
We personally focused on expanding spending on what matter most to us and what we enjoyed about life. For example, my wife likes eating out so we earmarked some cash each month to allow that to happen. Then for a while I can honestly say we found our balance point…well at least for a while. Then over the years I haven’t paid as much attention to the spending and it crept up a bit higher. Not huge amounts, but it moved up, some of that was just having a growing family (we now have two kids and a dog). Yet now I can honestly say I think perhaps we went a bit too far the other way. I don’t agree that all our spending was a good idea from a balance point of view (I won’t say we are hugely over spending, just a bit). So I struggle with asking myself where is the balance point again, because to be honest is shifts all the time.
The shift in some regards is normal, you change over the years and so does what matters most to you. So your spending should evolve with you to keep that balance, but often it doesn’t. We tend to form habits and keep them even when their outcomes no longer really serve us.
So my plan to try to head back to balance again is to go over our spending data with a detailed eye and get some input from my family on what they like the most. Then examine the things we don’t use that much or like and see if we can’t reduce our spending on them. This may free up some cash for savings or it may just end up boosting up others areas of spending, it all depends on the net results of the exercise.
In the end, balance is a temporary state, you have it and then it leaves, so you have to cycle back around to it. Frustrating, I agree, but it is the truth. How do you find your balance point between saving and spending?
Posted by Dave on January 28, 2014
The last couple of weeks, I have written about my past and present financial plans, today I thought I would write about one possible path that my wife and I have looked at.
My plan in retirement is to continue with my frugal lifestyle, spending as little as possible and living off of the investments I’ve made during my working years. One of the benefits of living on very little money, is that we may be able to live essentially tax-free in our retirement years.
In 2013, according to CRA, the basic personal amount Federally is $11,038, Ontario has an amount of $9,574 – both of which are inflation adjusted. Given our current level of spending, we would be fairly close to these minimum amounts, resulting in very little taxes payable to the government. My preference would be to pay zero taxes, because (like most people), I don’t like to pay these at all.
Most major “capital” expenses will be taken care of going into our retirement years. The two major items (our house and car) will be paid off and hopefully well-maintained, and I can’t foresee much in the way of major expenses (outside of normal emergencies like a furnace breaking down or a car accident) taking place, which can hopefully be taken care of out of an emergency fund.
Right now, we don’t spend a lot of money. Like most people, our spending priorities probably wouldn’t make sense to anyone but ourselves. When I look at variable expenses in my monthly spending, the vast majority of it is on gas for the car to visit family and friends, food, and drinks. Other than this spending, we spend almost nothing on “stuff” – we would kind of look like we were living in poverty (compared to a normal North American family).
Our low expenses in comparison to the income we bring in is the main reason we are even able to contemplate an Early Retirement path. I think the vast percentage of people would balk at our lifestyle, but at least for now are more than enjoying the current way we live. What would maybe look like poverty to an outsider, is comfortable and stress free to us. We have savings, we have more than enough food to eat, we have a car to get around with and we can support our various hobbies and interests that we enjoy doing in our free time. Our goal is to increase the free time portion of our life to have more time to enjoy these hobbies and interests.
Do you feel you’re missing out on anything by taking part in an Early Retirement path?
Posted by Tim Stobbs on January 23, 2014
So today begins an interesting experiment for our household. We are going carless for a week. Why? Well the timing is good. Our car was involved in an accident a while back and is finally going in to be fixed. When I booked the appointment I was warned that they would need it for at least five business days or in reality a week.
Given how much we spend on our cars the reality is they are likely the second biggest driver on your retirement expenses after your house. Having and maintaining a car can easily require an extra $100,000 or more in retirement savings per vehicle. So dropping to one car is good for your retirement, better yet? Going carless.
Rather than take the easy way out and get a loaner or rent a car while ours is being fixed we have decided to try out the other side of the equation and do without the car for a week. I’m curious how this will turn out since this really isn’t a nice time of year to do this kind of experiment. In fact, it is often bitterly cold outside at times around now so this week should give me a fairly good idea of what life could mean if you don’t own a car.
So how are we getting around? Well to work and back I’m taking the bus, that used to mean losing like an extra hour of my day. Yet recently the bus routes have changed and there is now an express route downtown that actually has a travel time around the same as my usual drive home. So other than the walk to the bus stops my commute should be very similar.
For more local things we plan to just walk around. The reality is I’m perhaps a 30 minute walk at most for any appointment or errand I may need to run in the next week (except the work commute). Long, but certainty not horrible if the weather isn’t bad. If the weather is awful, I also have the option of taking a bus.
In the end I’m sort of excited to try this out, since I admire places with excellent public transit where you really don’t need a car. Yet I’ve always dismissed that as an option living here. So it should be enlightening to actually know what the issues are and exactly how bad they can be.
So if anyone has some tips on not having a car I would be glad for the help. Or if you do have a car, what could you do to use it less?