Posted by Canadian Dream on July 15, 2008
Ok after some thought I’ve finally figured out what drives me a bit nuts about emergency funds. Most people that save one always end up having too much money in them. Why? The don’t break down their expenses to the essential payments.
Let’s face it. When things go REALLY wrong you are likely to want to take a few measures to ensure you are going to be fine. So some expenses are just going to go. Cable TV will be gone and so will high speed internet. Long distance plan will be gone too. You will likely going to cut down your spending to your essential items.
So if you are going to use a rule of thumb like 6 months of expenses, do it on your essential expenses not your regular expenses. For example, my regular savings/spending amount is around $3200/month. My essential spending is around $2300/month. Which would mean I would have about $5400 less in an emergency fund.
The advantage of this is two fold: a) it is easier to save that much money in the first place b) you don’t have too much money tied up in low yield investments (like a high interest savings account).
I personally don’t have a dedicated emergency fund, but rather a larger cushion of savings in various accounts and a handy line of credit. Why? Because for those odd times I need an emergency fund I can borrow up to $10,000 for a low cost of $40/month. I can float that loan for a lot longer than burning up my savings directly. I’m comfortable with this and it works for me. Yet if you like the security of a emergency fund I suggest you think about doing an essential one.
Posted by Canadian Dream on June 24, 2008
On my quest to retire at 45 I’ve noticed the single biggest thing I still face very frequently is staying on the path of saving and not getting too distracted by “I wish..” “I want…” and other temptations. Let’s face it there are a huge number of ways to spend your money and all of them have some appeal at some point.
One of my recent temptations was a lot in the same beach community as my parents cabin. I thought “Oh, that could be nice. My own place to get away and not have to be surrounded by family when I go!” The issue of coarse is it is huge sum of cash to buy the lot and then build a cabin. Then I would have to deal with a second set of property taxes, a second set of bills and then looking after the place.
In the end I decided not to. Yet the temptation was there and I had to work it over in my head before I could say no thanks. It is fun to play with this ideas, but don’t let yourself get seduced by all the good parts try to also consider the drawbacks to the situation as well. It can often be an eye opening exercise when you realize your little dream has some pitfalls as well as good parts.
So how do you handle temptation and keep on your path?
Posted by Canadian Dream on June 23, 2008
Well I did manage to wake up before my alarm. So that is a good sign as I head back to work after being off for the last 7 weeks. The bad news was a power surge to the house had reset the clocks in the house, so thank goodness for those late night baby feeds otherwise I could have been late for work this morning.
I have to admit I’m feeling a little nervous about it all. So what has happened when I’ve been gone? How much work is piling up on my desk? How many emails, voice mails and meetings will I have to attend to come up to speed?
On the other hand I’m worried about how the boys will handle being home with mom all day long. Also how mom will handle the boys. We’ve all grow rather used to having each other around, so going back is going to be a little bit of an adjustment for everyone.
Overall regardless of what happens today. I’m so happy I did it. This time with my family was great and I would encourage any fathers thinking of taking some time off to talk to their spouses about it. It really is a very good thing to help a family adjust at the start of a new baby at home.
Not to mention I’ve decided I could handle the early retirement lifestyle. I had no problems at all filling up seven weeks with things to do and I could easily see filling up 52 weeks a year without work (even without kids). Perhaps my only problem going forward now will be the slowness of the projects that I now face using regular weekends.
