April 2017 – Net Worth

The following is an update of Tim’s plan to retire early.  Please note we are mortgage free.

Our ultimate goal between investments and the home equity is a net worth of around $1 million.  The investment part of that target is $582,000.

Investments

Accounts

RRSP $59,700
LIRA $16,470
TFSA $86,175
Pension $161,650
Wife’s RRSP $88,370
Wife’s TFSA $78,150
Wife’s Taxable $51,060
High Interest Savings Account $30,410

Investment Net Worth $571,990 (increase of $11,190 over last month)

Home Equity

Estimate $395,000

Spending

Last Month $1741

Our life insurance came due this month for $324.  I toyed with the idea of reducing our coverage again, but decided to leave it until next year.

We also bought a new dining room table.  We honestly were not even looking to replace our current set until my parents mentioned they were downsizing and wanted to sell their solid oak table and chairs for $500.  It needs a bit of work to restore the finish but in very good shape overall.  Given we have family and friends over a LOT for meals, it seemed like a good investment to buy a table that can seat more people.

Well this month we didn’t actually spend money on renovation, instead I signed a quote and booked our roofer to replace the shingles on the house.  That should occur in the next month or two (depending on the weather of course).  Since this cost will end up being a bit huge I’ve decided to track our spending on renovations as a sub-total this year as it will heavily distort our spending for the year.

Trailing Last 12 Month Renovations $2350

Trailing Last 12 Month Average Everything Else $2656 (or $31,874 for the last 12 months)

Results

PF Score: 30.3 {Target 31}

Net Worth ~$966,990

Commentary:

You think I would get used to setting a target and overshooting it by now? But somehow it keeps throwing me a bit that our investments keep going up by over $10,000/month (about half of that increase was contributions).  I suppose on the plus side a bit extra money at the end of our plan really isn’t going to hurt us.  It just adds a bit to our safety margins which honestly is nice to have.

Of course this does mean that looking at the numbers is getting less and less relevant.  I’m now just counting down the time until I leave (and no I still haven’t told you that date yet…I won’t until I provide my official notice at work).

Any questions?

Investment Net Worth April 2017

(click to make bigger)

My Wife’s Plans

Jay the other day asked the following:

With your plan to have $5000/year income from your wife’s work, that’s the only part I question. Obviously you know the situation better than I do, I’m just wondering if she’ll want to end sooner because you’re not working and she’ll want more time with you. I don’t think you’ve written enough on the subject, its ready for a post.

Thanks Jay for pointing out to me that I haven’t discussed my wife’s plans much on the blog.  This is despite us personally having many discussions on the topic.  So what exactly are her plans?

Well in general I think you all know that she has no intention of stopping working for now even when I retire later this year.  We discussed it and she decided that she enjoys her work and isn’t ready to stop yet.  So in total she puts in about $7200 a year of income to the house from her business.  The business has been running since 2006 (with the exception of a year long maternity leave) so it is mature and the income is stable overall.  So I’m not worried about her having less income for long periods of time which could impact our plan.

The interesting part of her situation is when she stops working she has very little desire to ever work again.  Unlike me where I can see me picking up some income after I leave my day job.  So in that regard we need to ensure when she stops that we don’t need any further income from her in the plan.  After a few discussions she has indicated she sees herself working for another five years or so.  This of course gives our investments some time to grow and eventually cover her retirement income as well over that period of time.  In order to give her control over the timing of that I gave her the following guideline: as along as we keep the current house you have to keep the daycare. The reason for that guideline is simple.  We bought the house expressly for its layout being suitable for her business.  As such, when it comes to just us as a family it is a bit too big.  So we plan on downsizing the house in the longer term, but to reflect that in our plans I put her in control on when she wants to move and retire.

Of course, that is the plan but has Jay points out: what happens when she changes her mind?  Well I really don’t see that occurring to just spend more time with me.  In fact, if I’m honest, I have concerns about the opposite occurring.  We aren’t used to spending more than evenings and weekends together expect for vacations.  So if anything I may be ‘requested’ to leave the house periodically to allow my wife to recover from me invading her routine.  But if she does insist of leaving her business earlier than five years we would then just sell the house and downsize.  The left over equity would then fund her remaining commitment to our expenses.  Which keep in mind is a small amount at just $7200/year for five years.  So worse case, after a year she wants out.  We are only missing $28,800 which is like 7.2% of the assessed value of our house.  Not a big deal.

So hopefully the provides some information on my wife’s plan.  Even with working another five years she will still be an early retiree compared to most people and likely done work by the time she turns 45 or so.

I hope the helps explain things.  Do let me know if you have any follow up questions.

Peak Earnings

I was chatting the other day with someone about my plan to retire early and they noted that if things go wrong that “You may never earn this much ever again.”

To which I frowned and then replied, “But that doesn’t matter.  I’ve NEVER spent my entire salary, so who cares if I fail and go back and earn less? I don’t.”

You see that is perhaps why I’m a LOT more relaxed about my plan to retire early than most people.  I’m not obsessing about the fact I’m currently at my peak earning potential in my life.  That I believe is the logical flaw that sucks in a LOT of people who fall into the one more year syndrome.  They erroneously assume you have to keep working since you can potentially never earn this much income again.  They confusing having to work again in the future with having to have the same income and/or career.

The issue comes down to this, even if things go horribly wrong and I have to go back to work for a while I am under no obligation to go back to my current career or pay range.  Honestly, I earn currently north of six figures and only spend a bit over $30K a year.  So in reality if I have to go back to work to save some more money my actually target is to earn more than $30K a year to allow some savings while paying the bills.  So any job that pays $31K or more will work.  It’s just a matter of how much do I want to save and when I quit again.

Of course this ignore the reality that we already have substantial assets and I would likely notice things going wrong sooner than later.  Thus in fact I won’t even need to earn more than $30K to pay the bills, the fact of the matter is earning ANYTHING would result in me saving some money.   So even some mindless minimum wage job at half time would be enough to help build up my savings again.  It would just be at a slower rate than I’m doing right now.

So yes, I’m currently riding my peak earnings towards my early retirement date and if that is the case, so be it.  I can give up the really high saving rate and roll the dice on my current plan.  Yes, I may lose and have to go back to work at some point doing something, but if I win I will have an additional 25 years of time to do things that interest me.   I know what I’m choosing.

So what about you?  Would you spend an extra year or two working at my current job to buffer against ever working again or take the risk of having to do some work in the future? Would you care if you worked again in the same field or not?

A blog about early retirement and happiness