Posted by Tim Stobbs on January 20, 2014
That’s it…I’m flushing any goals for my retirement plan for this year. Not one single goal…instead I’m planning a rough target of contributing $50,000 to our various investments. Why only a rough amount? Because I already have a longer term target of hitting $350,000 by Jan 1, 2016. So if I increase my investment net worth by about $50,000 in 2014, I should be well on my way to my longer term target (which again is completely picked out of thin air).
You see I’ve hit the point in my savings routine where I no longer have to try all that hard to do it. I’m just used to saving a lot of money and not spending a whole lot. Also I’m not particularly interested in trying to save more. I’m happy with our current savings rate and I rather focus my energies on other projects.
Although I have to admit that my overly analytical brain really likes having targets of some kind to gauge my progress…hence a rough target for the year. I’m giving a little ground here to prevent part of my personality from having a crying fit over having no numbers to look at.
Would I recommend this idea for most people? Certainty not. It’s that making me a wee bit of a hypocrite? Yes, I can see that point of view, but you have to recall I’ve been at this saving for retirement aggressively for over seven years now. For me saving is so ingrained into me now that spending my full salary in a given year is nearly incomprehensible.
When you are starting out I would map the goals right down to a given month. You need that goals that detailed because it is very easy to fall off the wagon. So having a monthly goal and then meeting it gives you a little rush which is helpful to keep you motivated. At month number 85, it ceases to be helpful, now it is merely a habit.
Do you bother with yearly goals? Or do you prefer monthly? Why?
Posted by Tim Stobbs on January 8, 2014
So perhaps you have started a New Year’s Resolution and odds are if it wasn’t to be healthier it was about money. Perhaps it was to save more or perhaps it was to spend less, but in the end regardless of what is was, the hardest part is building those initial habits which will ensure your success.
How do you get started? Well you have to show up. For me to write each day the biggest hurdle I find is just getting to my screen to start typing. Once the rhythm of the page gets going the rest becomes easy, I let the words pour out and fully expect the first draft to suck. It always does, first drafts are utter crap for just about everyone I know. It’s ok, the point wasn’t to produce the next great novel, but rather just show up.
The same process applies to your spending. You have to show up and become aware of your habits. What happens on those days you buy lunch? Do they always occur when you sleep in? Could you keep a frozen dinner at work for those days if that occurs at least twice a month? Then look at your bills, do you really need the house at 22C, could you get away with 20C and using a sweater? The trick to all of these changes is the awareness, you have to understand what you do and when. Then you can formulate a plan to tackle them one by one.
I would caution one thing at the start…don’t reach too far too fast. It’s easier to get started for a while, but let the habit of starting to look at your habits occur first. If you try to change everything at once you can often hit savings fatigue and blow up all the progress you make (perhaps on buying lunch for all your co-workers, or a new TV or that new coat that you wanted for Christmas, but didn’t get). You have to take it slow and steady, if you are planning on saving for an early retirement, it isn’t a sprint, but rather a marathon. You have to find your own rhythm and keep going.
So get started you need to show up and find your rhythm…next time I’ll talk about those god awful distractions. How about you? What did you find the hardest part of getting started for a new habit?
Posted by Tim Stobbs on November 13, 2013
So the Saskatchewan Provincial government has realized something important…it is addicted to non-renewable resources revenue. How addicted? Well in the last provincial budget a whopping 30% of the money used to keep the government running came from non-renewable sources. So needless to say there is a huge risk for anyone basing almost a third of their spending on commodity prices like oil and gas or potash.
I give the government credit for at least realizing they have a spending problem. So they are rolling around the idea of creating a sovereign wealth fund where money will go in, but they won’t take the principle back out …ever. Similar to what Norway has done to build their 760 billion dollar fund. Of course Saskatchewan does plan to spend the interest income which is typical. The only problem is they don’t appear to be considering taking any big steps towards solving the issue…at least based on their consultant’s report which merely recommends capping their current spending of resource revenue to…wait for it…26% of their annual spending. Then splitting that mere 4% between paying down debt and saving it. Ugh, it’s like rewarding yourself and having a press conference for deciding to not spend a coffee today…it’s a drop in the bucket.
Then it occurs to me that perhaps our government officials aren’t familiar with how to save. After all taking on debt is much more their style. So perhaps they need a little motivation…so might I offer the following goal: a zero tax provincial government…no income tax, no business tax and certainly no sales tax. None, nil, nothing for tax.
How the hell is that possible? Well you just use the same math on how a person can save for financial independence. You see if you saving 5% of your income (all income here, not just resource based) and get a nice 5% return (after inflation) which you re-invest, with compound interest in 66 years you won’t need to tax anyone ever again. Your investment portfolio will be producing enough income that you should be able to run your current budget without taxes. Oh wait it gets better, if you pull off saving 10% of the government income and reinvest the interest you can be a zero tax province in a mere 51 years. In a generation, you can alter the very way people think about government.
In effect with a bit of will power and a long term plan you can actually have a government that lives in its means and actually saves instead of taking on debt for everything. I fully understand the odds of this occurring isn’t that good, but I thought I would at least point out the option exits. After all when you spend your entire life using credit cards and having a mortgage being debt free is largely incomprehensible.