What I’m up to Financially Right Now

This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any.  Dave is from Ontario and is working towards his CGA certification.

Tim regularly provides updates with regards to his net worth.  I find these posts interesting as a reader because we are essentially watching his “march” to early retirement.  I generally don’t provide updates because what I’m doing is really pretty boring.  I thought however, it may be interesting for people to see where I am spending my money right now in my own trip to early retirement, as well as where I am heading over the next few years.  I thought I would list the major areas of my current budget as well as a percentage of my income that this makes up.

1.) Paying down the mortgage (~70% of my paycheque) – This is where the vast majority of my money is and will continue to go over the next 3 years (at which point we are hoping this part of our budget will disappear).

2.)  A substantial savings account (~60% of my wife’s paycheque) – My wife and I wiped out our savings buying a car in early March.  Ideally, I would like to have around a year’s essential living expenses for our house (around $10,000).  This amount is somewhat arbitrary, but to me would afford a level of security that I am comfortable with.

3.)  Living expenses (~20% of each of our paycheques) – Our main expense is insurance – between car, life and condo content insurance this makes up the biggest “continual” expense.  Other than insurance, my wife and I split up food, gas, electricity, and cable.

4.)  “Stuff” (The rest) – This makes up the rest of the money that we spend.  It could be really anything, right now I’m saving up for the golf that I will be playing over the summer, and have a small amount of savings set aside for future car repairs, while my wife is saving money for a new wardrobe (she has been losing a significant amount of weight in the last few months and needs to replace some of her “big” clothes).  We talk about what we’re going to spend the money on, but really it’s up to each of us where it goes.

Once we have a savings account built up (sometime this fall) – my wife’s money will shift over to paying down our mortgage with the intention of capping out our allowable prepayments for the next few years.

After the mortgage is paid off, all the money that was going towards paying down the sizable debt will go towards income-producing assets, which will hopefully at some point add up to enough money to live off of and allow us to retire, me at 45 and my wife at 42.

As you can see, this point in my journey to retirement is pretty boring.  The somewhat more exciting time (for me anyways) of investing and making more money is still some time away.  But for now, that’s what I’m working on.  How does this compare with what you’re doing?

5 thoughts on “What I’m up to Financially Right Now”

  1. Thanks for the insight into your budget; it’s always interesting to see how people spend their money. The big three are almost always the same however — housing, transportation and income taxes. All taxes, really, if you really bore down on your spending and see what you are actually paying. Where I live in AZ there is even a tax on groceries — a very regressive tax as are all consumption taxes.

    Paying off your mortgage is, I think, a good idea but does not actually make your housing expenses go away. In the USA, even without a mortgage, property taxes, property insurance, and maintenance remain which is substantial in some cases and all subject to inflation.

    And why bother to get a CGA cert if you are “retiring”? Are you really retiring or are you simply planning to change the way you work and the quantity of work? Most people who claim to be planning for early retirement are not doing any such thing!

    Instead, what they are planning for is to leave the rat race of working for someone else in the five-day, forty-hour workweek construct. Usually, they are going to some form of part-time, self-employment augmented with savings. In that case, calling that change “retirement” is incorrect.

  2. I’m guessing that you must be in your early 30’s… based on the information provided, if you are anywhere near 40, you might not have the time to build up the funds necessary to retire at 45…

    At 39, I’ve managed to accumulate about 750k in retirement “assets”, and have another six years to get it to at least 1.2 million. From endless number cruching, this is the minimum level of savings I need to retire at 45 (with some luck from Mr. Market, I hope to do better than this)… it won’t provide for extravagant lifestyle, but I’m fine with that. (No kids is HUGE)

    Good luck to you Dave, on your own journey to ER… and to Tim, of course. 🙂

  3. Paying off the mortgage in 1998 marked a big turning point for me in my quest to retire early. While paying down the principal was basically exchanging personal savings for personal home equity, I did rid myself of the interest I was paying on the loan. All that extra money I did not have to sepnd I was able to invest in the booming stock market of the late 1990s, as one biweekly paycheck from full-time work more than covered my expenses (other than withheld income taxes).

    Since I changed from a fast-rising individual health insurance plan (I am in the USA) to a far less expensive hospital-only plan, my expense pie had changed significantly. Housing expenses, defined by my co-op’s monthly maintenance charges, are about 1/3 of the total, with income taxes now second at just under 20% (aliminating my itemized medical expense deduction will cause my income taxes to rise in 2011). Medical/dental expenses are down to 11% (from nearly 40%) now, thankfully.

  4. @ tmgbooks: I’m 31 years old right now – I have 14 years left in my working career. I am taking the courses to be more employable over the period – additionally, my work is paying for the courses, so other than the (excessive amount of) time the cost to me is minimal. I have no intention of working longer than I have to.

    @ jon_snow: I’m 31 right now – I’m hoping to get to $500,000 or $750,000 by retirement at 45 but realistically I’m willing to live on less if need be for a few years in order to gain the freedom of not working.

    @ deegee: I’m excited for the extra cash-flow after the mortgage is paid off, to invest and watch a balance go up instead of down.

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