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?