You Have to Start Somewhere

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.

In just under seven weeks (August 18th), I will be running the Toronto Tough Mudder – an 18 kilometer (11 mile) obstacle race that will take me up and down Mount St. Louis Moonstone.  I signed up for this five months ahead of time and have had plenty of time to train, and as long as I don’t injure myself lifting weights or training think I should be fairly ready to take on this challenge.  I had an advantage starting this process, as I was already in pretty good shape.  Similarly, when I started my “journey” towards early retirement  about four years ago, I had a head start over most people, as I was debt free, had relatively low expenses in comparison to my salary, and most of all was able to convince my wife that we didn’t require a lifestyle that would force us to live paycheque to paycheque.

What would someone with a bunch of debt and high expenses do if they wanted to be closer to being financially free?  I have a friend who has asked for some help with organizing their finances.  They are having troubles and would like me to provide them with some guidance.  They have no interest in retiring early or doing anything that I am doing, but they would like to be able to afford a couple of trips and other big-ticket items.  My advice to this person will be the same as someone who is looking at a mountain run with a certain amount of trepidation….baby steps.

Just like you wouldn’t want to start training by running 15 km of hills, I wouldn’t advise someone to change everything in their finances overnight.

I think that for someone who has just stumbled across this site and may be saying “wow becoming financially free in your 30’s and 40’s sounds like a great goal, but I have this problem….

The basic goal of any financial plan is to have more money coming in then you have going out.  If you have a problem such as huge student loan debt, credit cards out of control, or a shopaholic spouse, I would attack this issue first (although I would advise against physically attacking the spouse, perhaps a calm discussion would work better before it gets to that).  For someone interested in early retirement (like Tim and myself), money in versus money out needs to be really high, as the majority of it needs to be invested to live off of in the 40+ years that employment income will not be coming in.  If you are someone who has no interest in retiring early, the savings number can be substantially smaller, and allow for greater spending (I believe this is where my friend’s goals lay).

To get to a point where financial gains are being made, changes in spending need to be created.  Personally, I am not a “wash a ziploc bag” kind of guy, I prefer to attack large expenses instead, such as food costs (buying my meat in bulk from a farm to save on the high quality I like), transportation (having a single vehicle that isn’t driven all that much), and housing (having a house that I can pay off relatively quickly, or that makes up a minimal portion of my monthly budget). [Editor’s Note: Not to say washing ziplock bags is wrong.  I do it, but you don’t have to it to retire early.]  You have to find the way to do this yourself, there are a myriad of sites out there to assist in getting your budget under control.   What you need to keep in mind is the end goal of not being stressed at the end of the month because you’re mortgage is coming out, you’re out of gas, your cat needs food, and you have a dinner out with some friends that you don’t want to miss.

…..So, start small, “walk” for a bit, then when you’re comfortable, you can start throwing around some weight and running like Rocky up sets of stairs – financially, you’ll be at a point eventually where every spending decision is not stressful – hopefully allowing you to achieve some peace of mind.

If you’ve recently started a financial journey, or can remember when you did start – what was the first obstacle you had to overcome?

5 thoughts on “You Have to Start Somewhere”

  1. For me, the biggest step had been figuring out where my money was actually going! Pretty dull, but true. I was in my last year of university at the time and making good money but was constantly feeling short on money.

    Once I actually physically wrote down what I was making and what bills I owed, it really helped me get on the track of making a budget.

  2. For me, it was developing a better understanding of the investment market. How to invest realistically and whether to invest more or less conservatively – and what that meant. While I know that Wall Street is a real ball of wax, I came to a workable understanding of mutual funds, and chose to avoid direct investment in stocks. I guess it was figuring out how what my personal investments style would be.

  3. I think the biggest thing for me was tracking my spending and making a budget. It’s hard to move forward until you know all the variables that impact your finances.

  4. The earliest purely financial steps I took towards eventually becoming FI were the following:

    (1) I paid off my student loans in 18 months after the first payment became due 6 months after graduating college. This and paying cash for my first car enabled me to avoid costly non-mortgage consumer debt.

    (2) After paying off the student loans, I began saving up to buy a co-op apartment and stop renting. The cost of non-deductible rent versus mostly deductible mortgage+maintenance fees were about the same once you netted out the latter for tax savings. And unlike rent, I had control over my mortgage so when I paid it off 9 years later, my housing costs dropped by 50%, greatly accelerating my path to FI.

  5. Rightly said, there comes a time since when I should get started with tracking my personal finance. Keeping a calculation over monthly income, expenditure and savings would definitely provide me a secure as well sophisticated financial future. Being dipped under the credit card debt I have got to learn that it will be foolish not to make a budgeting sheet on time.

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