Well welcome to part II of my series on my one year of early retirement. Today, we get into some of the nuts of bolts of how this entire idea of early retirement works: let’s talk about the money.
So in the interest of a proper review let’s look at where I was at during the end of Sept 2017.
- Investments: $595,030
- Net Worth:$990,030
- Spending Previous 12 months (less renovations):$35,305
Meanwhile, my end of August 2018 numbers were:
- Investments: $619,850 (increase of 4.2%)
- Net Worth:$1,014,850 (increase of 2.5%)
- Spending Previous 12 months :$35,814 (increase of 1.4%)
Of course keep in mind I was officially on vacation for my first six weeks of early retirement and getting paid and still saving so the comparison to exactly one year ago is a bit off. But overall the investments and net worth went up even with the choppy stock market of the last 12 months. Of course I was sort of hoping to see my spending go down a bit not up during the first year but such is life.
A good part of our family’s income for the year was my wife’s daycare business which she has chosen to keep doing for a few more years (roughly $8000 for the year). Then the rest came from cash we had pre-saved for the year and dividend income (roughly $10,000).
Now according to my last net worth update I’ve exceeded my goal for the year as our money in from investment gains and income was 108% of our spending. This was even with our spending being a bit higher than predicted and our investment returns did lower than expected. Of course this is somewhat of an illusion because in fact it is only because without my tax refund of just under $4000 this won’t have occurred, with out that I would have been under my target. And of course going forward that large of a tax refund isn’t like to happen again as it was somewhat a left over from my previous job. So am I screwed going forward? Not really.
Why? Well there are two items that come into play. First the low investment returns, had those been closer to my expected long term average of 4.5% we would have still covered our spending without the tax refund. I purposely left some slack in the numbers to cover this very scenario. The second reason I’m not really screw going forward is I’m expecting some additional income in the future.
The two main increasing sources of income will be when I actually like publish a book or two (or take on some other ‘fun’ work which pays) and our Child Tax Benefit is set to swell dramatically in 2019 (estimates have it increasing from around $340/month to closer to $1000/month). Also we have stopped adding money to our kids’ RESP account as of this summer so know we can actually use our current Child Tax Benefit for our kids day to day expenses. We stopped adding money to the RESP because we broke our $80,000 target (the actual account balance is closer to $80,500 if you want to know). Of course a concern would be changing of the Federal government in the 2019 election, which even if they did roll things back to the old program amount we would still get around $730/month.
So going forward we should definitely have more income coming in even if our spending stays at the current level. Later this year I’ll take some cash from my RRSP account to fill up our high interest savings account which we use to help ‘pay’ ourselves an income twice a month. I use automatic transfers twice a month to simulate a paycheque.
So short term, I really don’t expect any problems for the next year or two. But with the long term we do have a potential issue that if our investments continue to perform below our planned long term average for the next five years my wife’s full retirement might get delayed. Yet even if that did occur we do have options like me doing some part time work to help boost savings and/or downsizing the house or any of my other back up plans.
The point is we will deal with that if it occurs in the future. Life never goes according the plan. You just adjust as you go which is honestly how we go to this point in our lives. We adjust as things happened.
Any questions on the money side of things? Or any other questions you would like to know about? If so, please ask in the comments.