Category Archives: Spending

The Long Road to FIRE

I’ll be honest after getting to FIRE myself I’ve backed away from reading most blogs on the topic.  My interest has shifted from ‘getting to FIRE’ to ‘living in FIRE’ which changes what I read.  But the other day I decided to skim some blogs and Reddit forums on getting there again and I fully admit I was a bit shocked by some of the ideas out there on FIRE.

Some people are like obsessed with the concept and saving as much as humanly possible, which from a old timer like me (I’ve been writing about this since 2006) is bloody stupid!

Saving a small fortune and then managing your investments is not a sprint which you can see how much you can save for as long as possible.  It is in fact a VERY long journey.  I had higher than average income, little debt and it still took my a decade to pull off.  So the only sane way to really survive the long road to FIRE is enjoy the ride.

What?!?! That’s your advice?  I know not very dramatic but I should perhaps tell a story of my own path getting to FIRE.  At one point I was like those obsessed people,  I had cut everywhere I could and was saving as much as possible but then something went wrong and all my plans blew up in my face. I couldn’t maintain that level of savings for very long because there was next to no slack.  Then it occurred to me to really do this well on the long haul I had to back off on my savings rate.  So we added spending back into the plan which gave us a bit more cushion and add some things back into our lives that we enjoyed.  And honestly the amount of spending we put back in was less than 5% of our savings rate…it didn’t really change that plan all the much (I can’t recall the exact change but it was under a year more of working).

But you know what? It was a world of difference to my life.  I enjoyed the world again.  I mean I was literally a more happy person by just spending a little bit more.  I had found that mythic thing called enough.  Then as a added bonus when something went wrong I didn’t freak out because we had some cushion for those weird things that come up like a car accident.  And then the irony started to kick in…I was beating my new lower goals anyway.  I had aimed to leave work prior to my 45 birthday and I exceed that goal by leaving before my 40th birthday because I didn’t depend on getting a raise for my plan to work.  So every raise at my job over those ten years accelerated the plan.

But the most important thing of all those long years of savings was this: I could literally ignore my savings for months at a time and just live my life.  My life was not only about FIRE…I had a much more healthy and interesting life because I firmly put FIRE on the back burner.  It could just simmer away with a few good habits and so when I was not interested in FIRE I could just forget about it and still make progress.  Thus I never had a full burn out and never entirely gave up on the idea.  I, of course, had moments of thinking: why bother? But I kept saving until I got interested in it again because I was spending enough that I didn’t feel deprived or left out.  I still took vacations, we still ate out and I still made my own wine and beer but yes I also bought some as well.  My kids never felt like we were poor but at the same time I never gave them everything they asked for either.  They grew up loved and with enough things that they didn’t feel left out at school.

In short, I lived the middle life.  Not saving too much and not saving too little but rather saving enough for us.  And here is the fine print: that level of enough spending is different for everyone.  So yes, try to cut back your spending until it hurts, but then back up 5% or so to find your ‘enough spending’ level.  And realize that amount will shift over time.  You won’t always be there but it is worth the effort to try and find your way back because getting to FIRE is a long road.  It is totally worth it but only if you don’t give up your life to get there.  You should be a fully developed person with lots of interests and hobbies otherwise you can find yourself bored in FIRE because you gave up too much of you life and now don’t have anything to do.

So the irony is this: the most successful people at FIRE isn’t those with the highest savings rate but rather those with the most happy lives.  So live life, spend some of your money and stop being a cheap bastard.

Okay, your turn.  How do you keep savings for the long haul?

Life After FIRE – One Year Review – Part II

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.

Picking Up Hobbies & Retirement

Given my nearly year off from work now I can say one of the downsides of having more time to do things is you keep finding new hobbies to try out. (Yes I know, damn retiree problems. 😉 )

For example, the cover image on this post is a set of 14 model trees I built over a week for use in our D&D games.  I really didn’t need the trees but I found a video on how to make them.  They looked interesting and I decided to give them a try.  Of course, I could have just bought some trees from Amazon but instead I got the project materials (which is why I ended up broke for the second half of this month) and built them from nothing more than some dowels, scrubbing pads, a can of expanding foam, paint and flocking (the green stuff on the bases and the trees).

Well guess what, I was right.  I did enjoy making them and I’m very happy on how they turned out.  The downside of course is now I have a list of other projects I want to try and make for additional terrain items to use on our game. Ugh, crap now I have another hobby in retirement.

The problem in retirement so to speak is you have more time than most so spending like ten hours on a new project really isn’t a barrier anymore.  Unlike when I was working and that amount of time would cause me to pause before trying out something new. While trying something new can of course be fun at times.  The downside is you can forget to work on things you really should be working on and lose focus on your other hobbies.

In the short term this isn’t a particular problem.  For example, while working on the tree project I stopped watching movies and TV shows except during the evening while I was basically waiting for stuff to dry.  But it can evolve into an issue for example, if I stopped working on my new book and got sucked into crafting other things.

So a trick I use is setting a weekly ‘to do’ list that includes things that I MUST work on to keep them moving along.  Case in point I set a goal to write at least 250 words a weekday on my new book project regardless of other things.  Of course that goal is flexible I can craft trees for two days and spend three writing the word count target for the rest of week on the book but the end goal is the same: that I don’t lose focus on longer term projects.

The method isn’t perfect but I find it does help a lot to keep things moving along which is main point.  So how do you keep working on a big project while new hobbies are trying to distract you?  Please share what works for you.