Couple of opposites trying to save, can we FIRE? (CAN)

[andie-ok]

Life situation:
My husband and I got married last year, I’m 30 and he is 31. I finished my degree in 2017 with no debt, and since entering the working world I've been saving as much as I can. My husband works for his family’s business in trades. We live in the Vancouver area.

My husband owns a condo in the suburbs. But we're renting it out for now and living in a rental closer to downtown (living in the suburbs would double my commute by transit, or I would have to drive so I would like to avoid this as long as possible to save money). We have 1 vehicle (Jeep, bought used). No kids, but planning to start a family in the next 1-2 years.  We will likely move into the condo when we’re ready to have kids as it has more space/better amenities like in-suite laundry, which is really important when you have small kids.

I plan to take 1-year maternity leave when we have a baby; my work provides a partial salary top-up during leave which is great. My husband would absolutely love to be a stay at home dad long-term, but I'm not sure if we could live on my income and also save much for retirement while we do so. His parents live nearby and will likely help with childcare, which will reduce daycare costs. My parents are considering moving to Vancouver, and if they do I'm sure they would help too.

In addition to our jobs, we have been experimenting with flipping properties in the lower mainland, through the family business. We are working on our first flip right now, should be on the market in 5-6 weeks. Hoping to make at least $50k profit, though you never know, it could be more or less. The purchase and expenses related to the flip of the property is all under the business, so as not to contribute to our income. If it goes well, we may do it again if we find the right property.

I would like to retire by 50-55, so in 20-25 years (given that I've just started working in my late 20s and we live in an expensive city, I'm not sure if it's realistic to retire earlier). My current job is very flexible, the work is easy and mostly enjoyable, and I can work remotely. It pays well considering how much flexibility I have.

Generally, my husband and I have very different perspectives on managing our finances. I prefer to invest using the tax-sheltered options (TFSA, RRSP etc), I’m quite organized and like to save money and I’m more of a long-term planner. I probably spend a little too much time obsessing over the numbers, and save as much as I can. My husband is more of a spender, though much improved since his 20s… He would prefer to purchase property as his form of investment, and not overthink investing. His goal is to own a few rental properties by retirement, so that we can subsidize our income with the rental income. I think he likes the idea of putting money into something tangible like a property, rather than investing in a bank account.

We definitely balance each other out, he calms me down and reminds me to be spontaneous and have fun. But these different perspectives make it harder for us to be on the same page with long-term financial plans. I’m working on communication and finding a happy medium for us moving forward so that I feel we have a plan, and so that he doesn't feel micro-managed.

Specifically I’m looking for some advice for how we can maximize our savings, and whether it’s possible for us to FIRE. If so, how do we get there?

Gross Salary:
Last year I made $70k (and I'm expecting a promotion this spring with ~$10-12k bump), husband made $53k.
Rental income on the condo: $1800 per month before expenses. It’s in my husband’s name so he claimed this income on his taxes (His total income after expenses ~$62k).

Pre-tax deductions: I contribute 12.5% of my paycheque to RRSP, plus I get a 3% top-up (total 15.5%). My husband is not contributing to his RRSP.

Assets/Savings:
We have almost $11k saved as an emergency fund in a joint high interest savings account for emergencies. We set up a Tangerine savings account which has 3% interest for first 6 months, will be moving this to one of our TFSAs once our promotional interest rate is up in a few months.

I have access to a $30k line of credit if necessary (there's currently no balance).

Our condo was purchased for $383k in 2012. Now it's valued at ~$600k, thank you housing bubble…

My husband owns a Jeep, bought used about 3 years ago.

I have $38k in TFSA, $14.5k in RRSP, most ($42k) of this was saved since I started working in Fall 2017. I’m contributing 15.5% to RRSP ($878 monthly), also working to max out my TFSA, contributing $1300 monthly. I get an annual bonus in spring, which I plan to put towards my TFSA. I expect I’ll be able to max it out in about 2 years. I’ve been moving more and more of my funds from our shitty group RRSP and TFSA at the bank to a self-directed investing platform, so that I can choose ETFs with low fees.


Liabilities:
We still have $263k left on the mortgage for the condo as of January. We have increased our mortgage payments by 10% last year, and another 20% this year to try and pay down the mortgage more quickly (paying ~$800 bi-weekly). We have a 2.59% fixed-rate mortgage; it’s up for renewal in 2020.

We still owe ~$10k on our vehicle, the interest rate is below 5% (We pay $310 a month).

My husband is also paying down ~$5k on his line of credit (I believe the interest is around 6%)

My husband does not have anything saved in RRSP or TFSA. He has almost $70k room in his RRSP. I have suggested that we put some of our savings towards his debt, but he doesn't think this is necessary.


Questions:
1.Should we put some of our savings towards his debt? Or the car? Or should I let him continue to be stubborn and pay it off on his own?

2.Once I max out my TFSA, should we contribute more savings to his TFSA? or to his RRSP? I have thought about setting up a spousal RRSP, but considering that he has so much room in his own RRSP I’m not sure if this makes sense.  I can max out my RRSP each year and we can still put a substantial amount into his until we have similar amounts saved in our RRSPs.

3.We have his/hers/ours accounts, which I prefer given that we have such different styles, and I like to be in control of my own money. However, would it make more sense for us to completely merge our accounts (except TFSA/RRSP of course), so that I can better manage our accounts? Like I said, I pay a lot more attention to finances than my husband does so I'm realizing this might be simpler. He doesn't care either way.

4. I always hear about how expensive kids are. How much should we have saved up to prepare?

5. Is it possible for us to FIRE? In 20 years?

Thanks for your advice!

[andie-ok]

Note: I originally posted over in the Canadian Tax discussion but it was suggested I move my question over here to the Case Study page

https://forum.mrmoneymustache.com/canada-tax-discussion/couple-of-opposites-trying-to-save-and-stay-sane/

[reeshau]

You have a lot of good questions here, but your case study is incomplete.  Nobody can answer if you can FIRE, unless we know something about your expenses.  Check out the "How to Write a Case Study" topic pinned to the top of this forum for a format to help fill in the blanks.

Personally, I think you guys are very well equipped with one stock person and one real estate nut. (you can guess which I am)  You have the potential for a much easier, calmer investment diversification than usual.

[Metalcat]

This is just my very strong bias about relationships, but your post freaks me out.

I simply cannot understand relationships where money isn't a constant and open topic of conversation. I mean, how can he even know that he prefers real estate when he doesn't even understand the financial impact of that "preference".

As someone who just diversified into real estate investing, it scares me shitless compared to index funds. That's just me, but I actually understand the relative risks and benefits of both.

It seems more like he doesn't understand money and the thought of real estate doesn't scare him for some reason. Maybe someone he thinks is smart once told him to invest in real estate. Who knows.

Regardless, I'm a relationship finances hardliner.
I believe that you cannot possibly make responsible and fully informed decisions in life without understanding the risks and benefits involved. Meaning, that you are driving blind if you don't at least understand the basics of your financial life choices.

This makes a partnership very very difficult, and effective communication virtually impossible.
Basically, it's all fine and good as long as everything works out reasonably well...I just refuse to bank on that outcome.

If you are 100% comfortable with this dynamic in your marriage, then feel free to ignore me. If you aren't though...then the key is to find a way to be able to discuss the impacts of these choices without drowning him in details he's not interested in.

My DH is utterly hopeless with personal finance and numbers. I bear the entire weight of understanding and analyzing our situation, but I patently refuse to be solely responsible for the decisions.

My DH was all about real estate investment too when we first got together, despite him understanding nothing about investing. It just "felt right" to him and he liked that it was tangible. Now that he better understands leverage and risk, he's completely changes his tune. You cannot know until you understand.

We go for a lot of long walks where I outline the real life implications of the risks of various scenarios and everything is framed as a lifestyle choice, not a financial choice.

We were just recently talking about a real estate investment that would have been an amazing growth opportunity long term. DH was really gung ho for it because he knows our area is gentrifying rapidly and his old real estate bias was raging with enthusiasm.

I spelled out my concerns the following way:

"this building will make our retirement even more luxurious than it already will be, which I think is great, but overkill. It also won't allow us to retire any sooner, it will only add luxury to our retirement or more money left over when we die because we aren't great at spending.

The main impact buying this building will have is that for the next 3 years, I will be under more pressure to produce at my job, and we will have less flexibility for travel.

We talked in January about starting to take our full vacation time, but I assure you that the short term pressure of this purchase will make it harder for me to feel safe taking time off of work beyond my usual 2 weeks. [Note: I don't get paid vacation]

So if late in life riches is our top priority, then this move is brilliant. However, if we live according to what we've discussed extensively already, then more time and freedom now is really our focus, and this is a bad move for that goal."

My DH's eyes glaze over the moment percentages and numbers are mentioned, but he deeply appreciates the concepts of stress, flexibility, timelines, and luxuries. And that's all finances are, they're just mechanisms for modulating those aspects of life.

We happily walked away from the property, instead bought a tiny condo that's a terrible long term investment, but lowers our cash flow demands today, and talked our closest friend into buying the other building.

Open, clear, and unambiguous financial dialogue doesn't have to involve forcing someone out of their financial comfort zone. Often it means communicating within terms in which they are comfortable.

[andie-ok]

It seems more like he doesn't understand money and the thought of real estate doesn't scare him for some reason. Maybe someone he thinks is smart once told him to invest in real estate. Who knows.

I can pretty much pinpoint this perspective to his experience growing up in Vancouver. Everyone I know who grew up here is very interested in real estate investing because they've watched the value of homes double, triple, or more in their lifetimes. I grew up in a small city in the prairies, where houses are not 'investments' but simply a place to live/raise a family.

My husband actually has a good understanding of investing and banking (he has a commerce background and used to manage a bank). He gives good advice but has trouble putting it into practice himself.

His main hang-up with investing is that when I show him how much X amount invested in index funds could increase in value over 10 years, 20 years, etc, he says that's just an expected return, and that there's no guarantee that you'll make a 5% or a 7% return each year.

But to be fair, he's able to consider the numbers and make decisions rather than relying on emotion when it comes to property purchases. We've actually been considering selling our condo, because from an investment standpoint we should get rid of it. We've gone back and forth on this over the last year, whether the condo is an investment property or somewhere that we want to live. (We currently rent elsewhere but plan to move back there when we have a baby.)

I really like your way of framing financial decisions based on their effects on lifestyle. We always talk about decisions before moving forward, and talking about risks framed in this way will probably be helpful. (i.e. "How will this affect our ability to travel? How much of the rental income goes to taxes and expenses? If we were to invest the down payment in ETFs, how could this amount grow instead? What happens if the market drops and we can't charge rent that will cover the mortgage? What happens if get bad tenants and they damage the property? And if it's not working out and we choose to sell the property, how will capital gains affect any potential profit?")

[Metalcat]

Man...

The fact that he actually understands the details of finance may actually make your situation more difficult. Lol.

But yeah, if you can't discuss personal finances in terms of what they mean with respect to real life impacts, then you aren't actually discussing personal finances, you are discussing meaningless numbers.

Money isn't anything in and of itself, it's a placeholder for time and energy, whose values change over time. DH and I literally don't include numbers in most of our conversations because numbers are distracting, we talk only in terms of what those numbers mean.

It forces a lot more self reflection in terms of goals.

[Lews Therin]

Andie: Use your current condo as proof of concept for Rentals and compare that to the market. It should be an excellent example of how much time, money you<ve put in it, how much you've made from rent, and how much you've made from capital gains.

Then point out that your condo is a leveraged asset (since the bank owns a large portion). This should be easy tangible examples of how rentals in vancouvers are only profitable if the capital gains continue rising forever.

[andie-ok]

Man...

The fact that he actually understands the details of finance may actually make your situation more difficult. Lol.

But yeah, if you can't discuss personal finances in terms of what they mean with respect to real life impacts, then you aren't actually discussing personal finances, you are discussing meaningless numbers.

Money isn't anything in and of itself, it's a placeholder for time and energy, whose values change over time. DH and I literally don't include numbers in most of our conversations because numbers are distracting, we talk only in terms of what those numbers mean.

It forces a lot more self reflection in terms of goals.

I know, right? It's hard to win these debates when he's just as knowledgable!! Thanks for the perspective - I'll bring things back to the real life impact whenever I can.

Andie: Use your current condo as proof of concept for Rentals and compare that to the market. It should be an excellent example of how much time, money you<ve put in it, how much you've made from rent, and how much you've made from capital gains.

Then point out that your condo is a leveraged asset (since the bank owns a large portion). This should be easy tangible examples of how rentals in vancouvers are only profitable if the capital gains continue rising forever.

Great suggestion, thanks! We aren't looking for rental properties at the moment, but I'll bring this up next time we talk about financial plans.

Until then - throwing everything I can into our TFSAs/his RRSP :)

[Lews Therin]

I also recommend you start tracking your spending/savings.

This will allow you to figure out how much you need/want yearly for your FIRE stash, and will allow you to figure out how much should go into RRSP in order to optimize the tax implications.

Broad line examples:
<20k/ per person per year = max RRSP
>80k/per person = no point in filling RRSP

(This is taking into account your salary is between 73-85k yearly)

[andie-ok]

I also recommend you start tracking your spending/savings.

This will allow you to figure out how much you need/want yearly for your FIRE stash, and will allow you to figure out how much should go into RRSP in order to optimize the tax implications.

Totally. While I was a grad student I used Mint to keep a budget, but since I've been making more over the last year, I've gotten lazy. Don't get me wrong, I've stepped up my savings, I just haven't been keeping track of anything. Plus now that our finances are more integrated, it might change the way we track spending.

I just took a quick look through our recent spending patterns this morning, and clearly there is room for improvement here... We're saving a lot but could definitely do better if we spent less at restaurants!

[Metalcat]

I also recommend you start tracking your spending/savings.

This will allow you to figure out how much you need/want yearly for your FIRE stash, and will allow you to figure out how much should go into RRSP in order to optimize the tax implications.

Totally. While I was a grad student I used Mint to keep a budget, but since I've been making more over the last year, I've gotten lazy. Don't get me wrong, I've stepped up my savings, I just haven't been keeping track of anything. Plus now that our finances are more integrated, it might change the way we track spending.

I just took a quick look through our recent spending patterns this morning, and clearly there is room for improvement here... We're saving a lot but could definitely do better if we spent less at restaurants!

That's cool if saving more is your goal, but Lews' point was to determine your spending level to see if RRSPs really are the most beneficial place to put your money.

Again, the numbers don't mean anything in and of themselves.

[andie-ok]

I also recommend you start tracking your spending/savings.

This will allow you to figure out how much you need/want yearly for your FIRE stash, and will allow you to figure out how much should go into RRSP in order to optimize the tax implications.

Totally. While I was a grad student I used Mint to keep a budget, but since I've been making more over the last year, I've gotten lazy. Don't get me wrong, I've stepped up my savings, I just haven't been keeping track of anything. Plus now that our finances are more integrated, it might change the way we track spending.

I just took a quick look through our recent spending patterns this morning, and clearly there is room for improvement here... We're saving a lot but could definitely do better if we spent less at restaurants!

That's cool if saving more is your goal, but Lews' point was to determine your spending level to see if RRSPs really are the most beneficial place to put your money.

Again, the numbers don't mean anything in and of themselves.

Oh, I see - so basically if we expect to spend <20k per person per yr, we should max out RRSPs because we'd defer our taxes now and be in a lower tax bracket when we withdraw. But if we expect to spend >80k per person per yr, then RRSP is less beneficial because we'd be in a similar/higher tax bracket in retirement. In this case we shouldn't focus on maxing them out. Do I have that right?

Thanks Malkynn and Lews!

[Lews Therin]

Yes, but that was just easy RRSP numbers.

In between 20-80k; it is simply less easy to know if RRSP are the best choice or not, depends on lots of factors.

That said, if you can give your yearly expenses (or an estimate) it'll be easier to figure out if you should go for TFSA or RRSP. (Though placing into the TFSA until March, and then transfering to RRSP would be very effective too. (It would also give you another 11 months to figure out if you should fill RRSPs or not.)

I recommend putting just enough in to get the company match, and do the rest on your own.

[andie-ok]

Ok, here's our estimated expenses... I'm sure there are some gaps, and it's not taking into account my husband's spending from his personal account (just mine and ours from our shared accounts).

Annual income
My income: $70,000 (after tax - $53,688)
His income: $53,000 (after tax - $39,120)
Rental income: $21,600 (not totally sure if correct, but after expenses and tax - $8,700?)
Gross Household income: $144,600 (after tax - $101,508)

Expenses:
Rent: $18,000
Mortgage: $20,690
Car Payment: $3,720
Phone (both of ours): $1,750
Estimated groceries/drugstore etc: $4,800
Gas: $1,800
Bus pass: $570 (some is covered by my work this is the remainder)
Internet: $352 (some is covered by my work this is the remainder)
Gym: $984
Coffees/Lunches/dinners: $10,200 (ouch..)
Shopping: $3,000

TFSA contributions: $15,600
RRSP contributions:$8,500 (not including employer match)

Total estimated expenses: $89,966

The difference is $11,542, some of which will be my husband's spending in his personal account, paying off his debt, etc.

If TFSA and RRSP contributions don't count as expenses -- then our household spending is about $65,866.
I guess this would put us on the lower end, spending about $30k to $35k per person?

[andie-ok]

Personally, I think you guys are very well equipped with one stock person and one real estate nut. (you can guess which I am)  You have the potential for a much easier, calmer investment diversification than usual.

Thanks for your perspective! I like to think my husband and I complement each other well, glad to hear you think it will make it easier for us to diversify our investments.

I've added our estimated expenses to the thread as well.

[K-ice]

Your story intrigues me because it is somewhat like mine. I have the opportunity for more savings/investing/pension, while my partner is relying more on real-estate. 

I will take a stab at your questions:

Questions:
1.Should we put some of our savings towards his debt? Or the car? Or should I let him continue to be stubborn and pay it off on his own?

It depends on the interest rate. If less than 4% I'd say let them ride.

2.Once I max out my TFSA, should we contribute more savings to his TFSA? or to his RRSP? I have thought about setting up a spousal RRSP, but considering that he has so much room in his own RRSP I’m not sure if this makes sense.  I can max out my RRSP each year and we can still put a substantial amount into his until we have similar amounts saved in our RRSPs.

I've asked myself the same question. The advice you already have with the over $80K  use RRSP is good.
You may want to keep some of his room if you have a large personal capital gain from flipping a property one year.

3.We have his/hers/ours accounts, which I prefer given that we have such different styles, and I like to be in control of my own money. However, would it make more sense for us to completely merge our accounts (except TFSA/RRSP of course), so that I can better manage our accounts? Like I said, I pay a lot more attention to finances than my husband does so I'm realizing this might be simpler. He doesn't care either way.

I like the his,hers ours. Since you say he doesn't care just get his login info so you can keep track.

4. I always hear about how expensive kids are. How much should we have saved up to prepare?

Daycare is the biggest expense for the first 8 years, but once you are back to work it is covered. I took close to a year and had some top-up for a short while. The year I was pregnant I saved $12K and used $1K every month to supplement my leave pay so we could still pay bills 50:50.  Figure out what you will need to stash to get thru the year of leave.  Other than that, I don't find kids that expensive. Welcome hand-me downs and gifts. They don't need near as much as you think. 

5. Is it possible for us to FIRE? In 20 years?

Thanks for your advice!

To answer this you need to know your spending to income ratio.  If you can save 40% of your income and live off the 60% than yes you can retire in 20 years.

Using your numbers of $101K income and 65K expenses you need to trim expenses a bit or make more.  At the current rate of 65X25 you will need $1,625,000 in your stash to retire.   

Assuming you invest your $35K a year and it makes 7% a year, and you plan to withdraw 4% after retirement it will build to your target in just over 21 years .  If you are only saving 30% this time line jumps to 24years. If you can save 50% then you can retire in 15 years.

Remember the double whammy you get by saving more, but also being able to live off of less. People who save 70% of their income and live off of just 30% can retire in just over 8 years.

Also, since you are a mixed real-estate/investment couple you might not need your investments to cover the full $65K per year in spending. The great thing about rental income is that is is probably there before and after you retire. 

Let's say you have a projected rental income of $20K in retirement.  Now you just need $45K per year from your investments based on current spending.
45x25 = $1,125,000 in your stash. It will take you 17.5 years to achieve this.  17.42=NPER(0.07, -35000, 0, 1125000)


I hope these numbers help, I think you are off to a very good start considering the HCOL area you are in.

[reeshau]

Ok, here's our estimated expenses... I'm sure there are some gaps, and it's not taking into account my husband's spending from his personal account (just mine and ours from our shared accounts).

Nothing wrong with this approach, of course, but are you also excluding whatever revenue in retirement he will fund his personal account with?  If it's just mad money, maybe it's small enough that it doesn't matter.  But you need to understand the limits of what you are planning for: maybe you leave him to it, but I would think you want him happy in your (together) retirement, too.

[Lews Therin]

Annual income
My income: $70,000 (after tax - $53,688)
His income: $53,000 (after tax - $39,120)
Rental income: $21,600 (not totally sure if correct, but after expenses and tax - $8,700?) - You should probably become aware of your rental`s numbers.
Gross Household income: $144,600 (after tax - $101,508)

Expenses:
Rent: $18,000
Mortgage: $20,690 - You'll want to separate this with principal repayment (savings) and interest & annual taxes (expenses) ; It`ll be more useful numbers
Car Payment: $3,720
Phone (both of ours): $1,750  -- WHY?!!! 75$/PP? I can`t imagine that there isn`t a cheaper option that is available if you shop around.
Estimated groceries/drugstore etc: $4,800
Gas: $1,800
Bus pass: $570 (some is covered by my work this is the remainder)
Internet: $352 (some is covered by my work this is the remainder)
Gym: $984
Coffees/Lunches/dinners: $10,200 (ouch..) Sounds like someone should be making more food at home :) There are lots of topics on meal-planning, simple meals, cooking, this will be your #1 if you want to FIRE faster.

Shopping: $3,000 - Next one if you are interested in cutting expenses

TFSA contributions: $15,600
RRSP contributions:$8,500 (not including employer match)

Total estimated expenses: $89,966

The difference is $11,542, some of which will be my husband's spending in his personal account, paying off his debt, etc.

If TFSA and RRSP contributions don't count as expenses -- then our household spending is about $65,866.
I guess this would put us on the lower end, spending about $30k to $35k per person?

TFSA and RRSP count as savings, as do mortgage repayment. (You will likely be lower than 30-35k if you take into account mortgage principal repayment) - Good news is that you have lots of space to reduce expenses if you want to FIRE, bad news is that it will take quite a bit of effort, so slowly try and reduce things. shopping for internet and cell deals are easy wins, meal planning is a harder effort one, but much more effective in lowering expenses.

Your current Savings Rate is somewhere in the 10-20k range (according to the numbers you wrote down).

However, your expenses amount to 63k, your savings 24k; so you have a hole in your budget of 14k. (that you don`t know where it went.)
Sadly, at this savings rate, you are looking at somewhere between 37-51 years... but every thousand you can switch from expenses to savings will make that number jump down.

[andie-ok]

Ok, here's our estimated expenses... I'm sure there are some gaps, and it's not taking into account my husband's spending from his personal account (just mine and ours from our shared accounts).

Nothing wrong with this approach, of course, but are you also excluding whatever revenue in retirement he will fund his personal account with?  If it's just mad money, maybe it's small enough that it doesn't matter.  But you need to understand the limits of what you are planning for: maybe you leave him to it, but I would think you want him happy in your (together) retirement, too.

A very good point - I just wanted to post an estimate of our expenses quickly for feedback. So I just looked through my accounts and our shared accounts which I have access to, rather than asking my husband for his passwords ;)

But seriously, we're talking now about creating a budget (and reducing those restaurant costs), so that I can increase the % we're saving. Definitely want us both to be happy in retirement and not only plan for myself!

Your story intrigues me because it is somewhat like mine. I have the opportunity for more savings/investing/pension, while my partner is relying more on real-estate. 

I will take a stab at your questions:

Questions:
1.Should we put some of our savings towards his debt? Or the car? Or should I let him continue to be stubborn and pay it off on his own?

It depends on the interest rate. If less than 4% I'd say let them ride.

2.Once I max out my TFSA, should we contribute more savings to his TFSA? or to his RRSP? I have thought about setting up a spousal RRSP, but considering that he has so much room in his own RRSP I’m not sure if this makes sense.  I can max out my RRSP each year and we can still put a substantial amount into his until we have similar amounts saved in our RRSPs.

I've asked myself the same question. The advice you already have with the over $80K  use RRSP is good.
You may want to keep some of his room if you have a large personal capital gain from flipping a property one year.

3.We have his/hers/ours accounts, which I prefer given that we have such different styles, and I like to be in control of my own money. However, would it make more sense for us to completely merge our accounts (except TFSA/RRSP of course), so that I can better manage our accounts? Like I said, I pay a lot more attention to finances than my husband does so I'm realizing this might be simpler. He doesn't care either way.

I like the his,hers ours. Since you say he doesn't care just get his login info so you can keep track.

4. I always hear about how expensive kids are. How much should we have saved up to prepare?

Daycare is the biggest expense for the first 8 years, but once you are back to work it is covered. I took close to a year and had some top-up for a short while. The year I was pregnant I saved $12K and used $1K every month to supplement my leave pay so we could still pay bills 50:50.  Figure out what you will need to stash to get thru the year of leave.  Other than that, I don't find kids that expensive. Welcome hand-me downs and gifts. They don't need near as much as you think. 

5. Is it possible for us to FIRE? In 20 years?

Thanks for your advice!

To answer this you need to know your spending to income ratio.  If you can save 40% of your income and live off the 60% than yes you can retire in 20 years.

Using your numbers of $101K income and 65K expenses you need to trim expenses a bit or make more.  At the current rate of 65X25 you will need $1,625,000 in your stash to retire.   

Assuming you invest your $35K a year and it makes 7% a year, and you plan to withdraw 4% after retirement it will build to your target in just over 21 years .  If you are only saving 30% this time line jumps to 24years. If you can save 50% then you can retire in 15 years.

Remember the double whammy you get by saving more, but also being able to live off of less. People who save 70% of their income and live off of just 30% can retire in just over 8 years.

Also, since you are a mixed real-estate/investment couple you might not need your investments to cover the full $65K per year in spending. The great thing about rental income is that is is probably there before and after you retire. 

Let's say you have a projected rental income of $20K in retirement.  Now you just need $45K per year from your investments based on current spending.
45x25 = $1,125,000 in your stash. It will take you 17.5 years to achieve this.  17.42=NPER(0.07, -35000, 0, 1125000)


I hope these numbers help, I think you are off to a very good start considering the HCOL area you are in.

Thanks for your input on our questions. I will note that we are purchasing properties for flips under his business - so they won't actually contribute to our income when sold (though it means we won't have direct access to the funds right away. Profits will stay in the business for further flips, or we can pay ourselves a salary over a number of years to reduce the impact on our marginal tax rate)

Thanks for going through the numbers as well - I'm going to aim to reduce our expenses to 40% or less of our income... hopefully just by keeping track of spending, we will be able to improve!

[andie-ok]

Annual income
My income: $70,000 (after tax - $53,688)
His income: $53,000 (after tax - $39,120)
Rental income: $21,600 (not totally sure if correct, but after expenses and tax - $8,700?) - You should probably become aware of your rental`s numbers.
Gross Household income: $144,600 (after tax - $101,508)

Expenses:
Rent: $18,000
Mortgage: $20,690 - You'll want to separate this with principal repayment (savings) and interest & annual taxes (expenses) ; It`ll be more useful numbers
Car Payment: $3,720
Phone (both of ours): $1,750  -- WHY?!!! 75$/PP? I can`t imagine that there isn`t a cheaper option that is available if you shop around.
Estimated groceries/drugstore etc: $4,800
Gas: $1,800
Bus pass: $570 (some is covered by my work this is the remainder)
Internet: $352 (some is covered by my work this is the remainder)
Gym: $984
Coffees/Lunches/dinners: $10,200 (ouch..) Sounds like someone should be making more food at home :) There are lots of topics on meal-planning, simple meals, cooking, this will be your #1 if you want to FIRE faster.

Shopping: $3,000 - Next one if you are interested in cutting expenses

TFSA contributions: $15,600
RRSP contributions:$8,500 (not including employer match)

Total estimated expenses: $89,966

The difference is $11,542, some of which will be my husband's spending in his personal account, paying off his debt, etc.

If TFSA and RRSP contributions don't count as expenses -- then our household spending is about $65,866.
I guess this would put us on the lower end, spending about $30k to $35k per person?

TFSA and RRSP count as savings, as do mortgage repayment. (You will likely be lower than 30-35k if you take into account mortgage principal repayment) - Good news is that you have lots of space to reduce expenses if you want to FIRE, bad news is that it will take quite a bit of effort, so slowly try and reduce things. shopping for internet and cell deals are easy wins, meal planning is a harder effort one, but much more effective in lowering expenses.

Your current Savings Rate is somewhere in the 10-20k range (according to the numbers you wrote down).

However, your expenses amount to 63k, your savings 24k; so you have a hole in your budget of 14k. (that you don`t know where it went.)
Sadly, at this savings rate, you are looking at somewhere between 37-51 years... but every thousand you can switch from expenses to savings will make that number jump down.

Thanks for the detailed analysis, and the suggestions for first steps to improve. I was looking at switching our phones to Koodo but got busy and forgot. This is a good reminder! And we are going to work on eating in more. Also my job tends to involve a lot of coffee shop meetings. I'll do my best to limit that.

I've created a new Mint account for budgeting. My husband and I just talked about creating a budget so we can save more. Hopefully we can stick to it!

I think this will help a lot. Should also give me a better idea of where that $14k went...

[Lews Therin]

IF you start making changes, you'll rapidly start saving more than you can believe! Just remember to do changes incrementally for the ones that are harder.

[Missy B]

Interested to see where you get to when you really start examining your budget. 35K a person might be normal or below average, but not in this neck of the woods, where 2 people can live on 35K a year and still be mocked for wanting a VitaMix :)

The flipping thing -- I live in Vancouver too -- made me go 'hmmm.'  Flippers are getting burned now, and this is an increasingly risky and uncertain way to make money. Maybe your husband is some kind of Jedi Knight of flipping, maybe you've got some niche figured out. It's a risk though.