Author Topic: Fire in 10 to 15yrs – How to make our money work harder?  (Read 2498 times)

Smoothmustache

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Fire in 10 to 15yrs – How to make our money work harder?
« on: February 17, 2019, 02:28:57 PM »
Life Situation:
Married, filing jointly, both mid thirties, 1 child age 7 years old (no plans for additional children), living in Alberta Canada

*All numbers are in Canadian Dollars and are approximate (income and paycheque deductions vary slightly month to month)

Income:
Gross Salary/Wages:
•   Me: $7600 monthly (~$91k annually working 4 days per week)
•   Husband: $10,600 monthly (~$127k annually)
Individual amounts of each Pre-tax deductions:
•   Company Pension Plans:
       Me: $460 (6% matched by employer)
       Husband: $640 (5% matched by employer)
•   Company Medical Insurance:
       Me: $80 per month
       Husband: $90
•   Parking:
       Me: $130/month (I am trying to reduce this cost but have limited options)
 
Tax Deductions (Federal, Provincial, CPP, EI):
•   Me: ~$2,200
•   Husband: ~$3,700

Adjusted Gross Income:
•   Me: ~$4730 per month
•   Husband: ~$6170

Other Ordinary Income:
•   Bonuses: ~$10k per year
•   Tax Returns: ~$5k
•   Employer Share Program profit sharing: ~$10k

Note: All “other income” gets reinvested to buy more shares and hence isn’t incorporated into our monthly income/expenses tallies.

Total (excluding Ordinary Income): ~$10,900

Monthly Savings:
RRSP savings (Me): $550 (8%)   
RRSP savings (Husband): $610 (6%)
RESP (child):    $200
Investments: $800 (we need advice on where to put this!!!)

Total Monthly Savings: $2,160

Monthly Expenses:
Mortgage & Insurance: $3700 ($3200 to principal, $500 to interest)
Property Tax: $220
Condo Fees: $340
School Fees and Before and After School Care Fees:    $800
Medical expenses (beyond those covered by insurance): $20
Gas & electric:    $200
Cell phones: $50 ****
Internet & Netflix: $80
Car Insurance & Fuel:    $420 ***
Clothing:
•   Me: $90
•   Husband: $90
•   Child: $70
Entertainment: $250
Groceries: $600
Misc:  $50
House Maintenance & Electronics Replacement:  $125
Vehicle Maintenance & Registration:  $150 (for 2 cars)
Gifts: $65 (we don’t typically spend all of this)
Sports fees and gear:
•   Me: $50
•   Husband: $50
•   Child: $50
Life Insurance    $35
Savings to Replace Cars in the future: $535*
Travel: $700**

Notes:
*We save this much each month to allow for replacement of our 2 cars every 8-10 years
**Yes, we love to travel. We save $700 each month so that we can do a short trip somewhere warm each winter, some weekends occasionally throughout the year, and a bigger overseas trip every 4-5 yrs. Insert face punch here!
***2 cars, while husband doesn’t commute he and I share duties dropping and picking up our son from before/after school care. We both have unpredictable schedules and need the flexibility.
****We have two cell phones which are partially paid by employers)

Total Monthly Expenses: $8,740

Liabilities:
House: Value: $525k, Mortgage: $216k remaining (3.2% with 6.5 years to go)

Total Liabilities: $216k

Assets:
Home Equity: ~$310k
Cars: Two vehicles, one 7 years old, one 5 years old (combined current value maybe $10-15k?)
Company Pension: Me: ~$75k, Husband: ~$55k
RRSPs (Mutual Funds, Big Bank): Me: ~$90k, Husband: ~$85k
Shares in company (Me): ~$57k
Emergency Stash: $12k*
Money to Invest: $30k*
Savings for next car: $23k*
Savings for next vacation: $9k*
*currently sitting in high interest savings accounts (awful, I know), partially TFSA

Total Assets: ~$700k

Specific Question(s):
1.   Our goal is to FIRE between age 45 and 50 (in 10-15 years). We would appreciate your advice on how to make that happen.
2.   We feel that we are good at saving money. Obviously there is still room for improvement there. Where we feel fail is investing, both long term savings (e.g. retirement, overall wealth building, etc.) and shortterm savings (e.g. monthly savings for buying more company shares, replacing vehicles, long term travel plans, etc.).  Advice on long-term and short-term investing strategies (relevant for a Canadian) would be appreciated. We have been considering Vanguard ETFs (TFSAs, RRSPs, unregistered, etc.), but we really lack confidence in making investment decisions.






Villanelle

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Re: Fire in 10 to 15yrs – How to make our money work harder?
« Reply #1 on: February 17, 2019, 02:50:45 PM »
That's~ $57,780 or ~$29,000 per car on a 9 year replacement schedule.  So the first thing you can do is cut the number in half, and plan to purchase slightly used, modest vehicles. (I realize that you are on the short end of that replacement schedule according to the age of the cars, so maybe you can't quite halve it it you haven't been saving that much for very long, but there is still LOTS of room for adjusting that number down. For half that amount--about $16,000 (plus a couple thousand when you sell the old one), you can get a very nice car, only a few years old and with <25k miles.  Since you didn't breakdown fuel only, it's hard to know what your costs there are, but keep in mind that a car with good gas mileage is often cheaper to buy (because it's smaller) and the continues to bring savings.  And frankly, if you r husband is mostly using the car for occasional day car runs, I'd aim to spend half (or less) of even that number for his next car, and if the current one is worth much more than that or gets mediocre or worse MPG, I'd sell it.  Snag a used Yaris or Accent for closer to $5k.  That's find the the occasional kid pick up. 

Smoothmustache

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Re: Fire in 10 to 15yrs – How to make our money work harder?
« Reply #2 on: February 17, 2019, 04:53:30 PM »
Villanelle - You bring up a good point about our cars. We have reduced our vehicle costs already, but certainly they could be lower.

lhamo - You are correct about the mortgage payment - we are on an accelerated payment schedule which is why our monthly payment is so high. I have known for a while we should drop the payment (we were actually paying even more earlier this year trying to pay it off before we turned 40) and instead focus on investing and keep the mortgage a few years longer.

I love your philosophical question - those are the best kind. You bring up a good point, perhaps pulling the plug earlier (even for one of the two of us) would allow us to spend more time together. I hadn't considered this scenario. This has started a good conversation between my husband and me.

Thank you both for your feedback!

Linea_Norway

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Re: Fire in 10 to 15yrs – How to make our money work harder?
« Reply #3 on: February 18, 2019, 05:38:44 AM »
Those big overseas trips are probably quite costly. My DH once went on a fishing trip to New Zealand which was very expensive. We also considered travelling to South America next year to see the next solar eclipse. But after making an estimate of the costs of such a trip, we have changed plans to visit the eclipse in Spain in 2026. That is much closer to home and therefore much cheaper. Also easier to organize in a country close buy and with somewhat similar culture.

You can only spend your money once. Every time you allow yourself to be a bit spendy on something, you postpone your retirement. Use the MMM method. Every time you want to make a luxury spending, calculate what that thing costs you per year and per 10 years. And compare that to that same amount of money in the stock market for 10 years. Usually it pays off to not spend it and get a cheaper habit instead. Instead of a long trip overseas, can't you make a road trip in your own country instead? Or a hike in a national park.

Freedomin5

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Re: Fire in 10 to 15yrs – How to make our money work harder?
« Reply #4 on: February 18, 2019, 07:32:44 AM »
You both earn pretty high incomes. If memory serves me correctly, I believe Alberta has pretty low tax rates, but you should still be maxing out both your RRSPs to lower your taxable income, and contributing enough into the RESP to at least get the full government match (don’t miss out on that free money). Then contribute the max to your TFSA if you have extra funds left over.

Check out the Investment Order thread on this forum — there is a post specifically for Canadians.

And yes, check out Canadian Couch Potato. We use the Portfolio model of ETFs (but that’s only cuz we are Canadian expats and can’t buy low cost index funds). We have a Vanguard Canadian equity index ETF, a Canadian bond ETF, and a World Ex-Canada ETF. That site also discusses which funds to hold in which investment vehicles, to minimize taxes paid on gains/dividends. For example, I found out I should not be holding bonds in my taxable accounts.

You have a savings rate of about 30%. That’s not terrible by MMM standards but also nothing to be terribly proud of either. I think you can probably up it to 40 or 50% without too much pain.

Also, no facepunches from me with regard to the travel budget. I just find it amusing that most of the world will pay thousands of dollars to visit Banff and Jasper National Parks, and Drumheller and the dinosaur museum, and you’re paying thousands of dollars to leave it. If I lived driving distance from the Rockies, I would never leave it. Actually, for one month, I did live driving distance from Banff (I was in Calgary). We ended up spending every weekend there.  DH and I are actually flirting with the idea of living in Canmore if/when we retire. :D


RWD

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Re: Fire in 10 to 15yrs – How to make our money work harder?
« Reply #5 on: February 18, 2019, 08:18:17 AM »
Monthly Expenses:
Car Insurance & Fuel:    $420 ***
Clothing:
•   Me: $90
•   Husband: $90
•   Child: $70
Entertainment: $250
Groceries: $600
Travel: $700**

Holy cow these expenses. I've shortened the list to a few I think deserve the most immediate attention but on the whole you are hemorrhaging money.

What is the split for your car insurance/fuel? This is a mind boggling amount of money for these two combined so I'm wondering if you have abnormally high insurance or something. We're paying $136 (CAD)/month in insurance on two modern sports cars. Assuming yours is similar that means you're paying $284/month for gas which works out to 1,470 miles per month (assuming average fuel economy and [Canadian] gas prices). That is either a ton of driving or you have very inefficient vehicles.

$3,000 on clothes per year is just stupid. Ignoring the kid's clothes you're spending more than 2.5 times as much as we are on clothes.

$250/month on entertainment is also crazy. Where does it all go?

We're feeding two adults very comfortably on under $350 (CAD)/month. I can't see how adding one kid would nearly double that expense.

Your travel is high and you know it.

You make a really good income (about the same as us), but you're spending a lot of it inefficiently. I think you're on track for FIRE in 12-15 years without changing anything, but you could halve that time. If you shaved $1500-2000 off of your monthly expenses you would probably FIRE when you paid off your mortgage in 6.5 years.

Goldy

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Re: Fire in 10 to 15yrs – How to make our money work harder?
« Reply #6 on: February 18, 2019, 10:05:53 AM »
What if you trimmed back on the mortgage accelation and put that towards your investments?  Without knowing your actual numbers it seems like you could easily reallocate about $1,500 per month from your low 3.2% rate into investments.

Smoothmustache

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Re: Fire in 10 to 15yrs – How to make our money work harder?
« Reply #7 on: February 18, 2019, 10:53:31 AM »
RWD - You bring up a good point, there is definitely room for improvement in those numbers. Your comment that making significant cuts changes could lead to FIRE in 6.5 years is very motivating!

Goldy - Thanks for your reply. Yes, we can reduce the mortgage payment about $500 per month (the max reduction allowed in our current agreement). That will be step 1 for sure!

I am going to spend some time reading the canadiancouchpotatoe. Thanks for the suggestion Freedomin5!

Smoothmustache

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Re: Fire in 10 to 15yrs – How to make our money work harder?
« Reply #8 on: February 18, 2019, 11:01:42 AM »
One other question, has anyone else retired (either one or both parents) with teenage kids? I always envisioned FIRE to be at a time when our son was out of the house (or at least grown up and in college) and my husband and I could travel together. I guess I was (and am) having a hard time envisioning what it would be like to FIRE with a teen at home. lhamo's comment about enjoying being home with a 12 and 15 year old has opened up my mind to this possibility. Maybe it is worth making significant reductions to our expenses to allow for FIRE to happen sooner.

Thanks again for everyone who has contributed. It helps to have people with different perspective review our situation and provide suggestions!

 

Linea_Norway

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Re: Fire in 10 to 15yrs – How to make our money work harder?
« Reply #9 on: February 19, 2019, 01:30:21 AM »
One other question, has anyone else retired (either one or both parents) with teenage kids? I always envisioned FIRE to be at a time when our son was out of the house (or at least grown up and in college) and my husband and I could travel together. I guess I was (and am) having a hard time envisioning what it would be like to FIRE with a teen at home. lhamo's comment about enjoying being home with a 12 and 15 year old has opened up my mind to this possibility. Maybe it is worth making significant reductions to our expenses to allow for FIRE to happen sooner.

Thanks again for everyone who has contributed. It helps to have people with different perspective review our situation and provide suggestions!

Haha. I can so imagine a teenager to be angry about having to get up for school in the morning while the parents can stay at home and sleep out or go back to bed as they please. Don't most teens have trouble getting out of bed on school days? They will feel that life is not fair (which is true in many aspects).

Maybe it is nicer to be FIREd with small children. Maybe a long sabbatical with young children would be the thing and going back to work when the children become teens, to FIRE when they leave the house...

Freedomin5

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Re: Fire in 10 to 15yrs – How to make our money work harder?
« Reply #10 on: February 19, 2019, 06:06:48 AM »
My parents reached FI when I was in highschool and my sisters were in middle school. Mom then RE’d. It wasn’t much different than when she was working full-time. For adults who work hard to FIRE, they’re not suddenly going to become lazy bums. Mom was very involved in volunteer work and church work, and managing rental properties, and helping dad out with the business.

It was nice knowing that my parents could rearrange their schedule if something happened and we needed them to pick us up from school, take us to lessons and extra curricular activities, drive us to the mall, pick us up from tbe mall, go out for brunch, efc.

elaine amj

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Re: Fire in 10 to 15yrs – How to make our money work harder?
« Reply #11 on: February 19, 2019, 06:33:04 AM »
I FIREd last year with teens at home. We are definitely more tied to home at present but that is because our teens still need us quite a bit. They sometimes get a bit jealous that I can sleep in while they have to hail themselves out of bed and get themselves to school but it became normal to them really quickly.

They do take up quite a bit of my time. My DS16 just got diagnosed with ADHD a few months ago so I provide a lot of schoolwork support.

They do like that we can now be flexible around THEIR schedules rather than ours. They are 16 and 17 so we go on many trips without them. Still short trips though. I don't like leaving them for more than a few days to a week max. Still dreaming of the day when I can be footloose and fancy free but that is still at least a couple of years (maybe more) away.

Right now we mostly stay home. I started aquafit and alternate that with walking for about 2hrs a day. That keeps me pretty busy.

I'd still sooner be at home than at work ;)

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« Last Edit: February 19, 2019, 06:38:59 AM by elaine amj »