Life Situation: Wife “K”: 42, healthcare professional, part-time (70% of full-time schedule)
Me “N”: 42, engineer/manager in a 100% of the time work-from-home arrangement
DS: 12
DD: 9
We live in Ottawa, Canada. All dollar amounts listed are Canadian.
I have wanted to exit the corporate rat-race for more than a decade now. I was investing before being introduced to MMM, but it was after that introduction that I saw that the path forward lay in ramping up our savings rate considerably higher than the 10% that many authors promote.
“K” on the other hand likes her job and wants to continue growing her DB pension until at least age 50. She works in a 0.7*FTE position, so she accumulates 0.7 years of pension service per year. She doesn’t get workplace benefits as a part-timer, but we have mine which are great. They pay her extra compensation in lieu of benefits – meaning if she were to change to full-time at some point, she would get very little extra money, but we would get her benefits instead. She has mentioned before that she would consider going full-time in a few years for a few years, but I don’t think either of us would prefer that option really. I’d rather work a year longer so that it wouldn’t be necessary if that’s what it took.
K has said she is on board with me leaving the workforce earlier than her. Of course, the implication is that the time for me to do that is “not until we’re financially ready.” I guess I’m trying to figure out at what point we will be financially ready.
My focus on this goal of getting to FI has come in “waves” of motivation. When the wave is rising I set a goal (50% savings rate), track our expenses like a hawk, and maximize putting the savings into investments. My wife tolerates the new regime probably better than she should considering it isn’t her goal to retire early – although really, she isn’t really a “spender” anyways. But she does change her habits (buys less coffees, delivers receipts to me for tracking) which I think chafes a little.
Eventually my motivation starts to wane as it sinks in just how long a road it is to save enough to reach FI. I settle back into just living within our means and not really going beyond filling the registered investment accounts. Currently we’re (I’m) riding the beginning of a large wave of motivation (to finally get to the end!? One can hope).
Gross Salary/Wages:N: $133K plus 10% bonus (bonus depends primarily on company performance and a little on mine)
K: Around $90K – it varies because she isn’t paid for stat holidays, sick days, etc., but she can also pick up extra work sometimes if she wants to (as casual shifts)
Pre-Tax Deductions:Each year we maximize our RRSPs. Because of K’s DB pension she never has a whole lot of RRSP room to contribute towards, but I typically end up with a good chunk (nearly $20K/yr).
We have an investment HELOC loan I took out when money was cheap that I use in an unregistered trading account. For 2022 the deduction for the interest will amount to $7150. It will be even more for 2023 with interest rates continuing to rise – but I might kill the whole thing off. We’re under water on the investment currently to the tune of about $6K on a $158K loan. Interest rate is currently 6.95% (but with the tax deduction it’s more like 3.93% interest). I don’t include the interest as an expense below because the HELOC itself is paying its own interest (i.e. interest is rolled into the debt each month).
We’ve pretty much passed through the period of childcare deductions and work from home deductions are minor too.
Current Expenses:Obviously the most important parameter to this whole case study. I’ve held off on even posting here for a few months because it’s tough to pin down exactly what our expenses would be if we were more focused with our spending/saving, and last year we were not, so what am I even going to base everything below off of?
The best I could do was tally up our spending for last year – I did so on this journal post:
https://forum.mrmoneymustache.com/journals/(can)-condolences-to-gentle-hearts-who-couldn't-bear-to-try-127925/msg3083580/#msg3083580That was during a period of time though when, like I said, we were not trying very hard. Many of the expenses were hard to figure out exactly what they were for after the fact – e.g. was a trip to Walmart six months ago for groceries? Clothing? Who knows anymore! It was a mess to figure out after the fact.
In December I started tracking very carefully breaking down every expense into proper categories. I used these values, along with knowing where further cuts would come from, to create a 2023 whole year projection spreadsheet which I’m now tracking ourselves against. So far (22 days in!) we’re tracking along nicely to the plan.
All this to say there is a degree of estimation in the expenses below – it’s my best guess.
Numbers below are yearly totals as this mirrors my spreadsheet.
**********************************************************************************
Yearly Expected After-Tax Income: $155K**********************************************************************************
Yearly Expected Expenses:** HOME**$14230 Mortgage
$4900 Property Tax
$1270 Home Insurance
$600 Home Maintenance
$5000 Home Improvement
TOTAL HOME = $26000We’re planning to get the central air AC unit replaced this year. It’s over 30 years old and could go at any time.
**TRANSPORTATION**We have two vehicles – 2017 CR-V EX-L and a 2016 Civic LX
$1300 Car Insurance
$1000 Car Maintenance/Parts
$2800 Fuel
Parking – K does have parking charges at her workplace, but they come off her pay (so they’re already accounted for in the above take home pay)
TOTAL TRANSPORTATION = $5100I know I’ll be changing the CR-V rotors and pads, front and back, in the spring (2-3mm left now). Other than that, just regular maintenance is anticipated.
$2800 for fuel might be too low based on where we’re at in January already ($175 of the $200 I budgeted with probably one more CR-V tank to go). Not to mention gas prices continue to vary wildly.
**Other Financial Charges**$400 Life Insurance
$1100 Professional Dues
TOTAL OTHER = $1500
**Utilities**$1600 Electricity
$1500 Natural Gas
$1130 Internet
$1200 Cell Phones (3 lines)
$930 Water
TOTAL UTILITIES = $6360I’m reimbursed $813.60 for the cell phones and $720 for the internet by my employer. I could get a slower than 940/30 Mbps internet package and probably have essentially free internet - it’s an option. The cell phone though I have to provide a receipt for – so anything less than $60/month (+tax) is just giving up free reimbursement.
**Food/Dining/Vices**$12000 Groceries
$2400 Restaurants
$1200 Alcohol
$600 Cannabis
TOTAL FOOD/DINING/VICES = $16200**Entertainment**$200 Spotify
$2200 Other (probably an over-estimation)
TOTAL ENTERTAINMENT = $2400I wouldn’t normally subscribe to something like Spotify. Most “content” I get for free one way or another. After a three-month free trial though we decided this was one service worth paying for.
**Shopping**$800 Clothing
$1200 Other
TOTAL SHOPPING = $ 2000**Health & Fitness**$500 Running (Me)
$1000 Rep Baseball (DS)
$1200 Horseback Riding (DD)
$300 Sporting Goods
TOTAL HEALTH & FITNESS = $3000**Medical/Dental/Pharma**Most things are covered 100%, but I’ll put in $1200 just in case (our pharma plan is the only benefit not particularly good by our own choice as we wouldn’t get much use from it)
TOTAL MEDICAL/DENTAL/PHARMA = $1200**GIFTS & DONATIONS**$2200 Gifts
$600 Donations
TOTAL GIFTS & DONATIONS = $2800**Childcare**$3000 Summer Camps
TOTAL CHILDCARE = $3000**Personal Care**$1800 Hair/Nails/Shaving/Cosmetics
TOTAL PERSONAL CARE = $1800**Travel**$4800 Generic Travel (no exact trips planned for now)
$1200 Backcountry Camping Trip(s)
TOTAL TRAVEL = $6000**Pets**$2000 A blanket $2K to cover mostly food, cat litter, vet visits for 1 golden retriever and 2 cats.
TOTAL PETS = $2000Only the dog visits the vet. All the pets are young (3-4). They won’t be replaced when they pass away (they’re mostly for the kid’s benefit).
*******************************************************************************
TOTAL YEARLY EXPENSES = $79360
AVG MONTHLY EXPENSES = $6613 (which sounds about right)
AMOUNT LEFT TO INVEST = $155K - $79K = around $76K (we’re aiming for 50% this year)Expected RE Expenses:If I were to pull the plug, I anticipate I could make the following changes:
- Sell one car resulting in a savings of: -$1500/yr
- Drop the life insurance: -$400/yr
- Lower food expenses: -$2000/yr mostly through better meal planning (probably more really)
- Unsure of what we would do for a supplemental health plan
- Childcare need completely gone: -$3000/yr
- I’m tempted to say consider the mortgage to be gone, as I would probably pay it off before RE (although we may take one out again purely for a deductible investment loan)
In total:
RE Scenario 1 (still have mortgage) sees RE expenses drop to $72460/yr ($6038/mth), and
RE Scenario 2 (no mortgage) sees RE expenses drop to $58230/yr ($4853/mth).Assets:$612K Primary Residence (likely higher, but this is the last appraised value from when we got the mortgage)
$170K non-registered investments (primarily in ETFs – VUN and XAW, and some cash in the bank account)
$734K registered investments
- $221K in TFSAs
- $193K in N’s RRSP
- $45K in K’s RRSP
- $44K in K’s Spousal RRSP
- $15K in N’s Ontario regulated LIRA
- $138K in N’s Federally regulated LRRSP
- $71K in the family RESP account
- Small remainder is in N’s workplace RRSP/DC pension accounts
- K has a DB pension – her accumulated service up to now would allow for $28280/year from age 60 onwards.
- As previously mentioned, we have two vehicles. I assume they have no value as we will drive them until they have no value, but if we were to sell one (likely the Civic) we could get $10K-15K.
Liabilities:- $202K Mortgage (1.74% fixed until March 2026)
- $158K HELOC investment loan (6.95% tax deductible – effective rate around 3.93%)
Specific Questions:1) Where the hell am I on this FI journey? I can’t help but think the following:
- Considering K still wants to work, and her take home is already nearly enough to cover our yearly expenses, I feel like I could pull the plug at any time. Our situation would improve in that we would start getting CCB again (we made too much last year to get any).
- On the other hand, we’re a good $600K away from having 25X our “Scenario 1” expenses. But K’s DB pension essentially covers nearly half of our expenses (17-ish years from now).
- Another consideration is that our investments are already generating nearly $22K/year in income, easily making up the shortfall (about $1800/month on average). We could start drawing out some of the dividends instead of reinvesting them.
2) Any of the spending categories seem way out of whack? (I realize what I’m walking into here…)
I realize by MMM standards we spend a lot. At least while the kids are dependent on us, we’d like to give them a semi-stable life and encourage them to pursue passions which interest them (sports, arts/crafts, etc.). We will stay in the same house for 4 more years minimum so the youngest can finish out public school at the same school. Realistically we would probably stay in this house until the last kid moves out, then downsize to a smaller house with a bit more land. Or maybe take some time to "slow travel" the world. K has a lot more travel experience than I do, but I welcome the chance to catch up.
3) When would you pull the plug in my situation?
Curious to hear different opinions. Would your answer change if K pulled the plug at the same time as me, or let’s say at age 50 in 8 years?
Part of me is pretty sure I could pull the plug now, but another part of me also knows that these are some of the best years I’m going to get to pad the investments even further, increasing the opportunities in the future for more travel/adventures. A little more stress today for a lot less stress down the road? We're both of the opinion that we will help the kids through post-secondary education to a point, but not pay their whole way. K would like to make sure the kids get a good start in life without much school related debt before we do anything too drastic. I'm of the opinion that they will learn a lot of responsibility from paying off their own school debt (although I don't want them to be drowning in debt either should they choose to pursue a program with an exceptionally high cost).
One of the possible “work-for-the-man” exit strategies I’m considering is starting my own business – likely an ETSY shop (I have a couple ideas). Alternatively, it could be a service-based business (I am working from home and popping out for an hour or so during the day isn’t out of the question). The plan would be to get the business running and successful before I quit the day job.