Minimum income to FIRE?

[Gail2000]

Hello friends,

I have been reading a lot of your wonderful posts and am wondering though if in mycase I can even aspire to retire early. I Found MMM about 6 months ago and only got my DH on board this year. I am 36 and he 35. Together our annual income (living in Canada if that matters).

Together we make 90k (me $38k and him 52K.

Our expenses are roughly $3000. Our take home pay $5200-$5400 depending on his hours.

Mtg: $605 
Land/ School Taxes:  3200/ 12= 267.00
Cable/ internet/ 2 cells: $220
Insurance:  House: $185
Cars $125
Hydro:  Average $150 (winter sucks)
Gas Average $75 (winter sucks more)
Car registration $30
Daycare $115

Food $500
Transport: 500. (includes Maintenance & 2 Cars)
Fun (I'm allowed that right?): 100
Him: 200 (includes expensive hobby & Smoking..trying to quit..)
Me: 100
Kid: 75

Yearly: House Maintenance (3% of house value)
            Licences
             Forgetting something but  all to say another $400 for this
         

Expenses: $3547

So I am supposed to be able to put away $1750/month. I guarantee 1250 is as this is the amount being automated including the mortgage being paid down. The rest seems to trickle its way out. No debt but 140K mortgage. I am feeling discouraged at the moment.

 

[Telecaster]

Don't be discouraged.   You have quite a high savings rate (compared to most people).   If things don't change, you won't be able to retire very early unfortunately, but you should be very comfortable when you get to that point.

Hopefully, your income will increase as your careers progress.  That should allow you to increase your savings rate.   

[Zikoris]

People do it on way less income than that. We brought in 77K in 2018, saved 64% of it (in line with our norms of 60-70%), and are on track to be retired before 35. We also traveled to seven countries in 2018, and live in Vancouver.

Money shouldn't be "trickling" anywhere. Put a stop to that. Track it. No trickle allowed.

[ericrugiero]

Something I'm trying to do is to invest before we have the chance to spend it.  Max out your tax advantaged savings accounts and any other savings you want to make so they come out automatically and don't hit your account.  You won't see the "extra" money in your bank account which will discourage the money from trickling away.  By default you will learn to live on less because it's just not in your account to start with. 

[Acastus]

I think Hubs might be low balling you on the smokes. South of Lake Ontario, a pack is about $10 USD the last time I paid attention. If he smokes 1/2 pack a day, that is $150.

You can make a lot of progress with a $1500 per month surplus. If your mortgage is at a low rate, you may be better off investing, rather than paying down the principal.

[Cassie]

Zig, they have kids so will have related expenses for them. I think you guys are doing well. Your incomes will hopefully rise.

[Gail2000]

Don't be discouraged.   You have quite a high savings rate (compared to most people).   If things don't change, you won't be able to retire very early unfortunately, but you should be very comfortable when you get to that point.

Hopefully, your income will increase as your careers progress.  That should allow you to increase your savings rate.

The simple fact that even with a kid and house and to be with out debt is a margin of victory but I let others dictate that level of success. Thank you for the encouragement. I am looking around at the site more and realize I became a complainny pants.

 

Zig, they have kids so will have related expenses for them. I think you guys are doing well. Your incomes will hopefully rise.

I think this is where I too compare apples and oranges. Our one kiddo knows the word no and but of course there are still necessities and some fun things. Thank you for the positivity.

Something I'm trying to do is to invest before we have the chance to spend it.  Max out your tax advantaged savings accounts and any other savings you want to make so they come out automatically and don't hit your account.  You won't see the "extra" money in your bank account which will discourage the money from trickling away.  By default you will learn to live on less because it's just not in your account to start with. 

Time to sit with a calendar and pinpoint when the money is leaving to make sure I’m not top or bottom heavy to strategize for this. It might be that I’m taking it out at the wrong times. Which might account for money disappearing. Awesome thank you

I think Hubs might be low balling you on the smokes. South of Lake Ontario, a pack is about $10 USD the last time I paid attention. If he smokes 1/2 pack a day, that is $150.

You can make a lot of progress with a $1500 per month surplus. If your mortgage is at a low rate, you may be better off investing, rather than paying down the principal.

I’ll have to look into it. He’s trying, bless him.p to reduce the amount. As far as investing, risk tolerance might grow with more reading on the topic of investing. The beast that is the mortgage had another 22 years there really is no rush per say to pay it. Dave Ramsay has filtered into our household but I’m reading that post on here regarding that debate. Fascinating perspective.

Alright. Big girl pants are on. I’m back to the drawing board tomorrow.

[EnjoyIt]

@Gail2000,
Congratulations on taking control over your financial future. Now that you are putting on your Big Girl Pants, it is time to go through all your expenses with a fine toothed comb and eliminate all waste and items that purchase little to no happiness and that definitely includes the cancer sticks your husband is smoking.  He needs to man up and take control of his addiction.  Here are some tools for you to help him quit.

1) If he smokes 1/2 a pack per day that is about $150/month or $1800 a year on cigarettes. If instead that money went into investing $1,800 per year over 30 years at 8% growth is $220k.  If he makes $52k a year.  That is 5 years of him working extra just to pay for his cigarettes.

2) I assume he works hard for the money he makes.  Ask him why would he bust his butt all day at work just to squander away all that money so that he can die younger. It makes no sense and needs to stop immediately.  Smoking not only causes lung disease, cancer, heart disease, peripheral vascular disease, and foot amputations.  Smoking also decreases blood flow to the penis which leads to importance.  Does he actually like smoking more than sex?  https://www.healthline.com/health/erectile-dysfunction/impotence-and-smoking

3) Him smoking cigarettes is putting the wellbeing of you and your children at risk.  Even if he doesn't smoke in the house smoke will linger on his clothes. https://health.clevelandclinic.org/5-things-you-should-know-about-the-risks-of-thirdhand-smoke/

You are doing great, good luck, and keep up the good work.

[Cassie]

One thing I do every few years is shop for better rates on car/home insurance, cell phone plans, etc.  We also spend a pre-determined amount for groceries.  Tracking should help you find leaks.

[Fire2025]

Just wanted to jump in and say congrats, you're doing really good, and FIRE is possible on lower, than the average here, incomes.

Combined our household never earned more than 95K (him 40K, me 55K) and my partner has already FIRE'd (@47) with his half of our house paid off. I'm 7 years from FIRE @55, but I will keep my half of the house mortgaged, because I have a sub 4% rate.  We have no kiddos.

You can totally do this!!!

[Bateaux]

I'd suggest paying all debts and save a million bucks.  Then revaluate the situation.

[Gail2000]

@Gail2000,
Congratulations on taking control over your financial future. Now that you are putting on your Big Girl Pants, it is time to go through all your expenses with a fine toothed comb and eliminate all waste and items that purchase little to no happiness and that definitely includes the cancer sticks your husband is smoking.  He needs to man up and take control of his addiction.  Here are some tools for you to help him quit.

1) If he smokes 1/2 a pack per day that is about $150/month or $1800 a year on cigarettes. If instead that money went into investing $1,800 per year over 30 years at 8% growth is $220k.  If he makes $52k a year.  That is 5 years of him working extra just to pay for his cigarettes.

2) I assume he works hard for the money he makes.  Ask him why would he bust his butt all day at work just to squander away all that money so that he can die younger. It makes no sense and needs to stop immediately.  Smoking not only causes lung disease, cancer, heart disease, peripheral vascular disease, and foot amputations.  Smoking also decreases blood flow to the penis which leads to importance.  Does he actually like smoking more than sex?  https://www.healthline.com/health/erectile-dysfunction/impotence-and-smoking

3) Him smoking cigarettes is putting the wellbeing of you and your children at risk.  Even if he doesn't smoke in the house smoke will linger on his clothes. https://health.clevelandclinic.org/5-things-you-should-know-about-the-risks-of-thirdhand-smoke/

You are doing great, good luck, and keep up the good work.

I am showing him this tonight. Hoping he just needs a voice other then his loving but apparently naggy wife (he's lucky I care enough to nag).

[AlexMar]

Seems there could be significant savings on food, smoking, and transport.  $5,000/year for house maintenance and licenses (and whatever else) seems like quite a bit, too.  Do you do the maintenance yourself?

If you could save $350 just on food/smoking/transport, plus $100 off your house maintenance budget, you would be looking at $300k or so over 20 years.  But as you know, that's just a start.  You hopefully will earn more money as time goes on.  Don't inflate your lifestyle and just put even more away.

The numbers are there.  You can do it.

[Arbitrage]

Echoing what others are saying, you're doing great and FIRE is a possibility.  How early will depend upon the details.  A few comments:

1. Don't treat any expense as immutable or untouchable.  Sure, some will be very difficult to change without major upheaval, like property taxes, but you should at least consider what could be done, even if you decide not to do anything about it. 

For example: Cable, internet, cell phone does not need to cost $200 per month.  Look into trimming each of these.  More and more people are finding that cable is completely unnecessary, and cell phones can be had very cheaply through prepaid plans or MVNOs. 

Transportation definitely doesn't need to cost $730/month.  Bike more, ditch the newer cars, do some of your own maintenance, etc.  Maybe you're already being frugal here for your situation, but you should question each purchase, particularly those that drain your account every month.

2. Since you don't know where all of your money is going, you really should do a detailed tracking of your expenses, either through a full-on budget software like YNAB, manually through a spreadsheet, or some other option.  You can't get a true handle on your finances with this phantom drain.  I'm not a big fan of YNAB anymore now that the cost increased by several hundreds or even thousands of percent (I purchased it for $15 with no recurring fees, but now it requires almost $100/year), but some people still swear by it. 

[EnjoyIt]

@Gail2000,
Congratulations on taking control over your financial future. Now that you are putting on your Big Girl Pants, it is time to go through all your expenses with a fine toothed comb and eliminate all waste and items that purchase little to no happiness and that definitely includes the cancer sticks your husband is smoking.  He needs to man up and take control of his addiction.  Here are some tools for you to help him quit.

1) If he smokes 1/2 a pack per day that is about $150/month or $1800 a year on cigarettes. If instead that money went into investing $1,800 per year over 30 years at 8% growth is $220k.  If he makes $52k a year.  That is 5 years of him working extra just to pay for his cigarettes.

2) I assume he works hard for the money he makes.  Ask him why would he bust his butt all day at work just to squander away all that money so that he can die younger. It makes no sense and needs to stop immediately.  Smoking not only causes lung disease, cancer, heart disease, peripheral vascular disease, and foot amputations.  Smoking also decreases blood flow to the penis which leads to importance.  Does he actually like smoking more than sex?  https://www.healthline.com/health/erectile-dysfunction/impotence-and-smoking

3) Him smoking cigarettes is putting the wellbeing of you and your children at risk.  Even if he doesn't smoke in the house smoke will linger on his clothes. https://health.clevelandclinic.org/5-things-you-should-know-about-the-risks-of-thirdhand-smoke/

You are doing great, good luck, and keep up the good work.

I am showing him this tonight. Hoping he just needs a voice other then his loving but apparently naggy wife (he's lucky I care enough to nag).

Good luck....Addiction is tough to break.  If you can, please share his reaction and let me/us know if what I posted becomes helpful.  I am always looking for improving my dialogue in helping people quite smoking.  If someone would remove cigarettes and fast food off the face of this world, many physicians and hospitals would go out of business.  Ok, I'm exaggerating, but only a little.

[Gail2000]

Seems there could be significant savings on food, smoking, and transport.  $5,000/year for house maintenance and licenses (and whatever else) seems like quite a bit, too.  Do you do the maintenance yourself?

If you could save $350 just on food/smoking/transport, plus $100 off your house maintenance budget, you would be looking at $300k or so over 20 years.  But as you know, that's just a start.  You hopefully will earn more money as time goes on.  Don't inflate your lifestyle and just put even more away.

The numbers are there.  You can do it.

As per maintenance, I am going off the 3% rule from a money blog from Gail vaz oxlade. It’s down now so I can’t quote it. It’s not that we have to spend it but I gathered that it was for an I case scenario like sinking fund. The transport is high but he has an aging truck at 260000kms. I speak of moving closer to our jobs and he quite heatedly says it’s too expensive and out of the question. There is some sense here but I to could be doable.

We are having a sit down again once birthdays are celebrated. A reset for this month and back at ‘er.

[Freedomin5]

Dave Ramsey is good for getting out of debt, but you’ll need to graduate to other sites to get the details on investing. A Canadian-specific site that many Canadian forum members like is Canadian Couch Potato (I hail from Toronto and use the Canadian Couch Potato ETF sample portfolio). Also ready Millionaire Teacher by Andrew Hallam — he’s a Canadian teacher who retired early.

JLCollins is also a good site to learn more about the basics of investing (though US-centric).

And of course, check out the Investment Order sticky on this forum (under Investor Alley subforum). There is a Canadian-specific post on the order in which you should pay off debt, invest in TFSA, invest in RRSP, invest in taxable accounts, contribute to RESP to get the government match, etc.

[Gail2000]

Dave Ramsey is good for getting out of debt, but you’ll need to graduate to other sites to get the details on investing. A Canadian-specific site that many Canadian forum members like is Canadian Couch Potato (I hail from Toronto and use the Canadian Couch Potato ETF sample portfolio). Also ready Millionaire Teacher by Andrew Hallam — he’s a Canadian teacher who retired early.

JLCollins is also a good site to learn more about the basics of investing (though US-centric).

And of course, check out the Investment Order sticky on this forum (under Investor Alley subforum). There is a Canadian-specific post on the order in which you should pay off debt, invest in TFSA, invest in RRSP, invest in taxable accounts, contribute to RESP to get the government match, etc.

this is fantastic! I’ve been at a loss since Gail retired. Suzann Orzman didn’t jive with what I was going for. I like Dave Ramsay but I feel since getting to investing, I’m at a standstill. He’s pawning that off onto his patsies. I listen for motivation. Looks like I’m heading to the library :)

[Freedomin5]

@Gail2000 Since you’re headed to the library, you might as well also borrow Your Money or Your Life, if you haven’t read it I already. Also an excellent book touted by many forum members.

[radram]

Hello friends,

I have been reading a lot of your wonderful posts and am wondering though if in mycase I can even aspire to retire early. I Found MMM about 6 months ago and only got my DH on board this year. I am 36 and he 35. Together our annual income (living in Canada if that matters).

Together we make 90k (me $38k and him 52K.

Our expenses are roughly $3000. Our take home pay $5200-$5400 depending on his hours.

Mtg: $605 
Land/ School Taxes:  3200/ 12= 267.00
Cable/ internet/ 2 cells: $220
Insurance:  House: $185
Cars $125
Hydro:  Average $150 (winter sucks)
Gas Average $75 (winter sucks more)
Car registration $30
Daycare $115

Food $500
Transport: 500. (includes Maintenance & 2 Cars)
Fun (I'm allowed that right?): 100
Him: 200 (includes expensive hobby & Smoking..trying to quit..)
Me: 100
Kid: 75

Yearly: House Maintenance (3% of house value)
            Licences
             Forgetting something but  all to say another $400 for this
         

Expenses: $3547

So I am supposed to be able to put away $1750/month. I guarantee 1250 is as this is the amount being automated including the mortgage being paid down. The rest seems to trickle its way out. No debt but 140K mortgage. I am feeling discouraged at the moment.

I see no reason to be discouraged. You have some GREAT information here. People here can help. Keep posting. Keep updating. Keep changing. This is a journey.

Just a few discussion points:

"The rest seems to trickle its way out". If you want a serious look at expenses, this just can not happen. I get it, tracking SUCKS, but you have to do it. A $500 "trickle: is actually 1/7th of your spending, and is worth finding out where it is going. I recommend using credit cards for EVERY purchase, paying off the balance EVERY month. Every time. No exceptions. You then have a full record of every transaction and can make decisions based on the data you receive. We also get 1.5% cash back, so we are actually paid to record every transaction.

A few "little things" quickly add to big things. You estimated $3,000 in expenses, then itemized $3,500.00 in expenses. That is a 16% increase from your estimate. Add in the "trickle" you mentioned, at you are at about 1/3rd of your spending. Your spending breakdown is a FANTASTIC start. You need to make sure these numbers are accurate so you can properly plan. Your numbers will change a little once you get a more detailed picture, but there are still a few items that jump out at me based on your current numbers. As always, life is about choices, and whether or not those choices provide the value you want them to.

Sometimes looking at things from a different angle changes perspective. Look at your mortgage, home taxes, home insurance, and maintenance. That totals $1458 per month. Is housing closer to work REALLY untouchable at that monthly cost. If you did move closer to work, could you drop 1 car, cutting auto expenses in half? I know for my family, we absolutely love rural home ownership in the suburbs with our 1 1/2 acres. We do not kid ourselves. From a strictly financial perspective, we should downsize. We probably will at some point, but the added costs are worth it to us. They might be to you as well.

Car expenses. If I read that right, it is $125+$75+$500. $700.00 per month on cars. More details would help here. This looks like a place to attack. What are you driving? Are they paid for? $8,400 per year on cars can definitely be improved upon.

$475 for "fun". $5,700 a year for fun. Only you can decide if that is money well spent. Does this include vacations? I do not see a line item for that. You can have 1 HUGE "fun" time with your family(like a trip to Hawaii), or a bunch of smaller "funs", like movies out, dinners out, smoking, fancy coffee, etc. Only you can determine whether these "little things" add the appropriate worth to your life. Smoking aside. That is just an evil addiction it took me 14 years to quit. No blame there, but deep down everyone knows it needs to stop. Luckily for me, they were $1.00 a pack when I started and less than $2.00 when I quit.

$220 cable internet phones. My internet is $50 per month. I will not give it up. Period. We had over the air the TV for 20 plus years. Never had cable. We now spend on Amazon prime and Netflix. After a few years of that, we may pull the plug on one of those. We will see. Phones are free per month through FreedomPop. Voice service is poor, but texts go through very well. WiFi calls are fine. Severely limited in data, but that is fine with me. Many people HATE the company, but they work for our family of 4. About $75 per month for us all in for this category. I could cut that almost in half without ruining my life to bad. I don't think FreedomPop is available in Canada, but shopping for cheaper service for your family could be worth the trouble.

$115 for child care. Is that per month or per week. Sounds very low, but great if it is accurate.

I am a little confused about the $1250 at the end of your post. Does that include the $605 mortgage? Is that the full mortgage, or only the interest portion, or only the principle reduction? Where is the rest of it going?

$90,000 in income and $62,000 take home. That is 31% taken off to get to your take home, which is your starting point for all your figures. I see that is consistent with tax rates in Canada. I know very little about it, but can't you sock away 18% into an RRSP(like a US 401k). Isn't that like an immediate 31% return(with taxes owed later of course). Canadians chime in here please.

Keep us posted on how your life changes, and how these changes effect your overall happiness.

[Dances With Fire]

Gail, don't be discouraged!! You are already doing what (most) do not and that is tracking expenses. This is often the most powerful but overlooked tool in wealth building. (Did you notice that I did not use the word "budget".) Breaking budgets tends to lead to discouragement and added family stress IMO. Sure there are many things that one can not control and need to plan for. Property and school taxes for example. So we must focus on those things that we can control.

Search this site and others for ways to "trim" excess electric, heating, transportation, and food expenses for example. (I know, winter sucks and it's difficult to find the extra savings but it can be done.

 FWIW, your numbers are (almost) exactly as ours...We became FI @ 50 ish...Not 30-40 however it was still doable. And, and this is a BIG and, we still made time for fun, travel, and the things we value most....Good Luck.

Dance With Fire

[Freedomin5]

Yes, 18% pre-tax dollars can go into RRSP. $6000 per spouse per year after-tax dollars can go into TFSA, which grows tax-free.

The RESP is the one that some people miss. The government will Give You For Free $500 for every $2500 you contribute every year, up to a max of $7200. That’s $7200 of free money, just to save for your child’s education. And that amount is per child.

I just noticed cars and transport are listed separately. Why are the cars double counted? And why is there a fun item line and also a Me item line? Is that also double counting?

[Chaplin]

I second the recommendation for Millionaire Teacher! It’s by far the closest thing to MMM in book form! Canadian Couch Potato is also key. Those two sources, plus this blog, should be all you ever need.

[Gail2000]

Yes, 18% pre-tax dollars can go into RRSP. $6000 per spouse per year after-tax dollars can go into TFSA, which grows tax-free.

The RESP is the one that some people miss. The government will Give You For Free $500 for every $2500 you contribute every year, up to a max of $7200. That’s $7200 of free money, just to save for your child’s education. And that amount is per child.

I just noticed cars and transport are listed separately. Why are the cars double counted? And why is there a fun item line and also a Me item line? Is that also double counting?

Good eye. No that was on purpose. The first mention of cars is under insurance but badly written. I thought it best we have a family budget too because it is a separate entity then each individual. Perhaps over thinking it....I have been accused of that.

Trying to keep us both accountable and it not affect my kiddo too much.

One thing I do every few years is shop for better rates on car/home insurance, cell phone plans, etc.  We also spend a pre-determined amount for groceries.  Tracking should help you find leaks.

That is definitely to be looked into. We aren’t even covered for very much for the house.

Just wanted to jump in and say congrats, you're doing really good, and FIRE is possible on lower, than the average here, incomes.

Combined our household never earned more than 95K (him 40K, me 55K) and my partner has already FIRE'd (@47) with his half of our house paid off. I'm 7 years from FIRE @55, but I will keep my half of the house mortgaged, because I have a sub 4% rate.  We have no kiddos.

You can totally do this!!!

Thank you. The kiddo is an expense but not overly. No special needs but I do have to calm down with the classes. One per season is enough.


Anyone I miss I read and appreciate the feedback.

[Imma]

Seems there could be significant savings on food, smoking, and transport.  $5,000/year for house maintenance and licenses (and whatever else) seems like quite a bit, too.  Do you do the maintenance yourself?

If you could save $350 just on food/smoking/transport, plus $100 off your house maintenance budget, you would be looking at $300k or so over 20 years.  But as you know, that's just a start.  You hopefully will earn more money as time goes on.  Don't inflate your lifestyle and just put even more away.

The numbers are there.  You can do it.

As per maintenance, I am going off the 3% rule from a money blog from Gail vaz oxlade. It’s down now so I can’t quote it. It’s not that we have to spend it but I gathered that it was for an I case scenario like sinking fund. The transport is high but he has an aging truck at 260000kms. I speak of moving closer to our jobs and he quite heatedly says it’s too expensive and out of the question. There is some sense here but I to could be doable.

The rule of thumb I've always heard is that maintenance is about 1% of the value of your home per year, not 3%, as long as you want to keep the house in the same condition as it was when you bought it - that means no upgrading, just maintenance. So far this 1% rule seems to be accurate for our house, but I imagine this depends on the type of house you own.

What I do to make sure I don't spend more than I've planned, is to put all my money in savings/investment accounts as soon as it arrives, then transfer back a set amount every week to my checking account. In my case that's €100. This pays for groceries, travel to work (€8/day) and any other expense that might come up. Usually I have money left over at the end of the week. It's worth a try to set an amount for every week, then consciously try to lower it each week to find out what your barebones expenses level is. You can then decide to add a little money for fun expenses, but this way it's a conscious decision to spend, not something that just happens to you.

[Gail2000]

e money as time goes on.  Don't inflate your lifestyle and just put even more away.

The numbers are there.  You can do it.

t maintenance is about 1% of the value of your home per year, not 3%, as long as you want to keep the house in the same condition as it was when you bought it - that means no upgrading, just maintenance. So far this 1% rule seems to be accurate for our house, but I imagine this depends on the type of house you own.

What I do to make sure I don't spend more than I've planned, is to put all my money in savings/investment accounts as soon as it arrives, then transfer back a set amount every week to my checking account. In my case that's €100. This pays for groceries, travel to work (€8/day) and any other expense that might come up. Usually I have money left over at the end of the week. It's worth a try to set an amount for every week, then consciously try to lower it each week to find out what your barebones expenses level is. You can then decide to add a little money for fun expenses, but this way it's a conscious decision to spend, not something that just happens to you.
[/quote]

I certainly admit the slipping away of funds is all my fault for lost planing and lack of discipline. I like your idea. I would need a secondary account. Savings accounts here tend to penalize you for taking money out more then once a month. Silly but there you have it. Hubby and I have scheduled meeting on Thursday which is payday so we can do the banking together. Posably a card cutting ceremony as the ability to access the money plays an important roll. Weakling we are lol.