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Is it possible to save too much for the future?

DSC00843Back in December, I shared my panic about not saving enough for early retirement. I was putting away $950 each month back then, and once employer contributions kicked in, that increased to $1,200. Because of my little panic attack, I increased it again to $1,350/month for January, and then in another surge of panic in that same month, increased it yet again to where it currently sits at $1,685/month.

And even though I’m not stretching myself thin by contributing $1,685/month (which includes employer contribution), I couldn’t help but ask myself two important questions:

  1. Could I be saving less into retirement and more into my general savings? If I don’t actually need to be saving this much money to reach my goal of early retirement, would I be better off setting that money aside for a down payment on a future home? Or spending more of it on life (which basically means travel)?
  2. If I continue saving at this rate, could I potentially retire earlier than the 55-57 age that I’m currently targeted?

Even though I’ve been saving for retirement for 10 years already, and early retirement is my number one financial goal, I really don’t think I’ve ever grasped the actual reality of retirement. I’ve just kind of been wildly throwing money into my portfolio in the hope that it would fund whatever lifestyle I choose to have. But the thing is, I’ve always known what I want. Maybe I can’t picture the details exactly, but I know the feeling.

Related: What does retirement mean to you?

I wrote this back in 2013 and it still feels so true to me:

Retirement to me means having the freedom to do whatever I want to do, without the obligation to work for a living. I guess you could call it financial independence, rather than retirement. Who knows what I’ll be up to! But whatever it is, it’ll be my choice, and it won’t be based on the need to bring in an income.

Most experts say you want to replace 70% of your pre-retirement income in order to live comfortably. Which is what I’ve always been aiming for. 70% of my income right now would conservatively be about $55-60k. But the issue I’m having is, that number seems really, really high. And I’m beginning to realize that your retirement calculations should be based on your pre-retirement SPENDING, rather than your income. Right?

Because, come on. I’ve never in my life spent $55-60k in one year! I’m living quite comfortably right now on 35-40% of my income (and that includes paying rent) in Canada’s most expensive city. So if I have no rent/mortgage to pay during retirement, and I live a good life right now, why on earth would I ever need 70% of my current income during retirement?

Related: Why 20-somethings might have difficulties retiring by 65

Sure, unexpected costs will always creep up on you. So let’s say on the high end, I’ll want 50% of my income during retirement. I’m a cautious person, and there’s always a degree of uncertainty to life – so the extra padding would be nice. But that’s still a lot less than the 70% I’ve been stressing myself out to obtain.

My goal for this month is to take a really good look at my retirement plan, my current contribution rate, and what that means for my goal of early retirement. I don’t know if I’ll end up changing anything, but I do think it’s an important exercise. And if anything, it might calm me down a bit. :)

Do you have a favourite online retirement calculator?

My former life as a personal finance train wreck

2013-11-03 13.34.35-2My finances used to be bad. Like, really bad.

I’ve been hounded by collection agencies. I’ve had my credit cards declined in public. I’ve borrowed money from friends. And I’ve been so maxed out I couldn’t even afford to take the bus.

That was me in 2006. I was 24 and just about to graduate from college. I had a mountain of student loan and credit card debt, and basically no job prospects. My three part-time jobs weren’t enough to pay “real” rent, so I was stuck living in my parents basement, and in a relationship I needed to get out of. With my college diploma in hand, I was desperate to start my new adult life. I needed change, and it needed to happen immediately.

I haven’t really thought of that time in my life for a while. But doing my taxes this year and shredding a bunch of old paperwork showed me just how bad it was. I saw max out credit card statements, a line of credit that I used as a revolving debit account, and collections notices for bills I couldn’t pay and chose to ignore. Shredding those pieces of paper was liberating, but it made me realize that the financial disaster of a person I used to be is still hiding inside of me.

Last month I spent nearly $2,000 in car repairs, travel, and clothing. And it could have been a lot worse. My life has changed in that I can now pay for all of that spending in cash – but when I look back at 24-year-old me, I can still see how easy it would be to slide back into old habits. Buying two items of clothing to replace two that have worn out was fun. I could have bought way more and still not have been satisfied. I still fight the urge to be lazy and not cook a single meal (and not having RD around lately has made me even lazier). I’ve been fantasizing about what I could be spending my money on instead of saving for retirement (imagine having an extra $1,500 per month to spend!), and can you imagine the traveling that could be done if I emptied my savings account?!

So what’s stopping me from sliding back? A lot of it has to do with the anxiety and hopelessness I felt when I was living perpetually in the red. If you’ve ever been in debt before, you know the feeling … like it’s too big of a mountain to climb … like you’ll always be struggling just to get by. I remember spending countless hours worrying, crying, and stressing out over how I was going to ever turn my life around. I had never been good with money, and was never taught how. I came from an immigrant family, but my parents were always responsible with their cash. I should have learned from their example, but I didn’t.

It took a lot of will power and motivation to take the step to change my life, but looking through those financial statements showed me it was worth it. Seeing my debt shrink each month (even if it was just by a little bit) was so motivating as it was happening back then, and it was motivating to me to read 10 years later.

I thought that once I got out of debt and taught myself how to be responsible with my money, that the urge to spend would disappear. But it hasn’t. Sometimes I slip up and buy things I regret, or I eat at restaurants too often, and I’m still sometimes shocked at my credit card statements. I have all of my savings automatically withdrawn from my account as soon as I get paid – not because it’s easier for me, but because if I don’t, I’m afraid I’ll spend it. I keep a detailed spreadsheet of all of my spending and savings and transactions because it helps me stay focused and on track. My monthly budgets and spending recaps on this blog? They’re for me, not you. :)

I may not be the personal finance train wreck I used to be, and I think my money management will always be a work in progress. I’m not a natural saver, but I know that it’s important for my future self, and for my current sanity. Seeing my savings grow and knowing I’ll be okay financially in the future gives me a lot less anxiety than seeing my debt grow. So I’ll continue saving and investing and spending within my means. But it’s not easy.

Are you a natural saver or spender?

What rock climbing and personal finance have in common

IMG_9625Over the past couple months, I’ve become quite passionate about rock climbing again. What was once my favourite sport is quickly rising up the ranks again, and I find myself getting excited for the next scheduled climbing day.

Okay leave it to a personal finance nerd to find similarities in money and sport. :) But the more I thought about it, the more I realized that the lessons I’ve learned through climbing and personal finance are pretty interchangeable.

Here are just a few examples:

Learn from other people

I love watching other climbers because you can learn so much from them. We have been obsessed with watching climbing competitions on YouTube lately. And even watching RD try to climb a route completely different than I what I had previously tried is both interesting and humbling. Much like personal finance, there isn’t one right way to do anything. All of our decisions are based on our previous experience, the tools that we have on hand, and how we hope to achieve the next problem. Learning from others gives a different perspective – and maybe their way of working through a difficult move is just what you’ve been looking for – or maybe the other person is a foot taller than you and holds that they can reach easily are the ones that you’ll have to jump for. :)

Don’t compare yourself to others

This is something I struggle with both in personal finance and in climbing. It can be easy to be jealous of other people’s accomplishments. Maybe they earn more money than you, or maybe they can easily run up a route you’ve been working for weeks on. But there will always be someone richer/smarter/faster/stronger than you, and it makes no sense to compete against anyone else but yourself.

climbingValue the small wins

It’s important to focus on the process and the improvement you make every time you try – instead of always looking for the end result, or the failures you’ve had along the way. I’ve been working on one route for ages … I’ve climbed harder routes, but for some reason, I couldn’t get past the first sequence of moves. It seemed impossible, and it was demoralizing when I saw RD easily reach for a hold that I struggled for a week to even touch. But each time I tried, I got a little bit closer … until one day I jumped, grabbed the hold, and continued on with the climb. But instead of focusing on the accomplishment of completing the first sequence, I was bummed that I had to bow out half way up the route because of another problem.

It wasn’t until later on that day when I was home, that I realized what I had accomplished. I didn’t finish the route, but I got a heck of a lot closer than I ever had before. And the process of trying (and not giving up) is something that I needed to see and value and be proud of.

Push yourself to achieve more

When I was getting out of debt, I pushed myself to pay off my debt as fast as I could. And when I didn’t think I could squeeze an extra dollar out of my budget, I found a way. There’s always more we can do to achieve our goals – whether it’s working a bit of overtime, finding a part-time job, saying no to a second beer (and actually saving that cash), or gathering all the energy you can muster to get yourself to the next hold on the wall. Which leads me to my next point…

Sometimes it’s really uncomfortable

You know the morning after you’ve worked out hard? All your muscles are sore and you can barely roll out of bed… it’s a hurt-so-good type of feeling, because your body aches, but it only serves as a reminder of how hard you worked the day before. I love that feeling! And it’s the same as with personal finance. When I can close my browser tab with items in my shopping cart – even though I really wanted those sweaters – is a pretty amazing and empowering feeling for me. I was really horrible with my money for a long time, so being able to say no because it doesn’t align with my current short-term financial goals is an accomplishment to be proud of every single time.

It’s okay to fail

A few weeks ago I had a horrible session at the gym. I couldn’t finish a single climb. Routes I’ve done multiple times before all of a sudden became too challenging. And each failed climb made me grumpier and more miserable. I felt bad for RD, because as much as I wanted to be cheerful, I was just wallowing. But he reminded me that it’s okay to have a crappy session – or even a crappy week. And the same goes with personal finance. It’s okay to slip up every once in a while, as long as you acknowledge your mistakes and keep trying to improve.

There’s just something about climbing that draws me in. I love that even though it’s an individual pursuit, it requires good communication, problem solving, and teamwork – much like personal finance. :) And when I do top a problem that I’ve been working on for weeks? Sure, it’s satisfying. But months later, what I’ll remember and learn from is an interesting footwork sequence, or a couple quick power moves that felt really good, or the endurance that it took to get me to the end. So even though the goal was accomplished, it was the work that got me there that I’ll benefit from the most.

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