Give Me Back My Five Bucks

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?

June 2016 Goals

After a very expensive May, I’m hoping June is a quieter month for spending.

I technically have no confirmed travel plans this month other than a weekend home to take my dad to a baseball game. But because we both have a lot of banked/vacation time to use up this year, we were thinking of taking the last week of June off and tackling a portion of the Sunshine Coast Trail over in Powell River. I can’t think of anything I’d rather do more than go on an epic multi-day hike to celebrate Canada Day! So I definitely hope this happens. :)

Work looks to be busy this month. Actually, it’s been busy for the past few months, but seems to be catching up to us lately. I don’t mind though, because I’m still loving my job and the company. I feel valued as an employee, and that’s not something I’ve felt in a really long time. Along with a small raise in April, my overtime hours have just been bumped up from 1.0x  payout to 1.5x (with the option to get paid out or bank the time). I was already collecting banked time off at a pretty rapid rate, but this just means I’ll end up with a lot of carry-over days for 2017 (which isn’t a bad thing – because next year I want to get on a plane and go somewhere amazing!).

RD won’t be home from his big 5-week work trip for another 7 or 8 days, and he’s gone again later this month for another 5 or 6 days of field work (and then again in the beginning of July). So I’m going to try to keep my dining out habit in check (something I failed at last month). I love the summer, but will love having him home even more. :)

Anyway, here is the budget I’m proposing for the month:

06-June2016-Budget

June 2016 Goals:

  • Continue being active. May was an amazing month for working out. I did something active 5x times per week, and loved it. This month will be a bit different because I’ll be bringing rock climbing back into the mix, but hope to continue mixing climbing up with yoga, spin class, and hiking.
  • Go hiking somewhere new. Aside from the SCT, I’d like to try something in the Lower Mainland I’ve never done before. Since there’s still a lot of snow up high, I’ve been looking at some hikes near Chilliwack and might head out there one weekend.
  • Examine my retirement plan. For many years I feared I wasn’t saving enough money. Now I think I’m saving too aggressively for the kind of retirement I actually want. I need to actually sit down and take a look at the numbers. Could I be putting my money towards savings outside of retirement? Or can I adjust my retirement goals to stop working even sooner than I thought?
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