Give Me Back My Five Bucks

2016 is the year of the emergency fund

Rob Carrick recently proclaimed 2016 as the year of the Emergency Fund. I’m a huge fan of having at least 3-6 months worth of living expenses set aside should you have to face any financial setback. Rob said it best when he wrote, “think of an emergency fund as insurance against a short-term setback that affects your long-term financial goals.”

My Emergency Fund isn’t something I have thought about much over the last couple of years. But I’ve certainly used it – like when I got laid off, when my laptop needed repairs, or when I accidentally cracked my car windshield and needed to pay the ICBC deductible. Then, once life settled back down, I topped the EF back up to its original amount, and stopped thinking about it again.

Related: When is it okay to use your Emergency Fund?

Right now my $10,000 EF sits in a high-interest TFSA – this represents about 5-6 months of normal living expenses, and it’s the amount I’ve always been comfortable with. I’m confident if I lose my job, I’ll be able to get a new one within a couple of months. And I don’t see a one-time emergency costing more than $10k at the moment (since I’m renting).

It took me 6 years to save up to $10,000. I started saving $25/month back in 2006, got to $5,000 in 2011, and finally hit $10,000 right before I left for Germany in 2012. It was not a fast process, and I had a bunch of setbacks along the way… but it was definitely worth it. So don’t feel discouraged if you feel like it’s taking forever to fund your EF (I felt that way too). Even just a little bit of cash saved up is better than nothing, and you’ll get there eventually. :)

Instead of keeping a chunk of money for emergencies, a lot of people will consider using a line of credit or a credit card if an emergency takes place. I personally really dislike the idea of going into debt in order to take care of a financial emergency, or relying on a bank to get you through. With cash, you don’t have to worry about payment schedules, interest rates, or creating a potential mountain of debt. Having your own money on hand gives you options. You can all of the shots, and that’s a huge step towards creating financial independence. And personally, I’m okay with the low interest rates in my “high interest” TFSA – because like Rob said in his article, “the emphasis is on safety over returns.”

Related: Creating a bare-bones budget

How did you determine what amount was right for your Emergency Fund?
Or are you using the line of credit/credit card method instead?

Are you passionate about your career?

When I was in high school, I was told by my parents and teachers to find a career based on what I was passionate about. Choosing a career path is a lot to ask of a 17 or 18 year old, and people often stay in school for years, get multiple degrees, leave jobs to get re-educated, or drift aimlessly, never really finding what it is they can be passionate about. They ponder what their true calling in life could be, and how to turn that into the Dream Job. But for some people – me included – a job will always be just that: a job.

Another one you hear a lot is “do what you love, and the money will follow.” Which might be the case for a few very lucky people, but unfortunately probably isn’t reality for many. If your passion happens to come with a low-paying wage, irregular/odd hours, or some other major issue, you have to make a choice: do you follow your passion with whatever faults it comes with, or do you choose something that you’re lukewarm about, but will offer you the lifestyle and stability that you want?

I chose not to pursue my passion because it did not align with the lifestyle I wanted for myself, and I learned that in 2007 – just one year after graduating college. I was offered a job that was two steps away from my Ultimate Dream Job. The only thing was, I’d have to take a 35% pay cut from what I was making at the time. It also required irregular hours, and plenty of OT (so much that it would be impossible to get a part-time job in order to make up the difference in salary). I wanted the job, but I couldn’t justify it. I would have to sacrifice my other dreams – like early retirement, owning a home, and traveling regularly – just to have what I would consider The Perfect Job. Essentially, I’d have to make my job my lifestyle choice.

In the end, I turned down the job. Which actually surprised me. I always knew The Perfect Job for me wasn’t exactly going to be high paying, I just always figured I’d find a way to make it work. But when the time came to actually make that decision, I started to second guess myself. Did I want to spend my life working long hours for a low salary? How important was traveling to me, and was retiring early really a goal I wanted to achieve? With the new job, I wouldn’t be able to do any of those things, no matter how much I cut out of my budget. So all of a sudden, The Perfect Job didn’t seem so perfect anymore. It was a hard decision to make, but I had to be realistic with myself.

I realized that, above all else, I would never be satisfied with my career unless I saw potential to grow my salary as I grew as a professional. And unfortunately, that was the one thing The Perfect Job couldn’t offer. It would always be low-paying, even at the highest level. So I chose a different path.

I am not passionate about my day job. Don’t get me wrong, I like marketing a lot. I think I’m pretty good at it, and it makes me happy enough that I hope to work in this field for the rest of my career. It is the path I chose for its versatility, salary range, and creativity. It offers a little bit of everything I like, and there’s a great deal of potential upward movement as my career continues to progress. So while it’s not my Dream Job, it’s as close as I’m going to get to it, while maintaining financial stability and achieving all of my other life goals as well. And really, I can’t ask for much more than that.

Some people have found a career they are passionate about. Whether they are rich, or poor, or anything in between, they wake up every morning and are absolutely excited to go to work. I honestly think that is incredible, and a really rare thing these days. But it’s unrealistic to believe that can happen to everyone, and I think we put too much pressure on people to find a career like that. There’s nothing wrong with not being in love with your job, and you don’t have to feel passionate about everything that you do in your career to feel fulfilled. You just have to like it enough to want to do it every day.

Are you passionate about your job?

The goal of early retirement

At least once a year I have bit of a breakdown about my early retirement plan. Even though I run the numbers every year to make sure I’m still on track, I somehow end up convincing myself that I’m not saving enough. This happened last week, and I promptly took an entire evening away from packing up my house to play in spreadsheets and run numbers through about a million online retirement calculators. I also tried to share my panic and frustration with RD, but because he’s got a nice government pension waiting for him when he retires, he didn’t really understand where I was coming from.

Early retirement is my number one financial goal. Right now my goal is 55-57. This has been what I’ve wanted since I started taking a keen interest in my finances back in 2006, and I don’t see it changing anytime soon. But what does retirement actually look like? Taken from a 2013 post I wrote, 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.”

Freedom. It’s a word I’ve been using a lot lately. I recently freed myself from my mortgage, and the lifestyle I desire now (as well as in retirement) allows me the freedom to make whatever choices I want to make. I want my life to be open to all opportunities, and perhaps as I get older, those opportunities will become more defined.

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

I may not know what retirement looks like for me from a day-to-day point of view just yet (because a lot can happen in the next 25 years), and that’s okay. Right now, I want to live in a small (tiny) home in (or near) my hometown. But just like in life, I don’t think retirement needs to look a certain way in order to be happy. I may have this exact lifestyle for the rest of my life until I die. Or maybe a family is in my future. Or maybe as soon as I retire, I’ll want to move somewhere exotic or travel the world with my husband. I guess the point is, it doesn’t matter what I want to do when I’m older, it just matters that I’m taking the steps now to allow me the freedom to make those choices later.

Back in 2006, I was saving $50/month towards retirement. I’ve come a long way since then, but the $950/month I’m currently saving is still not enough. Once employer contributions kick in, that amount will increase to $1,200. If my average annual salary is around $80k, and I want to be saving 20% of my gross income towards retirement, then I should be at about $1,350/month.

I’ve got some time to think about it before I set my 2016 goals, but I’m fairly confident that I can save that amount, as well as save for travel and any other savings goals that may come up (my total savings rate should be about 50-60%). I’m just not sure how to adjust my auto-debits, as my income can fluctuate quite a lot from month to month.

How much are you putting away towards retirement? 
Does the amount you’re saving align with your retirement goals?

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