Stephen from Canada

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singpolyma
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Stephen from Canada

Post by singpolyma » Sat Sep 08, 2018 7:55 pm

Hello everyone! I come from a fairly frugal background (lived below "poverty line" in Canada, then in a 3rd world country) but while I continued to live more frugally than my coworkers, my large salary did create slow lifestyle inflation that I did not avoid because "well, but I have the money..." -- I came to understand how wrong I had been just after getting married when I googled "how much do I need to retire" and found MMM.

Over at the MMM forums they do "case studies" where people post their expenses and others with a different perspective may see where you're being the most wasteful that you can't see just because you've looked at your own numbers for so long. I think this is a great idea, but I doubt I'd get much out of posting there because we've managed to cut our spending back to levels a bit above average for that forum. I thought it couldn't hurt to post a summary here and see if anyone had anything fun to say:

Budget for two people (and an 8-month-old):

Charity $374.43
Rent $1,600.00
Utilities $200.00
Food $200.00
Car Gas $100.00
Car Repair / Replace $170.00
Car Insurance $119.92
Vacation $150.00
Miscellaneous $62.00
Continuing Education $50.00
Kids $60.00
Phone + Internet $97.60
Entertainment $50.00
Gifts $30.00
House Maintenance $10.00
Bike / Transit $20.00
Health & Wellness $80.00
Museum $5.83
Hobby $42.79

This is ~41000 (6 Jacobs) / year or, after removing rent (which I know is a touchy topic) ~21000 (3 Jacobs) -- seems like there is obviously some room for improvement based on that metric alone :)

CS
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Re: Stephen from Canada

Post by CS » Sat Sep 08, 2018 8:02 pm

Welcome!

Your food is nice and low. :) I don't manage that and it's just me.

That is an impressive amount to Charity.

The obvious areas for cutting are housing and the car. Cars are so dang expensive. But it's hard to say without knowing more. I mean if you're in Vancouver with the crazy housing market, then you're doing great...

What is your savings rate? Do you have a timeline to FI?

singpolyma
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Re: Stephen from Canada

Post by singpolyma » Sat Sep 08, 2018 8:07 pm

Yeah, that car... before I was married I had no car. My wife used to commute to next town for work (!) but is now SAHM -- little one will be old enough to ride in the bike trailer later this month so I hope we can get to at least much lower car use in the near future.

Housing is high, I agree, but I'm not sure we can bring it down significantly without leaving town (which might be an option long-term, but unfortunately not an option at the moment)

Savings rate is 58% and I'm sort of cheating to FI (in a 4-year golden handcuffs situation that will easily get us there at current spending). Always looking for ways to improve :)

wolf
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Re: Stephen from Canada

Post by wolf » Sun Sep 09, 2018 2:12 am

Welcome Stephen!

Congrats to your SR. It is quite high. This is a great starting point and situation to be in.

Are you quite happy, content and satisfied with your life? Because IMO that is also important. Of course you can always improve your way to FI, but it shouldn't decrease what is also important in life for you.

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Bankai
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Re: Stephen from Canada

Post by Bankai » Sun Sep 09, 2018 6:04 am

Since you've asked...

To bump your SR to 66% you'd need to cut your expenses to 32k, and to achieve 75% SR - 24.5k.

Your housing (inc. bills), car, food & charity combined are 34k.

Everything else adds up to 6.7k and looks reasonable considering your high income. I would not worry about any of those expenses.

Therefore, to meaningfully increase your SR, you have the following options:

1) move
2) sell the car
3) cut your charity donations

Freeing yourself from the car saves you ~5k pa and bumps your SR to ~63%. The last 3k to reach 66% can be for example a combination of trimming charity, finding cheaper phone/internet and trimming vacations slightly.

For 75% SR, you need to cut 16.5k. Since you are probably not interested in cutting everything (car, charity & 'everything else' are 16k total), moving to a (much) cheaper place seems like the only valid option.

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Re: Stephen from Canada

Post by jacob » Sun Sep 09, 2018 8:11 am

Hey there. Your spending is over twice the average for this forum, so lets see what we can do.
singpolyma wrote:
Sat Sep 08, 2018 7:55 pm
Entertainment $50.00
Hobby $42.79
Gifts $30.00
Are these membership fees? If it's stuff it shouldn't really cost that much because it should be funded by selling old entertainment/hobby stuff. Buy things on craigslist/ebay/... sell them again there. Get very familiar with the depreciation formula of the actual cost:

(cost price - sale price)/time(s) used ... this should be near zero or even positive for good deals.

Zero cost hobbies and forms of entertainment do exist. For example, I own thousands of dollars worth of tools, but it's been a good long time since I bought any; the could be ebayed for almost the price I paid for them(*); and I work with scrap/crap wood ... mostly building stuff that saves me $$$ on home maintenance and gifts. WRT gifts, the entire family has come to a peace treaty in the sense that homemade is better. This does require some skill ... but see "hobby" and "continuing education".

(*) Example: A $325 handplane that I've owned and used regularly for 10 years. It cost $270 on ebay and could be sold for $220 (After ebay fees and shipping)... so (270-220)/10years = $5/year. Compare e.g. to a $500 power jointer from homedepot that was used 3 times but otherwise just sat there until it stopped working (anything with a powercord eventually breaks): $500/3 = $166/usage.
singpolyma wrote:
Sat Sep 08, 2018 7:55 pm
Utilities $200.00
Phone + Internet $97.60
Hard to tell. These can certainly be lower to an extent. We use about 10% in terms of gas and electricity and half the water of the average American household but thanks to minimum use fees and taxes, we spend almost as much on utilities as you (about 2/3 of you). The phone/net can likely be a lot cheaper.
singpolyma wrote:
Sat Sep 08, 2018 7:55 pm
Health & Wellness $80.00
Vacation $150.00
These could be near/zero by doing different kinds. I used to pay $100+/month to train with swords. Now I train with weights at home for $0.
singpolyma wrote:
Sat Sep 08, 2018 7:55 pm
Charity $374.43 ($150k)
Rent $1,600.00 ($640k)
Car Gas $100.00 ($40k)
Car Repair / Replace $170.00 ($68k)
Car Insurance $119.92 ($48)
The elephants in the room. I did the FI calculation under a 3% rule on how much you need to save to support these habits. The result is $946,000. Even if you have a high salary it would take some time to save almost a million bucks.

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BlueNote
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Re: Stephen from Canada

Post by BlueNote » Sun Sep 09, 2018 9:32 pm

Rent is the biggest elephant. After retiring I'd consider moving to a more 'average' place outside of the GTA (greater Toronto area). For example Peterborough is nice and has rents around $1k which lobs about 240k off the rather conservative 3% rule calculation. Before retiring you could look at Oshawa and other points along the go system. Your car insurance will also go down a lot when/if you move. I'd be setting up an RESP for my kid (6 months old) before I gave to charity but that's just a personal opinion, either way it goes to help someone. Car repai/ replace seems a little low, maybe your car gets less mileage and/or is newer than what I am used too but assume it's a one car household.

Stahlmann
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Re: Stephen from Canada

Post by Stahlmann » Mon Sep 10, 2018 10:33 am

Holy shit,
I paid for my car's insurance the same amount of money in PPP terms (mainly because I'm in the last year of very dangerous drivers' age bracket, but... I haven't used it for ages :x :x :x :evil: :evil: :evil: ).
Holy shit.
Holy shit.

[cutted rant]

Coming back to the OP:
If you like your job or/and get compensated well enough - keep doing it.
Enjoy cheap cars and gasoline in moderation :lol:

singpolyma
Posts: 3
Joined: Fri Jun 08, 2018 7:35 pm

Re: Stephen from Canada

Post by singpolyma » Mon Sep 10, 2018 6:31 pm

Thanks for the feedback everyone! It's really helpful. I'm going to think out loud about some of the observations and questions. Not rationalizing, I think every point is valid, just thinking.
1) move
2) sell the car
3) cut your charity donations
Fair. We just moved earlier this year, and we really like our area, but still I had started to price compare to other cities, etc. I'm not sure I want to go all the way to small town (which would be cheapest) but some of the cities in southern Ontario are a bit cheaper than where we are. Something to consider.

Sell the car is at the top of my list, I think. Starting with increased biking later this month when the little one is finally big enough for her helmet, hoping to eliminate most inner-city trips this fall. My wife does volunteer with a theatre group in a small town near us a couple times a year, and there isn't really bus service from here to there, so I'm thinking about options there a little bit.

I know I could increase our personal efficiency a lot by cutting charity. I feel like, since we are so privileged it is reasonable to use some of our considerable resources to help people besides ourselves.
Are you quite happy, content and satisfied with your life?
If you like your job or/and get compensated well enough - keep doing it.
Yes, I am happy with my life and we're on-track for our goals. But I do like to think about where we could be doing better, and also have an idea of what cost-cutting measures I would target first if we were suddenly in a different situation.
Are these membership fees?
The bulk of Entertainment goes to eating out, very occasionally we do something extravagant like a musical theatre production, or we may use this money for museum entrance, etc when on vacation.

Hobby is split between my part of a web server that I pay for (along with other friends) to host a lot of my side projects, etc, and craft material for more hand-on hobbies (fabric, thread, yarn, seedlings, etc).

The idea of using some of the "hobby" money twice by buying materials that are then made in to a gift had honestly never occurred to me as a cost efficiency of DIY gifts. Certainly something to consider!
Hard to tell. These can certainly be lower to an extent ...The phone/net can likely be a lot cheaper.
Utilities might turn out to be an overestimation, I won't know until after we've been through a winter. Summer utilities are pretty low, though still a bit variable. I've been trying to nail down my understanding of the swings in our costs. I think water cost mostly goes up when it's dry because we have a garden.

Phone + Internet we actually currently pay less than that because we're on promotions from both our cell and Internet companies. I tend to promo-surf as much as I can, moving from one to the next as they expire, but I don't want to rely on that for my FI numbers so I keep it at the cheapest full-rate I can find ($20 x 2 for cell phone + $57.50 for home internet -- both numbers after tax). We currently pay ~$47 total for both, but that will change in the spring when our cell phone promo expires.
Health & Wellness $80.00
Vacation $150.00
Absolutely these could almost go away. Health & Wellness has been mostly going to various physiotherapies my wife has been undergoing for some tendinitis issues, etc, but hopefully that can go down a bit next year as she seems to be recovering.

Vacation is so high because my parents live in Africa (very expensive flights) and I would like to be able to visit them once with the kids when older. This would be my first category to cut if we were under pressure, though, I think since it's the least needed and would just be nice to do someday.
I'd be setting up an RESP for my kid (6 months old) before I gave to charity but that's just a personal opinion
I don't include RESP here because that's savings/investment and not an expense. It's basically extra TFSA room that *could* go to daughter's education if she decides to go down that road and OSAP doesn't cut it. It will be maxxed out, on a schedule to get the full CESG of course.

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