Monthly Archives: January 2019

The Beginning (and my start-of-2019 finances)

Welcome to my small contribution to the Early Retirement Extreme / FIRE (Financial Independence, Retire Early) movement. If you’ve found my blog, there’s a good chance you’re familiar the concept. In case you’re not, the idea is simple enough. Instead of working for forty years while dutifully saving 10-15% of your income and retiring around age 65, you save 50 or 80% (or more!) and retire a few decades earlier.

Readers will find me more extreme than some and less extreme than others. I’m hoping to offer a unique perspective as someone going it alone in the wilds of rural Canada, braving long winters and enjoying cheap housing far from any urban centre. My posts will focus on personal finance, rural living, and reducing the grocery bill through gardening and foraging.

A little background…

After a fairly boring middle-class upbringing in the suburbs, I followed the recommended path of getting lots of post-secondary education so that I could have a career, make lots of money, and otherwise become a successful contributing member of society. Turns out I don’t much care for the whole career thing after all, and spending loads of money on stuff I don’t need is not my idea of a fulfilling existence.

Enter the ERE / FIRE movement. Finally, a way out! By the time I learned that there was a name for it, I was already well on my way. I paid off my $20,000 in student loans within six months of graduation and then went to work building up my cash reserves and the small stock portfolio that I had started while still in school.

…and fast-forward to today.

I managed to parlay all that education into a well-paying job in a little town with a very reasonable cost of living. Because the local population is small, my professional community even smaller, and my role putting me somewhat in the public eye, the details of said job will have to remain confidential. The important point here is that I really, really don’t want to do it any longer than I have to. I know this begs the question of whether I should just try and find a job I like better. It’s a reasonable debate in the ERE world and one I’ll certainly be addressing. Either way, I’m looking very forward to a future where Sunday evenings aren’t soured by an insidious sense of dread.

I bought a decent house and nearly two acres of land. Possibly crazy to buy property when my employment situation is tenuous at best, but what can I say? It was cheap and I love both the place and the surrounding crown land where I forage and explore. Whether buying or renting is optimal for financial independence, and whether one should use a mortgage or pay cash are definitely on the list for future posts.

So how is the wealth-building going? Well, here is my financial position as of January 23, 2019. For context, I am dangerously close to my 30th birthday and I joined the full-time workforce a little less than four years ago.

Net worth (all values in Canadian dollars)

Assets

Cash (TFSA and unregistered high interest savings accounts): $31,559

Canadian stocks (sheltered in TFSA): $22,105

US stocks (unregistered trading account): $5,808

Personal residence (conservatively-estimated market value): $175,000

Exchange-traded funds (RRSP): $60,570

Total: $295,042

Liabilities

Mortgage: $114,260

Total: $114,260

Net worth = Assets minus Liabilities = $180,782

Notes:

I’m choosing not to count my car (which like all vehicles is rapidly depreciating in value), household goods, or personal effects as assets.

Assets also do not include wages already earned that I will receive next payday.

Similarly, liabilities do not include current balances on credit cards. (It goes without saying that balances are paid in full every month.)

2018 Income, Expenses, and Savings Rate

Active Income: $87,142. This is my after-tax income from the dreaded J-O-B, which makes all of this possible. I submit a T1213 form to reduce the income tax deducted from my paycheque, but still expect a small refund this spring.

Passive Income: $2513.05. This includes interest on cash accounts, dividends, and distributions. The majority ($2076.85) is sheltered in my TFSA and RRSP. $212.28 is interest from unregistered accounts and is taxed as earned income, and $223.92 is from the US portfolio and is taxed as foreign dividends.

Expenses: $33,828 (Actually $34,132, minus the $304 I got back from cash-back credit cards). Note that I count the interest component but not the principle of each mortgage payment as an expense.

2018 Savings Rate (from active income) = ($87,142 – $33,828) / $87,142 = 61.18%.

There it is. Those numbers raise some questions. Am I sitting on too much cash? Should I be aggressively paying off the mortgage or focusing on filling up the extra room in my TFSA? Should those US stocks be sitting in a registered account? Am I spending too much and where can I cut back? That’s what this blog is for – a place to work through questions like those, and maybe offer some guidance to others who are asking the same things.

At the same time, I want to hold myself accountable to the path I’m choosing. This blog will force me to justify all the little nuts and bolts of my FIRE escape, be it the asset allocation of my portfolio, my target net worth, or whether early retirement extreme is even what I should be doing with my life. I don’t have answers at this point, or even a concrete timeline for my liberation from my 9-to-5. Looks like there’s a lot to do.

Let’s get started.