- Reader Case: Future Empty Nesters - September 25, 2023
- Full Circle - September 11, 2023
- Yield To Maturity Might Be Indicating a Bottom in the Bond Market - August 21, 2023
Today’s reader case hails from the Canadian oil patch. Albertan reader cases are always interesting, in that Alberta has experienced such a boom-bust cycle in the oil sector that it’s affected nearly every person who lives there. Let’s find out how.
Hi Guys,
First off thanks for sharing your book and inspiration! This was the first “Finance/Investing” book I had read in quite awhile. It was inspiring, entertaining, engaging and presented in a way to be easily implemented. What a breath of fresh air! And your Blog takes it to another level! What a wealth of information and experience.
Several years back my wife and I realized that we had to change our finances. As a newly married couple we followed the path of buying the house, having the baby, renovating the house and on and on. We were making good money but we didn’t seem to be saving much of it. And we do want to retire. Hopefully early!
The few investments I was involved in tended to be primarily equities. So working in the oil patch, downtown Calgary, Alberta…you get all sorts of great “tips” of “the next big thing” from family, co-workers and random strangers. As it generally played out locally, the “next big thing” was a massive downturn in our local economy that started at the end of 2014 and hasn’t actually recovered. Many of those great tips are today worth ten cents on the dollar.
In 2016 I wasn’t sure if I was going to be able to hold my job. There were layoffs everywhere and I had already taken a roughly 40% pay cut. The real estate market was still strong enough so we sold our house, as we didn’t want to be paying that mortgage and potentially looking for work at the same time.
We bought the house in 2010 for $495,000. We sold in 2016 for $575,000. Not bad right!? Well, I did rough math (I don’t keep exact detailed reports like Wanderer and Fire Cracker), and when the smoke cleared, the numbers said we rented that house for 6 ½ years for ~$1740/month. When I read your position on how home ownership is expensive, it mirrored our personal experience.
Ultimately, I did keep my job and after renting for a couple years, we did buy again. In this case we paid $350,000 for a duplex where we rent out the basement as a separate rental suite.
We would love to be “retired” in ten years. What could that look like for us?
- We are 49 years old
- Our son is done high school and has a RESP worth~$80,000 to take care of his post secondary education.
- Our dog will be 11. She could last a few more years to hold us back from world travel.
- Our home is totally paid off. Most likely paid off by the time we are 45.
- Probably keep this as a home base and as a small rental income stream.
- We can still rent out our basement suite. Or not. Maybe our son will live there if he stays local for post secondary.
- We pursue inspiring work where and when we want. It is not primarily finance driven.
- We could take a year (or more!) off and travel together.
- Possibly spend 6 months a year abroad. I think we still qualify for Alberta Health care this way. And we still like it here.
Here is where we are now:
- We are both 39 years old.
- Gross Annual Family Income: ~$224,950
- Net Annual Family Income: ~$158,143 (does not include rental income below)
- I’m Sales & Marketing in Oil & Gas. My wife is an HR Manager for a company that services mostly oil & gas.
- Monthly family spending: ~$7,000
- No debt (other than mortgage)
- Mortgage details:
- Principal Amount: $145,000 (purchase price was $350,000, we put $205,000 down)
- Annual Interest Rate: 3.14% fixed for 5 years
- Closing Balance as of Dec 27, 2019: $122,000
- We plan to put RRSP tax refund of ~$15,000 plus another $6,000 cash towards this in April.
- Maturity Date: May 15, 2023
- Estimate ~$280,000 in home equity (home should sell for more than $400,000)
- We have two vehicles (paid off):
- 2013 Ford Explorer worth ~$14,000
- 2015 Buick Encore worth ~$15,000
- I don’t really see these as assets. These two vehicles cost us ~$9,500/year in operational costs. That does not include depreciation.
- We have some gold, silver & platinum stuffed under a mattress somewhere. Current market value of Bullion ~$31,000
- Our son’s ( he is 8 years old) RESP: $32,000
- Bonds:
40% - Equities:
60%
- Bonds:
- Annual rental income from basement suite: $11,500 (gross)
- Managed Mutual Fund Investments:
- RRSP’s:
~$92,715 - Cash (money market): 6%
- Bonds:
30% - Equities:
64%
- TFSA(Wife):
$13,600 - Cash (money market): 6%
- Bonds:
30% - Equities:
64%
- TFSA (Me – just opened): $4,000
- Bonds:
40% - Equities:
60%
- Bonds:
- TFSA (Stocks): $2,290 (down 90%) (my wife stock shames me for this; which I probably deserve)
- Crypto: ~$10,000 (this is pretty much gambling and I wouldn’t include it in assets)
- Cash on hand: ~$18,000
- RRSP’s:
Summary
- Net Income: $158,000. Does NOT include ~$11,500 (gross) annual rental income.
- Spending: $76,000. (I’ve added a cushion beyond the expense table)
- Assets: $161,600. Does NOT include RESP, home equity, vehicles or crypto.
- Debts: $0. Mortgage Payments built into spending
Expenses
- Mortgage: $757 Per Month, $9,084 Per Year
- Utilities: $350 Per Month, $4,200 Per Year
- Property Tax: $192 Per Month, $2,304 Per Year
- Home Insurance: $97 Per Month, $1,164 Per Year
- Buick Insurance: $110 Per Month, $1,320 Per Year
- Buick Fuel: $125 Per Month, $1,500 Per Year
- Registration: $8 Per Month, $90 Per Year
- Licence: $3 Per Month, $36 Per Year
- Buick Maintenance: $75 Per Month, $900 Per Year
- Explorer Insurance: $110 Per Month, $1320 Per Year
- Explorer Fuel: $275 Per Month, $3,300 Per Year
- Explorer Maintenance: $75 Per Month, $900 Per Year
- Explorer Registration: $8 Per Month, $90 Per Year
- Groceries: $1,200 Per Month, $14,400 Per Year
- Dog (food, groom): $70 Per Month, $840 Per Year
- AMA: $15 Per Month, $180 Per Year
- Internet: $63 Per Month, $756 Per Year
- Netflix $14 Per Month $168 Per Year
- Son’s RESP: $170 Per Month, $2,040 Per Year
- Before/After School: $510 Per Month, $6,120 Per Year
- Son Activities: $125 Per Month, $1,500 Per Year
- Meals Out: $200 Per Month, $2,400 Per Year
- Meals In: $200 Per Month, $2,400 Per Year
- Bank Fees RBC: $16 Per Month, $192 Per Year
- Cell Phone: $65 Pre Month, $780 Per Year
- House Cleaners (Marriage Insurance Policy): $130 Per Month, $1,560 Per Year
- Misc: $100 Per Month, $1,200 Per Year
- Annual Trip: $500 Per Month, $6000 Per Year
~~OilFIRE
Ah, the oil patch. For you Americans out there, Alberta is basically Canada’s Texas. They have three major industries: oil, gas, and strip clubs for oil & gas workers. They wear cowboy hats and drive pickup trucks, and is one of the few places in Canada where you can find Trump supporters (due to his support of building pipelines down into the US). Curiously, they were also home to a fringe political movement for Alberta to secede from Canada and join the US. That movement has been…strangely quiet ever since the coronavirus hit for some reason. Can’t imagine why.
They’ve also been whacked badly by the oil price’s slide from over $100 a barrel to $40 today, which is why OilFIRE made a reference to potential job cuts in 2016. Their real estate market also took a big hit around then and has never recovered, so it’s quite common for us to see people from Alberta sitting on investment properties that are underwater. Fortunately, this reader has avoided being in that situation.
So, what jumps out at me when I look over OilFIRE’s numbers?
Where Did All Their Money Go?
People who work in Alberta’s oil patch are known for two things: Big salaries and big spending. Because the people who work in this sector often get massive salaries right out of school. it’s really common for them to go nuts with their spending. Easy come, easy go, right?
But in this case, their spending isn’t too bad. I mean, it’s still high compared to our budget, but in relation to their earnings it’s pretty reasonable. With net earnings of $158,000 and total spending of $76,000, they are saving $82,000 a year, which means a savings rate of $82,000 / $158,000 = 52%!
So that begs the question…where did all of it go? If we take into account how much money they put down on their house ($205,000) and their other investable assets ($161,600), we get $366,600, or only 4.5 years worth of savings at $82,000 a year. Their net worth should be way higher at this point in their lives. I’m not seeing any yachts or helicopters in their assets, so where did it all go?
Investments Are All Over The Place
And I think the biggest clue to answer this question is in their investment strategy, in that they don’t seem to have one. Some of the money is in managed mutual funds (yech), some of it’s in their duplex, some of it’s in gold and precious metals “stuffed under a mattress somewhere” (his words), and some of it’s in crypto (!!!).
And then there’s this line: So working in the oil patch, downtown Calgary, Alberta…you get all sorts of great “tips” of “the next big thing.” Followed by this line in their assets: TFSA (Stocks): $2,290 (down 90%).
So what this is telling me is that they’re doing random things with their money without a coherent investment strategy. And the investment strategy that we recommend is not to invest in individual stocks, precious metals, high-fee mutual funds, or cryptocurrencies, but rather invest in a diversified portfolio of low-fee index funds.
So that’s the first thing our reader needs to do. Go back through our Investment Workshop and learn about how to manage an ETF portfolio yourself. Then, when you feel you have a reasonable grasp on the material, gather all of the “investments” you’ve accumulated, sell it all, and build your portfolio.
If we do this, OilFire’s investment portfolio will be $92,715 (RRSP) + $13,600 + $4000 + $2290 (TFSAs) + $31,000 (precious metals) + $10,000 (crypto) + $18,000 (cash) = $171,605. We won’t be including the RESP since that’s earmarked for his son’s education.
Math Shit Up
OK so assuming that our reader gets his investments under control, how are they doing? For some reason in his summary table he makes a point to say that he’s not including his basement suite’s rental income as part of his earnings. I’m not sure why, it should absolutely be included as part of his earnings, though we do have to account for taxes on that income. Let’s be super pessimistic and say that his $11,500 gross annual rental income becomes $6000 after tax (damned Canadian taxes!). So his net family annual income is $158,000 + $6000 = $164,000.
Now how much is his spending? The answer? I DON’T KNOW!
His own email doesn’t even agree on the answer. At the top, he claims he’s spending $7000 a month. Then later on, he says he’s spending $76,000 a year, which is $6,333 a month, not $7000. And if we throw his broken down expenses into Excel and add it up, it only adds up to $66,744 a year, or $5,563 a month.
So I have a low degree of confidence OilFire actually knows how much he spends. But he’s given us 3 sets of numbers, so let’s see what each scenario implies for his FIRE plans.
At a spending level of $7000 a month, or $84,000 a year, he would need his portfolio to hit $84,000 x 25 = $2,100,000. His savings would also be $164,000 – $84,000 = $80,000. With these numbers, we can project he will hit FIRE in…
| Year | Balance | Savings | ROI | Total |
|---|---|---|---|---|
| 1 | $171,605.00 | $80,000.00 | $10,296.30 | $261,901.30 |
| 2 | $261,901.30 | $80,000.00 | $15,714.08 | $357,615.38 |
| 3 | $357,615.38 | $80,000.00 | $21,456.92 | $459,072.30 |
| 4 | $459,072.30 | $80,000.00 | $27,544.34 | $566,616.64 |
| 5 | $566,616.64 | $80,000.00 | $33,997.00 | $680,613.64 |
| 6 | $680,613.64 | $80,000.00 | $40,836.82 | $801,450.46 |
| 7 | $801,450.46 | $80,000.00 | $48,087.03 | $929,537.48 |
| 8 | $929,537.48 | $80,000.00 | $55,772.25 | $1,065,309.73 |
| 9 | $1,065,309.73 | $80,000.00 | $63,918.58 | $1,209,228.32 |
| 10 | $1,209,228.32 | $80,000.00 | $72,553.70 | $1,361,782.01 |
| 11 | $1,361,782.01 | $80,000.00 | $81,706.92 | $1,523,488.94 |
| 12 | $1,523,488.94 | $80,000.00 | $91,409.34 | $1,694,898.27 |
| 13 | $1,694,898.27 | $80,000.00 | $101,693.90 | $1,876,592.17 |
| 14 | $1,876,592.17 | $80,000.00 | $112,595.53 | $2,069,187.70 |
| 15 | $2,069,187.70 | $80,000.00 | $124,151.26 | $2,273,338.96 |
…15 years. Not bad, but it’s not hitting his goal of retiring in 10 years.
Now let’s see what his numbers look like using his second spending estimate of $76,000. At this spending level, he would need to hit a portfolio value of $76,000 x 25 = $1,900,000. His savings would be $164,000 – $76,000 = $88,000 (Ooh! Lucky Chinese number!). With these values, OilFIRE can retire in…
| Year | Balance | Savings | ROI | Total |
|---|---|---|---|---|
| 1 | $171,605.00 | $88,000.00 | $10,296.30 | $269,901.30 |
| 2 | $269,901.30 | $88,000.00 | $16,194.08 | $374,095.38 |
| 3 | $374,095.38 | $88,000.00 | $22,445.72 | $484,541.10 |
| 4 | $484,541.10 | $88,000.00 | $29,072.47 | $601,613.57 |
| 5 | $601,613.57 | $88,000.00 | $36,096.81 | $725,710.38 |
| 6 | $725,710.38 | $88,000.00 | $43,542.62 | $857,253.00 |
| 7 | $857,253.00 | $88,000.00 | $51,435.18 | $996,688.18 |
| 8 | $996,688.18 | $88,000.00 | $59,801.29 | $1,144,489.47 |
| 9 | $1,144,489.47 | $88,000.00 | $68,669.37 | $1,301,158.84 |
| 10 | $1,301,158.84 | $88,000.00 | $78,069.53 | $1,467,228.37 |
| 11 | $1,467,228.37 | $88,000.00 | $88,033.70 | $1,643,262.08 |
| 12 | $1,643,262.08 | $88,000.00 | $98,595.72 | $1,829,857.80 |
| 13 | $1,829,857.80 | $88,000.00 | $109,791.47 | $2,027,649.27 |
…13 years. Better, but still not quite there.
Now let’s see what happens with his final spending number that comes from that big long broken-down list of monthly spending items. If we add all that up, we get $66,744. At that spending level, he would need to hit $66,744 x 25 = $1,668,600. And he would be saving $164,000 – $66,744 = $97,256. With those numbers, he would be able to retire in…
| Year | Balance | Savings | ROI | Total |
|---|---|---|---|---|
| 1 | $171,605.00 | $97,256.00 | $10,296.30 | $279,157.30 |
| 2 | $279,157.30 | $97,256.00 | $16,749.44 | $393,162.74 |
| 3 | $393,162.74 | $97,256.00 | $23,589.76 | $514,008.50 |
| 4 | $514,008.50 | $97,256.00 | $30,840.51 | $642,105.01 |
| 5 | $642,105.01 | $97,256.00 | $38,526.30 | $777,887.31 |
| 6 | $777,887.31 | $97,256.00 | $46,673.24 | $921,816.55 |
| 7 | $921,816.55 | $97,256.00 | $55,308.99 | $1,074,381.55 |
| 8 | $1,074,381.55 | $97,256.00 | $64,462.89 | $1,236,100.44 |
| 9 | $1,236,100.44 | $97,256.00 | $74,166.03 | $1,407,522.46 |
| 10 | $1,407,522.46 | $97,256.00 | $84,451.35 | $1,589,229.81 |
| 11 | $1,589,229.81 | $97,256.00 | $95,353.79 | $1,781,839.60 |
…11 years! Close enough. With a few minor tweaks to his budget, he’d easily be able to bring that down to 10.
Conclusion
Usually, this is where I give the person suggestions on what to do with their budget to hit their target, but oddly enough his detailed budget already gets him there. If he can stick to his own detailed budget and not the vague hand-wavey numbers he was using earlier, then he should be able to retire within 11 years, which is close enough to his goal that even a minor tweak will push him across the finish line.
But before he does that, he absolutely needs to get his investments under control. This go-in-five-different-directions strategy has wasted a lot of time and, more importantly, money for OilFIRE. He’s got to put a stop to that and start investing his money in a balanced and diversified index ETF portfolio or he’ll never hit FIRE. Once he has that under control, then all he needs to do is track his spending ruthlessly and make sure he’s hitting his own budget consistently each month, and he’ll hit his goal of retiring in 10 years.
What do you think? Is there anything else OilFIRE should be doing? Let’s hear it in the comments below!
FLASH SALE: Guess what? The e-book version of our book “Quit Like a Millionaire” is available TODAY (Aug 28, 2020) only for $1.99 on Amazon Kindle! Bad for our royal statements but great for you. Get it before it’s gone! https://buff.ly/3b3KvBc
Hi there. Thanks for stopping by. We use affiliate links to keep this site free, so if you believe in what we're trying to do here, consider supporting us by clicking! Thx ;)
Build a Portfolio Like Ours: Check out our FREE Investment Workshop!
Travel the World: Get covid-19 coverage for only $45.08 USD/month with SafetyWing Nomad Insurance
Multi-currency Travel Card: Get a multi-currency debit card when travelling to minimize forex fees! Read our review here, or Click here to get started!
Travel for Free with Home Exchange: Read Our Review or Click here to get started.
You’re doing great! However, as a fellow Albertan, a few of your monthly expenses pop out to me to immediate reduce.
AMA can be eliminated by opening up a Canadian Tire Triangle credit card with no annual fee which comes with free roadside assistance.
For bank fees, look into online options such as EQ Bank or Motive which come with no monthly fees. Or if you’re against that, see if your bank will waive any monthly fees if you keep a certain account balance or do direct deposit, etc.
For cell phone, look into Public Mobile. Our plan is down to $3/mo with them, detailed below:
https://modernfimily.com/why-public-mobile-is-the-best-phone-plan-in-canada/
For internet, look into some of the smaller independent service providers out there. We were with Telus paying $80/mo and now with Lightspeed with a faster plan paying $34/mo.
“AMA can be eliminated by opening up a Canadian Tire Triangle credit card with no annual fee which comes with free roadside assistance.”
Really ? I am taking a trip in 3 days and didn’t know this… hurray… I have a triangle card so will look into the roadside plan… thank you so much
Yep 🙂 but you have to take the extra step to actually sign up for it. Simply having the card won’t cut it so make sure to do that, it’s super simple. Here’s some more info
https://triangle.canadiantire.ca/en/world-elite-roadside.html
This is a really good plan, I didn’t know this!!!
“Canadian Tire Triangle credit card with no annual fee which comes with free roadside assistance.” It needs 80k annual income, better get it before we reach FIRE.
I can take off the road side assistance off my car insurance now and save some money, I like it!
Yep 🙂 another super simple life hack more people should know about. I shifted to part time now that we reached FI and making under $80k and still got approved. But yea might as well get it now before downshifting. You may be interested in joining the ChooseFI Canada FB page, lots of good info there (such as this one).
Thanks Modern Fimily for the Public Mobile tip and the code on your website! I bookmarked some articles too.
For internet, I wanted to check Lightspeed and my antivirus warns me about a Trojan virus from their website. I’ll skip it for now, it’s not a good first impression 🙂
see below:
We blocked this dangerous page for your protection:
https://lightspeed.ca/wp-content/cache/min/1/b14c07bbd9ab427f311093e0633171dc.js
Threat name: JS:Trojan.Cryxos.4194
Dangerous pages attempt to install software that can harm the device, gather personal information or operate without your consent.
You’re welcome 🙂
Very odd re Lightspeed. I’m able to get to their site with no issues and we’ve been very happy users with them for a year now. There are many more out there (Teksavvy is another popular if you’re in western Canada). There is a non internet company called Lightspeed as well so make sure you’re on the right site?
The site is right, lightspeed.ca. The virus warning comes only on PC as a background notification from the anti-virus (Bitdefender) about their infected pages but the site functionality is totally available. They may not even know about it (not a good thing). So better safe than sorry:). I live in Ontario, happy with my fiber optic internet, but paying $65 plus tax. Lightspeed seems cheaper but the virus warning doesn’t make me comfortable with their site. You’d think they could invest in an anti-virus program.
Thanks for your thoughtful suggestions Court! I will be sure to check them out.
Another thing to note, your kid related expenses will likely dissipate or be much lower than they currently are in your post-FIRE world so rather than just take your current annual spend to figure out our FIRE number, figure out your projected future annual spend and base your FIRE number on that. There may be categories with higher expected spend (food, travel?). Like Wanderer said, get your current expenses figured out first, then tweak from there.
And yes, I’ll echo Wanderer again, please save your investments and switch over to a low fee index ETFs. Since it seems you like the 60/40 stocks/bonds split I’d say just go with VBAL and be done with it.
The issue with VBAL is the low exposure to US stocks. The 60% equities portion is divided 20% US, 20% Canada & 20% Developed World.
The current market share of US stocks is approximately 55%, so VBAL underrepresents it with an allocation of only 33% [20% out of 60%]. It was – and still is – a drag on returns, since US stocks have been overperforming other markets for 10yrs+.
Adding some VUN to increase US exposure might be a suitable mitigation strategy.
Totally agree re lower US exposure. Personally I don’t invest in any of the Vanguard asset allocation funds for this reason. Instead, I invest in VUN and VDU. But for OilFIRE who seems to be a bit all over the place, selecting a single low fee index fund may be the best option to start as they get more and more educated and then may decide to throw more VUN into the mix. The main point is to get out our high fee mutual funds. Most people get analysis paralysis preventing them from taking any action.
Thanks for the perspective Daniel! I’ve been hesitant in the past about investing in the US markets because of their ballooning debt. But historical numbers don’t lie… and here in Canada our debt is getting absurd.
I agree about the future expenses dropping.
As far as the mutual funds vs low fee ETF’s. I totally understand the reasoning, however I will say that our “Financial Advisor” has brought a coherence and a direction to our financial world that didn’t previously exist. Also my wife trusts his financial advice more than mine! So he has brought some solid value already. We picked him up (actually a family friend) a year or two before I encountered the FIRE movement. When I questioned him about the high MER’s compared to the ETF’s he agreed but also added that if your investments beat the ETF’s than you probably haven’t lost out.
Also my understanding from the book (and FIRE material in general) is that if we are working on a 10 year horizon, the MER’s don’t chizel as much gains out of your portfolio, compared to if you are running that same portfolio for 40 years.
Most likely we will stick with our guy for the forseeable future, compare our returns with how the ETF’s are doing and than make a decision from there after we are a little more financially educated and autonomous.
Ahh it sounds like your advisor has got you hook, lined, and sunk! Please read more on ETFs vs advisors and long term performance. You are much more likely to do better without the advisor and their fees if you just instead follow an overall index. “Beat The Bank” and “The Little Book of Common Sense Investing” would be good places to start.
Thanks Court.
I understand that only 15% of managed funds beat the index. And I am acutely aware that the ~2.2% MER takes a much larger bite out of both the portfolio and compounding power the longer this goes on.
Up to present time though, he has provided great value getting my wife an I on the same financial page. Time will tell how it unfolds though…
Thanks for the book recommendations!
Thank you Wanderer, I think you gave very straightforward common sense advice just one thing to add; OilFire must be careful to adjust annual expenses for inflation otherwise the same budget may no longer work 11 years down the road. I know the calculation did not also factor potential income increase in the future but I would rather be conservative keeping income constant and ploughing back any increase/windfall into investment. I wish OilFire the very best outcome in their FIRE journey.
Thank you Provident!
From what I recall reading the book and Blog…you don’t have to take inflation into account because its already built into the ROI. Something like that….worth clarifying (or correcting).
We will also be conservative and have some additional buffers in place as we go 🙂
Congratulations on setting a FIRE goal! I’m in the middle of climbing my mountain too, so please take my feedback with a grain of salt. First, I would prioritize consolidating your investments into low-fee index funds. It’s fairly low-hanging fruit with outsize impact. Second, rereading your case study, it seems that you would prefer to plan for a post-FIRE spending limit of $7k per month. Even if that’s the case, I wonder if it would be helpful to reduce your spending now to see how much you might test that limit. At the least, experimenting now would increase your savings and investments leading up to FIRE and increase your confidence in your plan. Third, I wonder if it makes sense to hold on to this particular house if you plan to travel 6 months out of the year. Would your preferences change if your child decides to relocate to another part of the country? How do you feel about potentially influencing him to stay in Alberta as a default choice because you already are there? Some food for thought! Best wishes as you proceed.
Thanks for the thoughts Tara!
It’s been a process to reduce our spending which fortunately we started a number of years back. It’s tricky to change your patterns quickly! So I totally agree with you…we will continue to tweak and reduce spending. Anything we can save now will compound going forward.
As far as our home…I’m not sure. We are not married to it, but as long as it makes sense to keep, than we probably will. I’m not concerned if my son wants to live in Alberta or not. If he stays here, he might be our property manager in the future. If not…maybe we sell it. Time will tell.
Good luck on your journey too!
Cheers!
I keep learning from your advice.
Your blog post prior to Fire in the Oil Patch cautioned not to invest in “the wrong ETFs” when recommending Vanguard Canadian Index ETF, Vanguard US Index ETF and Vanguard Aggregate Bond Index as good ones.
Can you elaborate on the “wrong ETFs”? I’ve put my money into a managed Questrade ETF account and am wondering whether I should discard some of the ETFs within my account.
Thanks.
Wouldn’t you need to include in your projections more than 6000 for travel if you anticipate 6 months of travel per year? Beijing
Hi Michael,
Wanderer and Firecracker address your point throughout their book and blog. They use the term “geographic arbitrage” meaning that it is actually cheaper to live abroad in some countries. Check it out.
Cheers!
My situation looks a lot like this, lost a lot of money in all kinds of random investments and wasted years of compounding. Also, most of these investments ended up with 90-100% losses. I would like to start and focus on a stable ETF portfolio, could you maybe recommend a portfolio that works for EU citizens?
One thing I often find frustrating about personal finance situations (not to pick on this specific reader), is this sort of a combination:
– “Net family annual income is $158,000 + $6000 = $164,000.”
So, makes a high combined salary (more than our average, where we reached FI with $1.2M a few years back).
Then…
Has rather risky, inconsistent investments. I understand the desire to buy individual stocks and catch the next big thing (I did too), or crypto, precious metals, etc. But the truth is, that’s all a high-risk/high-reward choice. But, they’ve got the income to not NEED to take that risk. Why bother?
Like you suggested Firecracker, low-fee index funds will get them to where they need to be with that level of income and put them on a quick path to financial independence. They don’t need to take risky investments.
Hey Chris,
All true. Before I saw the light, I was all over the map with “risky investments”. When I realized that the potential was there to “retire” in +/- 10 years following these methods…its a no brainer. I haven’t done any of those risky investments in probably 4 years. And I dont intend to.
And if we keep shaving our spending down, maybe we can have a much lower FI # likek you 🙂
Wouldn’t that be awesome!
Awesome to hear OilFIRE.
While I’m happy you’re on track for a more reasonable approach and financial freedom in short order, what’s most important is you’re doing what’s right for you guys. If that’s cutting back spending and hitting FI soon, great. If not, that’s okay too!
Do what’s sustainable for you that you find satisfying. Cheers!
Don’t worry, Albertans still want the west to separate lol. We don’t care about the covid either. Not after you math that shit up,personally know hundreds of people who tested positive and the worst of the symptoms was a runny nose. Protect the elderly and the care homes and fuck Trudeau. Oil still spins this modern world.
@Jimothy said “personally know hundreds of people who tested positive and the worst of the symptoms was a runny nose“
and the worst of the symptoms these people infected was serious life-long debilitating organ damage and death!
I won’t respond to any response from you.
Two thoughts –
1. Food is $1200 + $200 + $200 (groceries, meals out, meals in). That is a lot in my world, but not sure of Alberta cost of living…we would cut that and live like broke students in order to shave years off the working count down.
2. My impression is that OilFIRE is big on details, which can be great for ferreting out a problem and keeping records. Not so great when you can’t see the forest for the trees.
Suggestion: Simplify everything!
– Start with the big #s and work backwards. If a 10 year horizon, commit to that goal as a family. How much to save per year to get there? Subtract from your income and that is All You Can Spend. Get this number to shrink, and you can be FREE!! !sooner!
– For God’s sake, simplify those investments and forget the gambling/crypto, metals, and other miscellaneous items… Are you On FIRE or just half-assing it?? Get ALL you money together, and put it into a *cohesive* plan (index fund, really almost anything would be more sane and more motivating).
It is very satisfying to watch a big chunk of money grow as you throw chunks of money into an account. It is not satisfying to be like squirrels who hid money here and there…where you don’t even really know what you’ve got, some of it working for your FIRE goal, some of it drifting away into the oil sands, some of it wasted…if you focus, it will go faster. If you don’t focus, more things will distract you. You won’t get there.
Remember what you said to us: where there is a high income, there is a high pull to take your income from you for this or that scheme. Be smart. Those people are Not Smarter, and they are not your friends on your FIRE journey.
**Also, good for you to have high incomes and lots of home equity.
P.S. love the “Marriage Insurance Policy” aka house cleaning
lol! Yeah…I’ll admit I didn’t buy into it immediately. But it is a nice touch.
Thanks for the thoughts Chris!
For me the most important part of what you said is:
“Start with the big #s and work backwards. If a 10 year horizon, commit to that goal as a family. How much to save per year to get there? Subtract from your income and that is All You Can Spend. Get this number to shrink, and you can be FREE!! !sooner!”
If we follow the methods provided I think this is where the magic happens. One of the financial gurus of the past (I forget who at the moment) used to say “Pay yourself first.”
As far as food costs go…I agree. They are a tad high for 3 of us. We eat simple but we also eat well and a fair bit of local food. We will see if its something we can tweak. I know at this point we aren’t part of the group that will live like broke students…
Cheers!
Hi all,
Simplicity is the way to go. The main gist is to reduce the annual expense. Reduced expense means that the FIRE figure will be lower and this will mean the reduced time to FI and have the option to RE.
WTK
Congrats OilFIRE on deciding to make some changes. Here are my observations.
Networth is solid for a couple 39 year olds. Asset to debt ratio is 5:1 Debt is not an issue. Assets 600K/120K = 5 RESP is an asset, it’s yours so count it.
You can easily cut spending down to speed up FIRE goal. $70 per month on dog? I love my dog but not that much.
I wouldn’t put tax refund and cash into mortgage. Put it into your investable assets. Your mortgage is only $757 per month which is substantially cheaper then renting. Plus your renter pays your mortgage. 21 000×3.14%=659.4 21 000x 6%investment return= 1260
Just cost yourself $600. When interest rates are low don’t rush to pay mortgage but invest with extra money instead. Someone smart said you can’t eat the shingles.
Get out of mutual funds into ETF’s. Save more, spend less and you’ll FIRE in less than ten years. Oh and go see a good fee only advisor who won’t sell you their products.
You have much to learn but are still in solid shape.
Hey Gruff,
Thanks for the math and the solid points! I laughed at your statement about the dog. They are expensive….between food, the odd toy, bully sticks, quarterly haircuts….it adds up. So the $70/month takes into account a little buffer for vet visits. I actually bought clippers to do the hair cuts myself. Maybe I can use them on my son too?
I do have lots to learn. More exposure and repetition will help…
Cheers!
Ok, as a Calgarian who also lived and worked in Vancouver for 8 yrs. and in Toronto for almost 20 yrs., I will say this:
*oil & gas industry is falling on its face, despite the temporary upsurge in late 2021. The big firms know and are moving in renewable energy to diversity themselves. I had to laugh about stripclubs for oil/gas workers. Honest, the Calgary Stampede for horses, broncos, etc….is also a time for sex..from out of town. Some Calgarians get fed up with the circus and leave town during that annual week of yee-haw.
*So my best wishes for the careers of this couple in oil and gas. Keep updating /diversify some skills for next career change ahead.
*methinks he knows his own weaknesses. He got lots of advice in this thread so I won’t zone in much. No, not crypto. You have a kid. Wrong time in life.
*Food prices in Calgary (vs. the other cities where I’ve lived): Unlike Toronto and Vancouver, Calgary doesn’t have little corner stores that sell veggies and fruits. That said, as someone who doesn’t buy tv dinners/processed foods, the grocery prices aren’t that much more at all. and I don ‘t even buy organic. I also shop in ethnic local supermarkets: Italian Store near the airport, T & T, Basha is Middle-eastern and East Indian stuff. You want to buy 5 or 10 kilos of couscous from 2-3 different brands? Go there.
*Overall restaurant prices are more expensive in Calgary…and to me, less choice compared to the other 2 cities. (My whole family still lives across Toronto, so I know…)
*Yea, ever since I moved here over a decade, it’s very noticeable..more pickup trucks in the city. Therefore costs more to run the gas. Unless they are throwing in mountain bikes and camping gear in pickup truck….the practicality of pickup truck is kinda limited when living as an urbanite. I get it….for the hard winters living out in rural Alberta.