After the terrible experience in 2020 of being holed up away from family and friends, Christmas and New Year’s 2021 was a significant improvement. I mean, sure, we had to do a bunch of rapid tests and sure, we had to intersperse going to COVID booster appointments in between unwrapping presents, but this year we were able to finally spend Christmas with our loved ones. And it was AWESOME.
As the clock ticked down to midnight on New Year’s Eve, I reflected on the past year with a few close friends. Was the worst behind us? Do we dare hope that travel will return to normal in 2022 so we can be our nomadic selves again?
Now that we’ve been retired for over 6 years, I’m less into building accomplishments and more into building community. And when I say community, I don’t mean a large group of people who love and worship you. Just one person who accepts you as you are and is there for you when shit hits the fan can make a difference. It’s not about the number of people because even being in a crowded room (Yeesh, I get the heebie-jeebies just thinking about this. Thanks a lot, Covid.) can still feel lonely if you don’t find your tribe. Life isn’t about money or accomplishments. It’s about connection.
Just kidding. It’s totally about money and accomplishments! At least, at first anyway. Without getting my basic needs met and my finances sorted, I would’ve never found this exceptional group of friends (our Chautauquan family, as I like to call them) and there’s no way I would have had the time and headspace to get to know them on a deeper level. My days before retirement consisted of work, sleep, eat, repeat. Who has the time to find a tribe other than your sucky, sucky manager?
So, with that in mind, let’s get down to the nitty gritty of how we sort out our finances so you also have the time and freedom to spend with your tribe.
In 2021, with restaurants, movie theatres, bars, and cafes open, our austere pandemic lifestyle of being stuck indoors, meditating, reading, and watching endless hours of Netflix was quickly obliterated.
So, what did that do to our spending for 2021? Did we double it? Triple it? Spend it all and now have to go back to work?
With the economy returning to normal, so did our expenses, coming in at….*drum roll*…a whopping $39,028.88 for the two of us.
Here’s a monthly breakdown of how much we spent in 2021:
|Jan||$2,614.70||$2062.23||Toronto was still under lockdown, so we weren’t able to spend any money on eating out or activities. Sad panda face.|
|March||$3,748.96||$2956.82||We spent the coldest 2 months in Vancouver and Victoria, BC. which increased our spending. Worth it!|
|June||$2,320.63||$1830.29||This was our lowest spending month because I signed up for a special credit card from HSBC, which enabled us to earn enough credit card points to offset our spending by $625.|
|August||$2,531.34||$1996.48||Despite spending 10 days in the Atlantic provinces, this ended up being our 2nd lowest cost month because we visited family for 2 weeks afterwards which halved our monthly rental costs. Wanderer also signed up for the same HSBC card, which nabbed him $925 in points and travel credits.|
|September||$5,047.28||$3980.81||Highest spending month of the year. Why? 1) I spent $1600 on used furniture for an unfurnished 1 bedroom apartment, which is a steal at $1500/month rent, all utilities and parking included. 2) $519 is spent on splitting the cost of a cabin rental with friends.|
|Monthly Average:||$3,252.41||$2565.19||Despite living in expensive Toronto, our monthly expenses were still $80 less than our normal projected $3333/month spending.|
Here’s a monthly breakdown of how much we spent in different categories on average:
|Rent (utilities included)||$1672|
|Cell Phone & Data||$40.53|
Given that our spending in 2020 was only $33,965, it seems like our lifestyle inflated by a whopping ($39,028.88-$33,965)/$33,965 *100% = 14.9%!
15% is seems like insane amount of inflation in just 1 year. No wonder everyone’s screaming about inflation and how we’re all doomed and money is going to be worthless. Right?
If you look at the big picture, you’ll see that prior to the pandemic, back in 2019, we spent $43,053. The pandemic caused our expenses to deflate by ($43,053 – $33,965)/$43,053 *100% = 21%!
So despite all the sky-is-falling news articles about how Joe Biden printing money will destroy the US economy, when we compare our 2021 to our normal 2019 spending of $43,053/year, we’re personally experiencing deflation by 9% (($43,053-$39,028.88)/$43,053*100%).
Will this continue in 2022 as the world continues its return to normalcy? Who knows? The good news is now that travel is returning to normal (provided that Omicron fizzles out) we can once again use geographic arbitrage to decrease our expenses.
Portfolio B expenses:
Long time readers know that in order to keep our retirement experience pure, we live off of Portfolio A, which is the original $1 million portfolio we retired on, while segregating all the income we made post retirement into portfolio B. That way any bonus money we spend that is outside of living expenses like business expenses, donations, gifts for friends and family, and courses or tools for self-development and education, can be recorded as optional, “luxury” costs.
We do this mainly for the benefit of you, the readers, because as long as our base costs remain within the 4% rule of our original portfolio, that means that FIRE works even if you don’t end up making money on a post-retirement side hustle like we have.
Here’s how much we spent on Portfolio B this year:
The Big Picture
Now that we’ve been retired long enough, what has our spending looked like for the past 6+ years?
|Year||Spending (CAD)||Spending (USD)|
It’s fluctuated between $33K-$43K/year, and this averages out to be $38,288/year for the 2 of us for the past 6 years.
Contrast this with the average yearly spending of ($51,000 + $46,000 + $48,600 + $45,450 + $40,600 + $37,000 + $33,416 + $31,000)/8 = $41,633 during our 8 working years, means that on average, we were spending an extra $3,345/year to work.
Even though on paper we should be experiencing inflation, we’re experiencing the opposite (deflation) because those costs associated with working have permanently dropped off our budget.
Even more interesting is that we should’ve been increasing our 4% withdrawal number each year by inflation (2%), which means, now 6.5 years later, we should safely be able to withdraw:
Instead, we’ve just left it at $40,000/year in spending because I don’t feel the need to inflate my expenses any further to continue living my life of travel and comfort. Optimizing is fun for me.
This year, even after adding in the extraneous Portfolio B expenses of $6536.92, we’re still at $45,565.80, which is around the inflation-adjusted 4% withdrawal rate of the original $1 million portfolio.
So, even if we hadn’t earned a single cent in retirement and our portfolio went sideways, 6.5 years after retirement, we’d still be within the safe withdrawal rate. And despite having to come back to Toronto, one of the most expensive cities in Canada, we’re still within our original level of spending.
Looking back, I never thought that I’d be spending less while travelling the world, having more freedom and more money while eliminating my stress. There’s always that voice in the back of your head when you hand in your notice that wonders “What if I’m making a big mistake? How can I be sure this will all work out?”
What I didn’t know at the time was how much I was actually spending to work. Commuting, eating out, decompressing with vacation packages, buying and cleaning professional clothes, all of that takes time and money. Now, with all the time in the world, I no longer have to spend money on all those things, and I have more time than ever to optimize. Which is why we’ve been able to work on optimizing our expenses and investments so that we make money in our sleep while spending less than we ever did while working. As an added bonus, our relationships with our family and friends have never been better.
I’ve been retired long enough that I no longer care about fighting haters about FIRE. In the beginning, there’s always a part of you that’s unsure, especially if you’re a pessimist like me, about whether it’ll all work out. So, proving the haters wrong is a way of proving to yourself that you made the right decision. But after more than 6 years living this lifestyle, surviving turmoil in the markets like the 2015 oil crisis, 2018 US government shutdown, and the 2020 pandemic, I no longer feel the need to prove anything. If you want to become FI and live a life of freedom, I’m happy to show you how. I want you to be stress-free and happy too.
But for the people who don’t believe in FI and love hating on it, I no longer care about changing their minds. I’m not responsible for other people’s happiness. You are responsible for your own. You do you, boo.
So, that’s it. Our 2021 spending in a nutshell. Stay tuned for part 2 where we talk about how our Portfolio did in 2021!
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