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Happy New Year, everyone! Wow, what a difference a year makes. This time last year we were recovering from the plague, I was obsessively breastfeeding 3-month-old Little Matchstick to avoid a hospital trip, and he only had three modes: cry, crap, and nap.
Now, at 16 months old, not only can he walk (albeit more like a drunken sailor), he can speak a few Chinese words, nap for 3 hours straight, and go to sleep consistently on his own every night! He can even play independently from time to time, without destroying our apartment (mostly).
He’s like a completely different kid. Wanderer and I are now able to get some much needed “me” time during his naps and early bedtimes. We’re finally able to do the things we never thought possible last year—like play boardgames, watch a Netflix movie, and have an entire conversation without mentioning the word “poo”, “pee” or “milk”.
As a result of all this newfound freedom, we’re finally been able to go out to eat at restaurants, go to the aquarium, and even travel as far as Europe!
All this has done wonders for our psyches, but has it been a nightmare for our expenses? Last year, even though we had to buy child stuff which inflated our yearly expenses, eating out costs plummeted because I was tethered to a breast pump and could only leave the apartment for 2 hours at a time.
Well, this year, things are very different. We are now finally able to track a full year of child rearing expenses and not only has our eating out expenses gone up, so has our travel expenses. Does this mean the USDA was right all along? That it should cost $18,000 USD/year (or $24,656.40 CAD) to raise our son to the age of 17?
What do you think? Let’s find out.
Here’s how much we spent monthly in 2024:
Month | CAD | USD |
Jan | $4,967.52 | $3,626.46 |
Feb | $4,886.64 | $3,567.41 |
Mar | $3,776.62 | $2,757.06 |
Apr | $3,405.25 | $2,485.95 |
May | $4,005.00 | $2,923.78 |
June | $3,568.32 | $2,604.99 |
July | $3,893.87 | $2,842.66 |
Aug | $3,637.35 | $2,655.39 |
Sept | $5,113.49 | $3,733.02 |
Oct | $8,595.37 | $6,274.91 |
Nov | $5,527.85 | $4,035.52 |
Dec | $4,152.27 | $3,031.30 |
Total | $55,529.55 | $40,538.44 |
(note: I’m using a USD to CAD annual avg exchange rate of 1.3698)
So, after a full year of child rearing costs (including 4 months of travel costs) and living in one of the most expensive cities in North America, we spent $55,529.55 CAD or $40,538.44USD for a family of 3.
Of this, around $48,000/year is how much we would’ve spent as a couple, so $7529.55 CAD/year or $5496.82 USD/year are child-related costs. That’s only 30% of the USDA average number.
The main reasons why it cost so much less is because a) we didn’t upgrade our living space b) we don’t pay for daycare since we don’t need to work.
Something I did notice after having LMS is that we’re incentivized to spend more on travel to make things easier and more comfortable. Instead of just hopping on buses or trying to cram a long journey after a long flight to get to our Home Exchange, we’re doing things like booking 1 day at an airport hotel to make things easier.
We also tried out cruising. Note the massive spike in Oct, where we spent the most money we’ve ever spent in one month since leaving our jobs. This is because we went on a 14-day transatlantic cruise to Spain instead of flying there. Even though cruising isn’t the way we usually like to travel (we prefer to stay longer in a place to absorb the culture and savor the local food), I thought I’d give it a try since so many parents told me it’s the best way to travel with kids. While it was enjoyable in many ways and I learned a lot, there are quite a few caveats to cruising with an infant that I didn’t know about. I had been on cruises back when I was an employee but cruising with an infant is a completely different experience, and unfortunately, I didn’t optimize as well as I could have. I’ll be sharing all my mistakes in my next travel post to help you avoid the same mistakes.
Another thing you’ll notice is that there are spikes in spending in Jan, Feb, Sept, Oct, and Nov. Those corresponded to our travels to Mexico and Spain, except for Sept, which spiked because we got some dental work done and I bought an expensive travel stroller (the Babyzen Yoyo2). I’m very happy with this purchase as we’ve been abusing using the crap out of it every day and it’s still holding up well. It’s also apparently the de facto stroller in Barcelona—which I guess isn’t surprising since it’s European. I’m expecting to use this stroller for the next 2-3 years, so will report back on how well it holds up.
Even though we can’t be as spontaneous or adventurous as we used to be, I still enjoy travelling as a family and getting LMS out there in the world, learning all about other cultures and languages. So far, every dollar I’ve spent on travel has been worth it (except for the cruise).
Here’s how our costs averaged out per month, broken down into categories:
Categories | Yearly CAD | Yearly USD | Monthly CAD | Monthly USD |
Hotels + Home Exchange membership | $1,447.53 | $1,056.74 | $120.63 | $88.06 |
Rent (all in) | $18,912.00 | $13,806.40 | $1,576.00 | $1,150.53 |
Food: Eating Out | $8,818.40 | $6,437.73 | $734.87 | $536.48 |
Food: Groceries/Booze | $5,255.39 | $3,836.61 | $437.95 | $319.72 |
Infant Gear + formula + diapers | $3,191.89 | $2,330.19 | $265.99 | $194.18 |
Transportation | $3,666.06 | $2,676.35 | $305.51 | $223.03 |
Entertainment | $1,384.13 | $1,010.46 | $115.34 | $84.21 |
Clothing | $424.05 | $309.57 | $35.34 | $25.80 |
Cell Data + Internet | $955.68 | $697.68 | $79.64 | $58.14 |
Travel Insurance | $471.05 | $343.88 | $39.25 | $28.66 |
Dental/medical | $902.77 | $659.05 | $75.23 | $54.92 |
Cruising | $5,886.86 | $4,297.61 | $490.57 | $358.13 |
Other (personal items/gifts/donations) | $4,213.75 | $3,076.18 | $351.15 | $256.35 |
total | $55,529.55 | $40,538.44 | $4,627.46 | $3,378.20 |
Portfolio B
Ever since this blog was created back in 2016, in order to keep our retirement experiment pure, we’ve split our investments into 2 separate portfolios: Portfolio A and Portfolio B. 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. 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 post-retirement passion projects like we have.
Portfolio B spending is luxury spending and additional donation and gifts that aren’t part of our original budget that we call “fun money.”
Portfolio A is currently worth $1.7 million, which means a safe withdrawal rate of 4% gives us $68,000. This year’s spending of $55,529.55 is $12,470.45 below that number or only 82% of our safe withdrawal rate.
Here’s how much we spent from Portfolio B:
$5625.11 CAD or $4106.52 USD
This money was spent on non-essential things like massages, paying for family and friends for dinner/activities/etc, and additional donations and gifts.
When we add together our base expenses + portfolio B non-essential expenses, we get $61,154.66. Over the past 10 years, despite withdrawing and living off of it every year, having a baby, and adding in non-essential expenses, Portfolio A has grown so much that we’re at a 3.6% withdrawal rate ($61,154.66/$1,700,000*100%), giving gives us a 100% success of never running out of money in retirement with FIRECalc. This is completely disregarding portfolio B, which consists of all the money we made from passion projects after retirement. Wanderer will give you an update on the size of Portfolio B in the next post.
Dividend FIRE
Long time readers know that Dividend FIRE is when your yearly expenses are less than the passive income (dividends and interest) generated by your portfolio, so you no longer need to sell any assets to cover costs in retirement. That means you will never run out of money, even during recessions, because you never need to sell anything.
In order to be considered Dividend FIRE’d, our spending needs to be equal to or less than the yield (dividends + interest) we earned this year, which ended up being $70,530.
That means our base level spending was $15,000 under this year’s yield. Even if you add our luxury Portforlio B expenses, we’re still $9375 under the yield.
Here’s a look at our spending and yield ever since we quit our jobs in 2015:
Year | Spending (CAD) | Portfolio Yield |
2015 | $40,000 | $35,000 |
2016 | $40,143 | $35,000 |
2017 | $33,016 | $37,695 |
2018 | $40,519 | $38,124 |
2019 | $43,053 | $39,879 |
2020 | $33,965 | $38,284 |
2021 | $39,029 | $43,880 |
2022 | $42,916 | $46,985 |
2023 | $47,014 | $62,811 |
2024 | $55,530 | $70,530 |
Looks like we’re still Dividend FIRE’d! Having a baby didn’t blow up our retirement. *Phew*
I’m not sure what’s going to happen once he’s older and starts demanding all sorts of expensive toys, activities, etc, but for now, I’m reveling in his infanthood and the fact that we don’t need to buy an extra seat on the plane (PROTIP: pay for a little extra for preferred/extra leg room seats at the window and aisle. Likely no one will pay for a preferred middle seat, and you’ll get it for free for your infant! Some airlines even block off the row to enable families to sit together)
That’s it for our yearly expenses. Stay tuned for Wanderer’s post on how our portfolio did this year.
And now the moment you’ve all been waiting for…
Here are the 3 winners of Dr. Jordan Grumet’s book the “Purpose Code”:
- Dan V
- Laura
- Kayla
Congrats! You’ll be receiving an e-mail shortly on how to claim your prize.
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Love these updates. Thank you so much. Especially as a Canadian who is a few years behind you net worth but also wants kids it’s great to see what is possible. Curious a few things. Would you be able to let us know about the travel insurance you use when traveling, obviously a lot of different ones out there but just curious. And also thoughts on dental work as you mentioned it was quite expensive for you this year. This was my first full year not working full time so I also had an expensive year dental wise but just hoping those costs drop with the new Canadian dental plan. However would be interested if you have gotten work done in Mexico or Thailand as a lot of Canadian dentists recommend against it but at the same time I’ve heard it’s great from people who have tried it.
Sure, the travel insurance we bought is from SafetyWing (around $80 USD/month for the 3 of us. 250K coverage, $250 deductible:
https://safetywing.com/?referenceID=millennial-revolution&utm_source=millennial-revolution&utm_medium=Ambassador
We did dental cleaning in Mexico and had a few fillings done. You have to find a reputable place from asking around in the expat forums. The expensive thing done in Canada was a one time cost was to fix my husband’s retainer (not applicable if you never had braces). We could’ve waited until Spain to get it done cheaper but since it’s a one time thing, we just got it done here. Going forward, I’m expecting to do more of the routine stuff–cleanings, check ups, x-rays, fillings aboard.
Zipair is free for kids under 6! It is available in limited locations tho.
Good to know. Will use when we’re in Asia.
What’s the net worth growth so far since you had first early retired at age 30?
For Portfolio A, from $1,000,000 to $1,700,000, after withdrawing for living expenses yearly. I’ll let Wanderer do the entire net worth update (including Portfolio B/money made after retirement) next week.
I was an older working mom with an infant. Rather than leave him at home, he traveled with me on business trips. He was in 22 US States and the district of Colombia before he was 2. I have a lot of toddler airplane travel tricks! And I like your middle-seat hack—it’s a good one.
My son and I would repeat the rules for airplane travel in a sing-song game:
Indoor voice
No kicking, no screaming
Mom’s back is too important to carry you
I let him sit next to the window and play with color-forms on the window—so much easier than retrieving crayons, etc from the floor. I always had lots of activities to keep him quietly busy. I was lucky—he was an easy baby and a sleeper—as soon as that airplane engine started, he’d nod off.
Hotel babysitters are really terrific resources. As are local daycares that allow walk-ins.
We had fun—I miss those hotel-room pizzas and cartoons.
Live your life. . . Live your life. Children adapt to anything as long as love comes their way.
“he was an easy baby and a sleeper—as soon as that airplane engine started, he’d nod off.”
Wow, that’s a parent’s dream.
Thanks for all the family travel tips!
Is there a blog post on internet & cell phone options? We live in the US and spend about $300-$350/month for internet, cable + cell phones. We own our phones so we can take our business from AT&T to another carrier.
Try AT&T pre-paid. We have 2 phones for about $50/month and never run out of data! Same coverage.
Try this e-sim that we use: https://mobimatter.com/esim-united-states
It should work for Us and Canada. They have deals as cheap as 35 GB for 365 days for $39.99.
How do you calculate capital gains/income tax into your number?
We make the yield accessible via the Cash Asset Swap method outlined in our book. Any capital gains incurred during this process fits within our personal exemption amount.
Income tax on earned income after retirement is paid separately and is already deducted before the amount is invested into Portfolio B.
The four percent safe withdrawal rate on your Portfolio A should be pre-tax I think, so income tax must need to be included in your expenses. Also “dividend FIRE” should account for taxes. Can you provide an update taking taxes into account?
Same answer that I posted to previous reader above:
We make the yield accessible via the Cash Asset Swap method outlined in our book. Any capital gains incurred during this process fits within our personal exemption amount.
What I’m really curious about is how you get your grocery bill that low. For my husband, my daughter (5yo) and I in Portland, OR., it’s usually $900/mo even with us actively trying to shop at the budget stores.
Yes what is your secret … often eat at you relatives for free? … 25 % of Torontonians visit food banks I read somewhere? Dumpster diving? COSTCO?
Not sure why you think it’s low. When you add together eating out and groceries, we spend over $1100 on food (formula is not include in this amount). I have friends who spend way less than this.
Also, according to Money Sense “The cost of food for a family of three in Canada can vary depending on the city, but in 2024, the average monthly food spend in Canada is $1,227”. So i’m just a little under the average.
Maybe it’s the type of ingredients that we differ on? ( we tend to buy Asian ingredients from chinatown) Or maybe other people just eat bigger portions than us. We tend to get an appetizer and a main (like spring rolls + large pho) at restaurants and that’s enough for us to share. It ends up being $10-$20/person with leftovers sometimes. We also like to cook big batches of soups, like pork bone soup, which lasts for many meals and only costs $2.50-$3/person per meal.
Sounds great I like your tips. We buy a lot of stuff from T&T Grocery store, etc. we have a tendency to buy maybe more meat and treats again thank you for the tips and for all the new people to the blog your tips Might prove helpful
Thanks so much for posting this detailed info, its extremely helpful to those of us working on this.
Glad it’s helpful, Max.
Happy new year!
The information you provided is useful, but not complete.
(1) How much are you making from the blog, books, etc.?
(2) How much money is in Portfolio B exactly?
You are right, it’s not complete. That’s why it’s “Part 1” 😀
As I mentioned above, Wanderer will give exact details from Portfolio B in his next post about how our investments did.
I’m going to ask a question of the group. First let me say I love these posts and the book but I am living life differently. We are retired, older, and now having to take care of my mother while she lives independently. This means lots of road trip to an from our house to hers to the doctors/hospitals and increased eating out at higher cost places like the hospital.
So my question is, are there any blogger groups for people who are older than millennials but who believe in the FIRE approach?
I really do love this blog but there are different concerns as one gets older.
Hi Marshall, I’m not quite in the same boat yet but I see it potentially coming. I’m Gen X and my wife is slightly older. My parents are approaching 80 and still doing fine but having a few issues here and there. I’d be interested in any groups like what you describe. We FIREd ourselves in 2023 and it’s been great but I’m already seeing the need to change the approach based on family. For example, I don’t think we’re considering living abroad full time or extensively anymore because I want to enjoy time with mom and dad and they may not be able to travel overseas.
Hi Tom, For those of us who chose a different path our challenges are different. I am less concerned about age or what generation each of us are in. I guess that is why I like reading the posts on this site but many of us have different goals or needs. I will keep looking around but so many are dangling the “let us help you with your financial needs” carrot. I like the Boglehead forum for some things but it’s signally focused on finance. MMM is much like this site and I like reading their posts but they are fewer apart.
Sorry to hear about your struggle. I do understand how difficult it is to take care of elderly parents as we had to do that for my father-in-law before he passed.
If you want to find like-minded FIRE enthusiasts who are older than Millennials, I recommend the “Go With Less” group in Facebook. Lots of great people there in their 50s and beyond.
As always, an enjoyable blog post to read.
This post touches on an issue that I think is worth considering for all of those interested in FIRE.
The idea of living off of dividend income.
I have noticed that when a person really digs, it seems like the best analysis is that having a portfolio of dividend stocks will lag a portfolio of growth stocks.
Back to this blog post, I believe the early retirement year was maybe 2015ish, portfolio A at 1 million then, and at 1.7 million now.
I wonder where portfolio A would be, if invested in growth stocks, Rather than the dividend stocks/yield shield kind of idea.
Again, I think the consensus out there is that one’s portfolio will do better overall if invested in growth stocks.
And most fire people do it this way, eg. MMM.
But like with everything, there’s personal preference and comfort level as well.
If a person is really not okay with the ups and downs, then the dividend approach might be better. Maybe not better on the numbers, but better because of non-quantative factors.
You are right that growth should be the focus when you are in the accumulation phase. However, after you retire, stability is more important. There are differing opinions on whether you want to focus on yield or capital gains, depending on your risk tolerance, how much you plan to make in retirement, etc. Being dividend FIRE’d gives me tremendous peace of mind, especially now that I have a family.
I have done the analysis on this question using annual returns for VGRO, which is the ETF version of the Canadian Couch Potato portfolio that they started with in 2015 and teach in their investment workshop (roughly 25% each US, Int’l, CA, bonds). With 40-50k pulled annually starting in 2015, a $1 million portfolio would be worth roughly $2 million today. So they have given up about 300k in growth for the security of dividends.
You can use Portfolio Visualizer to back-test specific growth EFTs against dividend plays: https://www.portfoliovisualizer.com/backtest-portfolio
See my comment below. You just aren’t good at math. That’s all.
They are living off the Divs, so its a moot point. Unless they are going to sell from a growth porfolio
I wouldn’t call hundreds of thousands of dollars in lost growth a moot point. It sounds like they have left money on the table by chasing dividends. If it lets them sleep at night that’s great, but for anyone else who is deciding between a portfolio of growth stocks vs dividend stocks, it’s worth considering what they may be trading for a feeling of security. Even after you retire your portfolio needs to grow, especially if you have 40-50 years ahead of you. Dividend stocks and preferred shares could hinder that growth.
I think you’re missing the point. They are retired. Technically, they’re living off their portfolio. That means that’s money withdrawn annually to live off of. Dividend stocks and preferred shares have nothing to do with underperformance. And anyways, they own ETFs, not stocks directly.
$1,000,000 portfolio.
Withdraw 4% to live on, so $40,000 at end of 2024.
Portfolio now worth $960,000 to start 2025.
Get 10% return in 2025 of $96,000.
Total value of portfolio $1,056,000.
Rinse and repeat 4% withdrawal at end of 2025.
Person who is still working and has employment income and doesn’t require to withdraw any money from their portfolio:
$1,000,000 portfolio at end of 2024.
Get 10% return in 2025 of $100,000.
Total value of portfolio at the end of 2025 is $1,100,000.
Do you see the $44,000 difference between the two scenarios?
Is it so hard for people to understand basic math?
The problem though is that they are basing their entire retirement plan around the Trinity Study, which was based on 30 years of investment in the the total US stock market, (not concentrated preferred share ETFs and dividend ETFs) in order to grow throughout the years and outpace withdrawals and inflation. Historically, preferred shares and dividend ETFs have not grown as much as the US total stock market. Right now they are spending 3.5% of their portfolio, but their portfolio is not set up for long-term growth. Yes they are getting 60k annually in dividends, but what happens when inflation comes roaring back and suddenly 60k annually isn’t enough in 10 years time, and the ETFs powering those dividends haven’t grown? Maybe the companies in the dividend ETFs will raise their dividends, but preferred shares won’t. And they will have potenially missed out on portfolio growth by not being invested in broader indexes. Ben Felix explains why dividends are not free money, and how investors are giving up growth for a false sense of security https://www.youtube.com/watch?v=f5j9v9dfinQ
Congratulations on having a happy and healthy child. We took our children travelling a lot when they were younger, but we had a home base in the USA. Luckily we were able to buy a house before the prices went up. I am curious if you plan to keep travelling full time or stay in one place for a while.
Hi Steve! Glad you enjoyed travelling with your family and having a home base.
I think, given that LMS is a pretty good traveller, we’ll probably be travelling more in the future. Gotta take advantage before he’s school age and we need to decide on traditional school or homeschooling (or maybe a hybrid approach). It doesn’t 100% rule out buying a home in the future or having a home base for the long term. I’m just going to take it 1 year at a time, and not plan too far ahead because he does change day by day 😀
How do you manage to keep rent so low? Do you live in a modern apartment complex or condo? And what size roughly is it?
Thank you.
They grabbed a place during Covid, and it would have to be rent controlled, so only increases a couple percent per year.
Thanks for the informative post. Since the 4% rule was based on a 30 year retirement, how did you become comfortable with the 4% rule for an early retirement?
I believe you’ve mentioned in a past post that you currently live in a 1 bedroom apt. Are you planning to maintain that arrangement as your child gets older or planning to upgrade to a 2 bedroom?
If you want to live in a walkable neighbourhood, close to a good school, this could be a good deal more expensive than current living situation. Have you run your numbers for average 2 bedroom apartment rent?
Do you ever pay taxes on the portfolio withdrawals? You never talk about it.
Plus, how do you manage to pay so little in rent?
How do you manage to keep your grocery expenses so low?
They secured a spot during Covid, which would need to be rent controlled, allowing for only a couple of percent increases annually.