Kind of discouraged

[accountingsucks]

I was pleased to find this board in that I share the same values as most on here in terms of wanting to get out of the rat race as early as possible. Anyways when I look at how I am doing I should be happy but I just get discouraged. I live in a large city in Alberta, Canada for reference (fairly low cost of living here)

I am 30 years old

I purchased my home about 4 years ago for 200,000. I owe 45,000 on it and have a mortgage payment of 310 a month which is next to nothing. My home is likely close to 300,000 now due to renovations and the booming market here due to oil and gas activity so I have quite abit of house equity.

What I'm concerned about are my retirement savings to date. In an effort to pay my mortgage off as soon as possible - i'm very debt averse - I neglected this to some extent. I have 25,000 in my RRSP (similar to 401K in states) so at least I have something in there but I know that I have to start saving more diligently.

I make 70,000 CDN and truthfully this is on the low end in my profession (accountant) as the market is super hot now. Company contributes matching pension up to a measly 3% per year. I am saving about 2000 a month which I will put towards retirement. I may also pay off my mortgage in the next 3 years as interest is not deductible in Canada and I see no point in having it as rates will continue to rise on my variable rate mortgage.

Anyways I am rambling, but when I play around in Excel and figure out the Future Value of saving 25000 at 8% for 20 years (projected retirement at 50) I get an amount of about 1.2 or 1.3 million. This assumes I will drive the same car for the next 20 years, will have no house upgrade and not have any kids...all of which are unlikely to happen of course. I just feel like I will slave away for 20 years and still not be able to have enough to retire on and when I look at other 30 year olds I am way ahead of the game in terms of not having any credit card debt, house almost paid off, etc. I see my colleagues who make the same as I do purchasing 70,000 Corvettes and SUV's and wonder what they are thinking. For me I do not want to go to work everyday to pay off an expensive car....it makes no sense to me.

 

[retire@40]

I see my colleagues who make the same as I do purchasing 70,000 Corvettes and SUV's and wonder what they are thinking.  For me I do not want to go to work everyday to pay off an expensive car....it makes no sense to me.   

Then don't do what they are doing.

I think you are a good candidate for ER.

I make a motion to nominate you for membership.

 

[dusk_to_dawn]

You are thirty. Take it easy on yourself. I am sure there are lots of things I don't know about your situation, but it sounds like you are on the right track. I am pretty sure you are farther along than I was at your age. As you accumulate more assets, more options become available to you. When you pay off your mortgage (assuming that is your goal) you will have more funds you can save and invest. Stick with it and at some point in the future you will start to earn more from your investments than from working.

Maybe you are familiar with Quicken or some of the other personal finance software products. If you are an accountant and haven't used these products for your own finances, this might be a fun little exercise for you. I have found using Quicken is a good way for me to stay focused and measure how I am progressing to my goals. If I get kind of discouraged, I look back on where I was 5 years ago and I quickly see the progress my wife and I have made. You can set your personal finances up like a business (assets, liabilities, equity). Even the wife is into it. It's kind of like a little game. At the end of each month, we go over the Balance Sheet and the P&L; ahhh, one month closer to ER!!

 

[califdreamer]

I'll give you my two cent's worth.  I'm sure not everyone will agree with my advice but I think it's worth considering.  

In my early 30s I was flat broke.  And discouraged financially.  I did some research and decided to start investing in real estate.  I actually owned my first rentals while I was renting my primary residence.  I knew I had to take a calculated risk to get something going and I'm glad I did.  Yes, I was fortunate to get started in the mid 90s in the LA area just before the boom.  Now I'm 46 and on the edge of FI.  If I moved to a less expensive place I would be FI.  

You'll need to get a little creative with this.  Others will say, and they're mostly right, that the easy money is gone in RE investing.  But there are places that didn't enjoy the boom.  Some of those places are attractive locations that will grow, some got hurt in the tech bust and will come back (Austin is on it's way back with a vengeance).  

It sounds like you've had strong appreciation with your personal home.  I don't know what stage of the cycle your area is in but it is something you can research.  If it's near or at the top, that's OK.  No one says you have to invest in your backyard... actually some people say that but I disagree.  Let's say your research tells you the best place to invest in a small building (four units let's say) is in Indianapolis.  Create a way to make it happen.  Go find an investor there and partner with him of her and buy a fourplex.  

Will it be scary?  A pain in the butt?  Will there be annoyances associated with owning property?  Absolutely!  But it's worth it.  If you put 25% down and find a place that will appreciate at 6% a year for several years you can double your equity within five years taking into account selling costs.  I'm not familiar with tax law in Canada so I don't know if you can exhange property tax deferred if the investment is outside of Canada.  There are probably real estate mkts in Canada that are in the down part of the cycle and are on their way up.

I encourage you to do a little research and if it looks intriguing, take a little risk.  

 

[Spanky]

I make 70,000 CDN and truthfully this is on the low end in my profession (accountant)

That's 60,897.1 USD - better than U.S. average with less than 10 years of experience in accounting.

Are you implying that $1.3 million may not be enough to retire at age 50 in Canada in which health care is nationalized?

In short, I think you are doing fine financially.

 

[HFWR]

Age 30, I was flat broke, owned a '71 Chev, and passed $30k/yr for the first time... I think you're doing fine!!

Put a good plan in place, then mostly ignore it, and enjoy life.

 

[dunc0029]

As most everyone else has said, it sounds like you are doing fine!  Remember, you'll likely have more to put towards retirement once the house is paid off ( assuming you don't upgrade to a new home ).  Also, have you taken pay raises into account?  Have you calculated what your expenses will be in retirement?  Radically, you could sell your home to cash in your equity if you believe the money would perform better in the market versus real estate. 

Regarding your colleagues, the saying "ignorance is bliss" comes to mind.  Many people just take it for granted they will be working for 40-50 years and that retirement will take care of itself when the time comes, without determining what they'll need and want.  For whatever reason, most people just don't act in financially responsible ways.  I wouldn't be able to sleep at night if I was in the financial shape of many people I know. 

 

[Sheryl]

I echo the "you're doing fine" chorus.

Another way to look at it:  If you had a typical mortgage like your peers probably do, you could have 80% of that $300,000 ($240,000) more in retirement savings instead.

I'm not saying you should do that - just that in an apples to apples situation you should consider all that equity as an asset. 

 

[Coach]

I'd switch to being encouraged. Like a couple of others who have replied, I was broke at 30 but expect to be able to retire next year at 56. You are way ahead of most of your peers just in actually thinking and planning toward financial independence. I've got friends who drive really nice cars and have revolving credit debt of more than their annual income who refinance the home every few years to draw out equity. You're doing great.

 

[SteveR]

I also echo the basic sentiment that you are doing OK. I was deep in debt most of my young adult life with very little to show for working my tail off. At age 39 my world changed and I finally had the chance to start a new life. I will retire at 55 with a nice stash to fund my lifestyle for as long as I live. It can be done and many here have done it the hard way. Saving, investing, living below your means and educating themselves on investing.

The spirit of wanting to get off the work treadmill and get on with your life is what this board is all about. We each have our own magic number of how big our stash needs to be based on our lifestyle and investing style. What works for one may not work for another but the basics don't change. Save, invest, live below your means. The longer you can do these things the quicker you can reach your number. I did it in about 15 years; others reached their number quicker or longer. The point is, once you make up your mind and start doing something, the sooner you will get there. You appear to be well on your way.

Good luck on your road to FIRE.

 

[yakers]

Hey, heres another post about the 55 year old guy who is doing OK and was fairly broke at 30. Looks like a common pattern. Best suggestion I can make is marry the right person. Divorce cost more than income limitations. And if your spouse is saving inclined then you reinforce the RE process.

 

[Spanky]

Best suggestion I can make is marry the right person.

I know at least 2 guys at work who are (still) married to doctors (MD).

 

[Andre1969]

By the time I hit 30 I was starting to recover, financially, but I went through a financial crisis period from, oh, around the age of 25-29. Bad marriage/Divorce was a BIG part of it. I'm doing pretty well now, just a few months shy of 36. So hang in there, you're still ahead of most 30-somethings. And life will throw a lot of surprises and curveballs at you over the years. But don't despair, a lot of those surprises and curveballs turn out to be good things!