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PF authors sometimes make the mistake of focusing so intently on details that they miss explaining the forest on account of describing a few trees.

To view part 1 of this 3-part mini-series, click here.

Spending – Keep It Simple Stupid

Many personal finance authors sometimes make the mistake of focusing so intently on details that they miss explaining the forest on account of describing a few trees.  So much of PF basically boils down to the classic axiom of spend less than you make.  Or as Charles Dickens put it:

“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

Mrs. TM and I often discuss how fortunate we are to have inexpensive tastes.  For example, neither one of us has any particular taste for sports cars or luxury vehicles.  We both thoroughly enjoy our current 980 sq. ft. home and find we don’t need a whole lot else in life.  Our entertainment preferences revolve around reading, the occasional non-fancy meal out, and checking out the latest TV series (don’t you love living in the golden age of television?).  We do have a vacation bucket list that ranges from pretty cheap to fairly expensive, but if we don’t have children, travelling with just two adults is a manageable luxury.  The part of our budget that is most likely to experience inflation as we get more disposable income is probably gifts and charitable contributions, but obviously those are a little easier to remain objective about as our incomes increase.

Related: What’s your Travel Style? Resort Relaxer or Exploring Adventurer?

How Two Teachers Plan to Reach Findpendence By 45Taking a detailed look at our annual living expenses and discretionary spending over the last couple years, the numbers come in at around $25K (I’m not counting tuition payments here simply because these will be done after next year and then not applicable to the long-term outlook).  I’m not naïve enough to believe that we won’t be bit by the lifestyle inflation bug a little bit, but because we want to live rurally, and we already have considerable equity in our house, I don’t think our mortgage payments will ever be that large.  The amount of food luxuries and the level of vacation we take will no doubt increase, but other than that we generally enjoy pretty simple things.  I can’t see our consumption going much past the 40K a year mark unless we have children – which there are currently no plans for (admittedly this is by far the biggest variable – or left hook in Tyson-terms – in our plan).

Related: Why Starting Your Career Rurally Makes Sense

Size Matters

I’ve read some interesting stuff lately on how much money a person can save just by breaking with the North American obsession that bigger = better.  It turns out that people can often keep all the other luxury and creature comforts that they enjoy and still save money, if they are simply willing to live in a smaller home and drive smaller vehicles.

Currently we drive a Hyundai Elantra for all of our long distance driving.  We also have a van that my parents gave me.  It is pretty much used exclusively to get me the 4km to my workplace and back because I’m too lazy to walk that far in the morning.  I’ve always felt that I was missing that male gene that was supposed to make me want to oooh and aaah at fast cars and shiny chromed-out motors, and while that might make me less traditionally masculine, it certainly helps my bank account.  Fancy vehicles don’t do much for me or Mrs. TM.  Maybe one day when I hit a mid-life crisis I could see myself really splurging on something like a BMW 6 series, or a Hyundai Genesis just for vain aesthetics, but while we’re young and focused on building wealth I highly doubt we’ll drive anything but fuel-efficient workhorse cars.

We love our current small house (at least small by modern North American standards).  The main reason our expenses are so much lower than that of many Canadians is that we only pay $550 a month on our mortgage (and that is on a fairly aggressive 15-year amortization).  I think I’d be a fan of any house that had space for a decent couch, a nice TV, and a king-sized bed.  There isn’t too many other “must-haves” for me.  Mrs. TM says that our dream home will have a larger kitchen with more cupboard space and a little more of a dining area.  I guess in a perfect world I would enjoy a fairly large double garage as well.  When I look at houses on the market in areas we are considering eventually moving to for the long term, houses that fit this criteria are in the $220K -$250K range.

This means that if we were to sell our current house that I would conservatively estimate to be worth $130K, we’d take $50K-$60K in equity (depending on when we moved) with us and would be looking at a mortgage in the range of $170K-$200K.  Depending on how aggressive we want to be in the whole mortgage vs investment debate, we’re looking at mortgage of around $1,200 a month on a 25-year amortization if we expect mortgage rates to average 6% over the long term.  All in all, very affordable compared to the housing options many of my friends are looking at in urban centres across Canada.  I know that living rurally means that I won’t be surrounded by many of the activities that city-lovers enjoy such as a large variety of dining, entertainment, and shopping options, but to be honest we’re pretty ok with that.

Check out what early retirement and life after 45 might look like for our fearless (almost) protagonists next week as we reach the conclusion of our critically-acclaimed findependence series.

Article comments

Geoff says:

I think (ignoring the whole government pension matter, my only complaint of which is that I as a private sector worker should be allowed to join in with and contribute my share to) that a key part of your plan rests on the fact that I think you live in a part of the country where the cost of living is low but your income is high because it’s government set. In other words, transplant yourselves to working in Toronto and everything else being equal (including your 950 sq.ft house) there’s no chance of you retiring in your 40s.

My wife and I live in Toronto with one child, have a 1200 sq.ft house, and earn probably around $200K a year. We have well funded retirement accounts (over $200k) and are in our late 30s with a mortgage of $290K outstanding. And still my best case scenario for retirement is 55, assuming living another 35 years. Best case. But if we moved, our private sector jobs would not move with us.

Teacher Man says:

That makes a lot of sense Geoff. I definitely agree. I’m very thankful that my preferred lifestyle (that I would pay a premium for if I had to) comes with a huge cost savings. My mortgage would likely be AT LEAST 4x what it currently is and I wouldn’t have nearly the capital to invest at a relatively young age.

M says:

If you live well within your means and don’t plan to have children, retiring at 45 is not all that impressive. Why not aim for 40?

I’ve never read your blog before, but when I read the title I thought there might be some backlash– cynics out there who would react with comments about how good teachers have it with the DB pension and job security. I think that is the general sentiment of the public at large. I would suggest that in your future posts you should steer clear of anything that has to do with retirement, benefits, or job security. I don’t think readers will be too sympathetic.

Teacher Man says:

Hey M. I see where you’re coming from, I guess I wasn’t looking for a lot of sympathy, just merely throwing out some ideas about ways to reach financial independence. Rather than steer clear couldn’t we all just discuss options that are open to everyone (or not open to everyone).

Aiming for 40 would likely mean a hit to my lifestyle I’m probably not willing to take at this time. It’s obviously possible, I just don’t want to make those sort of substantial sacrifices to my life haha.

WTF says:

Retire by 40?!?!? Are you nuts? Really? Do you plan to be dead by 55? And I suppose you’ll have a pension and savings that will last you for the next 45-50 years!!!! Or the naive assumption that your union will never dismantle your pension fund because it can’t afford all the boomers and freeloaders like you who want to turtle into their shell of a lifestyle.

Teacher Man says:

You don’t pull any punches from behind that keyboard of yours eh WTF? I’m fairly certain my union can’t legally dismantle my pension that is completely managed by a third party is is currently about 95-98% funded.