“Financial freedom is the ability to maintain your lifestyle without going to work”.
My poor husband knows this quote by heart as it is posted in our bathroom and he sees it every day. This concept was first brought to our attention at a financial seminar where the speaker outlined how important it was to have low monthly expenses. If you can have your basic needs covered you are on your way to Freedom. The speaker said “don’t you think you would be able to come up with something that could generate some income when you don’t have to go to work anymore”. This is exactly what early retirement or 'working less' is all about for us.
Scare tactics are usually being used by financial institutions that insist we will need millions saved up before we can retire or we will be eating cat food and I am starting to disagree. I can also see the benefits of a company pension right about now as that is what some people can collect after 25 years of work. Except for old age and CPP, my husband and I are on our own for saving for retirement and that is something to keep in mind.
Everybody’s situation is different but I am getting to the point that I will rather live a simpler life and start it earlier as there is too many reminders that not everyone gets to retire. We have lost several friends and family members over the years at a young age and we know not everyone will get to live to experience a glorious retirement.
7 years ago we started investing in real estate and it has been a very good investment for the most part. The foundation here is to buy real estate at bargain prices and then to hopefully have the investment appreciate by 5% annually, the same return as a conservative investment. The additional benefit is that while you own the property someone else is making the mortgage payments and when you sell you cash in on the gain in real estate (5% annually) AND the balance owing after years of paying down the mortgage. There are obviously several issues to consider, you must buy the real estate at bargain prices and you must treat it as a business as being a landlord is not always easy.
Depending on your age there are several ways of looking at saving for retirement but if you want to start living more and working less earlier you need to start thinking about these things. Start working with a number like $500,000.00 in savings and consider your primary residence being paid for, how would your situation look?
The $500,000.00 cash would generate 5% in interest, hopefully, which is $25,000.00 annually. What would you need to earn additionally to live off this investment?
I figure our basic living expenses will be $5,000.00 per month for a total of $60,000.00 annually – we would then have a short fall of $35,000.00 which we would have to make up in order to stop working early. If we split the $35,000.00 we each will have to earn $17,500.00 annually by doing ‘something’. Kevin would be happy working on a golf course cutting grass for the summer if that meant the freedom to take the winter off.
Now we are looking at a life style decision – we would have to be content with not globetrotting all over the world which we probably wouldn’t do anyway. By working seasonally, we could comfortably leave Alberta for a month in November and again in January and February and live in Arizona.
This is how I think early retirement could be for us or we can choose to work longer and save more. I think I like the budget plan more and more. This is the plan and it can change any time, the point is we have at least started talking about it.
We can also hope and pray that interest rate go up and thereby give us a raise in our living allowance.
How soon working less can start depends on decisions made today. You can contact me at GreaterLivingInstitute@gmail.com anytime.
No comments:
Post a Comment