How do we measure up? Can we hit 10 goals in 10 years for early retirement?
Passionate fans of this site will know I’m not an early retirement zealot but I am very interested in working part-time on my own terms in about 5-10 years from now. That’s why we save, invest and basically spend money that is leftover as part of our daily, weekly, and monthly financial plan. We believe that is a better way to budget.
Recently on Retireby40 there was an article about 10 goals to hit if you want to retire early.
I thought I would take this test and see how we measure up – 10 goals to hit in less than 10 years.
Goal 1 – Eliminate consumer debt
Thankfully we’ve largely avoided this debt for extended periods of time although we have had student loans, auto loans and personal loans in the past. I would agree racking up huge lines of credit; not aggressively paying that down along with holding other long-term consumer debts are not a good recipe for financial success.
Goal 2 – Saving >25% of your net income
I would suspect this is very tough goal for many folks to achieve. With housing, transportation, childcare and other costs, there isn’t always 25% net income leftover. Sure, if you want to retire early you need to save early, save often and save at a modest to high rate. That just makes sense.
Even with good jobs over the years, with good benefits, we have not been able to save >25% of our net income consistently but we have managed to max out contributions to our TFSAs since Day 1. Combined with our monthly RRSP contributions (my RRSP is pretty much maxed out of contribution room) that’s saving close to 20% of our net income. That’s still pretty good.
We’ll keep working, saving and investing using our TFSAs and RRSPs, until we reach this goal. After that big hairy audacious goal is realized, and we’re debt free, I believe we’ll very close to considering part-time work for the rest of our lives.
Goal 3 – Have 10x your annual expenses in net worth
It’s another nice rule of thumb I guess but I don’t really buy into these rules. Ultimately for any retirement, early or semi- or otherwise, you’ll want to do some math on what you spend, what you need to cover those expenses versus relying on any simple ratio.
I know our enough number. It’s not 10x our annual expenses in net worth. It’s much higher than that. Your mileage may vary.
Goal 4 – Passive income pays 25% of your COL (Cost of Living)
Unlike Retireby40, we don’t get involved in real estate crowdfunding, rental units or other. We’ve already been a landlord and only time will tell if we do that again…
This blog generates some income but it’s more like minimum wage – I run it because I enjoy it – not because I’m looking to make a living from it like others. That may or may not change in the future as well. For the time being, this blog is hardly “passive income” – it takes work.
I don’t think this metric has much to do with early retirement at all. Instead, I believe the sooner your income sources, whatever they may be; can exceed your expenses the faster you will reach your goals. Don’t believe the sensational hype around “passive income”. All forms of income take some form of effort, monitoring or work.
Goal 5 – Have a side hustle
This is not unlike what I wrote about above. I don’t really have much to add!
Goal 6 – Know how to invest
Investing can take many forms. I will say that investing primarily in equities (not bonds) inside your registered accounts first (thanks TFSA!) and your RRSP will be a fast-track to retirement. This is because the sooner you can get that money growing for you tax-free and tax-deferred, the more money you will eventually have.
There are many articles and resources on my site to help you invest better, at lower-costs, and higher returns. If you can’t find something specific that you are looking for, make sure you drop me a line.
Here are some key pages on my site that will definitely help you:
Goal 7 – (Plan for) those big lumpy expenses
The article suggests most of us will have “lumpy expenses” at some point in our life. Bang on.
This is why we keep this amount of money in our emergency fund. $hit happens and you should have some cash on hand when it does.
This goal has nothing to do with retiring early but has everything to do with being smart with your money and planning ahead, whether that applies to emergencies, planning ahead for your kids’ education, or other major expenses.
Goal 8 – Stable family life
Easier said than done but this is certainly an enabler for financial wealth. The reality is, we all have ups and downs during our lives. Not everything goes to plan when it comes to family, friends and/or personal relationships. Things only change.
I can only advise (based on my own experiences) to be true to who you are and true to others about who you are in the process. This will help you be as stable as possible in your relationships with others.
Goal 9 – No bad habits that can derail your life
Do you play the lottery all the time? Bad idea really if you don’t already know.
Using some simple grade-school math saving just $25 per month on lotto tickets, every month, every year, for 40 years, could add up to almost $50,000 more in your bank account. Seriously. Don’t gamble often or at all. Wouldn’t you rather have $50,000 in cash instead? I know my decision. The choice is yours.
Other sin activities that will rob you of your financial health and general physical and mental wellness are as follows:
- Frequent drinking
- Smoking habits
- Lack of exercise
- Use of prescription drugs or other drugs
- Eating too much junk food
- Being around negative or toxic people.
These are obvious things you and I both know but common sense isn’t always applied.
Goal 10 – Have (a) FIRE plan
At the beginning of this post I mentioned I’m not an early retirement fanatic even though I’ve written articles about it on my site.
In the latter post, I mentioned that in my mid-40s now, I value and appreciate time more. While FIRE is something I’ll continue to read up on and give some consideration to – it’s not something I crave. I want to live a balanced life full of experiences; I’m willing to work (hard) for things I need or want, and it’s important we save some money in the bank for the future. Those choices may or may not apply to you.
Using the scoring model in that blogpost I think we scored about an eight. We’re in good shape but not quite there yet. Then again…
This site is all about our saving and investing journey to financial freedom, educating ourselves as we go and hopefully helping others in the process. Whatever your financial plan is, whatever mistakes you might make along the way, enjoy the journey. At the end of the day personal finance success is personal. That means the biggest takeaway you should take from this article is this: care less about what other people think you should do with your money and care FAR MORE about the goals you’ve set for you.
Measuring yourself against someone else’s milestones is fine – to a point.