MMM Graduation

I just finished reading the most recent blog on Mr. Money Mustache and it was the final blog in my introduction to frugalism, thanks MMM.

I started reading MMM from the Complete List of All Posts right from Post 1 through to the post linked above, by clicking on the next article, over and over. It was a lot of reading, it was a lot of learning, in a short period of time (about three weeks).

Let’s be clear, I’m an accountant, I understand the #s, but like too many Westerners, I thought I could just keep increasing the Credit side of the income statement (my revenues), without ever focusing on the Debits, despite an amazing wife who constantly critiqued my free spending ways and pushed us to move to a more frugal spending lifestyle. 

For the first time ever, I’m focusing on the Debits. For those that aren’t accountants, the Debits are your expenses and after looking at my budget tonight, it appears we are spending $12,000 per month – WTF, I need a MMM triple punch to the Face, how is this possible? In this post, MMM wonders how this insane fictional character can spend $8,900 per month and even finds the revised $5,000 per month improved spending crazy. 

If that’s the case, how can I spend this much? The good news, well it’s not really “good” is that a fair chunk of that amount is what most FI bloggers would  call “savings” because it’s adding to our net worth – debt repayments. Before you start screaming Debt Emergency and strapping on the boxing gloves, please recognize from my last post that my wife and I are anti high-cost debt and none of the non-mortgage debt is interest payments. 

Most of this debt is our home Mortgage. Our mortgage and strata fees are $4,000 per month, which is 2x what MMM spends on EVERYTHING in a given month. Additionally, we are paying off lines of credit that we used for investment purchases and home purchases ($1,500) , which should be paid off shortly. That’s a total of $5,500 in debt repayments. 

Where MMM readers would flip (am I doing a self case-study) is our absurd spend on vehicles. With our car payments and insurance, we are spending $1,800 on vehicles per month…the only positive being $750 of this is done in September at the end of our primary vehicle’s 0 interest 5 year payment schedule. 

My wife is going to be revising our budget / cash flow to break out principal and debt repayments as “investing” activities, which will give us a better picture of what our increase / decrease to our net worth is from. I believe that our current savings rate is going to be ~ 20 to 25%, and will update as I can. What isn’t considered in the cash flow is the impact, if any, of my bonus on our family savings rate, and my wife noted she’s not including her $7,000 contribution to her pension each year, which she’ll revise. 

My bonus, in a given year, will be between $50,000 – $100,000 pre-tax, which is ~ $30,000 – $60,000 after tax. If we include this in the savings rate, which is reasonable because that’s where it will go, then I believe our savings rate is going to climb to ~ 40%, excluding the adjustment above to debt repayments. If we add that in, then we may be in the 50% – 60% range and I’m super looking forward to adding that in as an update or future post 🙂

The positive in all of this is that despite my ineptitude of spending, somehow we’ve managed to accumulate a net worth of ~ $600,000 and climbing. My goal, reiterated from an earlier post, is $2,500,000 as my FI #.

What is missing, in my mind, in our investing and FI strategy is investing outside of real estate, which I’m heavily vested in. How do I do this? In the United States, there are amazing options, including direct Vanguard Investment, or a plethora of robo-advisors! Earlier today, I read an MMM blog on Betterment and was again frustrated by the uncompetitive landscape we have here in Canada. Fortunately, my Google results showed promise and there was a great spreadsheet that showed me some options for robo-advisors and after some research, I selected WEALTHSIMPLE and dug deeper, reading some reviews, checking out the advisors / team and reading as much as I could on and off the site – I liked what I saw. 

I signed up for an account and completed the questionnaire. Surprise (no it wasn’t), I’m a 10/10 on risk assessment. The sign-up process was fast and simple and very clean and intuitive and I imagine if I’d been on a desktop instead of an iPad it would be better! Seconds, maybe minutes, after I signed up (it was fast) I received a call from a WEALTHSIMPLE employee (Jason?) to chat through my signing up (I wasn’t even finished the short questionnaire, it was that fast). It was a great conversation and we scheduled a call for Monday AM and I’m looking forward to chatting with them. 

My biggest concerns right now are how to modify the weightings: (1) I’m way to  heavy real estate in my life, and (2) I’m not comfortable with the US indices with the Shiller PE Ratio indicating the markets are too hot, so I’d like to really lower these two weightings.

I’m going to be opening a TFSA, RRSP and taxable account. First, I will fill up the RRSP ($25,000 per year) and TFSA (~ $5,000 per year, though I have $36,000 unused contribution room) before moving to the taxable account, which will be the first taxable investment account I’ve ever had. I’m ideally going to be able to invest $65,000 per year with WEALTHSIMPLE, which will climb each year, as my salary and bonuses increase (I’m on pace for a major promotion in 18 months and can expect strong salary increase and even stronger bonus increases) and plan absolutely to lower my expenses, not increase them. Ideally, this will allow for $100,000 per year in investment and get me into the Gold Pricing Level within 3 years, which would be nice. 

As we pay off vehicles and debt, the amount we can invest may surpass $100,000 per year within the next couple years, which will have us well on the path to Financial Independence by 2023, which is my target year. To be clear, like many other financial independence bloggers, this isn’t the target date I want to “Retire”, it is, as Jim Collins describes, a date by which I can say F-You! Why is this date important? It’s important because when you’re not beholden to a job for survival, you’re much more capable of saying exactly how you feel on any given subject, which given my line of work is absolutely imperative to being the best I can be. It’s also the point that allows you to say, the stress of this role is too much, I don’t need it at this stage of my life, I’m going to switch careers to something completely different, something for fun that I enjoy. 

Tying into this, my next post will be on why this is relevant to me, at this stage of my life. If I’ve been satisfied with my lifestyle to date, why now? Why choose to go to MMM and Mustachianism when I’ve been a super consumer for years??!?? Well, I can’t tell you now, that’s the next post!

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