Our Updated FIRE Number

Back in September 2019 we wrote a very detailed post outlining how we arrived to our FIRE number. We also broke down our monthly expenses to show even further where we were coming from and our expected annual post-FIRE expenses at that juncture.  It’s now been well over a year since those posts were written so I wanted to revisit our analysis and see if there should be any revisions.  And guess what?  We’ve got some changes… to be even MORE conservative (surprise, surprise)!

What’s Changed?

Last year we had a few unexpected expenses that made us want to err on the side of even more caution with our future (yes, that’s me, Little Miss Cautious).  We also have been chatting about what our dream future life would look like.  What conversations did we have after that last post was written?  What happened?

• We want to move to a single family home versus a townhouses with more land and a private yard – done way sooner than anticipated!
• We want to be able to travel for the month of February or March to a warmer climate if we’d like to.
• We encountered some unexpected increases in some of our fixed costs:
  • Our home and auto insurance shot up
  • We had some unexpected house repairs (albeit they were inexpensive but still unexpected)
  • We wanted to add a buffer to our one-off expenses that may arise
• We want to set our kiddos up for second generation FI as best we can

New House Goals

We have been chatting recently a lot about what our dream house set up looks like.  Would we stay in the current town we live in?  Would we move west to interior BC?

We kept teetering on the location and would dream about listings we’d find across BC but we found we kept circling back to our current town and how much we love it, especially for kids.  It is full of young families, it’s clean and up and coming, it’s the perfect size for us (~35,000 people so not too big but not too small), it’s just outside Calgary which has even more amenities (the zoo, science center, international airport, IKEA, Costco, Superstore, etc.), it’s full of walking paths, there’s tons of sunny days (Southern Alberta is the sunniest part of Canada), we’re only a 40 minute drive to the beautiful Canadian Rockies, and there is so much natural beauty surrounding us.  I just wish winter was over and done with a bit sooner.  So our thought is to keep living in this town for the foreseeable future but add in a larger travel budget to escape for the entire month of February or March to somewhere warm.

We were living in a townhouse which was more than fine size wise but the lack of privacy was wearing on us.  Nic found a home that pretty much checked off all our boxes so we jumped on it back in August of last year.

Someday we may move out west to Vancouver Island, who knows.  But for now, we plan to stay put while the kiddos are in school.  That’s the plan for now at least – but we’re very aware that our thoughts could change in the future.  We’re very happy with our new home and it gives us everything we could want or need.

More Lofty Travel Goals

Last year, we were estimating $150/month or $1,800/year for our travel related costs once we retire early.  Since travel is our passion, we bumped this up to $250/month or $3,000/year.  While some may scoff at this low number, please understand that we have mastered travel hacking and have over 1 million travel related points in our portfolio and counting.  We typically sign up for 3-4 new credits cards a year which pump over 100,000 of travel points into our arsenal which can be used for airfares, hotels, car rentals, etc. to keep costs in this category quite low.

Since we aren’t tied to the typical peak holiday dates or short duration stints like most working folks, we have a lot of flexibility to travel during shoulder seasons when prices tend to be lower and when places tend to be less crowded.  We also prefer to camp, stay with friends/family, or stay in Airbnb’s (which you can negotiate especially for longer stays).  We also like to live like a local and wander around by foot, check out local cafes & bakeries, go on hikes, and check out local history – all of which are relatively inexpensive.

We’re thinking that during the month of February/March we will rotate through a few destinations: Florida, Mexico, Central America, South America, South East Asia, Japan, Australia, New Zealand, Phoenix, Vancouver Island, etc.  Some of these palaces we can take our sweet old time driving to, because well in a post FI life time is on your side.  And then of course, the majority of our summers will be out at Nic’s family cabin in SK which is a “happy place” for us all.

Of the $3,000/year, a few hundred will be on gas to/from the cabin.  Currently, we go out to the cabin for 7-14 day trips ~5 times a summer and it costs ~$100 each round trip go on gas.  This is because I have to jet back home for my shifts.  In our FIRE life, we can head out to the cabin in May (or once school is out when the kiddos are older) and stay until the end of September (or again, whenever based off the school schedule).  Nic’s parents are contemplating moving out to the cabin full time so it would be great to be able to spend quality time with them over the summers. I’m guessing we would spend under $200 in gas during our FIRE years being out at the cabin for the summer.

The remainder of the $3,000/year would be for Airbnb type places for anywhere from 4-8 weeks in February-March.  For some of the more expensive destinations, this figure may only cover 4 weeks of travel (especially if we also need to factor in a car rental into the picture).  For some of the lower cost of living locations, this should cover closer to 8 weeks of stay.  The airfare portion would be covered by travel points so maybe a few hundred dollars each trip to account for international taxes on the airfare (noting that some destinations would be via car and no points required for those, just gas).

Our Costly Insurance Hike

Our home insurance shot up by 44% (from $900 to $1,300) for the same coverage and our auto insurance shot up by 53% (from $1607 to $2458). Ouch!  That’s a far cry from my estimated 3% increase year over year.  What gives?  Part of it is user inflicted and part of it is out of our control.

Back in March 2018, little ole me was pulled over by an undercover cop in a white pick up truck when I was stopped at a red light where I picked up my phone from the cup holder to check the GPS directions on my phone.  Oops.  I was pissed and got nailed with a $287 distracted driving ticket.  I went to the courthouse to try and get the ticket lowered, and no dice.  Literally the judge was reducing every single other patron there with a ticket that did not involve a cell phone (driving in the bus lane, driving 10+ km/hr over the limit, etc.) and then came me.  There was no budge. At all.  Alberta is clearly trying to crack down on the number of incidents due to distracted driving and I can’t blame them.  I’ve since learned my lesson and bought a cheapo $2 holder from the dollar store to clip into my air vent to play podcasts and look at directions hands free in the car.

I begrudgingly paid the damn fine and thought we were done.  Nope.  To further add insult to injury, Alberta recently changed this type of ticket from a minor to a major and it remains on your record for 3 years, meaning it’s on my record for our May 2020-May 2021 insurance coverage (and thankfully will be off this coming year).

Of course, I did my due diligence to see if we were getting screwed, but alas, we were not.  Turns out we are actually considered lucky to have an insurance provider who is willing to have a driver with a major conviction, especially a low deductible for collision and comprehensive (the best comp I could find was over $3,300 vs our $2,548 for both vehicles).  I also learned that under the previous political party, insurance companies were capped at 5% increases to their policies year over year.  Well now with another political party in play, those rate caps were lifted and out comes the flood gates of higher policy premiums.

This situation served as a reminder that one off events can (and will) come up, whatever they may be, which cannot be ignored.  While the ticket was something we could personally control, the overall rate hikes to insurance premiums across the board are out of our control.  With more and more extreme weather events taking place across the globe (floods, hurricanes, tornadoes, wildfires, etc.), and more and more fancy tech getting built into cars making them more expensive to repair, I can only expect insurance premiums to increase over the years.

We did some hacking of our own to keep our overall insurance figures low when we were presented with this much higher than expected premium.  We’ve been testing out having one car in parking/garage status and only driving one car at a time which has been working well for us for the past 1.5 years.  Once these cars die on us we will be shifting to a 1 car household for good.  So we’ve taken this elevated insurance price and divided it by two to reflect a single car being insured.

I’m hoping that robo-taxis take over and eliminate the need for a car overall but the point of this topic is to think about things that can greatly jump up in price.

Is Our Townhouse Falling Apart?

Our townhouse turned 4 last year and we encountered a few repairs, mostly minor, but it made us rethink our $300/year budget for home repairs.

Some of the minor things were light bulbs going out and pull handles breaking from our kitchen cabinets.  While a pain, no biggie.  These fixes could easily be covered with our $300 budget.

We then had a bathtub spout that started to leak.  Nic the “DIY plumber” used her handy best friend YouTube to investigate and take the spout apart and turn off the water to that bathroom so we could stop the leak and continue to use water elsewhere throughout the house.  We went through a whole loop-de-loop to finally get the piece we needed delivered a few weeks later for free since it has a life time guarantee.  Nic tried to fix it herself but no dice.  We were ready to hire a plumber when Nic reached out to our local moms Facebook group to see if anyone was a plumber or could recommend one.  One of the ladies was a plumber and walked Nic through the steps she needed to do over the phone.  If Nic couldn’t fix it, this lady offered to come fix it for a bottle of wine.  Nic was able to fix it herself.  Problem solved, and for free (we still gave her a bottle of wine for walking Nic through the process)!

We also had our basement window well area swell up with water within the walls thanks to the landscapers putting too many rocks in the window well the previous summer not allowing the snow melt to drain properly.  Luckily, this was covered by the builders since we are still within 5 years of warranty on the building but a one off event like this could happen anytime once our warranty is up.

These little occurrences served as a good reminder that as a homeowner, we have to be cognizant of random house repairs that will come our way over the years.  Especially since our plan is to sell our townhouse and live in our single family home for the long term.  Our house was built in the late 1970s and was renovated in 2014 so it’s likely many home improvements are just around the corner. (Granted many can argue that homes build in the 70s are built much better than the cookie cutter homes of today.)

Second Generation FI

We decided that in addition to putting $2,500/year aside towards our kid(s) RESP for future education costs, we also want to consider setting up an additional fund for them if once we reach our Fat FIRE figure life is good and I want to keep working.

The idea is to put $10,000 aside for each kid to grow and hopefully by the time they turn 18 and they have full control over this account, we will have taught them all about the power of compounding.  We’re digging into the best type of account for them.  If we open an informal trust, technically they can do whatever they want this money after 18.  The aim is that they will hopefully be FI badasses themselves and leave it alone to grow.

If this $10,000 grows at 7% annually, 60 years later this account will be worth $658,775. (I use 7% to assume 10% average annual growth and 3% average annual inflation to keep the figure in today’s dollars assuming 100% equities).  Essentially we are creating a Coast FI life for them.  Second generation FI here we come?

There is a big caveat here that it all depends on how the work/life set up is going as we approach our FIRE date.  The plan is to reach our Fat FIRE number and see if it then makes sense to keep working a bit longer to set up an informal trust for the kiddos.  If life is good, I’ll keep working to set this up for them.  If I’m ready to be done the minute we reach our inflated FIRE number, I’m out.

This is a really fine line for us and we go back and forth constantly with if this is something we actually want to do for them as we do not want trust fund babies.  We want them to be hard workers and feel a sense of pride in their accomplishments.  We want them to have to grind it out in their 20s to create a strong initial financial foundation.  So part of me says not to put this extra money in an informal trust and forget about it all together.  The other part of me says if the work-life balance is going well why not set it up.  We shall see what we end up doing here.

Conservative Clancy

While we are already being very very conservative with our numbers – withdrawing sub 3%, not accounting for any sort of income once we FIRE, having a separate account for future car purchases that is not included in our passive income calcs, increasing our annual expenses year over year to account for inflation until we FIRE, factoring in some costs for miscellaneous repairs, and not accounting for a few accounts in the background such as my pension, HSA, CPP/SS, OAS, etc. – I decided to be even MORE cautious.  We were living in a naïve bubble and realized it can’t hurt to have some extra buffers in place.  Which leads to the next topic.

I Already Feel Retired

The main reason why I’m so comfortable admitting this and bumping up our numbers is because I don’t hate my job.  I never have.  It’s never been about escaping a bad boss.  In fact, as many long time readers know, I really love our current set up.

Nic retired early when our daughter was born and I work part time and the setup really is fantastic.  I work 2 nights in a row then I’m off for 8 days straight.  On repeat.  That means I have 36 stretches of 8 days off a year.  I’m only in the office 73 days a year and off 292 days a year.  80% of the time I am off and at home.  And I don’t have to think about work when I finish my shift.  I literally feel like I don’t work, yet we’re able to save and invest over 50% of my part time income (thanks in part to being valuists).

Because we’ve set up this sweet lifestyle, adding an extra year or two to our FIRE horizon is not a stressful decision to make.  Life is good.  We have a really good balance going on.  Now who knows what the story will be when babes 2 enters the picture.  Maybe I’ll take some time off for parental leave and decide not to go back.  Or maybe I will decide to go back afterwards.  All I’ve learned is that I need to go with the flow, stop projecting so much, and we will figure it all out along the way.

Nic is already talking about doing something once Finn and Baby 2 are in school.  Maybe she will work for a golf course by the cabin and mow the grass in the summers (her favorite job growing up).  Maybe she will work in a coffee shop over the winters.  Maybe she will do take out/grocery delivery to blast music in the car between pickups.  Maybe she will pick up some more tools and make some woodworking items to sell at the farmers market.  Maybe she will renovate an older RV to flip.  Maybe she will do online medical transcriptions.  Maybe she will deliver newspapers in our neighborhood.  Maybe she will work at the sports centre.  The point is, it will be something on her own terms – something she enjoys – something she actually wants to do – something that does not bring on stress – something with flexible hours so she can make up her schedule.  That’s the beauty of all of this.  And hell, maybe I’ll join her.  Who knows.  Maybe I’ll market my financial coaching platform more.  Maybe I’ll volunteer at the kids school.  Maybe I’ll work in the cafeteria or library at the kids school to be on their same schedule.

Currently, our thought is for me to work for the next month(ish), take parental leave for 61 weeks, get a true taste of the FIRE life, and assess how our portfolio is looking at the time.  While off on leave, we won’t be withdrawing too much from our portfolio which means more time for it to grow.  We will be getting about $20,000 from parental leave, $4,500 from Canada Child Benefit, rental income from our townhouse to pay down our mortgage, and the remaining bit will be coming from our cash stash.  While I do not expect the markets to boom, a little growth always helps.  We may be at our revised FIRE number or we may be short a bit.  Maybe I’ll never return to work again?  Maybe I’ll go back for 1 more year?  We shall see!

What is our New FIRE Number?

Ok ok, finally. As of last year, we were originally targeting a FIRE number of $875,000 of passive income.  Here is how we got to this figure:

$35,000 x 25 = $875,000

We reached that figure back in Q2 2020, woohoo!  And again, we do not consider any external income from government benefits such as CCB into our FIRE plans as we only want to be reliant on ourselves as government policies can change at any moment.  If you include these benefits, we are sitting under a 2% withdrawal.

And now, we’ve bumped that up to an annual spend of $40,052 and a FIRE number of the nice round $1 million.  Note that this assumes a FIRE start date of 2022 so 2021 numbers have been increased to account for inflation over the next year.  This also assumes that our mortgage will be paid off before we FIRE which was the original plan. (Although we have been having conversations recently about extending the rental on the townhouse for a few more years… whatever happens here the long term play is to be mortgage free sooner rather than later with the townhouse paying for our mortgage.)

Here are the new revised numbers:

We also will add in $10,000 for the kiddo “gifts”.  So ultimately, we’d like to see a passive investment portfolio of $1,021,000 before pulling the plug.

What do ya know, we reached that goal too in Q1 2021! Crayyyyy cray.

Some people think $40,000/year is bare bones, but for us, this is our lofty figure.  We realize this is likely much more than we will be spending each year, but we’re OK bumping up our financial goal as life is good.  Nic and I have had this chat many times, and we keep concluding that I might as well keep working my semi-retired part time gig to beef up our numbers while my employment is still enjoyable and it allows for a happy balanced life for all of us.  The most important thing is for us to be on the same page and to have proper communication.

But Wait There’s More

Now, we took it even one step further.  We looked at these figures and said what could these numbers end up being if we wanted to be super cautious.  We went through the numbers and came up with a more cushy setup where we’d feel way more than set.

We bumped up the “one-off spend” home fund (meant for replacing large one off items such as a new roof, windows, appliances, furnace, water heater, washer/dryer, deck, vanities, toilets, etc.) plus any miscellaneous house upkeep (such as lawnmowers, snow shovels, gardening equipment, etc.), a slight increase to internet & electricity (even though we’re now signed up for the free energy program with Ambit), a bump in our food, car insurance, gas, car miscellaneous, supplemental medical insurance, miscellaneous, and kids miscellaneous/activities. We also bumped the travel category from $3,000/year to $4,000.  So basically everything haha.  We also threw in the new car fund in here.  And where did that get us?

$49,934 annual spend or a FIRE target number of $1,248,362 with a 4% withdrawal.

Add in the $10,000 for each kiddo for second generation FI which brings us to our FatFIRE goal of $1,268,362.

Let’s see if we can get there!  If our portfolio returns 5% on average + bonus + tax returns – the depletion of some funds while out on parental leave, we should be there within the 2 year goal from today that I have made up in our mind for us (even though a majority of that is time off on parental leave).

*For those curious, here is how we came up with the “One-Off Spends” figure:

Conclusion

Putting this all together, I’d feel comfortable pulling the plug when our passive investments reach a portfolio size of at least $1,021,000 after taking into account our updated projected post-FIRE annual spend, extra housing costs, and our Second Generation FI funds.

For those who missed our latest Q1 2021 quarterly net worth update, we’re currently sitting at $1,093,404 in investments not including the house so booooom we’re there!

I’d feel super comfortable if our portfolio grew to just over $1,265,000 before I pull the plug.

Here’s our current thoughts for 2021-2022:

• 2021: Work part time job until baby 2 is born then take parental leave off through September 2022 to spend quality time as a family.
• 2022: Assess the portfolio and our priorities and decide if I will continue working or not once parental leave is up.  Possibly return to part-time work for a year.  If we surpass our FatFIRE figure, more travel in the future for us.

Throughout our journey we’ve learned how important it is to 1.) design a happy life along the way and 2.) be flexible. Your FI journey should not be a miserable grind to a magical number which will somehow turn you into a happy person.  That’s not how it works.

We’ll circle back a year from now to see if/how our plans have changed.

Have your financial plans or projections changed over the years? If yes, how so?  Do you have any contingencies built into your numbers?  Do you think we’re way too uber conservative and should loosen up a bit?  Or are you even more conservative than us?

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We believe in stacking up life hacks to keep your enjoyment levels to the max without depleting your bank account.  Here are some ways to further educate yourself and save thousands of dollars over your lifetime by making some simple adjustments:

• Investing Newbies: Check out our free Investing 101 Series.
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