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Moneys

Moneys

Back in June of 2012 I wrote a blogpost on how I was intending to begin saving 10% of my gross income towards retirement. Here’s what I wrote:

I’ve done ZERO retirement planning in my life so far. Sure, I’ve thought about it and what I want from life but I’ve taken very little action to plan towards it.

I currently have a $6,000 emergency fund, $2,000 in an RSP, $1,000 in a brokerage account, a few thousand in a rather volatile investment, and of course my largest asset, my house (mortgage and all, darn it) Obviously none of these will feed me much more than a few months (unless I want to eat my house?) so, starting with yesterday’s paycheque I implemented the 10% rule.”

I am sad to admit that after I updated the blogpost two weeks later, I didn’t follow through with this plan. After I began my bathroom renovation and went on a trip globetrotting, then there was school in the fall and a big reduction in income from Christmas until early summer this year. All in all, I didn’t save a dime towards retirement. From my monthly networth updates you might know that while I do still have a $6,000 emergency fund and while I have been investing in my house my renovating it, and while I have made progress networth-wise primarily due to my house value increasing and the very slow downward slope of my mortgage… I haven’t made any real, any dollar value of progress to my savings. Actually, since selling off my stocks I’ve decreased my liquid assets by $1,000.

This isn’t good. I also need to make a lot of sacrifices and aggressively save for the next year if I want to follow through on my plan to leave Canada for 3-4 months to figure out where I want to be.

I need to drastically improve my savings rate, restart contributing towards an account for retirement and cut all unnecessary spending. I feel a bit overwhelmed financially but I know I need to make a move, because not doing anything doesn’t get me any further. So, this is the plan for the rest of 2013:

1. I’ve set up an auto-purchase of my ING RSP of $20 every month going forward. It comes out on the 14th of every month, a random date I chose for no particular reason. This should be doable no matter what my budget looks like. It’s $20, it’s an auto transfer and I tend to do well with auto-transfers because it just becomes a regular bill once it’s been going for a while. $20 is a far cry from 10% of my gross income, but my primary goal here is to start with small contributions, get my other savings going and slowly ramp up the percentage of money being contributed to my retirement. I can only do this by carefully planning out my other expenses and plans, plus my immediate goal is not to put large sums of money to retirement. It’s more-so getting used to actually saving for something that’s still very far away instead of all the short-term stuff. Speaking of short-term stuff:

2. In addition to that $20 RSP contribution I’ve budgeted out that in order for me to have a $10,000 emergency fund by September 2014. (after which I am thinking of globetrotting for a bit) I need to save $300 per month for October, November and December of this year. And $400 per month from January – August 2014. I’ve planned this out in my budget and I should be able to swing it as long as no big projects or bills come up.

3. I of course need way more cash than just an emergency fund so I also need to start saving more in my misc savings, I’m currently contributing $50 a month towards a spring vacation to this account, I’ve budgeted an additional $150 to be saved in this account toward my living expenses, airfare etc. for this possible adventure. So, between now and the spring my miscellaneous savings account will hold money for two purposes; a spring vacation and my possible move.  I also eventually will need a means of transportation wherever I live, other trips etc. Building up a nice buffer in miscellaneous savings is important. This is a start. Once the emergency fund is full my focus will shift to this account and various other things to save for and increasing funding to my RSP.

I’ll keep tabs on these goals in future networth updates, I think it’s easiest to keep everything together in one monthly post, it will also be easier to see how much progress I’m actually making.

Moolah

Since I built up my first emergency fund for the first time in 2010 (and realized it’s usefulness when I had to use it the same day I completed it) I’ve learned that it’s really hard to get started with savings when you’re not used to it, and you might end up having to use your first and probably second emergency fund for something but...eventually you start to get ahead.

I’ve learned how great it feels to save and how great it feels to have money in the bank to take care of things when I need to. I also realized last month, when I received some less than happy work news, that an emergency fund takes some of the pressure off. I don’t have to lie awake at night with anxiety while playing a million “what-ifs” through my mind like I did for a large part of 2009.

Since posting that update on my work-life about a month ago I’ve completed my emergency fund of $6,000 which is now sitting in a separate online account until I need it. Having a full emergency fund, which for me is $6,000 for now, is a fantastic place to be… but now it’s time to look past the short-term and plan for the long-term.

I’ve done ZERO retirement planning in my life so far. Sure, I’ve thought about it and what I want from life but I’ve taken very little action to plan towards this. I currently have a $6,000 emergency fund, $2,000 in an RSP, $1,000 in a brokerage account, a few thousand in a rather volatile investment, and of course my largest asset, my house (mortgage and all, darn it) Obviously none of these will feed me much more than a few months (unless I want to eat my house?) so, starting with yesterday’s paycheque I implemented the 10% rule.

What is this 10% rule?
The 10% rule is about saving 10% of your gross income (check out this explanation as well)  Since I’ve been funnelling anywhere from $500 – $1000 per month into my emergency fund for the past half year, I’m really not going to miss this 10%! I haven’t opened a separate account for this 10% and won’t be investing it in the immediate future. My primary goal for the next few months is to get used to automatically saving 10%.

Since my wages vary from time to time I don’t have an automatic transfer set up for this and I kind of like it that way. Every time I get paid I will have to make the conscious decision to transfer 10% from my chequeing to my general savings account. (I’ve set up a separate account in my budgeting program to keep track of which amount belongs to my 10% and the rest of the money in the account which is my buffer/shorttermsavings/useforfunstuffmoney.

I decided to not just save 10% though, I stepped it up a notch! I’ve decided to put aside 10% of ALL my income, not just my wages. My GST refund quarterly, any tax refunds, contributions from my temporary room-mate. Everything will be subjected to the 10% rule.

My hope is that by the end of the year this habit will have become standard. I don’t expect to miss the money this week, or next week but I know there will be a time in the next month orso that I will question WHY I’m doing this. Hopefully I will be able to move past that so I can begin building a serious nest-egg for my future. Come Christmas I hope to then make a decision on what exactly I want to start doing with my 10%. (keep it cash, bury it in my backyard grandpa-style, buy bonds etc)

Update: I wrote this post about two weeks ago, I’m really enjoying putting the money aside with every bit of money that trickles in and I now have roughly $168 set aside without much trouble. I know I can’t touch it and I haven’t felt any urge to spend it yet! (Having the e-fund listed right above it helps)

You’ll notice I also renamed my emergency fund to something that more accurately (perhaps not appropriately) describes the freedom such a fund gives you 😉

How do you save for retirement? Do you use a percentage or just stuff some money in a mattress occasionally, or do you have your own mathematical approach to this retirement-thing…