When starting out on our journey to financial independence, we’d spend hours reading about other people’s experiences.
It wasn’t that we wanted to replicate someone else’s plan. It just seemed that each story offered a unique perspective – a new piece of information that brought us closer to our own goal.
Because of this, we know how important it is to write about our own journey. The FIRE movement is truly a community, and sharing our progress (and failures) has become our way of giving back.
Our path to FI is by no means perfect - it's not a gold standard or a formula that needs to be replicated - it’s merely one more example to reflect on.
With that said, here’s a look at how we spend our money.
All numbers are reflected as a percentage of our total pre-tax income. We find it helpful to look at things this way to get a full picture of where our money goes and how that may change post FI (includes taxes).
Where Our Money Goes
Taxes
About 20% of our income goes towards taxes and other pay roll deductions – this includes employment insurance (EI) and Canada Pension Plan (CPP) contributions.
Pre-Tax Savings
We contribute 20% of our income to our registered retirement savings accounts. Both of us have employer sponsored plans as well as individual accounts that we contribute to every time we get paid (RRSPs and RPPs).
After-Tax Savings
Aside from our retirement accounts, we save an additional 10% of our income. While some of this money goes into tax sheltered accounts (TFSAs), these contributions are not tax deductible.
Expenses
The remaining 50% of our income covers all of our expenses, from groceries to travel and everything in between — this includes irregular and infrequent expenses.
Here's a more detailed breakdown of our expenses:
As you can see, our house and cottage make up more than 50% of our total expenses. While this may seem like an obstacle to achieving financial independence, it really isn't.
Our plan is to live at our cottage full time long before we reach financial independence.
When we're ready to make the move, we'll sell our home and use the equity to pay off both mortgages. This will allow us to drastically reduce our living expenses (by more than 80%).
We expect our remaining expenses to stay pretty much the same - some may drop (like transportation) but others are likely to go up (like travel).
Setting Our Savings Rate
Finding a savings rate that works for us – one that helps move us towards financial independence while also leaving room for the things we love – has been a learning experience, and we're still working to get things just right.
There are still areas where we feel we overspend (like food) and other areas where we’re learning to be less frugal (like travel).
With every year that goes by, we continue to make adjustments, trying to strike just the right balance between saving more for our future and enjoying the present.
While it can sometimes be tempting to spend more, staying focused on the path to FI is important to us, and we know it will ultimately bring us more freedom for the things we love.
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