Thanks for reading! :D

You can contact me here or find me on Twitter via @brokeinthecity.

Or come visit me at my other 2 blogs:

Style on a String and The Everyday Minimalist

© FB @ FabulouslyBroke.com for Fabulously Broke in the City, 2010. | Permalink | No love left yet |

From the wonderful discount gift card website Gift Card Granny who partners with eBay.com, Plastic Jungle and GiftCards.com, I am giving away:

TWO Best Buy Gift Cards for $25 each

and

TWO Kohl’s Gift Cards for $25 each

Rules

• You can only enter to win ONE of the gift cards (be fair and share!)
• It is only for U.S. residents (sorry, I got shafted too…)
• Contest ends April 16th 2010 at midnight EST.

How to win

Subscribe to my RSS Feed: (One Entry)

RSS Feed link here: http://feeds.feedburner.com/FabulouslyBrokeInTheCity

You can use Google Reader (www.google.com/reader) if you are looking for something (fairly) easy to use, web-based and quick.

If you are already subscribed, leave me a comment and let me know.

Blog about it on your site (One Entry)

Tell your readers all about it!

Just link back to this post and leave me a comment with the link to your blog post so I can verify it.

Follow me on Twitter & Tweet about it (Two Entries)

Follow me on Twitter @brokeinthecity and tweet about it.

@brokeinthecity is giving away one of four $25 gift cards to either Best Buy or Kohls –> http://bit.ly/bH3H2A

Please tweet only once. Not twice.

Thanks for reading! :D

You can contact me here or find me on Twitter via @brokeinthecity.

Or come visit me at my other 2 blogs:

Style on a String and The Everyday Minimalist

© FB @ FabulouslyBroke.com for Fabulously Broke in the City, 2010. | Permalink | No love left yet |

This has been going around I’m sure, but he’s pretty amazing!

You really don’t need much to make beautiful music.

Thanks for reading! :D

You can contact me here or find me on Twitter via @brokeinthecity.

Or come visit me at my other 2 blogs:

Style on a String and The Everyday Minimalist

© FB @ FabulouslyBroke.com for Fabulously Broke in the City, 2010. | Permalink | No love left yet |

ThriftyGal of the blog Chasing Prosperity made a good point on my retirement post about $20,000 being sort of conservative for someone who makes $100k/year.

(Read: “Just stick a fork in me when I’m 50-ish!“)

And she’s totally 100% right.

However, as a freelancer, income is a bit trickier to pin down as a confirmed amount than working for a company and getting paid bi-weekly.

Therefore, $20,000 to me, is a good goal as a bare minimum even though I am making more than $100,000 a year right now.

Here’s the reasons why:

I am being realistic, rather than conservative

I don’t always work full-time.

This contract is a rare opportunity that is not even guaranteed to last either!

They could boot me out at the end of March and my plans for my future earnings could go up in smoke.

I am not mad about it, I am just trying to be really conservative and not expect what hasn’t been confirmed.

See, without statistics, I cannot say: “I will make $60,000 this year, and $20,000 can FOR SURE be set aside for savings.”

There are months where I won’t work, and there are months where I will work a lot.

I need at least 5 years of stats for that, and I am currently pushing 2 years.

• From Aug-Nov 2008: $90,000 as a freelancer (note: I was with a company before)
• All of 2009: $0
• Now, am earning a confirmed: $34,500 which is really $24,000 after expenses

I am hoping to stay on and work until end of 2010, but nothing has been put on paper yet or signed, so I can’t count my chickens before my eggs have hatched.

My real “secret” plan is to save as much as possible

With uncertain and unsteady income, I have to save as much as possible. No ifs, ands or buts about it.

So for example, if I work for the whole year, I will gross $190,000, or $154,000 net.

Note: I am taking out January because I started a month into 2010, and July because I am going to Europe for a month. In a full year, it’s really $230,000 gross taking into account holidays, or $186,300 net.

I am going to save as much as I can of that $154,000, because…..

…I have my priorities set in a laddered system

This is something I’ve done, even earning much, MUCH less than that (on minimum wage), because you should always know how to prioritize where to put your cash which means paying for shelter, food and warmth.

The rest is just bonus.

Since I cannot count on that income as being confirmed yet, having my money priorities set out beforehand are so much more important!

Therefore, I cannot say: 25% of my paycheque will go to savings, 30% goes here, and so on.

I need to allocate the money on a laddered system based on when I earn/get it.

If I don’t have enough banked to move on to my next priority, then I don’t move on until I do.

And they go a little sumpin’ like this:

Here’s a handy chart and my notes will follow.

Priority #1. Expenses for the whole year = $20,000

I need about $25,000 net this year, so all of the money that I make (net) up to $25,000 will go towards living expenses for 2010.

That, is just cash in the bank to pay for expenses so I don’t have to worry about having saved/spent too much on other priorities.

This is my true #1 above all the others.

Last year, I spent $30,000 in net expenses, but this year, I have a plan to spend $20,000 as I am going to try and control that this year.

Priority #2. Expenses for two Emergency Fund years = $50,000

Like in 2009 when I didn’t work*

*As rightly pointed out by ThriftyGal:

Yes, I could have worked another job, but aside from my French not having been strong enough to work in even a minimum wage job for most of 2009, the bigger thing is that I also chose not to work a minimum wage or a 9-5 job because I had the financial savings and the option to do so.

I will need another $25,000 for one year, but I am actually shooting for $50,000 as my emergency fund because I feel good with 2 years.

I am saving an extra $5000 over what I expect to spend, because I like having some extra room.

I am putting it all into high interest savings accounts and other safe, super conservative investment vehicles.

This does a double duty, because it’s subtly a part of my retirement plan as well, but I won’t consider it as such.

Priority #3. Retirement Savings = $20,000

Max out my RRSP.Put the rest in laddered savings.

My TFSA is already maxed out with Priority #2.

This is my bare minimum for retirement for 2010.

Priority #4. Fun = $10,000

Ahhh! FUN!

I honestly cannot think of anything I’d like to buy, but I like leaving myself some breathing room after being so serious with my earnings.

Need to have a break once in a while!

I’m probably going to spend some of it in Europe, eating wonderfully foreign candy, and buying foreign products.

We’ll see.

Priority #5. More Savings = $54,000

Anything left over = bonus to be banked as savings.

I can draw on this to help pad up my retirement funds in future years, or for whatever I’d like within reason.

But it’ll all stay as savings.

So, that’s the plan.

It’s a bit unusual, but I think everyone follows the same principles/strategy in theory, just perhaps not as regimented or as conservative.

Everyone spends their money on what they value the most.

Just look at your spending for last year (if you have the stats), and see where you spent the MOST money.

The top 3 spending amounts are what you value most in life, and hence where you put your cash.

I think mine was Retirement/Savings, Rent and then Food.

The rest were considerably smaller amounts in comparison, except for the shopping & electronics part that scared me.

So what’s your ultimate goal? Do you have a saving and spending strategy?

Thanks for reading! :D

You can contact me here or find me on Twitter via @brokeinthecity.

Or come visit me at my other 2 blogs:

Style on a String and The Everyday Minimalist

© FB @ FabulouslyBroke.com for Fabulously Broke in the City, 2010. | Permalink | 13 comments |

I thought it’d be a fun exercise to do a comparison between working for a company and working for yourself.

Salary:

The general rule of thumb is that you work for yourself if you can make more money — at least increasing your salary by 50%.

So if you normally earned $50,000 before, you should be able to earn at least $75,000 if you go out on your own.

That extra $25,000 is to cover retirement, healthcare and whatever else you have to deal with that a company would handle otherwise.

If it’s for the same amount of money, I don’t really see the point unless you really hate being under someone else’s thumb.

From my perspective:

They used to charge $150 – $180/hour for my services.

I cut out the middleman, and went from earning $30/hour (my employee salary) to $90-$130/hour.

I make more money, and I charge the client less.

Time:

In a lot of cases, you work MORE because you have to do your job and also do all the other tasks in the company like handling the books, reading contracts and dealing with the client directly.

If you run your own business you have to handle everything from vendors to customers to your own employees.

But it’s fulfilling in the sense that you know it’s directly affecting you and your earnings, so you are more motivated to do the work happily.

From my perspective:

It is the total opposite for me.

I actually work less now, than I ever did with a consulting company.

The reason being that I used to work 50-60 hours a week with a consulting company, but was only paid for 40.

I was working all that over time for free, PLUS filling out all those performance tracking and project review debriefings, all of which took

Now, I work no more than what I am allowed to bill, which ranges from 36 – 40 hours a week.

Over time has to be approved directly by the client, or I don’t do it.

And if you don’t want to go on a project that makes you travel a lot, you can say “No, I’m not going.”

With a company, you don’t have a choice.

Healthcare:

Have to cover your own, or get your own private insurance plan.

From my perspective:

Doesn’t really apply to me as I live in Canada. My out-of-pocket expenses are around $600/year which include seeing the dentist twice, and buying prescription pills.

I am actually saving money, because I wasn’t even taking full advantage of the company plan to begin with.

Retirement:

Have to handle it all on your own, but this was sort of what I did before as well — contributed to a retirement plan AND saved on the side.

Office Supplies:

Have to handle it all on your own, but you don’t need much if it’s just you.

And you can buy exactly what you want, instead of bitching about what they bought!

Resources:

You’re the only resource, but there’s an informal network of other freelancers who are more than willing to help you out.

Paperwork, Taxes and Deductions:

Lots of paperwork to deal with for your company is the downside, but now:

• you have control over what is being spent and what isn’t
• you don’t have to deal with someone to approve any purchases
• you benefit directly from the tax breaks, rather than the company taking them

When your laptop dies, you don’t have to ask anyone for approval to get a new one (and by new, I mean refurbished).

So if my laptop dies, I just buy another one under the company.

19% Flat Rate

I think it’s a BONUS that I only pay 19% as a flat rate in taxes for my small corporation’s earnings.

My company can earn up to $500,000 before being charged more, but under $500,000, it’s considered to be a small business.

If I were to earn that kind of money through a company, I’d be paying at least 40% in taxes.

$20,000 in dividends each year

I take the money out as dividends each year, to a maximum of $20,000 (it’s all I need anyway), and as a result, I don’t pay exorbitant personal income taxes.

$20,000 might not seem like a lot, considering that in 2009 I spent around $30,000… however, I also have some of my living expenses written off under the company.

No sales taxes paid & expenses are deducted from gross taxable income

If I buy something for the company, I don’t pay the sales tax AND it’s an expense before taxes for my company, so I save on the income tax as well.

Check out the comparison chart:

Let’s assume I buy a $100 item:

As an individual, I’d pay $113 with 13% sales tax, but under my corporation (if it’s a legitimate expense), I pay $81.

Naturally, I can’t buy anything not related to consulting, so a new wardrobe, or anything that is not used for business, cannot be claimed.

This is also not an excuse to go on a spending spree because of the savings, because you are still spending the company’s money, which is eventually YOUR money and what you buy is not “free”, it’s just cheaper.

This is also the reason why I bought a used minivan instead of a fancy new car for the company.

THE DOWNSIDES

• Fairly risky: may not work for large parts of the year (hello 2009?)
• May have to travel a lot and/or cover expenses which lowers my earnings
• No paid vacation, sick days or leave — it affects your income directly
• Managing myself & the client’s expectations
• Have to do all the work of a company by myself on my off time, for example:

• • Filing taxes and other statements quarterly
  • Bookkeeping — My budgeting spreadsheet comes in handy here
  • Analyzing my cash flow and expected income
  • Invoicing and Accounts Receivables — Making sure I get paid
  • Scheduling — If I travel, I need to make sure I am on top of the bookings

——————————————————————————

So I hope I’ve given a brief but comprehensive Pros and Cons list of both: working for a company or for yourself.

Personally, it’s a much better and easier deal to be a freelancer than to work for a company, especially as an IT consultant who works on projects rather than really being an employee.

Thanks for reading! :D

You can contact me here or find me on Twitter via @brokeinthecity.

Or come visit me at my other 2 blogs:

Style on a String and The Everyday Minimalist

© FB @ FabulouslyBroke.com for Fabulously Broke in the City, 2010. | Permalink | 5 comments |

I thought it’d be a fun exercise to do a comparison between working for a company and working for yourself.

Salary:

It’s steady income, and you can expect a paycheque deposited into your account bi-weekly like clockwork.

Time:

Sure, you may work some overtime here and there, but for the most part your workweek is pretty good.

35 – 40 hours a week, and you even get paid leave in some cases, like sick days, paid vacation, personal days, or whatever your company might offer.

In consulting, if you don’t have a project, then you’re “benched”, otherwise lovingly referred to as “beached”.. meaning that you sit at home and wait for the next project, but you’re paid to do so.

Healthcare:

Usually covered by your employer, giving you a whole range of great benefits that you otherwise may not have had the cash to pay for.

This I hear, is especially helpful if you live in the States, but not so much in Canada, as we are under the universal healthcare plan.

Retirement:

Again, an employer sometimes generously offers a 100% match!

Which means whatever you put into the retirement plan, they’ll match up to a certain percentage.

If you put in 3% of your salary, they give you 3% — it’s free money and a great perk of working for a company.

Office Supplies:

Need a pen? Paper? Huge industrial photocopier? Scanner? Huge projector? For the most part, everything is available at your fingertips, and if it isn’t, you can request it.

You don’t have to worry about having an office to work at, a good desk, a locked cabinet, buying your own computer or having a chair to sit in.

Resources:

Lots of people around you to pick the brains of, and you can lean and ask for help from anyone in your department. At least, in theory.

Paperwork, Taxes and Deductions:

Automatically taken off your paycheque.

You don’t have to worry about contributing to any of it, the company has everything set up automatically, and they just deliver a summary to you at the end of the year, which makes your taxes super simple.

If you need to change something, you just call HR.

You don’t have to deal with any of the nuances of being self-employed — you get your expenses reimbursed in full with (barely) any questions asked.

THE DOWNSIDES

• Having to work overtime for free (in most cases)
• Lots of seemingly redundant & unnecessary paperwork for performance reviews
• Never having autonomy to do what you want without deferring to your manager
• Office politics are pettier, because you’re all employees jostling for raises
• Not getting reimbursed or paid on time

Thanks for reading! :D

You can contact me here or find me on Twitter via @brokeinthecity.

Or come visit me at my other 2 blogs:

Style on a String and The Everyday Minimalist

© FB @ FabulouslyBroke.com for Fabulously Broke in the City, 2010. | Permalink | 9 comments |

Long story short, taking the Megabus is my new preferred way to get to Toronto if I have to.

You can get a one-way ticket from $18 to $55 a trip, and on average a ticket costs $38 for a half-filled bus.

If you go on off peak hours, or when people haven’t bought many tickets, then the price can go as low as $18.

I paid about $100 in total, but that’s because I miscalculated and had to come back a day early to start on a contract in another city…

Comparing it to driving to Toronto ($60 round trip by car)

• About the same length of time to get there (7 hours)
• Same cost of gas as well, but I booked my last ticket at $18!! ONE-WAY! Gas is at least $30
• Kind of sucks worse because you don’t have your own music or space
• …but you don’t have to try and stay awake to drive
• Also cannot bring more than 1 suitcase, 1 carry-on and 1 purse (not great if you were moving stuff, like us)
• Not great for people with motion sickness (me) because it rocks back and forth
• Can’t make any stop or rest anywhere you want to stretch your legs
• Internet is spotty on the bus, but at least you have it for free!!
• Has a table to work on in the lower level (it’s a double-decker) with power outlets

Comparing it to taking ViaRail ($180 round trip by train)

• ViaRail CLAIMS to get you there in 4-5 hours, but they’re 99% always delayed
• Only 2 hours more on the bus, and you’re paying less than half the price for a round trip
• In the end, the bus also drops you right on Bay & Dundas rather than at Union Station
• …which made for a much shorter TTC trip to get to my parents’
• The comfort level is the same — tables, plugs in the vehicle
• …and motion sickness is always a problem because both vehicles rock side to side
• Can’t make a stop or rest anywhere you want to stretch your legs
• The bus doesn’t offer food or snacks to buy, but if you’re organized, you don’t care
• Internet is $10 for 24 hours on the train, and is just as spotty as on the bus
• Both have bathrooms

In conclusion?

If you aren’t picky about amenities like food and drinks available to purchase on board, and don’t mind sitting still for about 3.5 hours (you get a 20 minute break in between halfway through), then go with the Megabus.

It wasn’t bad at all. It was better than I expected, and you even get both seats to yourself in a lot of cases!

I didn’t have to share my row with anyone, and I just listened to my iPod there and back with my Bose headphones to drown out the hum of the bus.

Highly recommended over the train, and on par with the car if you aren’t driving the whole 7 hours.

Thanks for reading! :D

You can contact me here or find me on Twitter via @brokeinthecity.

Or come visit me at my other 2 blogs:

Style on a String and The Everyday Minimalist

© FB @ FabulouslyBroke.com for Fabulously Broke in the City, 2010. | Permalink | 15 comments |

I am on the lookout for natural products with as little ingredients as possible, to replace my current regimen.

So, on the hunt for a day-time moisturizer that will not:

• smell like sunscreen (BF feels ill when he smells it, because it makes him nauseous)
• sit on my skin like a mask
• not feel oily

..and a moisturizer that will:

• absorb into my skin properly, when I put a teaspoonful on my face (as you should)
• smell great, but not too strong
• work well under a primer like Smashbox’s Primer, or possibly Tarte’s Clean Slate
• make my skin feel soft and moisturized

Enter: Korres Wild Rose 24-Hour Moisturizer SPF 6

I picked up a sample at Sephora, and have been experimenting with it.

First, by just applying it without washing my face — Bad idea.

Second, by applying it after washing my face — Much better.

And trying different types of primers over it to see how the product pairs up:

• Korres Vitamin E Cream Primer
• Tarte Clean Slate that feels like a Smashbox Primer, is more natural & is cheaper

What it is formulated WITHOUT:

- Parabens
- Sulfates
- Synthetic Dyes
- Petro-Chemicals
- Phthalates
- GMO
- Triclosan

And their supposedly “active” ingredients:

(Which I don’t care too much about (or believe), I just wanted something more natural and moisturizing but I couldn’t care less if it had that stuff below in it)

-Regenerative Oak Extract: Firms and plumps aging skin, radically boosting collagen and elastin production.
-Quercetin Active: Delivers the most active, well-established polyphenol for maximum antioxidant protection; catalyzes proteasome activity in skin cells, dramatically improving cellular function, and creating more youthful, healthy, elastic skin.
-Mourera Fluviatilis: Constantly regulates the optimum hydration of the cells, maintaining their health and improving their quality.
-Myrtle Active Extract: Enhances intercellular communication, visibly increasing skin density, protecting collagen fibers, and significantly boosting elasticity.

All the Good Things

• It smells heavenly, like a light scent of roses
• It doesn’t make BF gag
• It has SPF 6 in it
• It seems to absorb a teaspoon quite nicely

All the Bad Things

• It isn’t SPF 15, but for its lack of oiliness (which is usually the SPF), I’m compromising
• It costs $35 for 1.4 oz (ouch!)
• You MUST wash your face in the morning before using it, or else face the risk of looking like you dipped your whole face into a bowl of mineral oil

Other than that, highly recommended.

I mean, the SPF is half what it should be, but for everything else I am getting, like the non-gag factor from BF, I am thrilled.

Thanks for reading! :D

You can contact me here or find me on Twitter via @brokeinthecity.

Or come visit me at my other 2 blogs:

Style on a String and The Everyday Minimalist

© FB @ FabulouslyBroke.com for Fabulously Broke in the City, 2010. | Permalink | 6 comments |

BF and I have been (and still are) discussing our future retirement plans.

How did this all come about? Innocently one day, as we were petting unicorns and singing Kum-ba-yah…

Okay. Seriously, he was hyperventilating slightly about making sure we have enough for when we retire, and not only that — to retire early to boot!

This freak out came about one night when he started reading an article on how less than 19% of Canadians have saved over $250,000 for their retirement, which in his world, is his MINIMUM level for retirement savings.

About 30% haven’t saved more than $25,000.

*BF starts hyperventilating with visions of cat food dancing through his head*

And the discussion began.

Factors to consider:

• Not going to retire in North America so cost of living in retirement will be lower
• May actually have family home(s) available in Europe to buy in full or rent at low cost
• If not, will probably stay renters for life — we’re not really interesting in owning homes
• Each of us will fairly contribute 50% to the retirement egg*

*Some people don’t find this fair, and want to base it on income %.

I agree if that works for you, like if one is earning $20k to someone’s $100k.

But we don’t have a high differential in our incomes, it’s all over $100k for each of us if we both manage to score contracts for a good part of the year.

Questions to ask when planning for retirement:

After you calm down your hyperventilating partner…..

1. At what age do you want to retire?
2. How much do you need to retire? (What are your plans?)
3. How long are we planning for as a lifespan?

Canadian Retirement Notes:

TFSA = Tax Free Savings Account (like a ROTH IRA? Someone correct me please.)
No tax break given now, more like a savings account, but you can save up to $5000/year under this plan and not pay any taxes on the profits.

RRSP = Registered Retirement Savings Plan (like a 401k I think)
Given a tax break on your income now, but you will pay the taxes later when you withdraw the dough.

Canadians, read here about the difference between the two.

#1 — AT WHAT AGE DO WE WANT TO RETIRE?

That’s always the #1 question in retirement planning: when do you want to call it a day?

He’d like to retire at around 50, perhaps 55.

Me, I always thought I’d work until 65, and have 40 years to save.

I am not really convinced I will (or want to) retire early, but I think to be on the safe side, I want to be uber conservative and plan for the big picture.

Put on top of that the fact that he’s also 10+ years older than me, and if he retires at 50, I’m going to have to retire at 40 to keep pace!

That is, if I want to, which I am not convinced of at the moment because I feel it’s too young.

Nevertheless, this is a good exercise for both of us to consider.

Still, I never say never.

Early retirement also poses another problem: I cannot withdraw anything from my RRSP until I am 65.

Therefore, if I retire at 50, I need to bank 15 years worth of cash and TFSAs to live, before I can release and draw upon my retirement funds.

#2 — HOW MUCH DO WE NEED TO RETIRE?

I am not taking Canada’s government pension plan into account here, because I am not expecting more than $300 a month from it, and that can just be a bonus to supplement my own personal plan.

So…. I always thought it was 75% of your salary, and in the good ol’ days, I could count on $60,000 a year.

That meant that I was aiming to be able to withdraw and spend at least $45,000 gross.

But then BF made a good point: right now, we kind of already live like pensioners (which we’re enjoying by the way, not doing as punishment or out of an OCD need to save).

We spend about $20,000 – $30,000 a year on net expenses which includes traveling, fun stuff like entertainment, renting a place, and splitting everything in half.

In total, $40,000 – $60,000 together as a couple.

So let’s just assume what we’re spending now is generally what we’d spend when we’re retired, around $20,000 each if we’re traveling a bit and sharing in the expenses 50/50.

BF: But I wanted to upgrade our lifestyle!

Me: Upgrade? By buying a fighter jet? Eating foie gras daily? What are we upgrading on?

BF: Well.. I mean what are we going to do when we’re retired? I wanted to travel more.

Me: I wasn’t planning on sitting around at home staring at each other 24/7! Of course we’re going to travel. How much more did you want to travel?

BF: Like take a month off. It’s going to cost around $4000 just for a trip for a month.

Me: But we’re not spending $4000 every month on a trip in your upgrade scenario right? We already do that on our current budget.

BF: True. Maybe we just stick to our monthly budget and travel more by traveling on the cheap to cities around where we’re retired.

Note: What about having those rug rats?

We are not taking kids or a family into account here, because I am assuming that my future offspring will NOT need to support me and vice versa.

This is just retirement planning for the two of us, not the whole family, and we are going to make more than $30,000 a year each on average, to be able to pay all the extra expenses that will eventually come with having a family.

#3 — HOW LONG DO WE PLAN ON LIVING?

Well, taking statistics into hand, women live longer than men and I am 10+ years younger than BF.

Chances are, I am going to need a lot more money saved than he does.

On the bright side, I also have 10+ extra years to save and plan for this eventuality.

If we retire early, let’s say BF at 60 and me at 50. I should expect to live until 90 based on my current lifestyle and family history.

That means I have to have enough banked for 40 years.

BF is probably going to live unusually long for a man, until at least 80 with his family history and current lifestyle.

He needs to bank 20 years of savings, and I think he’s already got that more than covered from what I gather.

He’s just being a worrywart.

With all that in mind….

HERE ARE MY CALCULATIONS

With my handy dandy retirement calculator in my budgeting sheet, have come up with these numbers:

Notes:

• Rate of Return: 5% — very, VERY conservative
• Years to live: 40 because I am retiring at 50, living until 90 as my best case scenario)
• Years I have to save: 23

I need to save at least $1600/month at least which is $19,200 a year.

Still, if I can save more, I’m going to do it.

But.. DAMN!!

MY ORIGINAL PLAN VERSUS MY NEW PLAN

Originally, I wanted to save about $1000 a month, or $12,000/year, but I was also assuming I had 40 years to save! Not the hypothetical 23 years.

I did not foresee NOT working for all of 2009, so I had no fresh income coming in.

That being said, I still managed to sock aside these amounts from my savings:

$5000 = TFSA 2009
$3553 = RRSP
Total: $8553

For me, it was a pretty good showing, albeit pitiful in comparison to my original goal.

Since I need to start ramping up on the savings just to get to my comfort zone, I need to make a new plan:

$5000 = TFSA 2010
$5200 = Cash & Equivalents*
$9000 = RRSP**

$19,200 to be saved

* Cash: I need this to be my hefty emergency fund as well in case I run into a repeat of 2009 with $0 in income.

** RRSP: I don’t actually know the exact amount as my taxes aren’t filed yet, but ballparking it, I think that’s what I will be allowed next year. Hopefully more.

STEP #1: ALLOCATING THE $20,000 DIVIDENDS

I need to make sure I keep enough cash flow in the business to operate as well as enough cash in my emergency fund.

I can’t put everything into retirement accounts that I cannot touch until I’m 65.

I need large amounts of money saved because I’m a freelancer without a steady cheque.

$5000 = TFSA 2010 in full
$12,000 = Cash & Equivalents saved in full*
$3000 = RRSP

$20,000 to allocate

*I need to replenish a large chunk of what I drained for 2009 in living expenses.

STEP #2: FIGURE OUT WHAT TO DO WITH THE EXCESS

Any money I make above and beyond will go towards:

• Topping off my RRSP (now that I think about it, I think it’s $11,000)
• Putting the rest into cash equivalents for my emergency fund
• Bank the rest and wait for the next fiscal year to top off my plans again

Wash, rinse, repeat x 23 years.

ALTERNATIVELY: CONSIDER PASSIVE INCOME

BF’s strategy is just to save as much as possible and live off the interest.

To get $25,000 in interest, giving at least 5% a year, you need to have half a million banked.

Assuming interest rates are at rock bottom – 3% – you need at least $700,000 banked to get $21,000 in interest a year.

Maybe if I can really bank away lots of cash now into a savings account I could foresee being able to live off part of the interest.

The only thing nagging at me is all that money for no real enjoyable reason. I mean, if I saved half a million, I am selfish enough to want to spend some of it on myself during my retirement years and life, rather than just split it among my kids upon my death.

So, that’s the new FB Retirement Plan that I’ve hashed out so far: to save around $20,000 a year.

Thanks for reading! :D

You can contact me here or find me on Twitter via @brokeinthecity.

Or come visit me at my other 2 blogs:

Style on a String and The Everyday Minimalist

© FB @ FabulouslyBroke.com for Fabulously Broke in the City, 2010. | Permalink | 30 comments |

It seems as though everyone would rather make more money than cut back on expenses.

Just the other day, I heard the following lines coming out of The Idiot:

“We don’t have any money coming in now, but we CAN’T give up cable TV!

What would we do all day in the home, since I’m not working now?”

Uh.. cook instead of buying pre-made, processed, frozen meals?

Go to the library and read?

Play with your kids and teach them how to sing, learn, read and be children?

Go to the park and take a walk?

Rent DVDs for free from the library?

Do all the little chores you’ve been ignoring because you were soooo busy?

It totally sucks to be at home, doing nothing, trying not to spend money, but when money is tight, or you are going into debt with each passing day, you have to make drastic cuts and changes.

But to be fair, he isn’t the only person to say that, nor will he be the last.

I’ve heard it from my brother, my sister, my friends, and just in general online around the blogosphere.

“Nuh uh.

No way.

My nails and my hair are THE most important things about me.

I am NOT giving up my manicures, pedicures or blowouts.”

I have heard that coming out of a girl at a party I was at.

She was willing to go into credit card debt for her nails and hair each week, because they were the definition of who she was.

While I can understand that taking care of yourself, and dressing nicely is important.. I don’t see how it can become so important that it defines who you are.

Or that it requires you to go into debt for it.

“We NEED a maid and gardener twice a week, we just don’t have time to clean, because we’re working so much.

And we eat out all the time because we have to.”

(My brother)

Uh.. if you didn’t have to pay your maid and gardener, and cut back on your lifestyle inflation, you wouldn’t have to work so much.

And no one has to eat out all the time if you’re organized.

You can spend 4 hours cooking one major pot of soup for the whole week, making stock from scratch to do it and it would not be a waste of time.

Why?

Because you can supplement it with freshly cooked chicken or sausage during the week to add to it, and having pasta inside for a heartier meal.

There, slightly altered meals for the whole week, that are different enough to be interesting.

But then again, I am the type of girl that LOVES to eat the same meal over and over again, if I really love it.

“It was $3000 a month for a mortgage and about $2000 more than we wanted to realistically spend, but the baby needed a house and we couldn’t live in that tiny shack.”

“We didn’t want a starter home. We wanted to just skip all that.”

The Idiot and a former co-worker said those choice lines to me.

Well, at $3000 a month, I am not sure you will have anything left for the baby.

Or for emergency savings, or college fund savings.

No one needs a house.

Much less, a baby. A baby doesn’t care if you live in a mansion or a small, but cosy home.

A baby wants food, shelter, love and attention.

Period.

So let’s be clear. We all want a house.

We all want a place to call our own and to do whatever we want, but no one NEEDS one, when there are other options out there, like renting.

And if you have to start with a small house, then do it. You’ll find that you seem to make do, and if you feel like you need to upgrade later, then you can do it.

Later.

Not now, before you’ve even made the money.

“We NEED a break. We work so hard, and we need to treat ourselves. Our debt can wait.”

The Idiot again.

Everyone needs a break.

Everyone works hard.

But it’s up to YOU to set the priority of whether or not you can have a short-term, blow-it-all vacation in Las Vegas for a week, or put that money towards your debt instead.

If you decide to go to Vegas anyway, then own it.

Live with your decision and love it.

Don’t feel guilty about it after, and think: “Gee I should have put that towards debt.”

No one is forcing you to do anything.

But sometimes, I feel like people need to step back, and say “Do I really need, what I think I need?”

You may be surprised at what you can live without, do without and actually need.

You may find that NOT having a membership subscription at Barnes & Noble for discounts, may make you feel less pressured to spend money on books to make up for the cost of the membership (true story, happened to me).

You may also find, that giving up that membership, will force you to get out of the home, go to the library and spend a wonderful day, being able to check out ANY book you desire, to read and peruse.

And if you love it, you can buy it after. Not before.

You may find that no one cares if you wear the same sweater or outfit twice, and you do NOT need to buy a new outfit each month.

You may do a little organizing while you stay at home, trying to save a couple of bucks, and find that cherished necklace behind the dresser you thought was lost forever.

Thanks for reading! :D

You can contact me here or find me on Twitter via @brokeinthecity.

Or come visit me at my other 2 blogs:

Style on a String and The Everyday Minimalist

© FB @ FabulouslyBroke.com for Fabulously Broke in the City, 2010. | Permalink | 29 comments |