It wasn’t that long ago I was buried in debt and living beyond my means. Back then, financial planning was about when my next paycheque would arrive, what bills were due next, and how much I had left to spend at the bar. I remember checking my bank balance after midnight on paydays just to see if I could order another drink or pick-up a late night pizza.
My long-term financial plan was to daydream of a big raise or promotion at my next annual review, or simply bide my time until tax season where I would hopefully earn a juicy refund and pay off my credit card debt. I couldn’t see further ahead than a calendar year at a time.
When I finally had my financial awakening I tracked my spending for the first time, cut expenses to the bone, and took out a consolidation loan to pay off my high-interest credit cards. The loan came with a three-year term, so that became my long-term vision: Make these payments on time, control my spending, don’t take on any new debt, and when the loan is paid off in three years I’ll free-up that monthly payment and direct it towards savings.
And it worked. I made those $800+ payments every month for three years and got out of that debt spiral. I also earned a promotion that came with a decent salary increase. Suddenly, money wasn’t so tight anymore and I could start looking past my next paycheque and towards some long-term savings goals.
Finally, a Financial Plan
My employer had a group RRSP program where it would match 50 percent of contributions, up to 2 percent of my salary. My boss, a great mentor of mine who taught me a lot about personal finance and investing, encouraged me to contribute. I was earning $50,000 back then and so when I put $2,000 into my RRSP, my employer kicked-in $1,000. Add a couple of bonuses over the years and it wasn’t long before I had saved $25,000. I had a retirement portfolio!
Then life threw a curveball. My wife was diagnosed with Multiple Sclerosis and we had to sit down and really map out our priorities. That meant big changes in our lives, starting with the decision to have children right away and that my wife would stay home full-time. My career was also at a crossroads and I needed to earn more money to make this all work.
All of this prompted a career change to the public sector. I negotiated a substantial raise – a $10,000 per year increase from my then $65,000 annual salary – and the job came with other benefits such as more vacation time and less travel. The elusive work-life balance had been unlocked!
I started getting seriously obsessed with my personal finances and realized that financial freedom, and perhaps even early retirement, was actually achievable. It was an incredible feeling, especially given the sorry state of my finances just five years earlier.
The more I read about managing money, saving, and investing, the more I felt I had to share my story and help others get their finances in order. Boomer & Echo was born.
Writing a blog has been a great way to map out my goals and hold myself accountable to achieving them. While my long-term financial goals have changed over the years (remember, I wanted to build a portfolio that spit-out $90,000 per year in dividends, or retire by 40!), it’s the process that has really mattered most.
A Financial Compass To Guide The Way
Retirement, or financial freedom, whatever you want to call it, is just a signpost to stake into the ground miles down the road. Your financial plan is a compass or map to help you get there. The exact details of goals made for the distant future are less important than the positive habits developed throughout the journey.
Imagine you’re in Vancouver and you want to get to Halifax. It doesn’t matter whether you take an airplane, drive a car, or get there by pogo stick; the point is you need to get to Halifax. How long it takes will be measured by how much you earn, save, and spend over the years, plus how many detours you take along the way.
At first, you won’t be able to see your destination. You have to rely on your compass to guide the way. Years, or decades later, as your final destination appears on the horizon, you can adjust course to help you arrive on time or get their sooner. Financially speaking, this could mean ramping up savings in the final years leading up to retirement, matching your mortgage pay-off date to your retirement date, or extending your career by a few years to increase your pension benefits.
I prematurely planned for financial freedom by age 40. Then life gets in the way. Kids come along, they’re more expensive than you realize, and your goals get delayed. But what didn’t change was my commitment to the process. I kept saving, paying down debt, trying to control my spending, and looking for ways to earn more. I knew my compass wouldn’t let me down.
Whether I actually reach financial freedom by December 31st, 2024 is less relevant to me than the path I’ve taken to get there.
It’s amazing to see how far I’ve come with my finances in the last 10-15 years. Thankfully, I’m no longer the spendthrift I was in my twenties, living paycheque-to-paycheque and spending beyond my means. Now, financial freedom is on the horizon thanks to my financial plan and the good habits I’ve built over time.