In previous posts I have described how I started working at a major bank when my husband had a serious work place accident. This “temporary” job lasted for almost twenty-five years.
I won’t get into the reasons why I left but will continue the story from there.
Starting Our Own Business
Because of his health, my husband had trouble sticking with any type of employment. We decided to go into business for ourselves mainly so he would have some useful occupation but also because we liked the thought of having the freedom to make our own decisions.
Related: How To Prepare Yourself Financially Before You Start A Business
With dreams of future financial independence, we started a little retail store and threw all our efforts into making this work. Unfortunately, the economy was not the greatest and expenses were very high.
We struggled along for three years, using up almost all our savings and making the terrible mistake of financing the business with our many credit cards.
Eventually we gave up and closed the store. We sold as much of the stock as we could at liquidation prices and donated the rest to the charity shops.
With no money and over $100,000 in credit card debt, we sank to our lowest point of despair.
Starting Over Again
I managed to get a line of credit secured by our house to pay off all the credit cards and the lower monthly payments eased our situation somewhat.
I started working a few evenings a week in a big-box retail store and got up at 3 a.m. every morning to deliver newspapers to get some money coming in.
Related: What I Learned From Working Retail
I then took a merchandising position at the store. It was still part-time with no benefits, but more hours – 30 to 35 hours a week.
The pay was way less than I was earning at the bank, but more than I was getting up to then, so I was able to quit my newspaper gig.
The job was a lot different from what I had previously done, but I enjoyed it (most of the time) and got along well with my co-workers.
During this period my husband was convalescing from his second major heart surgery; my mother-in-law passed away and I (as her executor) handled all her affairs; my own parents ended up in the hospital on different occasions necessitating going to BC several times for weeks at a time, which resulted in the need to sell their house and move them into a seniors’ residence; our basement flooded; and our first grandchild was born (a happy occasion at an otherwise stressful time).
After I had worked there for over 6 years, the company was purchased by another business. All the upper management changed and they proceeded to make changes to job descriptions and duties and reduce staff hours.
Related: Switching Careers Midlife – Is It Worth It?
I was not willing to make the required changes, so I quit. (In fact, all but two of their long-term employees left within a three-month period.)
Early Retirement?
So here I was at 57, unemployed and – judging from the total lack of interest in my job searches – pretty much unemployable. So I guess I’m basically retired.
My husband gets disability pay and I receive some blog income, but after more than a year our savings are rapidly depleting. I don’t want to start working at a job that requires me to ask, “Do you want fries with that?” but it may come to that.
My parents want us to move to BC and I have been considering that. The problem is with our house. It’s admittedly too big for the two of us (5 bedrooms, 3 bathrooms) but it needs major updating to get it ready for sale.
We could only pay for the home renovations with our HELOC. This, together with the amount still remaining from our credit card consolidation, would really reduce our equity.
After house closing and moving costs are taken into consideration we could only afford to buy a small condo apartment. What’s wrong with that? It’s not really what I want, but it still bears thinking about.
My only significant asset is my RRSP. I have been considering converting it to a RRIF, but is it too soon? My worries are:
- Will it deplete too fast? (My dad tells me I have at least 30 more good years in me.)
- I earn about $600 a month in dividends, which I have always reinvested and I don’t want to lose this income by selling the shares.
I tend to be impulsive and overly optimistic, but in this case I need to step back and really consider my options carefully. If I make a mistake I won’t be able to bounce back again easily.
Related: Create A Retirement Income Plan
The only thing I know for sure is that I don’t intend to move in with my parents.
This is a guest post from long time reader Gary Daniels.
We retired in 2006; I am 66 and my wife Margaret is 63. We started collecting CPP at 60 and of course OAS at 65.
We’re now in our 7th year of retirement and we are very happy (although it took us three years to get used to not having a regular paycheque!)
We are also debt free.
Related: 5 Misconceptions About Retirement Planning
We’ve made plenty of mistakes; the worst of which is being over budget each and every year due to either an unrealistic budget or too much travelling!
Make A Plan
Preparing for retirement was partially a guessing game. We knew three things:
- We wanted to travel — we love cruising and camping;
- We wanted to escape the snow and cold in the winter months;
- And most important we wanted to be part of our grandchildren’s lives.
All three required savings, as being self-employed we had no pension plan beyond CPP and OAS.
Our only option was RRSP’s.
Today we have TFSA’s, which in my opinion are as or more important than RRSP’s.
Related: Using Tax Free Savings Accounts In Retirement
If we need a lump sum we’ll either cash in RRSP’s, which have tax ramifications, or use our non-registered savings.
With TFSA’s you can build up a nest egg of tax free savings even when you’re withdrawing from other sources.
My wife always calls it the “better than diet”. Instead of eating two butter tarts, just eat one.
Making The Budget Work
Our first decision was to move closer to our grandchildren; into a retirement community, not a high-priced condo.
Our trips are researched constantly for the best deal, and the purchase of a fifth-wheel is certainly much more frugal than buying a house in Arizona.
Related: Are Road Trips Really Cheaper Than Flying?
When we retired in 2006, we received monthly income from the company that bought our business. That ended in late 2008 so our RRSP’s were left untouched until then.
It was a stroke of luck that 80% of our RRSP’s were in GIC’s and the balance in monthly income funds. The markets tanked and we were basically left unscathed.
We originally planned to keep two to three years ahead in GIC’s, but we need more income from our investments than GIC’s can provide. Remember the years of 10 – 15% savings interest rates? Oh, to have those rates today we would be on easy street!
But interest rates got so low that we decided to put half our portfolio in monthly income funds and half in dividend paying stocks, which we started buying in 2010 after reading Boomer & Echo.
Our last GIC will be used up this year. After that we’ll live off our CPP, OAS, monthly income funds and dividends.
We hope that if the markets go south that not every company would cease paying dividends – which they didn’t in 2008-2009. It’s a bit of a gamble, but life is a gamble.
Related: Can You Succeed With An All-GIC Portfolio?
Thankfully, having no debt affords us the ability to TRY to live within our means.
Travelling In Retirement
We love to travel. Each year we find a trip we would love to take, but of course we’d never budget enough so our savings take a hit.
We certainly won’t be the richest people in the graveyard. Our two kids have done well so an inheritance is not expected; it would just be a bonus.
Travel while you can because you don’t know what’s around the corner. As you get older, health insurance becomes very expensive and if your health deteriorates then look out!
Related: Drug Coverage For Seniors
We are in Myrtle Beach, SC right now in our ‘tin can’ (fifth-wheel) looking at the ocean. It’s economical, and best of all – no snow!
In-er-tia: a property of matter where it remains at rest or in uniform motion unless otherwise acted upon; a tendency to keep things as they are.
Financial Inertia: It’s easy to do nothing
Despite all the advice to think ahead, set goals, work at achieving your goals, and make a life of your choosing, many people opt to stick with the status quo and let life just propel them along, often complaining all the way. It’s a lot easier just to do nothing.
Marketers are well aware of this tendency.
- The cable company that offers you free programming for three months.
- The credit card that offers you 6 months free balance protection insurance.
They could easily delete it at the end of the period. But, no! They put the onus on you (yes, you) to call them to cancel.
How many of us are paying for services we neither want nor need all because we didn’t bother to make a phone call?
That’s financial inertia in action (or non-action if you will).
Inertia is not the same as procrastination. A procrastinator will eventually get around to doing the required task – mostly at the last minute.
These are the people who run to the bank on March 1st to make their RRSP contribution, or work the whole previous night the day their project/proposal/term paper is due.
For a procrastinator, tomorrow is often the busiest day of the year.
Take control with autopilot
The tax department knows about our inclination towards financial inertia so they set up automatic tax deductions from our paychecks.
Related: 25 Tips For Filing Your Own Tax Return
Banks followed with loan and mortgage payments whisked out of our accounts before we could get to the money first.
With the wonders of technology it’s easy to handle most of our financial affairs with systems that can keep us on the right course without having to be reminded each month.
Once you overcome your own inertia, it only takes a one-time effort to:
- Complete the enrollment forms
- Choose a contribution amount for your savings
- Decide which investments to hold and in what allocation
- Select a beneficiary
- Set up your bills for automatic payments
It makes life so much easier. By doing nothing you’re doing the right thing. But are you? It can become too easy to let it slide.
When my utility bills and statements came in the mail, I used to thoroughly scrutinize them. Now that I have almost everything set them up automatically with e-services, I’m embarrassed to say that I very rarely even look at a statement. If a bill payment amount seems right, it gets paid!
Once you’ve taken the initiative to put your automatic programs in place you need to overcome the same inertia to occasionally monitor your plans.
Automatic investing
Investing is one area that can easily be forgotten about. Initially, sticking with regular automatic purchases takes the emotion out of investing and reduces the temptation to make hasty changes when the markets have a bit of a drop.
Related: Market Corrections – Buy, Sell or Ignore?
When Sarah started university, she worked at a part-time job to help cover her expenses. After reading David Chilton’s The Wealth Barber she decided to contribute $25 per bi-weekly pay to a balanced mutual fund at her bank.
Fifteen years later she’s working at a well paying job and still enrolled in her $25 savings plan. Yes, she now has over $10,000 in savings that she may not otherwise have – but inertia kept her from increasing her contribution even though she had the financial means.
Sarah should re-read David’s book, or, better yet, take the time to schedule a review of her financial situation and set up a more appropriate plan.
By selecting appropriate investments and allocating your portfolio just one time, and then not making any changes for years, or even decades, you are making a big mistake.
“Buy and hold” is a popular investment strategy but it doesn’t mean, “buy and forget.”
Related: Why Your Financial Plan Sucks
You still need to take the time to re-balance, re-evaluate and re-allocate as your situation changes. And what if you made bad choices in the first place?
Many of us don’t want to do the boring operational follow through to keep up with it. We have good intentions to do it ourselves but usually wind up doing nothing because it’s too complicated and we don’t have time.
We either end up spending a lot of time worrying instead of managing, or take a look at our portfolio one day in the future and discover a financial mess.
Others opt to have it all done for them by financial professionals, and pay a hefty fee for the privilege.
In what areas is inertia a problem in your life?