The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.
Next in the series is FMF reader BW. He answered my questions (in red below) as follows:
Please tell us a bit about yourself.
I’m 31 years old, male with a trade certificate in Automotive Service Technology living in Calgary, Alberta, Canada. I work in Supply Chain at an oil and gas producer that I have been with for 2 years and have been in the same field for 8 years. I have been married for 5 months but we have been together for 4 years before we took the plunge.
Funny how we think our lives will turn out, mine like all stories started with a girl. We fell in love but my hours at work at a car dealer were not good, the pay was horrible and it was hurting our relationship. I found a job pushing paper around at an engineering company not even knowing what it did. I started from the bottom and worked harder than anyone there, moving my way up until an opportunity came up for me to work in the middle east. Worked there on site for 2 years and it was the best thing that ever happened to me. Hard to be away from family and friends for that long but it allowed me to explore the world. Worked at a couple more sites here in North America till I settled back in Calgary with a desk job. My wife works here as a Nurse at a local children’s hospital.
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
- Income(Me) – $125,000 (Base)
- Bonus (Me) – $20,000(Min)
- Stock (Me) – $50,000 (Given every year then vested every 3 years)
- RRSPs (Me) – $15,000 (12% of base)
- Income(Wife) – $80,000
Fixed Expenses are $3,278 a month, and our variables fluctuate a lot month to month (usually dinners out)
- House – $420,000
- Cars – $35,000 (combined)
- Cash – $1,500
- RRSP – $65,000
- TFSA – $15,000
- Taxable Investments – $5,000
- Private Equity – $250,000
- Wife's Pension – $20,000
- Mortgage(3.5%) - $265,000
- Car Loan(4%) - $17,000
- Student Loan(Wife) - $2,000
What are the current financial issues you're facing (saving, paying off debt, etc.)?
Both of us aren’t really great savers (wife had CC debt and larger student loans when we met) and neither of us can really stick well to a budget so how we make it work is I invest 22% of my base salary into investments(plus the 12% I get from my company) for 34%. We also increase our mortgage payment every week to pay that off faster. We learn to only spend what we have left. We don't spend alot of stuff but we do enjoy vacations and that is where a large amount of our discreasionary income goes. Don’t usually like to keep a lot of cash around as I like to be fully invested at all time. Have been thinking about this as of late to maybe to accumulate cash and buy on more opportunities rather than every 2 weeks with my pay and bonuses. My bonus for me are started to pay off for me this year as what I got when I started is vesting now so my bonuses are going to grow considerably. We don’t count them into our monthly income so they get invested as I get them.
The small amount of student loans (at 1%) isn’t worth it to pay off in my opinion and my wife can write off part of the interest anyway. The Car loan is through our bank at a really low percentage as well so in our opinion its not work paying off early as we feel there are better opportunities elsewhere.
We are also looking to start a family in the near future so my wife will be staying at home and the plan is to have her stay at home permanently just working some casual shifts as they come up. Daycare is ungodly expensive here in Calgary and for the cost we feel its better for my wife to stay at home and raise them ourselves. We know we are lucky enough to be able to support us on 1 income.
Our plan is to really ramp up our savings and hope to get to 50% + in the next few years. Our house is really inexpensive for Calgary, still hard for me to understand how starter homes here are 400k+ and the mortgage is quite low. We are looking for a bigger place in the next 5 years or so.
What are your plans for the future (retire early, build your career, etc.)?
Plans are to get to a point where we don’t have work anymore. Right now I work quite a lot and have built up my career faster than most people I know my age. All of my staff are older than me and have been since I started working. Ideally I would like to get to 250k a year from my job to replace my wifes income so she doesn’t have to work at all.
When we have a good base of assets I have some colleagues that I might start a small EPC company to concentrate on small oil and gas projects. The idea of owning and growing something of my own is very appealing to me. The hours will be long sometimes which might be a turnoff when we do have kids.
I have made some investments in private equity companies through connections I have made. They are for sophisticated investors and are very high risk/high growth opportunities. When these start to pay off I have a colleague that would be interested in starting some angel investments here in Alberta. Would be great to give people the same opportunities to succeed as I have gotten.
Also very interested on working with some charities to help with fundraising. Alberta is very polarized, people make a lot of money or not very much. Very hard to live here on minimum wage jobs with a high cost of living. Would love to help younger people get into a career with training that they normally wouldn’t be able to afford and show them opportunities to change their lives.
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
I suffered a huge loss trusting someone I shouldn’t have. We moved in together way to early and I didn’t do enough to find out about her background before we bought a house together. Even though we were never married from what she stole from me and legal fees I have lost several hundred thousand dollars(which is why my savings/investments are way behind where they should be for my income). Even with a signed contract of what she will pay me I have not and will not see a dime.
Lesson: Don’t just trust everybody, there are very few people that have your best interest at heart.
Save more than what you think you need. Experts say 10%, it should be way higher. Having more money builds confidence, you will do better in your career and your life if you don’t have to worry about money. When you are not worried about losing you job because of money, it allows you to take bigger risks which get you ahead faster.
Lesson: Save more than you think, way more.
Get an education that will pay you. My wife has 2 degrees, she is incredibly smart. The reason she has 2 degrees is because her first degree didn’t do anything for her. Couldn’t get her a job, she went back to get her nursing degree when she realized that she needs a paycheck. Don’t go to college or university just for the sake of going. Find someone with the lifestyle you want and find out what they did to get there. Was it a trade, advanced degree, connections? I have found that the most successful people I know are always willing to help others who ask for it. So ask questions to them, find a mentor. I went to trade school to be a mechanic, dreaming of working on muscle cars and exotics. After a few years of dealing with oil leaks on minivans and every one I worked with over 40 telling me to get out before your body stops working as well I started working elsewhere. Although I am not in the trade right now it has helped me immensely. Trades and apprenticeship are often overlooked but there is always work somewhere for them and the shortage of labor is astounding. Go where the work is.
Lesson: Get an education that will pay off.
Networking is the key to every opportunity that I have ever had. The power of knowing people is everything in this world, they can help your problems and you can help with yours. Build relationships with everyone because you never know who they will end up being to you. I remember someone telling me early on, if you help enough people get what they want, then you can get what you want. Sometimes my wife will ask me why I am helping some people get a job or with a project and I know its because the world gives back what you put in. There will be a time when you need help, the world is full of crisis’s, financial, health personal. I have a big network that I know I can call on if I do need help and now some come with opportunities. I have learned that the rich get richer because of who they know, if you get to know rich people the world opens up for you then you can pass that on to others.
Lesson: Help everyone you can and build a network of successful people. Get a Mentor.
You can have anything you want, just not everything. Find what you want and go after it, when you concentrate on something its amazing how the world comes together to make that happen.