About Mr. Cheap
I’m a normal early-30-something computer nerd who earns a good living but constantly feels like I need to figure out this whole “investing thing”. My parents were rabid savers (I love ‘em but they both act like depression era survivors – and I’ve inherited the same behaviour from them). I’ve always been good at living below my means and regularly saving, but have been overly conservative (mostly GICs and Canada Savings Bonds). I invested a bunch of cash right before the Tech boom ended, and promptly lost $15K (75% of what I’d invested).
Feel free to e-mail me at cheapcanuck@gmail.com.
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I guess I’m a little slow, but I have just discovered your blog, and I like it. I’m going to add it to my blogroll on my site, as you’ve been a much appreciated poster there.
Thanks,
MG
When do you plan on retiring?
How much money do you require to get there?
I’m still in flux a little about the specifics, but its looking like I can live comfortably on $1300 / month, pre-tax. Given the recent income I’ve been making, potential expected returns and inflation I’m currently estimating that I could retire in 3 years (at a networth of around $300,000 I think). At that point my passive income (from dividends and rental properties) should grow enough each month to cover my cost-of-living, keep up with inflation, and grow my savings (as a buffer for anything unexpected in the future).
Obviously after I turn 65, there’d be a bit more cash to play with (if the old-age pension is still around at that point).
If my plans don’t work out (if I see a problem before I’m 65), I’ll go back to work and start saving again
.
$1300/month? How is that possible?
Well, my fixed costs are ~$700. I don’t own a car (I have a monthly subway pass and rent a car the odd time I go out of town), I don’t buy a lot of consumer crap, and I’ve recently cut my food spending drastically. $600 / month for food + entertainment + extras goes pretty far…
That should be $1300 / month POST-TAX (although, $15,600 isn’t taxed too heavily, especially if a good part of it is dividends)
What is your current savings rate?
(percentage of net income)
If you don’t mind me asking.
I definitely don’t mind you asking (I’m a pretty open guy, ESPECIALLY when I’m blogging semi-anonymously).
Right now I’m saving about 83% of my income (my networth increased on average $6,317.50 over the last two months, so that would equate to a gross of about $7,617.50). I’ll have a better estimate of my monthly net savings (and savings rate) on July 1st. I’ve been “tightening my belt” in terms of food spending, so hopefully my networth increase will be higher then $6,317.50 for June).
All this is pre-tax. I’m not 100% sure if I’ve got a handle on my tax implications for this year. I’m planning to take the H&R Block course this fall, max out my RRSP, and make sure I have some cash on hand in April in case the tax bill is higher then expected.
I’ve regularly gone through periods where I intentionally don’t work, so I’m used to living pretty cheap. Right now I’m working a full time contract at a pretty decent rate, which is why I’m able to save so much.
In the past I’ve saved the money then spent it during the lean periods. I’m leaning towards trying to set-up something sustainable (get my networth and passive income up to the point where if I’m living cheap I can do so off of my interest, not just off of my savings).
How does this all compare with you guys?
I wouldn’t mind seeing your expenses. You really are living quite cheaply…hence the name I guess
Mike
That’s what my girlfriend says too
. She’s happy you guys are all shocked at how little I’m spending (she’s probably hoping it’ll loosen up my purse strings 
).
I’m spending about $14 / day ($420 / month) on food (groceries and eating out). The other $180 is misc. expenses (I just bought a new pair of work shoes for $40, I buy the odd book, rent a movie, etc.).
I don’t smoke, and I drink very little and very occasionally. In the past a lot of my money has gone to traveling (which the $1300 / month doesn’t include). I’m going down to NY with my girlfriend at the end of the month, so that may “blow the budget” a little.
“Over a week, my variable spending was $396.26, which works out to a total monthly “cost of living” of about $2,348.26.”
This is more than $1300.
You lost 70lbs? Holy crap that’s pretty good.
That is impressive. We are saving 34% of net income currently. We do have a mortgage and 2 car payments though.
4P: That was before I cut back on my food spending (yes, it was more then $1300 before). Yeah, I’ve kept it off for quite a while too (1.5 years now).
MG: I have a mortgage (for my income property), no car payments though.
4P: That time period was also when I bought my plane ticket to NY (which obviously gave me a higher estimate then recently without buying any plane tickets
.
The $1300 / month would be without traveling and with my new food spending plan.
Back of the napkin – We spend about $3,500 per month.
Hmm, so I guess you’re saving a little bit more than me per month ~$6,800. My girlfriend and I keep our finances separate so I wouldn’t really even be able to guess what our combined savings are (I’m FAR, FAR, FAR more of a saver then her though).
Our average spending so far this year is $4750 per month.
On what, I’m really not sure.
Mike
Hi, I came across your blog while searching for blogs that write about what also write about. I work within developing nation with an annual income of $16,120. I am impressed by your savings habit. Out of my annual income, I save an annual sum of $12,000 while using the remaining as tithes, vacations and living expenses. Do you think I’m on the right track. Currently, my net worth is $39,695. What do you think?
Good for you January!
I’m a big believer in its not what you make, but the difference between what you make and what you spend that’s important.
Mr.C.
Are you planning on reading Derek Foster’s new book, The Lazy Investor…it just might be right up your early retirement alley….
MG: I’ll defintiely read it. Part of me worries that Derek’s approach is “too easy to work” (do this, then this, then this and retire as young as you want!).
On the flip side, “Stop Working” is probably what got me thinking and reading about the stock market again (before that it had always seemed like the whole point was betting on which companies would go up or down, the dividend approach to buying reliable income streams was far more attractive to me).
Hi Mr. Cheap,
My fiancee is currently looking at renting out her condo after moving in with me. I was wondering if you could give an overview on the tax situation for owning a rental property, doing renovations on it, converting to a rental property from a residence, etc.
Cheers
Hope you don’t mind my interjecting…
As far as turning a residence into a rental property, be sure to get an appraisal. When it comes time to sell, your appreciation should be based on the date you converted it to a rental. This will be especially important if the condo has appreciated greatly since she purchased it.
yaletownguy: Yes, listen to telly
Are you in the US or Canada (that will affect the rules)?
Actually, the rules for rental properties aren’t very different between the two countries. I think the only difference is the way Capital Cost Allowance (depreciation) is calculated.
As I said, listen to Telly! So telly, any tips on where I should go to school or who I should marry?
Telly, is there any way when you’ve had a principal residence to rent it out for a while, then make it your primary residence again and avoid paying capital gains (or would you still be responsible for paying appreciation while it was an investment property?) I’d be willing to move into a property for a couple of years if I could avoid paying taxes on the capital gains…
Mr. C – I think I’ve seen that scenario in some “ask the experts” articles – I’m pretty sure you are still on the hook for the cap gains accrued while you were renting it out. Otherwise, someone could live in a house for a year, rent it out for 40 years and then move back in for a year and avoid any cap gains.
Mike
Yeah, that’s the trick I wanted to pull… Those guys at Revenue Canada are always one step ahead (curse their oily hides!)
Mr C, I think you should go to Windsor and I can set you up with one of my lovely single friends.
Mike’s right, CRA doesn’t like that trick. The key (though likely impossible to make it work) would be to live in the house when homes were appreciating substantiallly and then rent when prices stabilized (or are falling).
Telly: I am tempted to move to Windsor for the killer deals that seem to be had on multiplexes there right now. If I don’t get in to a PhD program you might see me relocating (and starting a Windsor based property management company)…
Too bad we didn’t cyer-meet earlier, my dad just sold his 23 unit apartment building!
I doubt I could have put together a competitive offer for it…
You and your husband should have offered to manage it for him! Apparently 10% of the gross rent + expenses is the going rate…
What made him decide to sell?
Could you expand a little bit about borrowing to buy equities and making the interest tax deductible: does it have to be a margin form my online broker or it can be a simple line of credit, or investment loan from a bank(didn’t hear these being advertised at all)?
Great site! I enjoy reading it and nice that you are a Canadian.
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