Starting out at 25

[brad]

Another good resource is Your Money: The Missing Manual, by J.D. Roth, who runs the Get Rich Slowly blog. He has some good advice on goal-setting and realistic expectations. This is part of the Missing Manual series, published by O'Reilly, which originally focused only on computer software but has now branched out into a variety of topics. The book is written for US-based readers so some of the stuff won't apply to us in Canada, but the basic principles of money management and goal-setting are universal.

[MoneyGal]

Cool! I love the idea of "missing manuals." I'm going to check that book out.

[OptsyEagle]

and don't forget that it is not the goal that is as important as the journey. Since I have gotten that load of malarky out, I will explain it better.

If you can retire on a million dollars and that will give you your financial freedom, then that perhaps should be your goal. But you need to understand that everytime your net worth increases, your options have improved. You see when you have absolutely nothing but a wagon load of debts and your boss comes in to your office to wreck your day (as is a very frequent event for all of the working class), you don't have many choices but to assume the bent over position and prepare to receive. Now if you have lets say, $100,000 in savings, you may still need to work, but you don't necessarily have to work this week and certainly don't have to work for a moron. You see where I am going with this.

Every dollar you accumulate or dollar of debt you reduce, between now and the time you reach your ultimate goal, still gives you more financial flexibility and freedom every day, even while you are still working towards your goals.

This feeling will feed on itself. Good luck to you.

[the-royal-mail]

and don't forget that it is not the goal that is as important as the journey. Since I have gotten that load of malarky out, I will explain it better.

If you can retire on a million dollars and that will give you your financial freedom, then that perhaps should be your goal. But you need to understand that everytime your net worth increases, your options have improved. You see when you have absolutely nothing but a wagon load of debts and your boss comes in to your office to wreck your day (as is a very frequent event for all of the working class), you don't have many choices but to assume the bent over position and prepare to receive. Now if you have lets say, $100,000 in savings, you may still need to work, but you don't necessarily have to work this week and certainly don't have to work for a moron. You see where I am going with this.

Every dollar you accumulate or dollar of debt you reduce, between now and the time you reach your ultimate goal, still gives you more financial flexibility and freedom every day, even while you are still working towards your goals.

This feeling will feed on itself. Good luck to you.

BEAUTIFULLY SAID.

I should print and frame this.

[Berubeland]

Starting where you are... you can achieve your goal by saving about $4000 per month. That does not include any interest.

According to TD's retirement calculator you need to contribute about 2800 per month to achieve a $50,000 per year income at 5% interest.

If this is your goal this is what you have to do to make it happen.

You could also pursue other ways of making income, to increase your net worth. For instance you could save like mad and then buy a 4 plex and live in it for a while. If you buy properly you may be able to live for free and make a small cash flow from your property. In 25 years your building could be paid off and rents generated would be income for you.

It is possible and people do it, so don't listen to all these people saying it's not possible. It's not easy but it is possible.

I can say this from my own experience.... find a mate with similar goals and who has a demonstrated ability to save. Working at cross purposes makes it much more difficult.

[Cal]

Tough to guess if it is possible for you, as no annual income/expenses are stated.

As mentioned lots of things can happen in life that can alter your life plan. But you are forming a plan. A great first step.

Best advice I have seen on here yet came from Berubeland 'find a mate with similar goals'. Simply stated.

Stay focused on your goals, reevaluate them periodically, and it will happen. Might be 30, 35, 40....but it will happen.

[ashby corner]

my first recommendation: get away from the east coast.

I grew up (if you can call it that) in NS. Great place to grow up, but I had no idea about the world that was out there---the opportunities are endless. Within 2 years of living in Ontario, I doubled by Halifax salary; within 8 years, I had triped my Halifax salary.

People will say 'oh, but the cost of living in Ontario is higher'. That might be true in Toronto, but it's not province wide.

Move away, and budget for one trip back per year (for Lobster), and THAT will help you achieve your goals that much faster!

[72camaross]

Wow I has to multi-quote a lot here! Here we go.

Even though it may sound improbable, if you want it bad enough, it can happen. Although it's family net worth, we started at age 23 with a negative net worth, and now at 30 with almost half million. We expect to reach $1 million in net worth (or more) by 35.

FT I have read a lot of your blog, I know you're somewhere on the east coast and you're on a journey I would like to start! If I could do half of what you've done I'd be happy! Thanks

For the average person of your profile, I think you can aim for the following:

1. pay off your student and car loans
2. save a rainy day fund of about $30K in cash and use it ONLY for life emergencies
3. max out your TFSA (you are allowed $5K per year starting with 2009)
4. max out your RRSP contribution limit (the amount shows on your revenue canada notice of assessement)
5. down payment of 20% on a house
6. stop racking up consumer debt effective immediately
7. forget about retiring at 45. That's not realistic.
8. move away from home now and let your life begin. get an apartment, call professional movers (don't mooch off your friends for this) and let the games begin.

In the next 10-20 years, you will have girlfriend/wife/marriage/kids/divorce, job loss, accidents, disability and broken down cars (which need replacing) all as possible obstacles to what you want to achieve.

I would love to pay off my student loans haha. Luckily I've always paid cash for cars and can fix them at home. I am looking into the TFSA and I contribute a little to RRSPs but not close to enough so this will definitly be something I will work on. I am on a good road to cut consumer debt, I've been working on it for a bit. Cutting costs on anything and everything. Retirement dates will come, I could retire with the company I'm with on a pension and hopefully whatever I do on the side will compliment it. Thanks for all the great points! Sometimes it's a lot for me to take in and I miss some things. Why can't I just marry a millionaire?

The first thing you need to do is get a handle on your most important asset.... your 'career asset'. Determine a realistic salary that you could see yourself earning and, combined with a retirement age and a reasonable investment rate (commensurate with your risk profile). Then run the numbers, and see where your lifestyle level solves. This setting a dollar amount ($1M at age 55, say) drives me nuts. The important metric is lifestyle... that constant level of beer&grocery consumption you can enjoy pre&post retirement such that it takes you out to some ripe old age.

If you have a university degree in a 'power profession'... that $1M at age 55 is more realistic a goal than if you were a store clerk. The store clerk can certainly reach the $1M, but at what cost?.... living under a bridge and dumpster diving, saving his entire paycheck, could allow him to reach his $1M goal, but at what cost? These 'million dollars by 55' rules of thumb are silly... start with the basics.... what you have currently saved, what your paycheck expectation -over time- is. Start there, determine a reasonable lifestyle and the schedule/level of investing which will allow you to achieve that lifestyle.... forget the "$x million by age yy" thing, it is just not a realistic approach.

I don't mean to have 1M in cash or in a bank account. I just mean in a net worth setting, so with my house/houses, camp, cars etc. Starting with the basics is definitly the best for me since all of it is new. I knew I should have taken business in University but that's another story. Thanks for the input.

Your Money Milestones is a great, accessible book. Are you a Stock or a Bond?, Moshe's previous popular finance book, is also VERY worthwhile. I work for the company that created the calculators I linked to so, if you have questions about any of them, fire away.

Now, coincident with what Steve41 just posted, I'm going to add another perspective. You say you are in computer science, and you don't want to work longer than the next 20 years - fully 20 years before the "normal" retirement age.

This tells me you aren't crazy about the work you do. Right?

So one solution would be to invest more in your human capital, so you can find ways to monetize it that are "worth it" for you. Right now, you are planning on abandoning your mine while there's still lots of gold in it. But one key to happiness in life is to find work you truly enjoy.

I mean, that solution isn't for everybody. But I have never understood the undercurrent of "I need to get out as fast as possible from this job." Blerg! Better to find a job that actually fulfills what you are up to in life.

Thanks for the calculators and book links. How do I invest in my human capital? I'm not sure I know what you mean. I tried the calculator it says I'm already worth 1.2M haha so that makes me happy if nothing else. I am not crazy about the work I do, so getting my career straightened out is a big thing for me too. I can do what I do but I don't wake up and want to go to work. That's what I would love to find. I shouldn't complain about my job because it is great, great benefits, decent wages and pension and I'm pretty good at it! I am looking at part-time jobs to maybe see if there is other fields I would enjoy. Again, thanks for the help, looks like more books for me to read! Can't wait. I'd like to figure out how I can use all those calculators to help plan my future and see how the numbers work.

Another good resource is Your Money: The Missing Manual, by J.D. Roth, who runs the Get Rich Slowly blog. He has some good advice on goal-setting and realistic expectations. This is part of the Missing Manual series, published by O'Reilly, which originally focused only on computer software but has now branched out into a variety of topics. The book is written for US-based readers so some of the stuff won't apply to us in Canada, but the basic principles of money management and goal-setting are universal.

Thanks brad! I think that'd be a good book to start with that way I can set up a plan with goals that are not dreamy. O'Reilly..takes me back 2 years to university haha.

and don't forget that it is not the goal that is as important as the journey. Since I have gotten that load of malarky out, I will explain it better.

If you can retire on a million dollars and that will give you your financial freedom, then that perhaps should be your goal. But you need to understand that everytime your net worth increases, your options have improved. You see when you have absolutely nothing but a wagon load of debts and your boss comes in to your office to wreck your day (as is a very frequent event for all of the working class), you don't have many choices but to assume the bent over position and prepare to receive. Now if you have lets say, $100,000 in savings, you may still need to work, but you don't necessarily have to work this week and certainly don't have to work for a moron. You see where I am going with this.

Every dollar you accumulate or dollar of debt you reduce, between now and the time you reach your ultimate goal, still gives you more financial flexibility and freedom every day, even while you are still working towards your goals.

This feeling will feed on itself. Good luck to you.

It is the journey I'm excited for, I know it's going to be a roller-coaster. I get what you mean with the 1M vs 100,000$ in savings. I would be happy being fired knowing I could take my time to find another job I like instead of feeling pressured to get something right away.

[72camaross]

Starting where you are... you can achieve your goal by saving about $4000 per month. That does not include any interest.

According to TD's retirement calculator you need to contribute about 2800 per month to achieve a $50,000 per year income at 5% interest.

If this is your goal this is what you have to do to make it happen.

You could also pursue other ways of making income, to increase your net worth. For instance you could save like mad and then buy a 4 plex and live in it for a while. If you buy properly you may be able to live for free and make a small cash flow from your property. In 25 years your building could be paid off and rents generated would be income for you.

It is possible and people do it, so don't listen to all these people saying it's not possible. It's not easy but it is possible.

I can say this from my own experience.... find a mate with similar goals and who has a demonstrated ability to save. Working at cross purposes makes it much more difficult.

Berubeland, you are very good with numbers I think, I enjoy reading your posts on the property managment side of life. I am looking at increasing my net worth by living in a triplex or 4plex currently actually. One in my town is for sale, needs some work that I could do and I'm still learning on how to crunch the numbers on it to make sure it is somewhat close to positive cash flow. Finding a 'mate' with similar goals is something I never would of thought of, I guess there will be a talk coming up. haha Thanks!

Tough to guess if it is possible for you, as no annual income/expenses are stated.

As mentioned lots of things can happen in life that can alter your life plan. But you are forming a plan. A great first step.

Best advice I have seen on here yet came from Berubeland 'find a mate with similar goals'. Simply stated.

Stay focused on your goals, reevaluate them periodically, and it will happen. Might be 30, 35, 40....but it will happen.

I would like to form a pretty solid plan that I have in writing so I can see it, read it and remind myself of it daily.
Right now I'm at home so my expenses are about 1100$/month. That's all my loans and credit cards, insurance, etc. I gross about 67k$/year. Thanks Cal!

I hope I didn't miss any other great posts! Thanks guys! I now have atleast a better starting point with some of these books I can read to set goals I actually can achieve.
JD

[72camaross]

my first recommendation: get away from the east coast.

I grew up (if you can call it that) in NS. Great place to grow up, but I had no idea about the world that was out there---the opportunities are endless. Within 2 years of living in Ontario, I doubled by Halifax salary; within 8 years, I had triped my Halifax salary.

People will say 'oh, but the cost of living in Ontario is higher'. That might be true in Toronto, but it's not province wide.

Move away, and budget for one trip back per year (for Lobster), and THAT will help you achieve your goals that much faster!

haha that is true. I lived in Ottawa for a year working for the Federal Gov. Also a great job with great pay. Loved the people I worked with but didn't really like the work I was doing. They offered my a full-time permanent job and I turned it down...sometimes I wonder...
My problem is I love the East Coast too much to leave, not to say I didn't have a blast in ON just not the same as here though. I still go to Ottawa twice a year just to see friends! I love that city.