Back in January 2016 I wrote a post about the opportunity costs of working – spending $$ – having fun outside. It’s been a year so I thought I would update that post. In that post I laid out a 4 step plan that I’m recapping below:
- Step One we admit that every time we buy something new that costs us time outside with our family and friends. Buying new bike #3 is not getting you an amazing tool to let you be outside riding more. It’s a heavier chain attaching you to your desk.
- Step Two we start buying less stuff and saving that money.
- Step Three we start using the saved money to buy ourselves more free time
- Step Four we enjoy our lives more.
I’m solidly into Step Two. I’ve put a lot of effort into reducing my costs. The main gains have been through curtailing spending on bike parts and outdoors gear, but also in more mundane areas like lowering my cell bill, reducing home insurance costs, eating out less and cutting my grocery bill significantly. The end result was that 2016 was one of the lowest spending years I’ve had in a long long time.
I’m taking any extra money that I am saving and investing it in the stock market. Saving is great, but without getting a decent return on my savings not only will they not grow, but given how little interest a savings account pays these days I’ll actually have less buying power each year due to inflation.
Here are a couple examples for folks not used to thinking about compound interest:
- If I put $10,000 into a savings account getting 0.5% interest and inflation is 2% after 10yrs my actual buying power in that account is $8,623. Yes things went backwards! 😦
- If I put $10,000 into the stockmarket for 10yrs and get a 9% return with 2% inflation I would end up with $19,421. That’s nearly double. 🙂
While there are no guarantees with the stockmarket, over long periods of time a 9% return before inflation is a reasonable estimate of what could happen and inflation can be higher than 2%, which would eat up any savings faster unless interest rates increased to compensate.
I’m not a fancy pants investor. I don’t try and out smart the folks that spend all day everyday analyzing stocks. I just invest in boring index funds and once I buy them I forget about them and don’t try and move shit around thinking I am going to pounce on some amazing deal. It truly is a deadly boring way to invest, but it also happens to be a very effective way to make money with your money.
Here is my asset allocation. If you are interested you can copy me and you’ll get the same returns I do:
- VUN [US total market stocks] 50%
- VCN [CDN total market stocks] 30%
- VDU [International develop stocks] 10%
- VEE [International emerging market stocks] 10%
In 2016 this spat out an ~11.5% return with inflation in Canada over that period being 1.43% so my adjusted return was ~10%. So $10,000 invested at the start of 2016 end up as $11,000 at the end of the year in terms of buying power without me having to do anything. You’ll notice all my fund symbols begin with a “V”. They all come from a company called Vanguard who provide low cost investor owned funds. I won’t spend too much time/space going into the nitty gritty about them, but if you are looking for a place to invest feel free to leave a comment and we can discuss why they are a compelling choice.
I’ll be honest with you – Step Two of my Recreational World Domination Plan is pretty dull. While I get some satisfaction from saving and investing it’s not very exciting and my goals are far enough out still that I’m not able to get jazzed about crossing the finish line yet. That said I know intellectually if I don’t do the hard work now there will not be any finish line to cross…ever…at least not while I have my health and ability to shred a mountain bike. So I keep my head down and I work the plan knowing it will pay off.
One thing I am not doing while deep into Step Two is giving up my normal level of outdoors time. If I stopped riding my bike for 5yrs to make the monies and then died under a city bus just before I could ride my bike 24/7 that would have been a bad trade off. So I’m going on the usual amount of road trips and riding locally frequently. There are no guarantees in life so although it’s very likely I will see Steps Three/Four of my plan I don’t assume that with 100% certainty. I want to make sure looking back on every year of my life that that I can say “That was pretty darn sweet!” So far so good. 🙂