How to Get Out and Stay Out of Debt
Part 2–So Did You Cut Up Your Credit Cards?

Cut up credit cardsMost people assume that the first thing I did when I decided to take the bull by the horns and get out of debt was to cut up my credit cards.

Well actually, huh… no. I can’t even say it crossed my mind. Instead, I thought I should take advantage of the fact that, through years of creatively taking from Paul to pay Peter but never getting ahead, I had built an excellent credit rating for myself that would help me get out of debt. Besides that, I’ve never been much of a compulsive shopper, so I wasn’t a danger to myself with a credit card.

So, I kept the cards and, more importantly, my line of credit. In fact, the latter was the centrepiece of my debt-elimination scheme. While I was lucky that I had the low-interest option on my main VISA — about 10 to 11 percent interest annually instead of the more standard 18 to 19 percent — the rate I had on my line of credit (LoC) at the time was even better — about 4.5 percent annually — plus, by that time, I had a pretty high limit (about $35K if I remember correctly).

I handled my LoC as “just another bank account” except that it works in reverse in that a positive number means that I owe that amount rather than have it. Therefore, my first step even before I started my serious number crunching was to take each outstanding balance on the credit cards and move it to this so-called account. In so doing, I self-consolidated my debt.

In Canada, a line of credit is like an open loan that’s always accessible to you. You don’t have to use any of it and if you don’t, it doesn’t cost you anything to have it. However, it’s money you have access to at a far lower annual interest rate than a credit card.

Every month you pay the interest on that balance, but instead of that amount being added to the outstanding balance (as is the case with credit cards, which is what gets you in trouble with them), it is taken directly from the chequing account to which your LoC is linked. The moment you pay off a bit of what you owe, you start paying the interest only on the new outstanding balance. A LoC can be recalled at any time but, in my experience, as long as the bank always gets its monthly interest from you, it’ll be happy (because it’s making money off you) and you’ll be happy (because you’re not letting the bank make AS MUCH money off you).

The balance on my LoC has been at zero for three years except for a 10-day period last year when I borrowed against it to meet the 2014 contribution deadline for my registered retirement savings plan (RRSP). I knew that I had that amount coming to me except it would only land into my main account a few days after that deadline, but the $35 or so of interest I paid for dipping into my LoC for 10 days was only a tiny fraction of what I got back in my tax return for having invested so heavily into my RRSP, so it was money very well spent.

My LoC became the one and only ball I had to keep my eyes on, with the objective of bringing its balance down to zero. If one day I had to use my credit card for car repairs or whatever unexpected event that got thrown at me, I would immediately move the outstanding balance to my LoC, for if a purchase on a credit card is paid off within 21 days of the date of purchase, you pay no interest.

In fact, today I use my credit card for almost all the purchases I make — there are a few for which I’m forced to use cash/direct debit or cheques — and I just pay it off every week. In so doing, I get a bit of money back every month that I use to replenish my gas fund. Indeed, when you budget and keep track of every penny you spend as you spend it, you never have to guess what the outstanding balance on your credit card will be on your next statement. In fact, because of delays in moving funds from my main chequing account to the credit card and for some purchases to clear, my formal monthly credit card statement often has a negative balance as if I’d overpaid.

During that period when I was getting out of debt, because the interest payment on my LoC was taken automatically from my chequing account every month, I treated that fee as one of my recurring monthly payments. As the amount kept going down from the amount I used to set my budget, I used the excess to pay down my debt even more. I built two sheets for this account in my workbook so that I would know, almost to the penny, how much interest I would have to pay on the 8th of the coming month.

When I started my budget, I was pissing away well upwards of $70 a month just on interest for the LoC, but by paying it down at the rate of about $225 per paycheque plus whatever extras I could scrape up, the monthly interest payment started to go down very quickly — as in, in the mid-$60s in only three months of effort. If you quibble that you can’t see how throwing an extra $5 here and another $10 there against a huge debt could possibly make that much difference, I refer you again to this posting to prove to you that it does.

What you need to figure out about yourself with regard to credit cards is whether you can view them — and thus use them — just as if they were cash or a debit card while always remembering that whatever limit you have on a card is NOT your money. It’s the bank’s money, and they’re lending it to you at a considerably high cost. So, during your debt-elimination period, you must view them as an emergency measure to pay for something your need, not want, but for which you don’t have the cash on hand in your chequing account at the moment.

If indeed you can view them like that and if you never, ever carry a balance on them — unless you’re in the situation described in Part 6 of this series, in which case this “never carry a balance” rule will become your objective once you’re out of debt — then they’re not the evil that many people say they are. Be careful about one thing, though: If you pass that 21-day grace period, you pay interest from the date of purchase. So a partial payment (or worse, a minimum payment) doesn’t cut it, because you’ll still pay interest on the full amount of the purchase, not just what’s left to pay on the purchase. (Yes, that’s in the fine print of your credit card agreement, so I can see why people assume that credit cards are inherently pure evil.)

If you don’t have a LoC as I defined above, you need to look into getting one. If your credit rating isn’t in tatters and you approach your bank and say that you want to use it to consolidate and eliminate your consumer debt, they’re likely to give it to you. (In Part 6, I’ll show you an alternative if the bank refuses you a LoC.) They might, however, want you to get rid of all but one of your cards and lower the limit on the one you get to keep, but that’s a good idea because you don’t want your pool of available credit to be too high. Remember that your credit card use will be limited to an equivalent of cash for emergencies when that cash isn’t available at the time in your chequing account, so be sure to ask for a comfortable but reasonably low limit on that card so that your total available credit with the LoC is equal to or only slightly higher than what you currently have. It’s up to you and your circumstances to define what that “reasonably low limit” should be, but the point here is to make the total amount you owe right now your Ground Zero from which you’re gradually going to crawl away.

So the bottom line is that if you’re willing and able to keep your wants in check and spend only when you have the money while you’re in consumer debt elimination mode, you can keep ONE credit card.

What about the debit card? Well, the jury’s still deliberating on that point but I say that it depends on the individual. For me, strangely enough, cash in my pocket is far more dangerous than using my debit card. Indeed, for me, if cash is in my pocket, it’s meant to be spent and I tend to do so mindlessly. However, if I have to pull out the debit card from my wallet, I’m very conscious of the fact that I’m about to spend on something. If in that sense you’re the opposite of me, then I suggest you look into Gail Vax-Oxlade’s “magic jars,” but do one or the other and don’t just carry on as you have been because that’s what landed you where you are right now.

That said, even if you’re one of those old-fashioned cash-and-cheques kind of guy or gal, I suggest that now’s the time for you to step fully into the 21st century and make arrangements so that all your recurring payments — rent, mortgage, power, phone, etc. — are debited automatically from your main chequing account. That way, you’ll always know the exact date the transaction will go through your account and you’ll never pay another late-pay charge in your life. Besides, it can be awfully tempting to “borrow” from one of your jars and then forget to “reimburse” that jar, and then that money won’t be there when you need it. As for those few remaining recurring expenses you must continue to pay by cheque (as I must for rent, for example), consider providing post-dated cheque and assume that it will always clear your account on the date written on the cheque even if you know from experience that it seldom does so.

Finally, if you don’t have an overdraft on your main chequing account, get one! That’s not to give you extra credit even though that’s theoretically what it is but to provide you a cushion in case of mistakes. If you’re the one who makes the mistake, like forgetting to move funds into that account when you were supposed to, swallow your lumps for having to pay for tapping into your overdraft and learn from your mistake. However, if a third-party makes the mistake or, heaven forbid, a fraudulant transaction goes through your account, you’ll be on firm ground to argue with your bank to have any fee incurred as a result of the mistake or fraud reimbursed to you. When my landlord made the mistake of cashing two rent cheques one month, the electronic trail was clear and obvious and the bank waived the bounced-cheque fee, the fee for dipping into the overdraft, and the interest I paid for each day I was in overdraft. It’s also not a bad idea to sign into your online banking every day just to keep an eye on things and immediately catch any mistake that might occur.

Now we’re finally getting to the point where you need to start building your debt-elimination plan, and this is when you really need to work on getting your shit in a pile. The centrepiece of my method is to make sure the money is always ready when you need it without having to think about it on the eve of a “payment due” date. It’s not going to be just a simple spreadsheet listing what you’re allowed to spend on this and that over a month and sticking to it! There’s a lot more to it than that, so hold on to your hats!

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How to Get Out and Stay Out of Debt
Part 1–Accepting That You Need to Go on a Diet

When I happen to tell people that three years ago, I managed in two years to clear $28K of debt and found a way of saving for my retirement while still enjoying life, they all ask me, “How the hell did you manage that?!” Well, I’ll tell you how in this series of postings that I’ll be writing over the coming weeks. My system took a lot of work on spreadsheets to help me map out what I kept visualizing mentally, but I’m sure it could be adapted for someone else in a lot less time now that I’ve ironed it all out.

Cat about to pukeWhen people get the advice that they should prepare a budget, they either roll their eyes or even feel a little nauseous. We tend to think of it as having to go on a diet, and the mere mention of the word “diet” can make anyone feel a little queazy. Trust me, I know: I’m having a dickens of a time trying to find the motivation to start a traditional one — of the food variety.

The analogy doesn’t end there, though. With a diet, if you stop following it or go back to your old eating habits once you reach your goal, you’ll gain weight again. (Trust me on that one, too.) Similarly, if you stop following your financial diet once you reach your goal of getting out of debt, you’re likely to eventually go back into debt.

Pushing the analogy further: a particular diet might work wonderfully for some people, moderately for others, and not at all for others still. Everyone’s metabolism is different, not to mention their appetite (pardon the pun) for physical activity. Well, similarly, everyone has different financial circumstances to deal with, and not everyone has the same appetite for belt tightening and deferring, nor the same definitions for needs and wants. Plus if your needs exceed your income, which is a situation I’ve known at one time of my life, getting out of debt is an outright impossibility. However, even there, by keeping wants to a minimum if not completely cutting them out when you don’t have enough to cover needs, you can limit the damage — that is, the debt.

The tips I’m about to share with you in this series of postings work best if:

  1. your income is enough to cover your needs and (preferably) then some;
  2. you receive a steady income at a steady interval;
  3. you don’t turn all “damsel in distress” on me when I tell you that you have to get used to using and moving around an electronic workbook with many worksheets;
  4. you’re willing to “balance your cheque book” almost every day and move funds frequently from one account to another, and
  5. you’re willing and able to accept what the numbers tell you and move on if they tell you that certain wants will remain wants foreover.

For instance, I need housing like everybody else but I would have wanted to own mine. However, I also needed a plan for my retirement and, after many hours of research and number crunching, I had to come to terms with the glaring reality that, given my age and where I live (and, yes, want to live), I couldn’t have both. Housing prices in Montréal have more than doubled in the last 15 years but salaries certainly haven’t, so my timing to enter the housing market was horrible to say the least. Therefore, I had to take a step back, put a cross on my want to own my home, and move on.

But coming back to the diet: Have you ever gone on one — of the food variety, that is — and had some success on it for a while? It might have only worked for a few weeks or a few months… maybe longer if you were lucky as I was when I managed to sustain it for more than five years. If so, do you remember how proud if not downright euphoric you felt?

Well, I’m anticipating the nay-sayers who say that diets never work by asserting that a financial diet can be just as uplifting, and if you sustain it after you climb out of that hell hole that is debt, you’ll be encouraged to sustain it so that you can see for yourself the array of choices that’ll open up before you. Think also of diets or restrictions some people have to impose on themselves due to food intolerances or allergies. If they start again to eat certain foods, they will become ill or, in extreme cases, might even die. Similarly, debt is an illness that robs you of long-term choices and, if you manage to finally climb out of it, you’re not likely to want to go back to feeling financially rotten.

In terms of needs, you’ll be able with my method to think about and plan for those that are years in front of you. As for the wants, you’ll find that you can allow more than you might imagine right now and, because you’ll have given them a lot of thought, you’ll apppreciate them much more than if you’d succumbed to them on a whim and quickly (and perhaps mindlessly) moved on to the next one to get that next hit of excitement.

So what kind of choices am I talking about? Some are small but some are huge.

Three years ago this coming November, just a month after I’d gotten out of debt, it became clear to everyone including myself that I was miserable in my old apartment. I found the one where I’m living now on Kijiji, but it was available the following January and, as I feared, the landlord at the old place refused to give me a break and let me out of my lease before April. On the surface, it seemed foolish to pay an extra $2,670 over three months to rent two apartments (not to mention the nearly $1,000 in moving costs on top of that). But it was a pity because I’d spent hours upon hours searching and everything I found was a compromise, a downsizing …until I found this one. It had my name all over it!

Sure, before my financial diet, I still could have chosen to rent both apartments, but with the head-in-the-sand approach I had back then, I only would have pushed my debt load well over the $30K mark with no realistic plan to lower it. However, with my diet and newly found debt-free status, on April 1 when the lease ended on the old place, I still had my first $2,000 in savings — the same amount I had when my double-renting period had started on January 1.

Choices… and a whole lot less stress. Now when life throws me a financial curveball, I may not like it — who does?! — but I can shrug it off. When a big annual bill comes due, I don’t even bat an eyelash. When dear friends come to town, I can pick up the tab and make everyone happy yet know that it’ll be paid off by the time I get home. When I decide to go away on vacation, I don’t always HAVE to stay with friends in order to afford to travel.

You get the picture.

And all it took to reach this enviable situation was to accept that I needed to go on a financial diet.

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“We Don’t Have the Priests We Used To”

Père Paul BreauMy father was sitting in the rocking chair and I at the kitchen table one day when I was visiting from Halifax, when he said to me out of the blue, looking blankly in front of him, “We don’t have the priests we used to.”

I have no idea what prompted him to say that. We weren’t talking about the many sex scandals that had plagued the Catholic Church in the decade or so to that point, or at least I don’t think we were. Maybe more allegations had recently come out on the news when he made that unexpected statement to me. However, I was struck by how he, who rarely expressed his feelings, was clearly feeling not just saddened but betrayed, for he was such a devout Catholic. Every weekday evening before his walk, he would go to mass at 6:30 or 7:00, for back then there were enough priests to go around in the Diocese of Moncton to allow such a thing. His attendance was by rote, but this routine clearly gave him so much comfort.

“It was a kindness that rendered him unable to understand why there is so much evil in this world.”

I distinctly remember writing that line in my eulogy to my father in direct reference to his declaration about not having the priests we used to.

My parents being so religious, I had no choice but to attend church every weekend. And truth be told, I was such a good little boy that it took me years to rebel against and reject the Church, although I think I got away with stopping going to church a year or two of age younger than my siblings. I was even an alter boy from about Grade 4 or 5 to Grade 9.

From 1971 to 1981, Père Paul Breau (pictured above) was the vicar in the parish where I grew up. He was very popular because he had such a no nonsense way about him. He wasn’t pompous like Père Maurice Léger, the asshat drama queen who caused me such grief a few minutes before my father’s funeral. In fact, Père Breau had an amusing ritual around Labour Day, which was like the beginning of the new year coinciding with back-to-school, where his sermon was about how he wanted things to run in the parish. For example, he had the reputation of holding the fastest weekend mass in Moncton: 42 minutes if attendance was average so that communion could be distributed as quickly as usual. So one of his demands one year went along the lines of, “I conduct the quickest mass in town, so could you please be respectful enough to let me get to the back of the church at the end of mass before you start spilling out of the church?”

Going back to Père Maurice for a second: I think one of the reasons that his quasi-refusal to let me do my father’s eulogy got so deeply under my skin is because I smelt the closet pedophile off him way before that incident. I realize I’m being slanderous as I can’t prove my intuition. However, when I learned that he had died somewhere in South America in 2009 and was shipped back to Canada in a casket, my immediate thought went to reports of how some dioceses would cover up but punish their pedophile priests by sending them to some godforsaken hole in Peru or Ecuador or wherever. My gut reaction upon learning the circumstances of his demise was the same as I had had when my mother told me about how one of my cousins had “cracked” following a minor fender bender: I immediately thought that he’d cracked not because of the accident, but because he was a closet queer. A few years later, my suspicion was confirmed when I bumped into my cousin at Moncton’s “fruit stand” when instead he was supposed to be at home recovering from appendicitis.

As a teenager thinking back to all the priests I’d encountered when I was a kid, I grew suspicious of all of them except one. There’s even one in particular, a missionary priest who spent a few months in our parish, that to this day I still wonder if he did or, more likely, wanted to do something shady with me. But until yesterday, I always, always thought that Père Breau was one of the good ones.

However, yesterday, one of my childhood friends with whom I still keep in touch through Facebook sent me a link to this news story on CBC. You could have knocked me over with a feather.

The allegations place the complainant’s repeated incidents at the parish where Père Breau was posted after our parish. Strangely, some 24 hours after hearing the news, I still can’t believe it, but that’s not to say I don’t believe the complainant. I think everybody who has known Père Breau are just as shocked as I am. He was one of the few good ones. And right now I feel immense guilt for wishing that the allegations against Père Breau weren’t true. I don’t give a rat’s ass about the other accused.

Thank god my parents aren’t here to witness this news. I might be in shock, but they would be shattered. Then again, given what I just wrote above, I’m probably not just in shock; I’m feeling betrayed, exactly as my father had felt.

As much as I’m agnostic as far as an afterlife goes, I just hope there’s something like “victims’ impact statements” over there for people like my parents who have been so betrayed by these awful men.

I initally posted this entry under “Gender & Sexuality” but quickly changed it because sexual assault is about violence, not sexuality.

A Bit Here and There: It All Adds Up!

Money Saving ChallengeI first heard of the Money Saving Challenge last winter just as I was rebuilding my budget spreadsheets for the next 10 years to see if I could indeed afford to retire at 60.

It goes like this. On Week 1, you put $1 in the pot. On Week 2, you put in $2, giving you $3 in the pot, and so it goes for 52 weeks, each week putting $1 more than the previous week. At the end of 52 weeks, you’ll have $1,378. When I posted this trick on Facebook at the time, one of my friends said that she used it to save for Christmas gifts, except that she did it in reverse (starting at $52 on Week 1 and putting in $1 less each week).

I hardly ever have any cash on me. I find that when I break a $20 bill, the change I get back isn’t money to me anymore so I just waste the rest away. So, since money has become more of a mathematical abstraction to me, I never needed a trick like this to develop my ability to save. I’m better at going from an abstract model, as complicted as it might be, and enacting it in reality.

But what sparked my interest about this challenge is the number: $1,378. When I started my quest to rebuild my financial health in 2011, I had no idea what I averaged in gas money each year. I mean, it’s such a moving target: in the last decade, I’ve seen regular gas go for as much as $1.49/litre to as little as $0.89/litre, plus some years I travel considerably more or less than others. However, after tracking how much I spent on gas each year from 2013 to 2015, I found that I averaged about $1,500/year, which is damn close to $1,378!

So last December I decided that every late-December when I get my yearly bonus, I would leave $1,500 in my chequing account and earmark it as gas money. Initially I just paid cash as I went (with my debit card) and had a spot in my spreadsheet that showed me the balance in that “virtual account” I called Gas Money. My thought was that I could top it up if I ran out before the following late-December (which I thought unlikely even though I’m driving more these days), and if there was still some money left in it by the following late-December, I would only top it back up to $1,500. I figured I would have to try this for a few years to see if I needed to squirrel away a bit more than $1,500, but the benefit for me is that I wouldn’t be counting that amount as potential savings when I knew that I would in fact be spending it.

Then, last May, Tangerine Bank (where I maintain a savings account) offered me a MasterCard that would pay back 2% on three categories of purchases and 1% on all others, but for the first three months, the cashback on the 2% categories was 4%. You can change your three categories at any time, but knowing I would be going on vacation in those next three months, I chose “Hotels & Accommodations” as one of them, to be changed to “Gas” later, and “Restaurants” and “Groceries” as the other two.

The cashback goes directly into my savings account on the 17th of every month, and by paying absolutely everything I can with that card since the middle of May, I got $135 back as of September 17. It’s not a huge amount, but it’s free money just to use a card! Also, I wouldn’t care if the interest rate on the card were 50% (it’s actually 19.99%) because you pay no interest for the first 21 days and I pay it off at least once a week, often as soon as expenses are posted. I haven’t paid a bank any interest in the last 3 years, except for $35 in 2015 when I borrowed about $31,500 from my line of credit for 10 days in order to meet that year’s RRSP contribution deadline which was a few days before I would be receiving a huge tax refund from the Feds.

Also, twice a year for three months, Tangerine gives a considerably better interest rate on new deposits in their savings account. You have to read the fine print because sometimes the “new savings” are only up to a certain date well within the three-month period, but other times it’s for the whole three months. For July to September of this year, the rate applied for the whole three months and went from its regular paltry 0.8% to 3.25%, so I moved much of what I had in a savings account at my credit union where the rate is 1.7%.

Because Tangerine’s rates aren’t as good as my credit union’s for half the year, I used to drain that account at the end of every offer. However, as the new credit card cashback would go into that account, it dawned on me that I should simply view it as my virtual gas account and earn at least 0.8% rather than ziltch in my chequing account and, on my spreadsheet, I would separate the gas money from the funds I move in and out just to benefit from the semi-annual better-interest-rate offers. And then, in so doing, something else dawned on me.

Now, twice a year (in early-June and early-December), I move whatever interest I’ve earned at the credit union’s saving account into the Tangerine savings account and earmark it for the virtual gas account. Then, whenever I get some interest or cash back from Tangerine, I also earmark those amounts for the virtual gas account.

The point? As of right now, I spent $1,080.17 on gas in 2016. However, my gas fund isn’t down to $419.83 ($1,500 — $1080.17); it’s in fact at $819.50. In other words, with just a bit of planning and a few mouse clicks, I made a few cents shy of $400 and painlessly dumped it into my gas fund. So, come late-December, I might only need to put +/- $1,000 of my yearly bonus into my gas fund instead of the full $1,500. (Update, late-December 2016: I ended up spending $1,298.67 on gas in 2016 — I didn’t have much reason or opportunity to drive in the fall — so with the interest and paybacks earned to the end of December, I only needed $607.69 to top myself back up to $1,500. In other words, it looks like I got banks to pay about half my gas consumption this year!)

A bit here and there: it’s really does add up! I’ll take cash back over air miles anytime because I can really make it work for me. When I told one of my brothers about this little scheme, he just laughed and said, “That is SO something Mom would have done!”

His saying that made me smile. Because he’s right. I hadn’t thought of it that way until he mentioned it, but it really is something she would have thought of as well.

Misleading by Numbers

MisrepresentationHe didn’t mean it with any ill intent, but I once had a colleague who would sometimes word things in such a way that, while he wasn’t lying, he was answering the question in a way that skewed what was really happening.

Let me try to explain while remaining as unspecific as I can.

My team had a backlog of clients waiting to get an appointment with any one of four or five people. Each of us had a few available timeslots starting three workdays ahead, and then more and more timeslots the further ahead you looked. But each of us is one of two parties, the client being the other. While we might have two timeslots available three days ahead and three timeslots four days ahead, the client might not be available or ready for an appointment for any of those times. Therefore, we have to look for a mutually acceptable time further down the calendar — sometimes many days or even a few weeks ahead.

Concerned that we were having to make our clients wait an unacceptable number of days before getting an appointment with us, our supervisor asked my former colleague at one point, “How far ahead are we booking appointments right now?” In my mind, the answer should have been three days ahead, with the caveat that there aren’t many availabilities. However, my colleague, remembering that one case when he booked an appointment 15 workdays ahead, answered 15 days. While he answered our supervisor’s question literally, he seemed to be implying with his answer that there was no availability before 15 days.

The reason I’m bringing up this anecdote is that I had this nagging thought after posting about my epiphany on how I would be able to afford to retire at 60, or in 9 years. Therein, I asserted that “already I’m living on 70 percent of my income,” but was I really misleading by numbers as my colleague was? Indeed, I realized that when I would add up all the incoming money in one year and substract all the outgoing expenses for the same year, there were a few thousand dollars that I couldn’t trace even if I counted as an “expense” the amount I managed to set aside in the year. The percentage of income spent and the percentage of income saved never added up to 100%, so what was wrong with my logic?

It then occurred to me that I was confusing income with cash flow. For instance, I get a $50/month non-taxable expense reimbursement for my home Internet connection since I work from home, which I just put back into my cash flow. Similarly, the interest I earn in savings accounts, which is taxable, gets circulated into my cash flow as well (specifically to suppplement my gas fund). But I don’t recirculate the interest or dividends I earn in my Tax-Free Savings Account (TFSA) and my retirement fund (RRSP), which are not taxed, and every cent I get back in tax returns goes into my RRSP. While those amounts are incomes, they don’t go into my cash flow.

The minute I added up take-home pay and other revenues that I add to my cash flow (expense reimbursement, interest earned but not tax sheltered, cash payback on all spending done on one of my credit cards), I came to a totally different lower number (CF) from which I substracted all my real expenses (E), which gave me the exact amount I socked away in savings from cash flow (CFS [for cash-flow savings]) as opposed to the total amount saved (S). Then, using that different number as the denominator for percentage of expenses (E / CF) and percentage of savings from cash flow (CFS / CF), I always get 100%. (Well, except for 2015 because I bought my new car cash and used some of my savings, so I adjusted the E / CF formula so that the result cannot be higher than 100% and the formula for CFS so that it cannot be less than $0.)

So what’s my point? I don’t currently live off 70 percent of my income but 75 percent of my incoming cash flow. Or stated differently, I manage to save one quarter of my available cash flow just by planning ahead, paying as I go, and keeping my list of “wants” (versus needs) short so that when I do indulge in wants (which I do!), they’re real treats! What I haven’t wrapped my mind around yet is whether 75 percent versus 70 percent means that I will have to cut back my expenses by 5 percent upon retirement (about $1,500 a year) or if it’ll all work out in the wash. However, I think I’m further ahead in my thinking 9 years before retirement than most people are on the eve of their retirement.