FIRECracker is a world-travelling early retiree. She used to live in one of the most expensive cities in Canada, but instead of drowning in debt, she rejected home ownership. What resulted was a 7-figure portfolio, which has allowed her and her husband to retire at 31 and travel the world. Their story has been featured on CBC, the Huffington Post, CNBC, BNN, Business Insider, and Yahoo Finance. To date, it is the most shared story in CBC history and their viral video on CBC’s On the Money has garnered 4.5 Million views.
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Today’s reader case touches on an issue that’s near and dear to my heart, so without further ado, let’s dive in!
Hi Firecracker & Wanderer!
I’ve been an avid reader of your blog for years now, and first stumbled upon your book in 2020…I bought both the audible version and physical copy, and have probably re-listened/ re-read your book about 7 times to really solidify the concepts. At the time of reading Quit Like a Millionaire, I still had about $10,000 in student loans to pay off, had $0 in savings, and was low key panicking about my financial future.
During COVID, I got more serious about investing. I followed your investment workshop to a tee (as you’ll soon see below), signed up for Questrade and started investing for the very first time! I gave up my apartment in Toronto and moved home with my parents in Waterloo for half a year to save money and figure out my next move before moving to Vancouver in 2022. Over the last 5 years, I grew my portfolio from $0 to $340,000 following your investment workshop! THANK YOU SO MUCH.
I’m almost 37 years old, am self employed and run my own digital marketing agency. My current goal is the get to a portfolio of $1.5 million by the time I reach 45, but my partner and I are looking to have two, maybe three kids in the next few years. Since we’re a lesbian couple, we’re going to have to go the IVF route which ain’t cheap!
While it’s difficult to determine exactly how much we’re going to spend on IVF for 2 kids, the average costs for IVF is $10,000-20,000 per cycle, and it takes 2-3 cycles on average to get pregnant. So for the sake of planning, I’m anticipating $60,000/child ($120,000). Egg freezing is going to cost $20,000 plus an additional storage fee of $750/year which I’m starting next month. We’re planning on having our first kid with my eggs in 2-3 years.
Income
Since I’m self-employed, my income varies, but this year, I’m going to be bringing in approximately $200,000 in gross income / $130,000 net.
Monthly Spending
I’m an endurance athlete so a lot of my money goes towards food, race fees, gear, and more food lol. I’m embarrassed to admit how much I spend in this category because it’s kinda insane, but here ya go:
- Groceries = $800
- Meals out (+ lotsa coffee) = $700
- Fitness supplements = $175
- Rent (Vancouver, ugh) = $2,350
- Utilities (internet, hydro, insurance) = $149
- Phone bill = $60
- Gas = $150
- Vehicle Expense (oil changes, tires, general maintenance) = $100
- Dog (vet bills, food, toys) = $150
- Endurance racing (race fees, travel, coaches, gear, nutrition) = $500
Total = $5,134
No Debts
Assets
Car = $18,000
Investments / Savings
- Cash = $0
- Margin account = $46,889
- RRSP = $137,237
- TFSA = $135,591
- FHSA (started this in 2023) = $19,295
VAB.TO = $39,586
VCN.TO = $98,303
VUN.TO = $101,454
XEC.TO = $30,347
XEF.TO = $69,158
So based on our plans to start a family, I’m wondering if retiring at 45 is still a realistic target? I’d love to retire sooner than that if possible, but not sure if that’s doable given how much I eat haha.
Thank you so much for considering my case study!
First of all, great job on going through the Investment Workshop and setting up your money machine! Going from $0 to $340k in 5 years is an awesome accomplishment! Give yourself a pat on the back.
Now let’s talk about a topic that I know a bit about, which is IVF.
The Finances of IVF
Starting a family is a big decision, and starting a family through IVF is an even bigger one, because it involves a significant cost in time, emotional trauma, and of course, money.
Everyone’s IVF journey is different and deeply personal, and having gone through the process myself, I know how tortuous it can be. The cost of each cycle can range from $5000 for the fertility drugs with the rest of the cycle covered by health insurance, to hundreds of thousands if you have many failed cycles, need to buy donor eggs, and/or hire a surrogate.
And while I can’t predict how your journey will go, I strongly suggest having an honest and frank discussion with your partner and agreeing on a ceiling for how much you’re willing to spend before you start, rather than having a vision for how many kids you want.
It’s an awful trap that so many couples fall into, through no fault of their own, and I wouldn’t wish that kind of mental anguish on my worst enemy. From a psychological perspective, it’s a classic sunk cost fallacy. If they’ve already spent $50k, $60k, or $70k, the choice these couples are forced to make is whether to spend another $10k or $20k in the hopes of coming away with something rather than walk away empty handed. It’s the same fallacy that causes people to sink more money into a bad investment, or to keep gambling at a casino when they’re in the red. Logic would suggest that you should walk away, but the temptation to try to buy your way out of a loss can be irresistible.
The finances of kids
So, we have two aspects of having kids that we have to take into account: One is the cost of the IVF treatments itself, and the other is the cost of possibly raising the kids.
Let’s take our reader’s budget of $120k and assume that she uses that as her IVF ceiling, meaning that’s as much as she will spend on IVF, and if she ends up spending less, they get to keep whatever’s left over.
The second, and much trickier bit is to budget the ongoing cost of raising the child. Spending on a child can vary wildly, but as a FIRE couple raising a kid, we found that our own spending was about $565 CAD a month , so it’s definitely possible to raise a kid on far less than the average. Obviously, this depends on a lot of factors, such as whether they have access to parental help for childcare, whether they choose to breast-feed, and other factors.
The reality is that our couple won’t know what their cost of raising a kid will be until they actually try it. After having their first kid, they should carefully track their spending and see what their personal cost of raising a child turns out to be. And on top of that, they should figure out what expenses would drop off it they weren’t working. Daycare, for example, would no longer be necessary if our reader wasn’t working.
They don’t have to match our $565 a month, but to make their retirement work, they should aim to get this post-retirement childcare costs in below $666 CAD a month.
Why $666? In Canada, we have something called the Canada Child Benefit (CCB), which is a tax-free amount that you get to help offset the cost of raising a child. The benefit is income-tested, and drops the more you make. For our couple, they make way too much to get any CCB, so on the surface this doesn’t seem to help at all.
But, you have to remember that once you hit FIRE and leave your job, your earned income drops to $0. This qualifies you for the maximum payout of $7997 per year, or $666.42.
That means that if they can credibly raise their child post-retirement for less than this amount, having the kid wouldn’t affect their retirement target since the CCB would kick in and take over this expense for them.
If their child related expenses exceed the CCB amount, that means that having the kid will extend her retirement, and they can calculate how much by taking their projected post-retirement child-related expenses, subtracting the CCB, and then multiplying this amount by 25. This is how much additional money they will need to save in order to retire.
Plus, she can use the estimate from the first kid to decide whether having a second kid would make sense. However, I would caution that when a third kid enters the picture, the cost of housing rises dramatically, because while it’s possible to find a 2BR, or 3BR apartment, 4BR apartments are vanishingly rare. Once a third kid enters the picture, the pressure to buy a house increases dramatically, which really screws the math up, unless you’re willing to consider geo-graphic arbitrage and world schooling.
Math Shit Up
So all that being said, what is their current time to retirement? Here is their inputs as of right now.
Summary
Amount
Income
$200k gross, $130k net
Expenses
$5134 monthly, $61,608 annually
Assets
$340k
Debt
$0
Her expenses, especially since they appear to not include her partner, are on the higher side. But you know what? Spending money on your own health is an excellent use of your money, so I can’t make fun of someone for that. Plus, it sounds like she could kick my ass with one arm tied behind her back, and mocking someone like that is just a bad idea for my own personal safety.
$61,608 annual spending would require $1,540,200 in assets to cover via the 4% rule. We also have to budget $120,000 for her IVF journey, so she needs $1,660,200. With net income of $130k and expenses of $61,608, she can save $130,000 – $61,608 = $68,392 per year, and with a current portfolio of $340k, her time to retirement is…
Year
Balance
Savings
ROI
Total
1
$340,000.00
$68,392.00
$20,400.00
$428,792.00
2
$428,792.00
$68,392.00
$25,727.52
$522,911.52
3
$522,911.52
$68,392.00
$31,374.69
$622,678.21
4
$622,678.21
$68,392.00
$37,360.69
$728,430.90
5
$728,430.90
$68,392.00
$43,705.85
$840,528.76
6
$840,528.76
$68,392.00
$50,431.73
$959,352.48
7
$959,352.48
$68,392.00
$57,561.15
$1,085,305.63
8
$1,085,305.63
$68,392.00
$65,118.34
$1,218,815.97
9
$1,218,815.97
$68,392.00
$73,128.96
$1,360,336.93
10
$1,360,336.93
$68,392.00
$81,620.22
$1,510,349.14
11
$1,510,349.14
$68,392.00
$90,620.95
$1,669,362.09
Slightly over 11 years. So that puts her FIRE date at 48 rather than 45.
I fiddled with the numbers to see what it would take to get her to her FIRE target by the time she’s 45, so in 8 years rather than 11, and what I found is that if she were to abandon her plans to have a baby, AND drop her fitness expenses of $500 for training and $175 for supplements, it does get her there, but I would argue that this is a case where the math doesn’t give you the best answer here.
FIRE is a great way to focus your mind to making your finances as efficient as possible, but I don’t want people to sacrifice big, important life decisions just to achieve FIRE. Sacrificing starting a family to achieve FIRE is not worth it. Neither is sacrificing your health. I would rather our reader retire at 48 with the family she and her partner want, and in amazing physical shape, rather than retiring at 45 with no family and in worse health.
FIRE is about living your best life, and if that means starting a family, and being an endurance athlete, then that’s the life you should live. Plus, being in amazing health will increase your lifespan, so even though you’re starting a bit later, you’ll enjoy a longer retirement because you’ll live longer.
Conclusion
This case study is a great example of a situation where the math doesn’t always give you the best answer. From a math perspective, she should drop her desire to have a kid (since IVF costs money) and stop spending so much money on being an athlete. But from a life perspective, you and I know that’s not the right move.
Math is a tool, and it can be useful to help you decide between Option A and Option B, but math sometimes doesn’t give you the full answer. There are certain things math can’t understand, like the desire to start a family. So in cases like this, we have to listen thoughtfully to what the math has to say, and take it into consideration, but at the end of the day we have to make the best decision for ourselves, even it goes against the math. Because at the end of the day, the point of FIRE is living a long, happy life, not maximizing digits in a bank account.
What do you think? Let’s hear it in the comments below!
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