What Early Retirement Means to Me

I’m not entirely sure how I came to the path towards early retirement. I still don’t have an entirely clear picture of what the end looks like, but I’m slowly evolving my idea of ER. What I do know is, the things I have learned along my travels have changed the way I’ll look at life forever.

Some things I have learned:

  • Don’t over eat. Why eat more than you should and have to work it off later? You pay money for food, and then you pay money for a personal trainer to burn it off. You’re paying for your lunch twice. When it comes to what you’re eating; eat what you want and the healthier the better. Don’t waste time eating junk filler, get the good stuff (ideally, make it) and enjoy it!
  • Exercise. I’m not going to advise you on what you should do, but find a physical activity that you enjoy. Being active will help you live longer, and healthier! The healthier you are, the less you’ll spend on healthcare and the more money you’ll have in your pocket. Invest now and get your health dividend.
  • Don’t buy your way into lifestyle bloat. Buy a good pot and pan that will last your entire life; you don’t need 5 of each. You actually may have the need for another pan, but live with one until you NEED another. I once bought 40 shot glasses (yeah, really. Yikes.) to serve a tray of 40 tequila shots at a party; now I have too many shot glasses. Do you need what you’re buying?
  • Fill your home with things that mean a lot to you. I like to bring souvenirs home from my travels, however, I make a point not to buy junk. Copper Bosnian coffee set? Good choice. Looks great in the kitchen and makes great coffee. Shipping a rug across the Atlantic from Morocco? Kidding, I’ve been reformed after the tequila incident. I keep skateboard on my wall as art. If I break a board and need one in a pinch; I’m covered and have a rotating cast of wall art.
  • Get Creative. Please don’t buy plastic water bottles. Buy a water bottle for during the day use. I keep flip top glass bottles in my fridge to have ice cold water while at home. I like not sweating during the summer, but cool a whole house is ridiculous. Cooling my bedroom with a small air condition, gets a single room cold in about 10 minutes. Make yourself a clothesline and ditch the dryer when the weather is good.
  • Key tabs on your money. Make a budget. Setup automatic deposits. Buy index funds when you’re carrying too high a balance in your chequing account. Whatever you do, get an investment and saving strategy. Scrutinize your strategy, and constantly evolve it to improve your situation. $ave dat money.

Retiring early, to me, means being more conscious of your spending, more conscious of your earning, and having a clear idea of why you’re saving. Get a raise, save the increase. One day you have the ability to do stop working, you don’t have to, but you can chase another dream if you wish. Freedom is the goal.

-Mike

Budget Optimization

There are a million and one talking points on budget optimization, but I found a metric that works really well for me. When you’re travelling, you often look at what day-to-day costs are for your trip, because it is typically measured in days. When you live somewhere, you usually look at it in months, because that’s how bills are paid.

I’m challenging you to look at what your current life costs you per day, it should give you a unique perspective. Until recently, living in Toronto costs me about $48/day. I think that’s pretty high, so I found ways to get that down to $45, and hopefully I’ll have it below $40 in the next 6 months by moving.

Look at all of your required expenses, and determine if you can reduce or eliminate any of them WITHOUT giving up anything you love. Myself, I dropped a couple domain names I haven’t used in over a year, got rid of my gym membership, reduced my meat and cheese consumption, and stopped buying lotto tickets. This got me to my goal. $3/day seems trivial, but that’s over $1000/year!

Try slimming down, you’ll feel better!

-Mike

Rewards Credit Card: Get One!

Everyone runs their budget differently. Some people use a cash-only strategy, some use a mix of cash/credit/debit, others use only debit, etc. All of these are excellent choices, but if you have the will power and don’t mind crunching the numbers every month, putting all your spending on a rewards credit card is the way to go.

When you spend cash at a business, unless they offer a cash discount, you’re paying full price with no rewards. Maybe they offer a points program, so you’re paying full price with some reward. If you pay with a rewards card, you double down on the rewards!

Whatever your choice of reward, don’t spend money just to gain rewards; that’s backwards. Anything you NEED to purchase, should be done on your card. Free is free. These cards often come with other perks as well. Travel cards come with travel insurance, lounge access, companion tickets, and more.

Currently, I have a Cashback card that I only use at No Frills (they don’t accept visa). I also have an Amazon Visa, which I use for daily spending and while travelling. I am in the market for a new travel rewards card for daily spending after dropping my Amex Gold.

If, like me, you’re looking for a new card, check out the following card aggregators:

Both of those sites are perfect for picking a card that gives you the most free stuff! Don’t be scared of yearly fees, as long as the benefit for you is there, and you will come out ahead.

-Mike

Eliminating Legacy

Legacy

  1. denoting software or hardware that has been superseded but is difficult to replace because of its wide use.
  2. an amount of money or property left to someone in a will.

Today the universe aligned, and both definitions of legacy entered my life. Normally, they would have passed me by but because I was listening to the Aussie Firebug podcast with the Mad Fientist thinking about FI, I had two realizations.

The first realization was code related. I was building an interpreter to compile a legacy templating language into JavaScript and was failing horribly. I was thinking to myself:

” Why the hell are we supporting this? This is literally 15 versions and 3 years behind, the language itself is super outdated, and our new build system doesn’t support it…wait, wait a minute. The new application will be using React so we can convert these to JavaScript once and wait until they are rebuilt in the new format. Problem solved, the better way.”

When it comes to being minimalist, optimizing your finances, and working towards financial independence; eliminate your legacy baggage. Sell off equipment for old hobbies, sell or give away unused furniture, and collapse investment funds into better funds. Myself, I’m migrating my HISA to EQ Bank to get a better return on my emergency fund. It will lower my TFSA limit for the year, but it will bounce back next year. Additionally, I’ll be getting a new credit card to get better rewards return on my spending. I eliminated legacy to move closer to my goal.

Finally, for the other meaning of legacy, why does someone leave a legacy? The only legacy I’m concerned with leaving is a positive impact on the world. Maybe I’m simple like that, but I think leaving things better than when you started is one of the most valuable things you can do in your life. Don’t get me wrong, if I have children and have money left over, I won’t be upset about it. If I hedge and invest well, and work hard, I don’t mind if I’m net $0 when the end comes. Financial Independence is an asset that provides freedom.

-Mike

Setting Goals & Action Planning

I’m going to learn Spanish. I’m going to learn to be a good swimmer. I’m going to write a book. I’m going to retire early. These are all goals that I have. It’s important to have goals, they give you something to strive for. I believe in improving myself everyday and so should you.

Each of these goals has a different end point, which makes planning difficult. The result of writing a book is a book; simple. How does one quantify being able to read, write, and speak Spanish? It’s a little bit subjective. What is a good swimmer? Early retirement just means you stop working. Seems easy enough? If only it were.

Money makes the world go round. You need it so survive in this day and age even if you farmed all your own food and made your own clothes, you have property tax to pay which requires Canadian Dollars. To retire early you need to figure out how much money you need per year to survive, and figure out how to get that amount as a return from your investments. It’s impossible to know how long you’ll live, so it’s ideal to live off your dividend and your principle investment amount will be a great emergency fund.

I found my goal amount, and setup a number of milestones to hit along the way. In a spreadsheet I have an additional column to make note of when I hit the milestones. Here’s what I have:

  • $15,000 Net Worth
  • $30,000 Net Worth
  • $50,000 Net Worth
  • $75,000 Net Worth
  • $100,000 Net Worth
  • $150,000 Net Worth
  • $200,000 Net Worth
  • $275,000 Net Worth
  • $350,000 Net Worth
  • $450,000 Net Worth
  • $600,000 Net Worth
  • $750,000 Net Worth

Feel free to put in smaller milestones if you really need to see the progress. The idea of reaching financial independence to me is a milestone enough, but these are nice to see, too.

Happy Saving!

-Mike

Canada’s Debt Problem

Well, the numbers are out and it doesn’t look good. Canada’s debt to GDP ratio recently reached 354.5% due to a long period of low-interest borrowing. I’m fortunate in the fact that I’ve never been in debt but it’s hard to watch my fellow Canadians and my government go so far into it.

I’m fortunate in the fact that I’ve never been in debt. I worked 40 hours week and did freelance work during college to pay for my education. My education has been the best investment I’ve ever made, as it’s paid me back a huge dividend over the last 4 years. Going into debt for an education is considered good debt, as long as there is a career waiting for you as a result.

If we as Canadians can make an effort to get out of debt sooner than later, we’ll be a more prosperous society because of it. In the last 4 years I’ve slowly taken more and more control of my money and that is what spurred me to write this blog.

I hope I can provide you all with a philosophy that will teach you take control of your money, and provide you some strategies to help you do so.

-Mike

 

Get More Value From Your Bank

If you have a job, salaried or otherwise, you probably get paid via cheque or direct deposit. You need somewhere to keep this money because filling your mattress with cash is a terrible idea for so many reasons.

Since the creation of currency, people have needed a place to keep their money safe, and thus, the banking industry was born. I think in general people have lost sight of what a bank should be and how they work, so most people continue to pay for services they don’t use.

My advice? Move to a no-fee bank. EQ Bank, PC Financial, and Tangerine are all great choices. Most credit unions also have excellent offerings, as well. I think paying a bank is a bit absurd, because they already make money by lending your savings out. In fact, they can lend out every $1 you deposit, for almost 10 times that amount all the while they charge interest to the borrower.

Free banks still charge interest on your money, but most of them give you interest in their savings accounts. Keeping your money in a savings account with Tangerine for instance, gives you 0.8% interest which helps you fight back against inflation while you find somewhere you want to invest that money.

So here are your options:

  • You could hold it in physical cash, but you lose value to inflation.
  • You could pay for an account, but you’re losing money every month to inflation, not getting interest, AND you’re paying to lose money in the form of a fee.
  • You can hold $3000 to $6000 in an account to avoid the fees. Again, you’re losing out on inflation and interest on that money (regardless how small, it adds up).
  • You go with a no-fee bank, and get paid to park your money there. You lose only a small amount to inflation. If you have TFSA room, and keep your money in a 2% HISA, you’re making money by doing your business with that bank. THIS IS HOW IT SHOULD BE!

I’m with Tangerine and I have zero complaints after moving from a full service bank. If you decide to go with Tangerine, use my Orange Key (43631608S1) on sign-up to buy me a beer. Thanks!

– Mike