You’re Closer to Retirement Than You Think

Ever since our story went viral, we’ve been getting slammed with e-mails and comments saying “Yeah but you’re making a salary of $260K year! Nobody makes that.”

Okay, first of all, at our highest point (2014) before we quit, our salaries were $164K, which is $213K before tax (we live in Canada, not Denmark). And that’s after 11 whole years (including co-op) of busting our asses for our Corporate overlords, getting multiple promotions, and drowning in overtime. You don’t get that kind of salary fresh out of school or with an easy, fun degree. You have to pay your dues by crawling through the mud-filled, body-riddled trenches of engineering school, and climbing your way up the corporate ladder, 60-80 hour weeks at a time. It’s not easy nor is it fun, but boy is it worth it when you come out the other end, smelling like roses.

The-Shawshank-Redemption1

Fear will hold you prisoner, a portfolio of index funds will set you free.

Anyways, enough about me, let’s talk about you.

What if you’re not in engineering, and you don’t make that kind of salary, can you still retire early?

The answer…is an astounding: HELL YES!

And here’s how:

Update: Math has been updated based on reader feedback. Thanks for the assist guys!

Let’s say you make $50K/year and there are two of you. (The key here is to have both people working. If one person is dragging the other one, you’re going to have a hell of a time rowing with half the capacity.)

Help you row? I'm really more of an ideas person... Photo by Don DeBold @ Flickr

Help you row? I’m really more of an ideas person…
Photo by Don DeBold @ Flickr

That gives you a combined salary of $100,000. So after minimizing taxes with RRSPs/401Ks, TFSAs/Roth IRAs, we get $82,261.

Using the power of bad-assity to make our spending as efficient as possible, you can easily live off $40,000/year (we lived off less than this in expensive Toronto, and my buddy and fellow blogger Justin from RootOfGood.com lives off this with 3 kids). That means you can put away $42,261/year into the ol’ savings account.

But if instead of leaving it in a do-nothing savings account, you invest this amount in a portfolio of low-cost Index ETFs, with a conservative return of 6% you’ll have a cool $1.11 Million in 15 years. (And this is assuming your salary is only going up by 2% a year with ZERO promotions or raises in 15 years. Most people will get several promotions during this time) If you just graduated, that’s less than 1/3 of the number of years most people work before they retire.

Year Starting Balance Annual Contribution Return Total
1 $0.00 $42,261.00 $0.00 $42,261.00
2 $42,261.00 $43,106.22 $2,535.66 $87,902.88
3 $87,902.88 $43,968.34 $5,274.17 $137,145.40
4 $137,145.40 $44,847.71 $8,228.72 $190,221.83
5 $190,221.83 $45,744.67 $11,413.31 $247,379.81
6 $247,379.81 $46,659.56 $14,842.79 $308,882.16
7 $308,882.16 $47,592.75 $18,532.93 $375,007.83
8 $375,007.83 $48,544.61 $22,500.47 $446,052.91
9 $446,052.91 $49,515.50 $26,763.17 $522,331.58
10 $522,331.58 $50,505.81 $31,339.89 $604,177.28
11 $604,177.28 $51,515.92 $36,250.64 $691,943.84
12 $691,943.84 $52,546.24 $41,516.63 $786,006.72
13 $786,006.72 $53,597.17 $47,160.40 $886,764.28
14 $886,764.28 $54,669.11 $53,205.86 $994,639.25
15 $994,639.25 $55,762.49 $59,678.36 $1,110,080.10

Don’t want to wait 15 years? Well you don’t have to! Retirement for us young, passionate and (presumably) sexy Millennial Revolutionaries doesn’t mean sitting around and sipping cocktails by the pool. Hell no! We’d pursue our dreams! Maybe this means writing a novel, become a DJ, becoming the next Louis CK, whatever. We’re too creative to just sit around doing nothing. And that means you’d still be able to make money in “retirement.”

So instead of waiting 15 years, you can stop working in 9 years (same as us!) after you hit half a million. This gives you a sweet passive income of $20,000/year. By working on something you’re passionate about, and making only $10,000/year each (not insurmountable in any of those creative pursuits I just mentioned), you’ll be able to quit your 9 to 5 and do what you love in just 9 years.

Year Starting Balance Annual Contribution Return Total
1 $0.00 $42,261.00 $0.00 $42,261.00
2 $42,261.00 $43,106.22 $2,535.66 $87,902.88
3 $87,902.88 $43,968.34 $5,274.17 $137,145.40
4 $137,145.40 $44,847.71 $8,228.72 $190,221.83
5 $190,221.83 $45,744.67 $11,413.31 $247,379.81
6 $247,379.81 $46,659.56 $14,842.79 $308,882.16
7 $308,882.16 $47,592.75 $18,532.93 $375,007.83
8 $375,007.83 $48,544.61 $22,500.47 $446,052.91
9 $446,052.91 $49,515.50 $26,763.17 $522,331.58

Most of us don’t want to sit around doing nothing after leaving the 9 to 5 anyway, so having a goal of making just $10,000/year each is very doable.

Hell, with all the time in the world to build things, you might even find that you’ll make MORE money in retirement than when you were working! Don’t believe me? Check out these hustlers, who managed to do just that:

Mr.MoneyMoustache

BudgetsAreSexy

Financial Samurai

Pat Flynn

I know people in my field making even more than we did ($150K/year each) but can’t manage to save even 10%. So by making only 33% of what they make, you can still kick their ass and coast to retirement 36 years earlier just by optimizing your spending, Hey, if I can travel the world on $40,000/year, and other people can raise 3 kids on it, you can live off $40,000/year.

And keep in mind that your cost of living drops drastically once you stop working. You no longer have to pay for daily transportation, gym, dry cleaning, professional wardrobe, eating out, day care, etc, etc. So if you were living on 40K when you were working, you won’t even need that much once you quit. People have no idea how much they are actually PAYING to work (but that’s an article for another day).

But what if your salary is even lower? What if your family income is $65,000/year and living off $28,000/year (like one of our readers).

After taxes, that’s around $55.2K/year. But with a spending of only $28,000, this gives us a savings rate of 49%! Nice! By putting away $27,200/year, this couple can retire in 15 years.

But wait! What if they were to work part time, and make $10K/year each after retiring from the 9 to 5? This reader said he wants to pursue music and his wife wants to be a writer, and while it may take a while to get their income up to this level it’s, again, not THAT crazy. This brings down their time to retirement to only 6 years! (WAY faster than us!).

And I can already hear the Internet Retirement Police firing up their keyboards, saying that this doesn’t count as retirement. So let’s be crystal clear: Retirement means “retiring from the 9 to 5”. It means no longer having to do a job you hate just for money. You can step it down to part-time, or choose to do something you are passionate about, but never paid enough to fully support you. The portfolio gives you supplemental income so you can make these kinds of choices.

Retirement doesn’t mean doing nothing. Retirement means FREEDOM.

So even if you don’t have a 6-figure salary, as long as you understand how money works and how saving and investing can allow you live your dreams, you can STILL kick ass and retire from the 9 to 5, 30-40 years earlier than everyone else!

The real secret to early retirement is that savings rate matters more than salary. A higher savings rate means you need less to live on, which also means you need a smaller portfolio to quit. Win-freaking-win!

And just because you make more money doesn’t mean you’ll be able to retire earlier. If you look at my 6-figure friend, who saves only 10%, his time to retirement is 50 years! A higher salary makes it easier to save more but that doesn’t always happen. In fact, if you don’t understand the retirement math, higher salaries just lead to higher spending. (*cough* houses *cough* purses)

Purses full of BULLSHIT.

Purses full of BULLSHIT.

So, don’t get discouraged just because you don’t have a 6-figure salary. With a few adjustments to your spending, and a plan to make just a measly $10k/year each after quitting your 9 to 5 (which you will probably do anyway, because sitting on a beach every day is boring), you can retire from the nine-to-five in just 5-10 years.

Don’t let anyone tell you you can’t become financially independent just because you have a small salary. Growing up poor, if I had believed every bully who told me I was never going to be rich I wouldn’t be where I am today. And even though they grew up with more money than me, I am now richer than them. I came out ahead because I refused to let them tell me what I couldn’t do.

And you shouldn’t either. If you make less but keep more, you are WAY ahead of people who make 6 figures and piss it all away. And while they’re stuck in their job for the next 50 years, you’ll be free in just 5-10 years, doing what you love. Who’s going to be laughing then?

I’m going to leave you with one of my favorite quotes:

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Reader Case: How Do I Stop the Bleeding?

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photo credit: woodleywonderworks @ Flickr, license: CC BY 2.0

 

To sell or not to sell, that is the question…

Or in this reader’s case, more like “how do I stop the bleeding?”

As you all know, here at Millennial Revolution, I never shut my trap about the dangers of buying into the housing “cult”. Why? Because locking all your wealth into 1 asset, feeding it your entire paycheque, betting on it making a buttload of money because housing always goes up, up, up…is stupid.

And here’s your proof (e-mail has been edited for brevity):

“In 2014 I moved into a swanky one-bedroom condo in Edmonton. I was a single guy, with a great job, and making good money so I figured I’d better buy the place, since “renting is a waste of money” and I didn’t want to move again. I believed that if I did end up meeting someone I could easily sell it, or rent it out since Edmonton was full of single guys with lots of money. My realtor assured me that I could easily rent it and be cash flow positive by a couple hundred bucks each month. And that was all the homework I did. I bought my place for $295,000 in the fall of 2014.

Since then:

1. I met a great girl, and in January 2016 I moved into her place. (My condo is too small for both of us, and her place allows us to walk or bike to work). G/F and I are splitting rent on her place and my place is empty most of the time.

2. The price of a barrel of oil went down the shitter, and all the wealthy dudes took off. It’s now a renters market, and I would be lucky to rent my place out for $1600/mth.

3. My monthly cost of ownership is $2100 (mortgage at 2.1%, which I’m making accelerated payments on – 16 yrs owing, and condo fees, property taxes, utilities, insurance)…this eats up 36% of my monthly take home pay of $5900.

5. The current suggested list price of my place is $259,000. Realtors I’ve spoken to have warned me to be prepared for a sale at closer to $245,000.

6. Given that I owe $265,000, and considering the cost of selling, I suspect I’d be on the hook for a big stinky loss of $30,000. This would go onto my line of credit, and I can pay it off in 10 months. I tried listing it in the spring at $299,000 (same price as my competition), with no success.

7. There are plans for more development around my property. I’m concerned that the potential construction would scare away renters, and that the other condos, once completed, will outcompete with my mine for renters and buyers.

Given that moving into my place isn’t an option, I’m left with the decision to either sell and eat the $30,000, or rent and eat $500/mth until the economy improves (whenever that’ll be).

I’ve been waffling on this decision for months. I’ve been trying to convince myself that the $30,000 is not a bill, rather, the cost of the lessons learned, but then there’s a nagging voice that keeps reminding me of sunk costs, maybe things will be better next year, and there’s only 16 years left on my mortgage – maybe I should refinance to 25 years so maybe I can rent and nearly break even each month, eventually I’ll make a profit, etc.

So many variables, it makes my head hurt, and I haven’t even mentioned landlording hassles, tax brackets, and capital gains…
I’m feeling like I should just pull the trigger and list it for $259,000 – if it doesn’t sell I can still rent it and relist later if I have to.

What should I do?

Thanks!
STB (Stop the Bleeding)”

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Yikes! Okay, let’s summarize:
• Should STB keep the condo and lose $500/month or sell it and lose $30,000?

Oof, this is tough. And don’t think we didn’t try to make this work, we really put our thinking caps on and tried to get out of this situation without losing money but try as we might we just could not get the math to work out. The reason is that rental income is unfortunately taxed at STB’s marginal rate, so even if he deducted the cost of insurance and property taxes, he’s still down an extra $400 a month (20.5% Fed + 10% provincial). That’s a monthly deficit of $900 a month, or $10,800 a year.

If he sells now he’ll be able to get back to even within 10 month. If he keeps it, in less than 3 years, he’ll have bled away around $30,000 anyway. And that’s assuming he has 0% vacancy rate and a perfect tenant.

But if we were to get creative and try to re-finance that mortgage? We plugged it into a mortgage calculator at today’s rates and we estimate that can bring our monthly cost of ownership down to $1500. That helps, but because of taxes on the rental income, he’s still not breaking even. He’s operating at a loss of $300 per month, or $3600 a year.

And here’s the bigger problem: if he breaks his mortgage in the middle of his term he’ll incur a massive penalty of >$10k. So assuming he has the most common 5 year fixed term, he’ll have to wait 3 years anyway before he can refinance, making this all a moot point.

So we are faced with a rock-and-a-hard-place situation. Lose $30k now or hope like Hell that prices recover by more than 12% to dig himself out of this hole. That’s a tall order, and it doesn’t sound like the condo construction around him is going to help.

stuck-between-a-rock-and-a-hard-pla

Not fun.

Personally, I don’t see the housing market in Edmonton getting better any time soon (in fact, overall Canada is losing jobs and the Vancouver housing market is already cooling), and given the risk of further losses once the other condos are completed, I can’t justify holding onto it.

BUT if he can somehow re-finance right away without penalties, renting it out at a smaller loss gives him more time to wait for a rebound.

Still, that’s not a great outcome. Absolute best case scenario with a perfect tenant and the ability to re-finance right away, he’s still losing $3600/year. Whereas if he sells, he’ll break even in 10 months. Does he think the housing market will come roaring back in just 10 months? And since he mentioned that his GF’s place is closer to work, he can reduce his expenses by not having a car,  start saving money, and be cash flow positive in less than 1 year.

And that right there is EXACTLY why I prefer renting and investing over buying.

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When the market crashes (as it ALWAYS does), my portfolio continues paying me dividends, while letting me rebalance and preserve my capital. Houses on the other hand, bleeds your equity while it sits on the market, plummeting in value. And while you’re tearing all your hair out, it continues costing you in property taxes, mortgage, insurance, and maintenance. On top of that, there’s another 5% just to sell it.

That. Sucks. Balls.

STB made a HUGE mistake by betting into the Edmonton housing market. And at this point, his only choices are either “rip the band-aid off” and take the loss or “continue bleeding” and possibly lose even more money.

So that’s my analysis, but let’s hear what you guys/gals think. Sound off in the comments. What would you do if you were him?

What Should My Asset Allocation Be? (Nervous Newbie Edition)

What should my Asset Allocation be?

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This is the number one question we get in our (pretty much constantly flooded) inboxes. As this silly little blog continues to spiral out of control and our readership continues to climb, more and more people are writing to us and saying we’ve sparked something in them. A yearning, it seems, for life before it got so damned complicated, and so damned expensive!

And that’s AWESOME. The first step in the Millennial Revolution is standing up and refusing to be beholden to these annoying little truths that we’ve all come to accept. BS “truths” like “you HAVE to buy a house or you’re a loser.”

So of course the next step is to learn what to do with your money instead. We advocate a balanced, diversified Index Investing approach using low-cost ETFs that get rebalanced periodically. As we’ve said over and over again, this is the only way that the average Joe Shmoe can reliably and safely invest in the stock market. It beats 85% of active fund managers, and is championed by none other than Warren Buffet himself.

But one of the central pillars on Index Investing is to hold equities and fixed income in an asset allocation that makes sense for you. Remember the effect that asset allocation has on your portfolio performance. The higher your equity allocation, the higher your long-term returns will be, but at the cost of higher volatility.

MPT_3

Remember…the higher the volatility and the further to the right each dot is…

MPT_4

…the more jaggy your portfolio will behave

As a result, academic research focuses on asset allocation as a function of age. Over 10-15 year periods of time, volatility becomes irrelevant. Remember that the S&P 500 has NEVER lost money over a 15-year period. So most studies recommend a higher equity exposure in your 20’s (~90% to 100%) and then gradually backing off as you get older.

Here’s the problem. In your 20’s, most people don’t know what the Hell they’re doing when it comes to Investing. We know we didn’t. We had to learn all that shit as we went, in the MIDDLE of the worst financial crisis of our generation no less. It was a bit like taking off in a plane and learning to fly it while it was in the air. Not fun.

So what’s a beginner investor to do? Should they go 90% equity like the papers say, or something more conservative like the 60%/40% split that we do?

This is a tough question to answer, as any financial advisor will say “it depends” and “there’s no one-size-fits-all answer.” And that’s true, but we here at the Millennial Revolution think we can do better.

Here’s the thing. While the cold, hard math indicates the single biggest determinant of long-term financial success is your asset allocation, in practice the single biggest determinant of long-term financial success is you, the investor. If you freak out and panic-sell at the first sign of loss, then it really doesn’t matter what your asset allocation is. You’re gonna get screwed and lose money during the next stock market crash (and it WILL crash).

So here’s our suggestion to those beginner Investors:

  • First, pay off any and all high-interest debt. If you have any credit card debt whatsoever, investing makes no sense.
  • Make sure you’re cash-flow-positive, meaning you’re saving money every month and your savings are growing, not shrinking.
  • Carve out a small amount of your savings, say $5000 and invest it using low-cost Index ETFs or Index Funds such as the ones listed on CanadianCouchPotato. Use a portfolio allocation of 50% equity/50% fixed income.
  • Leave the rest in a savings account and continue to sock money away into it.

The purpose of this exercise for the nervous first-time investor is to get comfortable with the idea of investing while limiting the amount of money that they could lose. Over time, either the stock market will either run ahead or (if you’re lucky) crash horribly, knocking your 50/50 asset allocation out of whack.

Why do I say “if you’re lucky” a stock market crash will happen? Because you’ll get to experience the deafening screeching noise the media makes each and every time the stock market crashes. They’ll say that “it’s different this time”, that the “world’s going to end as we know it”, and to “sell everything and run for the hills”. How do I know?

They say it every market crash.

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The great thing about this strategy is that you’ll only have $5000 in the markets when this happens, so you’re less likely to freak out.

Then with the help of the soothing noises this blog will be emanating, you will be able to watch your portfolio go down in value calmly without worrying where your next meal is going to come from, figure out how many fixed income assets to sell to rebalance to your target 50/50 asset allocation, buy into the equity markets as they free-fall, then sit back and watch your portfolio rebound to a level higher than before.

We know this will happen because it happens every market crash. But only if you follow the rules of Index Investing and rebalance the way you’re supposed to. This simple strategy caused us to pull off a feat most of Wall Street couldn’t: If got us out of the Great Financial Crisis of 2008 without losing any money.

And after you make it out of your first crash, you’ll realize like we did that “hey, Investing isn’t that hard! Market crashes aren’t that scary!” At that point, you can up your equity allocation to something more aggressive, as well as deploy all that cash you’ve been saving this entire time.

The trick about investing is that there’s no real trick to it. The only thing you have to watch out for is your own fear forcing you to do the exact wrong thing at the exact wrong time. But what I believe is that fear comes from the unknown. The first time you ride a roller coaster, it’s scary because a part of you doesn’t know if you’ll get hurt. But when the ride’s over and you realize you’re OK, you’re not that scared the next time. Same with Investing.

And as usual, standard disclaimer: We are not licensed Financial Advisors and as such can’t legally recommend individual ETFs. The advice here is not based off fancy exams and certifications, but cold hard math and the fact that it allowed us to become the youngest retirees in Canada.

How Growing Up Poor Made Me A Bad-Ass

Unlike Wanderer, I didn’t grow up in Canada. I grew up in a small rural village in Communist China and as a result, my childhood experience was a little different…

Typical Conversation

Childhood Friend: “Awww. Our skipping rope broke.”

Me:“Hey, do you wanna go to the medical waste heap and dig around for rubber bands to make another one?”

Childhood Friend (super enthusiastic): “DO I?!!!”

PROTIP: Apparently, contracting every single Hepatitis strain at the same time somehow makes them cancel each other out, turning you essentially immortal. Who knew?

Hepatitis Q?!? There's a Hepatitis Q?

Hepatitis Q?!? There’s a Hepatitis Q?

So besides all the playing around in used needles, drinking contaminated water, and swimming in rivers filled with raw sewage, I had a pretty normal childhood.

My home sweet home: Concrete walls with all the fixin's.

My home sweet home: Concrete walls with all the fixin’s.

 

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Looks remarkably like the set for “Dark Water” doesn’t it?

But I never felt poor. After all, my parents kept me happy and fed—with heaping portions of porridge, dumplings, and noodles, with only the occasional bout with intestinal worms, life was good.

Then came the day when Mom and I boarded a plane for Canada. I had no idea at the time, but my life was going to get infinitely better.

The second the plane landed, my Dad, whom I hadn’t see for 3 years, handed me a can of coke, which I had seen in China but could never afford. I took one sip and my head nearly exploded. The excitement gave me a gushing nose bleed because I had never tasted ANYTHING so good in my life!

And after nursing the entire thing for a whole week, when my Dad tried to toss out the empty can, I screamed at him to stop. That can was far too precious to just be thrown in the trash. It was going to be my new cup, my toothbrush holder, and my hair curler. I think I even nicknamed it “CanCan” and slept with it every night. That’s right, folks. My teddy bear growing up was an empty can.

Until one fateful night when I rolled over in bed and THIS happened. *sniff* Never forget.

Until one fateful night when I rolled over in bed and THIS happened. *sniff* Never forget.

So when I went to primary school for the first time and the kids teased me about my thrift store clothes, my DIY haircut, and my bargain-bin lunch box, I was confused.

What was wrong with my things? And why were they calling my parents poor?

We had a 1-bedroom apartment, an abundance of food, clean water that came out of a tap that WASN’T contaminated with E. Coli, and clothes that were actually one single piece of cloth! What was the problem?

I didn’t know and I didn’t care. I was proud of my Dad, who was working for the university as a PhD student for a pittance, and terrified of my mom, who would regularly fly into fits of rage from stress, working long hours at her dishwashing and hotel cleaning jobs.

I knew we didn’t have a lot of money. And a big chunk of whatever they made had to be sent to our relatives back in China.

So I tried to make myself useful.

I got a job delivering newspapers. I cleaned up around the house (using cleaning products I bought with coupons of course), and whatever we needed around the apartment, I always managed to find it for next to nothing at garage sales.

We didn’t have much but I was happy. And I didn’t know it at the time, but all this hustling was turning me into a Bad-Ass. I was starting to develop the vital skills that would later turn me into a millionaire.

What are those skills?

Well, let me break them down for you:

1) Creativity

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When you’re rich, you don’t need to be creative. Why? Because the lack of constraints lets you get away with doing whatever you want. Hungry? Go grab a burger! Bored? Go see a movie! Don’t have the cash on you? Just put it on your credit card!

Not so when you’re poor. When you’re poor, you have to prioritize. You can’t go buying things you don’t need. You need to be ruthlessly efficient.

As a result, you end up pushing your brain cells to work harder to creatively solve problems while maximizing every precious dollar you had.

I couldn’t afford to buy a doll-house, so I made one out of a shoebox! I remember making it was even more fun than actually playing with it.

I couldn’t afford expensive food from the *gasp* grocery store, so we used restaurant leftovers Mom brought back after work and mixed it with tomatoes and spinach we grew on the windowsill. Tasty! And probably healthy.

I couldn’t afford $60 to go to my high school prom, so I walked to school for a month instead of taking the bus, and used that money I saved for prom.

2) Resilience

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When you’re rich, running into a problem means you can just throw money at it to make it go away.

Not so when you’re poor. When you’re poor, you have no choice but to tough it out.

We couldn’t afford cable, so I just stopped watching TV. Instead, I spent more time at the library. This is where I developed my love for writing.

We couldn’t afford a car, so we bought a used bike from a yard sale, wore multiple layers in the frigid Canadian winter, and biked around instead. Bonus? I was super fit.

One time, my eye was swollen shut from a wasp sting and we couldn’t afford anti-inflammatory meds. So instead, I just put on a pair of shades, and told my friends I wanted to be a rapper. (Jokes on them! I didn’t even have a radio!)

As a result of all this “toughing it out” when I was growing up, nothing really seems that insurmountable to me anymore. I got through one of the toughest engineering programs in the country despite programming being my worst subject, because I had to. Nor did I have the luxury of moving back in with my parents if things didn’t work out. I had exactly one shot. Failure was not an option.

3) Adaptability

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Because we were new immigrants, we couldn’t qualify for a mortgage for many many years. As a result, we moved around a lot, chasing cheap apartment rentals.

I wasn’t happy about this, and every time we moved I’d have to say goodbye to my friends and start all over.

The first time, I broke down into uncontrollable sobs, refusing to let my friends go. My dad pulled me side, held my chin between his hands, and looked me directly in the eyes. “I know you’re sad you’re leaving your friends. But we need to move because I found a cheaper place that will save us money. Your cousins in China are counting on this money to go to school, and they have so much less than you. You don’t want to let them down do you?”

That quickly shut me up.

Those who have followed this blog for awhile or listened to any of my rants in the media may have noticed I tend to get a little peeved when people say they have to buy a house because kids need stability.

No. No they don’t.

4) Perseverance

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photo credit: Hansueli Krapf @wikipedia

When you’re poor, you can’t just get people to like you by buying nice things to fit in.

When you get teased about your thrift store clothes, all you can do is persevere. You can’t go keeping up with the Joneses to make them like you. So you grow a thick skin and learn to ignore them. And then use their vitriol to drive you toward bigger and better things. You persevere with what you have, and ignore the bullies.

Fast-forward 20 years

Now instead of making $20/week on a paper route, I was an engineer, making way more! Finally, I’d moved up in the world. I was no longer poor. By North American standards, I was “middle class”.

But that bad-assity I’d gained from growing up poor never went away. While my friends bought fancy clothes, over-priced houses and shiny new cars, and worked longer and longer hours to pay for them, I decided to put my bad-assity to work, and build my portfolio so I could be the youngest retiree in the country. And what do you know? It worked.

By using the skills I developed from growing up—Creativity, Resilience, Adapability, Perseverance—or CRAP (I’m not good at making acronyms), I became a millionaire.

I could’ve never gotten to where I am today without these skills. Growing up in North America, the mean kids at school made sure I knew I was poor. But all that did was make me stronger, and turn me into a bad-ass. That’s why when haters clog up the comment threads, I just shrug and go “whatever” while others crumble and hide under their bed.

And here’s an interesting thing I’ve noticed. In my extremely non-scientific poll of other early retiree bloggers (there are like 8 of us, and I’ve met 3 in person), I’ve noticed something weird.

In all the early retiree couples we’ve met, at least one of them is always an engineer (or something closely related). And at least one of them spent some part of their childhood in poverty. Note that sometimes these traits are blended between the two people.

That’s weird, isn’t it? I have a theory. Despite the fact that the ideas behind Financial Independence and Early Retirement have been around for a few decades, couples who pull it off in their 30’s are still exceedingly rare. I think it requires an interesting pairing of skills. The Engineering part means that person’s good with numbers and comfortable with math. Spreadsheets turn them on. And interestingly, engineers belong to one of the few professions that can earn a lot of money, yet don’t spend a lot of time caring what other people think of them. Engineers take their pride in what they’ve built, not how rich they appear.

And as for the poverty part, the skills I just described above are a huge part of what drives the couple to succeed, because they are willing to do whatever it takes to save money and damn what the haters think of them.

But that’s not saying you have to have grown up poor or have an engineering degree to do this. On paper, people who grew up wealthy or middle class have way more advantages than those who grew up poor. But don’t think that growing up wealthy or middle class is sufficient to become rich yourself. You still have to want it badly enough.

And if you grew up poor, don’t let anyone ever tell you that you can never become rich one day. You may be a bigger bad-ass than you think.

*Photo Credit: Susan Murtaugh @ Flickr.

Haters Gonna Hate

Well, so much for a quiet week.

After our initial CBC article and video spot went up, we have been inundated. With emails and comments both here and on CBC where people are expressing surprise, jealously and frustration at our situation, commonly referred to as “haters.”

Well, the peanut gallery on CBC continues:

CBC: Ditching ‘cult’ of home ownership unrealistic for most, finance expert says

CBC: Wealthy 30-somethings doling out financial advice breed online hate

A follow-up article ABOUT the haters, which in turn generates MORE haters in the comments, which will create another follow-up about THOSE haters, which will…

Hmmm I think I see a problem here. Let’s see, that’s one…two…INFINITY haters! We’ve created an infinite hater generator! Awesome! Now if only we could find a way to plug a light bulb into that, we’d have no need for fossil fuels anymore.

Well, this is to be somewhat expected. Most people have built their entire financial lives around the underlying belief that “you have to buy a house or you’re a loser,” and what we’ve effectively done is reveal that “no, no you don’t.” And when confronted with evidence that a belief they’ve held to be true for so long turns out to be false, it’s far easier to simply attack the messenger than entertain the notion that everyone’s made a giant collective mistake.

But that’s OK. If we wanted to sit back and just sip margaritas on some beach, we would have kept our mouths shut and just sailed off into the sunset.

But then how selfish would that have been? To realize that life could be so easy, stress-free and awesome, while discovering a reproducible method of getting there that didn’t rely on starting the next Facebook or hitting a home run in the stock market, and then to just keep that secret to ourselves? That would have been the height of selfishness.

So that’s why we’re doing this. We’re doing this because this knowledge is too valuable to hoard for ourselves. We’re doing this because so much stress is just accepted as “that’s just how life is” when in reality it’s self-inflicted. We’re doing this because we want to bring along as many people with us as we can. And if we have to endure a couple rocks thrown our way, we will because Millennials need someone to stand up for them.

And you know what? For every hater we get screaming at us, we got emails like these that makes it all worthwhile.

1) I just wanted to comment on your achievements. Keep up what you are doing because it will start a revolution amongst younger generations… I do not subscribe to the idea that you need to work so damn hard all your life just to pay off that house and car.  We live in a “sick” society that thinks this is what we are meant to do. It’s no wonder people are so unhappy in life.  So I just want you say you two are fucking awesome!!! Enjoy your travels.  Would love to meet you both one day and learn a thing or two.

2) I absolutely loved reading your blog and I actually was cracking up with your ability to “say it like it is”… You hit on so many truths and it was one of the best reads I have had in a long time, you got talent girl.

3) My girlfriend and I have been binge-reading your blog for the past 48 hours. I had to put off the last episode of Stranger Things because of you. Thanks. We really loved your financial insights (but more so your quirky remarks) on how to become financially independent.

Now where’s my margarita…