Reader Case: Grounded in Vancouver and Dreaming of FIRE

Wanderer
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Lately FIRECracker’s developed the bad habit of scrolling through our old travel photos (and by “old”, I mean from like 3 months ago). “Hey, cut it out!” I’d say whenever I caught her doing it. “You’re just going to make yourself feel bad.” And then she would look up at me, her lip quivering and a single tear rolling down her cheek. “I want my smokey chicken.”

Well, it looks like we’re not the only one feeling this way.

Hello FIRECracker and Wanderer,

Greetings from here in lockdown Vancouver.

Everyone says it’s so nice here, but when you’re stuck inside and paying rent it’s just expensive. And it’s demoralizing because you look outside and it’s so nice out there.

I’ve been meaning to use the time at home to Marie Kondo my apartment, but instead I’ve been floating around the internet and have discovered FIRE and this is my light now. FIRE and tennis. I miss playing tennis so much. Fortunately, they kind of go together because Wanderer kind of sounds like Federer.

Here’s my situation… I’m hoping I might be able to be FIRE’d in 7.5 years, or possibly 12.5 years at most.

Gross income: 105,000 CAD

Rent: 1,800 … downtown Vancouver rent is ridiculous, but after 10 years in this building I feel like I’m getting a good deal now on the rent…?? I move around town on foot, bike, transit or the occasional car share.

Monthly spending (non-rent): 1,000 … I mostly eat and drink at home, spending $ on re-stringing my racquets and tennis balls. Have drastically cut-down my UNIQLO shopping.

Debt: none …. I have several credit cards I use to get points, but I pay them off each month, no balance. Have recently discovered that I can pay my rent with a credit card.

Fixed assets: none

Savings/Investments: 250,000 CAD … it’s been mostly stupid mutual funds for the past 10 years and sitting in cash (super lame, I realize) as I missed out on the bull market.

My plan is to put:
1. 100k in an all-in-one ETF like VGRO, or XGRO (for the auto PACC)
2. 100k in dividend growth stocks (I found some well written blogs on the subject like My Own Advisor)
3. 25k in some home run stocks like energy (this is in March/April 2020, so in 5 years…). The home run thing sounds like a bad idea when I write it out, but it would be about 10% of my savings… ¯\_(ツ)_/¯
4. 25k in cash emergency fund

Pension: I have a targeted plan/DB plan from work. The last statement said:
Stop work at 50, start collecting at 55 = $20,000 / year
Stop work at 55, start collecting at 55 = $25,000 / year
Stop work at 50, start collecting at 65 = $36,000 / year

Monthly savings goal: $3,000

I’m not a massive spender (I’m trying to get your book from the library, 42nd in the request line), and my plan would be to initially travel for a few years. Then perhaps work part-time either teaching English (which I did in the past and enjoyed, but was concerned it wasn’t a real job… but it would be fun to do part-time, maybe teaching online as a part-time side gig = $5-$10,000/per year)

Ideally, I’d like to be a snowbird, spending each winter in a warm country (near a tennis court) and summers in Vancouver (it’s nice here in the summer and my parents are getting older). Then eventually settle down somewhere, maybe Penang or Hua Hin (my two favourite places so far in SE Asia). I currently get to travel internationally for my job, but when I’m not on the road then I’m stuck in a cubicle. During the quarantine I’m actually really loving working from home (it’s not the office!), but the trade-off is that I can’t travel nor play tennis…

Thank you for any advice and guidance you can offer. I’ve read a lot of FIRE websites and yours was the one that made me laugh out loud with your tone and humour. Most read post on CBC News too, nice!

Lastly, I’m old for FIRE, my chronological age is 42. But I’m thinking of re-framing my age as 32 (everywhere except on my passport) because it’s more how I feel and more how I probably act… Also, it makes me feel like I can still be FIRE’d (hopefully by the fake age of 40). About 33% of the time I’m still ID’d at the liquor store when I pick up my rum, so I feel I could maybe fake it and get away with it. And a bonus would be that CPP+OAS would arrive 10 (fake) years earlier.

Sorry for the looong email. I would be very grateful for your reply and any suggestions. I’m terrible at math.

Warm regards,

ClippedWings

OK so first of all, on your investment plan, I just have this to say: No, no, a thousand times no. The following emoji ¯\_(ツ)_/¯ should never appear in someone’s investment strategy. Read our Investment Workshop as a starting point, and go from there in designing your portfolio.

Where Do We Stand?

OK so let’s get down to brass tacks and MATH SHIT UP. Here are the inputs to ClippedWings’ finances. He only gave me his gross income, but knowing he lives in B.C., and assuming he maxes out his RRSP every year, his net income would be $84,159.

Summary Amount
Income $105,000 gross, $84,159 net
Spending $1800 (rent) + $1000 (other) = $2800 per month, $33,600 per year
Savings $250,000
Debt None

What really stuck out at me reading this is that despite the fact that he’s living in Vancouver and complaining about the “ridiculous” downtown rent of $1800 per month, his financial situation is actually pretty strong. In fact, at this spending rate, his savings would be $84,159 – $33,600 = $50,599, or a whopping 60%.

This stands in direct contrast to all the news coverage out there that says everyone in Vancouver is drowning in debt, like this one:

Vancouver Household Debt to Income Hits new High of 242%

The key word there, apparently, is debt. Everyone that has debt (i.e. mortgage debt) in Vancouver is drowning in it. But our reader doesn’t have any debt. Because he never bought a house. Instead, he rents, and even though the rent is relatively expensive, he’s doing just fine because he never fell for the siren song of real estate.

Well done, ClippedWings. Well done.

So given his spending of $33,600 per year, that would put his FI target to be $33,600 x 25 = $840,000.

And given his current investable assets of $250,000 (assuming she reads the workshop and invests is properly in low-cost index funds), how long will it take for him to FIRE?

Year Assets Savings ROI Total
1 $250,000.00 $50,599.00 $15,000.00 $315,599.00
2 $315,599.00 $50,599.00 $18,935.94 $385,133.94
3 $385,133.94 $50,599.00 $23,108.04 $458,840.98
4 $458,840.98 $50,599.00 $27,530.46 $536,970.43
5 $536,970.43 $50,599.00 $32,218.23 $619,787.66
6 $619,787.66 $50,599.00 $37,187.26 $707,573.92
7 $707,573.92 $50,599.00 $42,454.44 $800,627.36
8 $800,627.36 $50,599.00 $48,037.64 $899,264.00

Just 8 years! That would mean he would be fift…ahem…I mean FORTY, if we go by how old he FEELS rather than his chronological age.

That ain’t bad!

But Wait! What About The Pension!

Now, normally I’m all for going with the age you feel rather than the age you are, but the one time I’d go with your chronological age is when you’re filling out forms for your pension eligibility.

By the time he hits his FIRE target, his chronological age will be 50, which makes him eligible to begin collecting his pension 5 years later. This will have a massively positive effect on his retirement numbers, because it will start adding an ADDITIONAL $20k of income per year!

Without the pension, his FIRECalc results look like this:

Click here to see FIRECalc results

95% success rate over 30 years, with an average ending portfolio balance of $1,573,890.

But if we add in $20,000 of inflation adjusted income starting 5 years after his retirement? It looks like this.

Click here for FIRECalc results

Yowza. That looks like guaranteed success to me. That is a 100% success rate over 30 years, with an average ending portfolio value of $2,734,568. There are few sure things in the world, but that is as close to a sure thing as I’ve ever seen.

And we haven’t even taken into account the fact that he plans on spending part of his retirement in SE Asia, or the fact that he may take on a part time job teaching English. Either of those things just makes him already phenomenal retirement even better!

See You in Penang!

So ClippedWings, despite the fact that you lived in a city with ridiculously high housing costs, and that you’re self-professed “terrible at math,” your instinct to avoid buying into the insanely overpriced housing market and rent instead has positioned you to have the retirement of your dreams. You did it!

Just promise me one thing: When you make it to retirement and book that flight to Penang, let us know so we can meet up over a delicious bowl of Penang beef noodle soup.

Oh, man. Look how good that looks…I wish I was in Penang right…goddammit! I just made myself feel bad again.

Can we f**king start travelling yet?!?

 

Fun news: Guess what? The FIRE movement now has its own theme song! A reader, WeWantGuac, dropped this beat in our inbox and the only reasonable response was to convince Clover to choreograph a Tiktok dance with me. Check it:

To listen to the whole FIRE song, click here.


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20 thoughts on “Reader Case: Grounded in Vancouver and Dreaming of FIRE”

  1. The nice thing about our rural area is the outdoor tennis courts are free and always available. My wife is a great player so we never had to stop hitting and as the CDC gradually determined it was unlikely you could catch it by touching tennis balls we were able to start playing others again. It’s been a huge mood moderator to be able to keep playing!

  2. 50 is a great age to retire early. That’s still very early by any standard. You’re still young and can do pretty much anything.
    I’m really ready for a vacation too. Staying home is no fun.
    BTW, my mom has a lot near the beach in Hua Hin if anyone is interested…

  3. As another Vancouverite who can do math, hooray to ClippedWings for staying out of this real estate market! Co-workers keep trying to convince me to buy a condo, but I like my >50% savings rate and zero debt lifestyle just fine. Living car-free downtown is cheaper than living farther out and commuting.

    1. +1 for another FIRE Vancouverite renting downtown who can do math! send me a DM on Instagram or email if you’re interested in connecting! Maybe we can start a 604 FIRE chapter / chat group of some sort 🙂

      1. As Shyla said below, there is already a ChooseFI Vancouver Facebook group – they were planning meetups before COVID!

  4. Love the FIRE Song Dance video!

    As for the travel, I guess we might be the only few (lucky?) that can’t still relate yet to what 99% of the world is feeling right now since amazing Taiwan (where we have been since the pandemic) is keeping us busy like never before. I won’t post pictures here because I know FIRECracker will hate me for that, but if people are interested about what the life during COVID in a country that has done extremely well into handling it, I invite your reader to check out some of our Instagram stories about Taiwan (https://www.instagram.com/nomadnumbers/) or even our Taiwan related posts (https://www.nomadnumbers.com/tag/taiwan/). See ya!

  5. Wow, great post! As another FIRE Vancouverite, my situation and numbers are very close to ClippedWing’s, except that I am younger 😀 (in chronological age only. I feel like an 70 year old inside hah). If he / she is reading the comments, shoot me a DM on Instagram or email and we can connect / keep each other motivated! It’d be pretty cool to start a Vancouver FIRE chapter / chat group of some sort.

    1. I am also a Vancouverite (well, technically a Coquitlamite) who has managed to avoid all the housing craze. It’s pretty insane to me – all of my friends are either massively in debt because they have bought an apartment or house (one in particular has over a million dollars in debt, and she’s a teacher…that ain’t getting paid off any time soon) or desperate to get into the housing market. It doesn’t make sense to me at all. I’ve tried discussing it with them but seem to come up against a brick wall every time – the one that is particularly galling is how frustrated they are at “throwing away money renting”. Oh well, all I can do is stay the course and enjoy my debt-free, leading to FIRE life, and hope that they will all eventually see the light. Judging by their stress levels regarding housing, I’m hoping that it will change soon.

  6. I think projecting so far into the future and using an annuity model (portfolio grows at x, I’ll withdraw y) when you’re in your 40’s and can be looking at 50+ more years is very dangerous, especially in a volatile global market that looks like it’s setting up for a high inflation years for years to come (every country is printing money to get through the pandemic and there will be costs to that, if not right away). As a 40-something who only came to FIRE specifically in this decade, I have found that focusing on multiple streams of income, including but also outside paper assets, is much more realistic when you have that long a timeframe. Our multiple streams include real estate (international and domestic, long-term and vacation rental), consulting on passion projects, and royalties.

  7. Do yourself a huge favor and learn everything on how stable your pension is. Corporate pensions may be less secure than Gov’t or nursing, teaching. Find out if there is any unfunded liability and how big it is. Is there any bridging with CPP etc…
    Secure pensions can act like the bond portion of you portfolio which allows you to take a higher risk with the equity portion of your portfolio. If you follow Mark at MOA he thinks same. Read Daryl Diamonds Retirement Income Blueprint. Don’t wait for library copy of Kristy and Bryce book, they did you the favor of analysis so reciprocate and buy their book. I thoroughly enjoyed my copy and remember there are many ways to FI.
    Oh, and well done. You are off to a great start.

  8. I envy him for being same as my age but having that amount of money. I am only starting on my journey to FIRE, as in literally starting, and at the moment still have debts to pay. But, still with the knowledge from your book and your blog, and action from my side, im sure I will be reaching FIRE too.

  9. It does not matter how much one has at the prevailing present time. The most important thing is to get started on the FIRE journey. The rest will unravel on its own. Action is louder than words.

    WTK

  10. Happy to hear from a Vancouverite. Even in Vancouver if you practice frugal living you can save around 50%. I live in Surrey, a suburb near Vancouver, own a home and is able to save around 40%. FI is not impossible for people in Vancouver area.

  11. Hi Firecracker and Wanderer,

    Hello from Singapore

    I accidentally came across your book and was blown away after reading your book “Quit like a millionaire” for having able to retire so early.

    I wanted this to happen for my son and have been introducing this FIRE to him. He got interested and has opened an online account with “Interactive Brokerage” where he invested 100% just on IWDA LSEETF iShare Core MSCI World UCITS ETF Fund.

    He is 25 years old and he justifies that since he has a long timeframe, he should just do 100% on equity.

    He has an annual income of SGD36 000(disposal income of $28 000), with $6 000 towards ETF, cash savings of $12 000.

    Currently no debt.

    I am in no position to advise if this is the right move. I hope you can advise me as all these investments have overwhelmed me.

    Thank you

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