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Going through the reader cases in our inbox today, this one immediately caught my eye. Specifically, because of this sentence: “it may expand some reader’s horizons and remove the stigma towards tradespeople”.
As someone who grew up being taught under no circumstances should I ever consider getting a certificate in the trades (apparently, I might as well be a prostitute) or blue-collar work (given that my Dad once worked in a factory, I find that a tad hypocritical, but you don’t question a man who’s survived a famine and 10 years in a labour camp), this reader’s story blew my mind:
I’m a big fan of your blog. I’ve been following it for a while now and it has set me on the right track for financial independence.
I have a case study that may be of interest to you. Given that I’m probably one of the few “blue collar” workers that read your blog, it may expand some reader’s horizons and remove the stigma towards tradespeople.
I’ll give you a quick rundown on how I got to my current situation. To start off, I grew up in Ontario, Canada. I originally wanted to be an accountant, but my grandpa told me I should get a trade so I would always have something to fall back on.
After graduating high school, I moved out to Alberta to complete my electrical apprenticeship. I worked mostly in Calgary as well as northern Alberta, typically on a 14/7 rotation. For those who don’t know, that essentially means I would work 10-12 hour days for 14 days straight, with meals and accommodations paid for. I would then spend my 7 days off in Banff or Lake Louise, or occasionally go on trips south of the border such as Mexico, Costa Rica, Colombia etc (I should really learn Spanish one of these days).
Anyways, after a few years of doing that, I ended up taking a job in North Vancouver as it has always been a dream to live & work here. Due to my experience, I am in a specialized position where I earn a little north of 200k a year. I believe simplicity is key when it comes to investing, so I put the majority of my savings into ETF’s and have my pension set up at a 90/10 stock/bond split. I also allocate a small portion into growth stocks such as Tesla and Nio, which I have earned a handsome profit on.
To be a little conservative, I will underestimate my income and overestimate my expenses.
Monthly spending: $1200 on rent, $500 on vehicle, $600 on food, $300 miscellaneous. Total $2600
Debt: ~$11k on student loans, 2% interest. I could pay it off but I am earning more interest with my current investments, so I am in no hurry. $150 monthly payment.
Fixed assets: Mazda 3 paid off. Considered a pre-construction home but due to the insane market right now I am holding off.
Investments: around $6000 in cash, $51,000 TFSA, $35,000 RRSP, pension not sure but probably around $12-13k
Given the current numbers, how long do you think it will take to reach my goal of $1 million? Most of my coworkers are well on their way there and I feel like I have a long way to go. I am currently 27 and have a goal to reach it by 35.
Thank you for your consideration! I look forward to reading your future case studies. All the best
I have to admit, my eyes bugged out when I saw BCF’s salary. I had no idea that you could make this much as an individual, and not only that, be able to do it without a university degree. So in that sense, you’ve actually got a much better return on your trade certificate than our engineering degrees because you spent way less on it. When it comes to POT score (see Chapter 4 of Quit Like a Millionaire), you’ve got us beat.
Now, let’s see if you can beat us to early retirement too.
|Income:||$200K (gross), $144,658 + $27,830 (RRSP contribution) = $172488 (net)"|
|Spending:||$2600/month or $31,200/year|
|Debt:||$11,000 @2% interest|
|Investable Assets:||$6000 (cash) + $51,000 (TFSA) + $35,000 (RRSP) + $12,000 (pension) = $104,000|
Wowza. If BCF maxes out their RRSPs (our American readers, that’s the Canadian 401K), when I plug their numbers into the tax calculator, they’ve got an individual net income of $172,488, which is more than our highest earning year COMBINED! And they’re only 27 years old! I’m impressed. Good thing you listened to your grandpa, BCF, because the man is a genius!
With a yearly spending rate of $31,200/year, BCF will need $31,200 *25 = $780,000 to become financially independent.
With a savings rate of ($172,488-$31,200)/ $172,488 = 81% (holy shit!), investible net worth of $104,000, and $11,000 in student debt, BCF will be FI in:
Less than 5 years!
Since BCF is only 27 years old, BCF can choose to retire at the ripe young age of just 31. That’s the same age I was when we became FI, and there are TWO of us.
Given that BCF’s goal is to have $1 Million in net worth, let’s see how long it’ll take to get to this milestone:
Less than 6 years! So BCF will reach $1 Million in net worth before turning 33. So yes, BCF, you should become a millionaire by 35 if you max out your RRSPs and maintain your current spending level.
The fact that BCF can get to FI faster without a university degree challenges everything I’ve ever been taught about the trades. So contrary to my parent’s beliefs, becoming a blue-collar worker isn’t like becoming a prostitute and you won’t die broke? Shocking.
I also agree with BCF that it doesn’t make sense to pay off your student debt, given that the interest rate is only 2%. However, I would caution that since your runway to retirement is less than 5 years, you may want to rethink your 90/10 allocation as you get closer to retirement. You’ll need that money to live on and anything can happen in the next 5-6 years.
That’s it! What do you think of BCF’s story? Does it surprise you that a cheaper trade certification can be a better investment than an expensive engineering degree?
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