- Let’s Go Exploring! Atlantic Provinces Part 1: Halifax - September 20, 2021
- Why Freedom Can Be Scary - August 30, 2021
- The Cheat Code to Financial Independence - August 16, 2021
To say that 2020 has been challenging is an understatement. After the devasting news about Wanderer’s dad’s brain cancer diagnosis, we immediately cut our nomadic life short by hopping on the 2nd to last plane back to Canada from Taiwan, just before all the borders closed.
With 2020 at an end, this means that we’ve been retired for over 5 whole years! Buying our time back has been the best money we have ever spent, and in no other year has that been more apparent than this one. Despite having our ambitious schedule of conferences, a Google talk, and filming a documentary, all obliterated by COVID-19, being able to spend precious time with family has been priceless. You never know how much time you have left with those you love and sometimes, you even learn to forgive and heal the most difficult relationships of all.
In life we learn the most not from just being happy and fulfilled, but from how we react in a crisis and, hopefully, emerge stronger the other side. Which is good, because as we’ve learned from the past 5 years, retiring doesn’t mean you’ll be happy forever.
And while we’ve spent the majority of 2020 working on our inner feelings, don’t think for a second we’ve left the spreadsheets neglected. Oh no, no, no. I may be a little more touchy-feely these days, but there’s a time for yoga and meditation. And that time, ladies and germs, is AFTER our spreadsheets are happy!
Also, I don’t think comedians can ever say “ladies and germs” ever again after this year. Ugh.
One of the things I worried about (other than losing my identity) after retiring, was inflation. I figured, if we were to travel the world, wouldn’t that inflate our expenses? Will our portfolio be able to continue supporting us if we’re gallivanting continuously around Europe and Asia, drinking wine, hiking the Swiss alps, relaxing in saunas, and devouring sashimi and Kobe beef?
Turns out that fear was unfounded because we discovered something that was well known in the digital nomad community but completely foreign to us: travelling the world saves you money! The trick is to balance your time between expensive places like the UK, Switzerland, Scandinavia, Japan, with inexpensive places with Thailand, Mexico, Indonesia, and Eastern Europe, and using geographic arbitrage so that you spend a stronger currency (like USD, CAD, or Euros) in a place with a weaker currency like Thai Baht or Indonesian Rupiah.
That lifestyle hack, however, like so many other things this year, was swiftly decimated by covid-19. We were forced to come back to Toronto, one of the most expensive cities in Canada, to help our family.
So damn, I thought. If I can’t use geographic arbitrage, maybe I can use local arbitrage. And by that I meant moving to an inexpensive city in your home country, with the savings from your higher salary in a big city. Since we were no longer tied to jobs in a big expensive city, we could live in a small town that’s still within driving distance to our parents.
Turns out, we didn’t even need to do that. To our endless surprise, during a pandemic the best value ended up being found not in the suburbs, but smack dab in the middle of the downtown core!
Flexibility for the Win!
According to the National Rent Report, rents in Toronto have gone down 20% since last year on average. That’s why we found ourselves renting an 800 sqft 2-bedroom condo for $57/night— less than 1/3 of its normal nightly rate of $200 .
And we aren’t the only ones! Our friends also recently negotiated $255/month off their monthly rent.
Despite having to come back to expensive Toronto, our monthly expenses were somehow less than how much we spent in Thailand in January. Having lived here for the past 9 months, our rent in Toronto averaged out to be $1641 CAD/month (or $1300 USD), utilities, WIFI, and parking included.
The key in a pandemic is flexibility. Investors who bought condos to put on AirBnb got screwed (especially with new rules coming into effect ), while their tenants, who could move around, won out. By negotiating with each new landlord and pitting them against the plummeting rental market, we were able to score some surprisingly good deals in one of the most expensive cities in North America. When you have the upper hand, you use it!
Here are some of the places we stayed in this year:
Chiang Mai, Thailand:
$850 CAD/$640 USD per month
$600 CAD/$450 USD per month
Toronto (west end):
$1350 CAD/ $1000 USD per month
$1560 CAD/ $1200 USD per month
$1700 CAD/ $1280 USD per month
With restaurants, sporting events, stores, and spas all shutdown due to the pandemic, we couldn’t spend money even if we wanted to (and believe me, we wanted to). As a result, we’ve been cooking more often than we ever have in the past 5 years . I’ve never been this domesticated in my life. *shakes head in disgust*
As a result, the cost of food, which would normally be around $1000-$1200/month (mostly due to eating out) ended up plummeting down to $600-$800/month. Plus, our food quality has gone up, as we’ve learned how to make authentic Sichuan dishes, as well as use healthier organic ingredients.
With nowhere to go, transportation and entertainment costs also dropped by 50-70%. And with no bars to go to, we found a place that lets us bottle our own booze, saving us another $150/month.
So, in the 5 years we’ve been travelling, this year’s expenses ended up being the lowest, despite spending 75% of the year in the most expensive city in Canada. I guess that’s one of the very few bright spots of the pandemic: forced austerity. So, if you’re worried about hyperinflation from all the government quantitative easing/money printing around the world, the opposite turned out to be true. We experienced deflation instead.
Here’s a breakdown of how much we spent this year:
|Region||Duration||% of Year||Cost (CAD)||Cost (USD)|
|Asia (Thailand, Singapore, Indonesia):||3 months||25%||$2,917 + $3225 + $2632 = $8774||$6597|
|North America (Canada):||9 months||75%||$2629 + $2523 +$2548 +$2858 + $2979 + $3093 + $2907 + $2721 + $2933 = $25,191||$18,941|
This is $6000 below our normal yearly withdrawal of $40,000 and since our portfolio has gone up since we retired in 2015, despite not having a job, we’re at less than 3% withdrawal rate, which gives us a 100% success rate on FIRECalc.
Portfolio B Expenses
As you know, since we want to keep this retirement experiment pure, we live off the original portfolio we built when we retired in 2015, and any additional income from passion projects post-retirement have been segregated into Portfolio B. We don’t touch Portfolio B for any living expenses, only for business expenses, donations, gifts for family and friends, or extraneously expenses like online courses or tools for learning/education.
That way you can see that you can, in fact, live off your portfolio in retirement using the 4% rule, even if you don’t earn a single cent in retirement.
And if you do choose to start a passion project, sometimes unexpected income comes when you’re not even looking for it. When you enjoy what you’re doing and give value away for free, sometimes money comes your way. In our case, an editor from Penguin Random House reached out to us to write a book—and how can you possibly say no to Penguin—so we spent the past 2 years working on Quit Like a Millionaire. That book, along, with this blog, ended up earning us an unexpected income in retirement, which we have been investing into Portfolio B.
And here’s how much we spent this year from Portfolio B:
|Category||Spending (CAD)||Spending (USD)|
This year has been a, shall we say, imperfect year. But it’s been a perfect test to see if financial independence still works in bear markets, and I’m happy to report, not only does it work, it has exceeded all expectations.
Stay tuned for the part 2, where we breakdown how our portfolio did in 2020 and how much we earned from passion projects.
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