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“Japan is SO expensive. All the hotels are over $250/night and I haven’t even added in taxis, food, or tour packages,” Lilly complained. “I have no idea how you manage to travel so much. It’s crazy expensive!”
“What about this one?” I said, pointing at a pristine, modern looking hotel with a reasonable price tag of $85/night. “It’s got a 4.5/5 rating from 200 guests and looks really nice.”
She wrinkled her nose. “3 stars?! I only look at 4-stars and up.”
I resisted the urge to roll my eyes. “Okay. Then can you take the subway instead? Taxis cost over $100 for a short 30 min ride. For that, you could ride the subway for the entire week!”
“Subway? That’s going to be a hassle and really confusing. I don’t want to get lost.”
Deep breath. In and out. In and out. “Okkkkayy. How about instead of taking a tour, you visit the attractions on your own? They’re all near a subway station, so it’s really easy to just get there yourself and look around.”
“I dunno. I like tours because they figure everything out for you. It’s so convenient.”
And so I threw in the towel. As it turns out, travel planning with your friends is REALLY hard. Instead of a joint trip, we decided we would go first to Japan, and then just meet up with Lilly if her tour happens to cross paths with us.
As it turns out, that never happened.
Even though we did end up in the same city at the same time (TWICE!), we never did meet up with her, because her tour schedule was packaged so tight, she never got any free time to go off on her own.
We were prepared to empty our wallets in Japan, but as it turns out, even with the Canadian dollar in the crapper, we still only spent $68CAD/person/day (that’s only $53US/person/day!).
And that’s including splurges like:
Fancy Kobe beef dinner ($125 CAD for 2)
The Robot Restaurant (Best show I’ve ever seen in my life!): $150CAD for 2
Eating out every day…half of our meals were sushi.
Playing with owls
Flight from Toronto to Tokyo, and additional flights and trains from Tokyo to Kyoto to Osaka.
Lilly on the hand, managed to rack up $350/day just for 1 person.
And the funny thing is she didn’t even enjoy herself! Most of her time was either spent on a bus, rushing from place to place, or being ushered off to touristy places with mediocre food, or to a market to shop.
She had no idea what I was talking about when I mentioned the robot restaurant, kobe beef, the owl cafe, or the best ramen in the world. Most of her time was spent sleeping on a tour bus or train, travelling to the attraction, and then only being allowed 30mins to look around.
Which just goes to prove that paying more doesn’t always mean a better experience. If you’re inflexible like Lilly, you’re forced to spend more, but not necessarily for more enjoyment.
And when it comes to financial independence and early retirement, the same rules apply.
The less flexible you are the longer you have to work.
This is why people say you can’t travel the world for less than $100k/year and you can’t retire on $1 Million. These are the very people who CHOOSE to work an extra 30-40 years because they have needs way beyond the average person.
And they are right. If you’re inflexible, you can’t retire early.
• Must have an expensive car
• Must buy an expensive house
• Must live in an expensive city
• Must stay in 4 star hotels when on vacation.
• Must take cabs everywhere
• Must have the latest gadget, fashion, purse, etc
Then no, you can’t retire with a $1 Million. Hell, you probably can’t even retire with $2 Million. You will be working A LONG time. And if that’s the trade off you’re willing to make, that’s your prerogative.
BUT… if you’re flexible, $1 Million is probably WAY too much. Heck, I know couples who’ve travelled the world for $28K and retired in Vietnam with a $250K portfolio.
But so what, you say. That’s only because they’re retiring in a 3rd world country right?
Did you know that the average RETIREE Canadian household income is $42K/year? That’s the AVERAGE. Not the lowest.
So in that case, our $40K/year retirement income is actually not low at all, but quite average, statistically speaking. And we are able to travel THE WORLD on this income, including expensive countries like UK, Denmark, Switzerland, Japan.
During this time, we didn’t stay in any hostels or take any cheap, dangerous, overnight buses. We travelled around on comfortable trains and flights, stayed in mid-range hotels or AirBnBs, and splurged a lot on food and attractions.
By travel hacking flights, using AirBnb, taking subways instead of cabs, balancing cooking with eating out, we never felt deprived at all.
Because we are flexible, we need a much smaller portfolio than other people, like Lilly, who will need to work another 30-40 years to build a multi-million portfolio to support the 4 star hotels, the cab rides, and the organized tours.
The less flexible you are, the bigger the portfolio you will need to retire.
So to figure out how long you have to work for, I’ve broken retirement into 3 different types, based on flexibility.
The Backpacker Retirement Plan
- You are extremely flexible
- You are willing to stay in hostels, shared rooms, and rooms with no air conditioning,
- You are willing to take long bus rides to save money.
- You are willing to travel hack, cook, and give up some comfort to save money.
- You are willing to clean, teach English, or house-sit for free accommodations
- You are willing to live in Southeast Asia for a significant part of the year
With this retirement plan, because of your extreme flexibility, you can retire on a $250K-$500K portfolio.
Assuming you have a combined family income of $100K (before tax) and have a savings rate of 50%, you can retire in 5-10 years based on a conservative 6% market return.
The Flash-packer Retirement Plan
- You are quite flexible
- You are willing to forgo 4-star hotels for mid-range 3-star hotels and AirBnBs.
- You are willing to spend time travel hacking to save on flights.
- You like eating out, but are willing to cook occasionally to save money
- You are willing to forgo cab rides for public transit.
- You are willing to live in Southeast Asia for part of the year or move to an inexpensive North American city.
With this retirement plan, because you are quite flexible but want to splurge every now and then, and have needs similar to the average North American retiree, you can retire on a $600K – $1 Million Portfolio.
With a combined family income of $100K (before tax) and a saving rate of 50%, you can retire in 10-15 years (we did it in 9 years–slightly faster due to our higher savings rate).
The Kanye West Retirement Plan
- You want it all…the 4 star hotel, the cab rides, the fancy restaurants, etc
- You must live in an expensive city
- You must buy or rent an expensive house
- You must own an expensive car
- You must buy expensive things
Since you are completely inflexible, you will need a HUGE portfolio to retire. $2 Million will barely cut it. You will likely need at least $3 Million – $4 Million to live what you consider a comfortable lifestyle.
Even if you make significantly over $100K per year, you are looking at at least 30-50 years before you can retire. But in reality, more likely you will NEVER retire because you’ll never be able to control your costs or save money.
So there you have it. Whether you’re on the Backpacker, Flash-packer, or Kanye West retirement plan depends on your flexibility.
The less flexible you are, the longer you have to work.
And the corollary to that:
If you are completely inflexible, you will NEVER be able to stop working.
So tell me, what type of retirement plan is yours?