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This is part of a series called “How We Got Here.” Part 1, Part 2, Part 3.
(update: as of 2018, Garth Turner, whom we mention below, is no longer our investment advisor. We now manage our own investments. To learned how to build a portfolio like ours, check out our FREE investment workshop)
Financial advisors are weird. One second they think you’re a two-year-old, the next second you’re the goddamn Queen of England.
The transition usually happens when they find out you have half a million dollars.
Then all of a sudden, instead of slowly explaining what “compound interest” and “money” are, they’re going on about Covered Call hedge funds that get you 15-20 % returns and calling you a genius even though you’re the same person you were five minutes ago.
Garth was different.
Garth knew we weren’t geniuses.
In fact, he basically called us idiots…straight to our stupid idiotic faces. I knew instantly we’d be BFF’s.
I knew that Indexing worked, since it helped us survive 2008 without losing money. But if we weren’t sure that the same strategy for building our stash would work for early retirement, so we were trying to get help building a dividend-producing portfolio that would pay us 6%.
“Terrible idea!” Garth says. Huh. That’s weird. Everyone else called us geniuses!
Turns out that yield-chasing in the Canadian market simply results in a portfolio loaded up with oil and bank stocks, opening yourself up to a potentially nasty surprise if oil prices crash. If oil prices crashed, energy companies would crash and cut their dividends, leading to a nasty double-shock as both the yield and share prices plummet. This advice would turn out to be prescient, as exactly this scenario happened in early 2016. If I had listened to those other guys, I’d be screwed right now.
“Soooo…Indexing?” I asked, confused.
“With a twist,” he explains. The core strategy is still Indexing using low-cost ETFs, which I was already a huge fan of, but with a twist of adding higher-yielding bonds than the Government of Canada ETF’s I was using. By carefully layering in Corporate bonds, Preferred Shares, and Real Return bonds (which we will write about in a future article), we find that we could goose our yield from 2% to close to 4% without taking on much additional volatility. Solid.
So on that snowy afternoon, the three of us crafted a plan to retire in our 30’s, and we haven’t regretted it since.
Around this time, Wanderer and I also start doubling down on our writing. After 2 failed novels and 75 rejections, we are FINALLY getting somewhere with our new novel about super-villains.
PROTIP: If you’ve ever wanted to write a book thinking it was an easy way to make a quick buck, BWAHAHAHAHAHAHAHA. *falls down gasping for air*
Write because you love writing, not because it pays well, because it doesn’t. But with our portfolio now growing and generating passive income, I finally plan for the day I get do what I love instead of having panic attacks every Monday morning.
And so we wrote, night after night.
And at work, the beatings continued, day after day.
MadDog patrols our cubicles hourly, barking at anyone who dares to eat lunch while NOT typing with their other hand. At least 50% of your appendages must be working at all times!
One of my co-workers can’t take it anymore and disappears on short-term disability leave. We’re annoyed, because at the time, none of us had any idea he was on anxiety meds and anti-depressants.
And since work is as much fun as sliding down a banister made of razor blades, I can’t help but daydream about going back to Europe. So we decide to take a breather and go to London for 2 weeks.
Even though it seems far away, the Plan to reach a 7-figure portfolio and retire early has been hatched. And with work going down the crapper, I turn into an obsessive-compulsive Budget Nazi, which is why everything is now broken down into more specific buckets.
|Groceries/Eating out||$1100||We cook more, but still have weekly outings with our friends.|
|Entertainment||$45||Since we are writing like fiends we spend an ungodly amount of time at the library, reading every writing and publishing book I can find. This also has the side effect of lowering our entertainment costs down to almost nothing.|
|Bills/Transportation||$200||We start walking to work in the summer so we didn’t need a pass for the whole year.|
|Clothing||$30||Absolutely loathed shopping at this point. Not only did it feel like a chore because I wasn’t writing, I start to see mindless consumerism as ball and chain keeping me from early retirement.|
|Vacation||$583||Trip to London, trip to San Francisco for a friend’s wedding (7000 in total for the year)|
At the end of the year…
|Combined income (after tax)||$168,680|
|ROI (After Fees)||3.4%||Irritatingly, the tornado of paperwork needed to transfer all our money into Garth’s practice takes so long we miss most of the year’s returns. So we did crappily, but the rest of his clients made around 7-8%.|
|Total Net Worth||$655,830|
2013 is pretty hazy…because we spent half the year writing like crazy, and the other half drinking ourselves into a stupor.
Because we finally got a literary agent. And that literary agent sold our book!
We are now officially published authors.
When the dream you’ve had since you were eight years old finally comes true, all you want to do is laugh manically, cry, and laugh some more, before chugging an entire box of wine and passing out in a puddle of your own drool.
Work is still bad, but I don’t care. My dream came true and everything else can go fuck itself.
Now I’m REALLY motivated to budget. Because if our Plan actually works and we get to a million, I can do this FULL time for the rest of my life! And with that motivation, we take a hatchet to our spending. It’s not about sacrificing, but cutting waste. We never clipped coupons, but we changed where we shopped and what we bought.
|Rent||$850||Our landlord suddenly realizes he had forgotten to raise our rent this entire time, and bumps it up to $850|
|Groceries/Eating Out||$800||We find this awesome Chinese grocery store, which somehow sells everything at 33% less than all the other places. We eat out even less.|
|Bills/Transportation||$250||We don't walk to work as much because we have to go home to write.|
|Gym||$75||Turns out my company had a program where we could buy discounted gym passes this entire time. *facepalm*|
|Clothing||$3||I buy 1 shirt and a few socks for the whole year.|
|Household/Gadgets||$150||We buy a new laptop after wearing out the old one from writing. Worth it!|
|Vacation||$467||A trip to visit friends in DC + Cruise from Boston to Tampa, Florida|
At the end of the year…
|Combined after tax earnings||$155,000||Earnings actually go down, as my entire department gets their bonuses cut for 'not working hard enough.' Whatever. Fuck 'em.|
|ROI (After Fees)||8.39%|
|Total Net Worth||$832,414|
With our Net Worth cresting above $800 grand, we now have enough to buy that slanty semi with cash, but the allure of houses is so gone by now. Buy an overpriced prison and keep working hateful job for another 10 years, or retire in 1? Hmmm…tough call…
Work sucks. Everyone is busting their ass, and rumours of layoffs and re-orgs are flying all over the place.
My boss, Scott, goes on short-term disability leave. There’s a blood clot in his leg and doctors say he has to be on blood-thinners or he might die. A month later, he comes back, acting like nothing’s happened. The blood clot is still there and he limps around with a cane, but he just works even longer hours and screams at us to do the same.
A few months later, my mentor, Andy, collapses at his desk and almost dies. His doctor says working 14-hour days is as bad as second hand smoke.
And then finally the axe falls.
But not on me.
On my best friend, Amanda, after losing half her family.
Taking her place is a foreign worker, working twice as hard for half the pay. As more and more foreign workers move in, hostility permeates the air like acrid smoke.
One day Lenny corners me in the cafeteria, fuming. “Do these fucking Indians think they can just take our jobs? We have families, kids, homes. Do they not give a shit about any of that?”
“Hey, don’t blame them. They have families too,” I point out.
“What? Why are you defending them?” He said, glaring at me. “Whose side on you on?”
“I’m not trying to take sides, but they’re miserable too. Do you know how many hours they work a day? And how little they get paid? One guy even missed the BIRTH of his own child for a meeting! How fucked up is that?”
“Great,” he throws up his hands. “So they get paid peanuts, we lose our jobs. Everybody loses!”
“Except the company.”
Lenny takes a deep breath. “So what can we do? My house is 900K, I’m in debt up to my eyeballs, and so is everyone else. We can’t risk losing our jobs. None of us can afford to stand up for ourselves.”
As I watch Lenny walk away, defeated, the feeling in my chest goes from a dull ache, to anger, to full-fledged rage.
At this point, I realize my journey isn’t just about retirement. It isn’t just about fulfilling my writing dreams, and ditching my hateful job.
It’s about breaking free from the corporate prison we’ve all been tricked into. Because of overpriced houses and expensive lifestyles, we’ve been conditioned to believe is this is the ONLY way to live. And corporations know this, so they saddle us with more debt, forcing us to work at our jobs until we die.
This reminds me of an episode of Mad Men I saw the other day, when this song started playing at the end credits.
You load sixteen tons,
what do you get?
Another day older and deeper in debt.
This was a song from the 1950’s about how much it sucked being a coal miner, yet somehow it feels just as relevant today as it did back then. How is it possible that 60 years later we can relate to a coal miner from 1950?!?
Because we’ve been tricked into thinking that saddling ourselves to massive debt, and being prisoners to our jobs is normal.
Since writing this blog, friends and co-workers have been asking me “Hey! I’ve been working just as long (or longer) than you, and I don’t even have $10,000 in my bank account? Where did my money go?”
That is an excellent question. Where did it all go? Because the only difference between us is that I just kept track of where my money went, and didn’t buy into the whole “buy now or be priced out forever” crap the real estate industry sprouted at us.
Sometime around November while I was still 31 I logged into our investment accounts and, after adding up the money we had saved that year, the total staring back at me was $1,000,000. We had done it. We were millionaires.
On New Year’s, we watched the fireworks from the waterfront, knowing that this would be the last year we would ever have to work. And when we got home that night, we both flipped open our laptops and penned our resignation letters.
|Groceries/Eating Out||$750||At this point I can see the home stretch, so I’m cooking pretty much every day.|
|Entertainment||$100||Go out for movies a bit more.|
|Clothing||$20||Slightly more stuff than last year, but still bare minimum. Seriously, I hate clothes shopping. It bores me to tears.|
|Vacation||$168||We pretty much skipped out on vacation this year, since, you know, the rest of our lives would be one giant vacation.|
At the end of the year…
|Combined after tax earnings||$164,000||Wanderer gets his third and final promotion.|
|ROI (After Fees)||8.1%||Eagle-eyed readers will notice that this ROI seems too high, as 53,000 / 832,000 = 6.4%, not 8.1%. This is because the savings I made in 2014 I decided not to move into the portfolio, instead building an emergency fund due to a growing chance of job loss. Therefore, the returns of 53,000 were made on the 656,000 that was sitting with Garth from the end of 2013. 53,000 / 656,000 = 8.1%|
|Total Net Worth||$1,018,414|
There is something special about reaching a goal you’ve been running towards for 9 years. You’re sweaty, dizzy, and exhausted, but it doesn’t matter. When you see the finish line in the distance, you get a second wind. You pump your legs harder and push yourself just a bit farther.
And then all of a sudden you’re done! You reached it.
Victory is FINALLY yours. And you regret nothing, because it was all worth it. You’ve made it and no one can take that away from you. What you suspected all along was true: Failure doesn’t faze you, and now you can do anything.
Hopefully, I’ve managed to convey the fact that we are not that special, we didn’t do anything magical to get here, and we didn’t sit in our basement clipping coupons and eating cans of beans like hobos. All we did was:
- Not buy an overpriced house
- Walked or took public transit rather than buy a car
- Kept track of where our money went
- Found an honest, independent financial advisor who helped us invest
Got that? Becoming a millionaire is not about hitting a home run picking stocks. It’s about not shooting yourself in the foot. If you’re reading this thinking “Hey, that doesn’t sound so hard! Can I do it too?”
The answer is: Yup.
To read the next post in the series, click here.
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112 thoughts on “How We Got Here, Part 4: The Bearded One”
wow…i’m just speechless at your determination and focus! well done!!
Good luck with your book…I’m sure you will fulfill that dream too.
Btw, did you guys go to UW?
Thanks! And yes, we did go to UW.
I’m an older fan…my son is starting his degree at UW in the fall. I forwarded him this site! Here’s hoping he will be as focused as you too:}
Thanks! UW is HELLISH to get through but MAN is the co-op program worth it. Congrats to your son for getting in!
DOPE. Thanks for the great read FC! Truly inspirational to us idiot youths.
From one idiot youth to another: if our journey was a website it would be less MoneySense and more StumbleUpon.
Where did you work?! Why not switching companies if it was that bad?
Any link to your books?
Boosting your fixed income from 2% to 4%, essentially increases risk.
Theoretically speaking. Yes if you combine low correlated, mean reverting assets (such as fixed income) we can talk about some volatility return, but is it sustainable (extra) 2% over time? Especially that the said correlations keep changing?
Don’t get me wrong, extra risk may be OK for some, but I think when investing, risk planning is a major part (and Garth doesn’t mentions this often enough on his blog)
Also, I would agree that, under Canadian taxation system preferred shares make sense in taxable account (dividend tax credit) which will boost after tax return. However combining more risky assets (such as high yield bonds) together doesn’t reduce the risk (2008 and sub prime mortgages is a clear example)
Emergency fund is not clear. Doesn’t it go against Garth’s advice?
Also since Garth is doing total planning including taxes, wouldn’t this 100K+ sitting somewhere in GIC made his work a little more complex?
Hoo boy, that’s a lot of questions. I’ll respond to some here and the others in more detail in an upcoming post as others have asked.
I did switch companies, but all companies are the same. Even if it starts off good, it eventually turns bad. Besides, by the time my latest one turned truly bad I had figured out an escape plan, so why go through the trouble of switching?
And all return comes with added risk, yes, but the trick is to hedge this risk both inside the portfolio and outside. This is beyond the scope of a pithy comment and I will write about this more in depth in the epilogue.
“Emergency fund” in this case was a temporary build up of cash. Normally, we build up savings over the year then transfer it into Garth’s practice in December. That December (2013) we chose to skip this and keep it in cash because we were worried I’d get laid off before we could retire. This would turn out to be not necessary, and we transferred it all in and got it properly invested at the end of 2014.
Good story. Fwiw, not buying the house and keeping track of your money seem to make a huuuge difference. Not buying a car definitely saves a lot of money too, but at the end of the day the house is the killer.
Exactly! This is why most of our friends are in debt, but we’re living our dreams. MUCH better option.
It must feel great to achieve freedom and get your lives on the path you want it to be on. Enjoy it.
Please clarify — your investment earnings occurring in 2012, 2013, and 2014 were $17k + $55k + $53k = $125k. Implying the balance of your $1M net worth, $875k, was saved income. Is that correct?
So your story is far more about saving than investing.
Would you be gracious enough to concede that buying real estate in 2012, in cash, and selling in January 2015, would have left you with a multiple (vs a fraction) of $125k in surplus?
In other words you could have gotten to the same place, if not further along, by taking the RE route.
You must be a realtor.
Look, you can’t get Garth to admit he’s wrong and you won’t be able to get us to either. Because we’re NOT. If what you’re saying is true then everyone who bought houses in 2012 should also be millionaires and retired. Yet we stand alone.
In 7 years of ownership in K-W our house appreciated a whopping 9% (sale price – commission – maintenance/upgrades). yup, less than 1.5% annually (ignoring mortgage interest & property taxes) which is an order of magnitude less than any of our investment accounts during the same time.
Since we sold and set sail 2 years ago the ‘comparables’ have continued their anemic appreciation at under 1.5%.
But there will always be skeptics and realtors!
Smart of you to sell and go on your sailing adventure! Did you invest while you were traveling?
Haha. I’m no realtor. I run my own portfolio a different way.
However, like Garth, you’re speaking in absolutes with your experience and advice. And I do realize I would have been further ahead trading RE than ETFs. But you win some, you lose some.
Simply, you do yourself a disservice by denying the reality of the marketplace.
Real estate strategies are unlikely to work successfully in the long term with the nest egg you have. The primary issues are lack of diversification and transaction costs.
Real estate could work just as well in terms of percentage return but you would need more capital and time to diversify across regions and classes of real estate…Not nearly as easy or as reproducible.
I’m interested in hearing specifics on how you boosted your yield so effectively. Preferred stocks are a black box relatively speaking.
Hindsight is 20/20, right?
It is possible that one could be far ahead by buying real estate, it’s possible that if you bought and sold at the wrong time you might not be. For example, condos in Vancouver for the ~5 years leading up to last year were basically net zero return before you even considered the transaction costs, maintenance, etc.
One asset strategies are generally pretty risky – you have to have made the right call every single day, whereas the naysayers only have to have made the right call once.
Well said, BikeMike!
“condos in Vancouver for the ~5 years leading up to last year were basically net zero return before you even considered the transaction costs, maintenance, etc.”
And holy shit! Really? I didn’t know any part of the Vancouver market had stalled already. Whoa.
You guys rock! =D
FYI .. after several attempts I have learned that Garth Turner will delete/block any attempt to link to this post (I have screen shots of the deleted posts).
It seems he prefers the media version that implies that you converted $500k to $1,000,000 soley through his investment services.
Silly me – I did not realize that the “promise” not to censor comments on http://www.greaterfool.ca was a not quite true.
You might want to think about who is looking after your investments?
Um…do you even read Garth’s blog? Check out this statement:
“Missing from the media report was the fevered level of saving these two crazed beavers exhibited as I worked with them, the way they Hoovered up every scrap of cash from every source and jammed them into their portfolio ETFs, the insane budgeting they engaged in and the fact they lived on less than the average lichen. Yes, their portfolio did well. Yes, they never pulled back in corrections or got greedy during surges. But it was the totality of the obsession with becoming millionaires at age 30ish that actually got them there.”
Cleary, he is agreeing that it wasn’t solely investment gains that got us from 500K to 1mill.
Do your research before you make random accusations.
Thanks for sharing your journey. I stuck with managing our investments since we finished university which admittedly has been a huge time commitment and learning curve, but I enjoy it. In lieu of an advisor I do have an independent research firm that I’m a member of which helped in the past couple years to reach our current balanced equity portfolio of stocks supplemented with ETFs or low cost funds for fixed income, REITS, Prefs and international exposure, but will admit I do sometimes consider contacting the bearded one. I guess I just need to find another hobby first.
I am curious about the split between growth and fixed income that you guys have employed to fit your goals. Garth often points to the generic 60/40 on his blog, but elsewhere I’ve read numerous cases for advisors favouring more aggressive splits of 70/30 or more. Always nice to know what someone that has actually achieved their goals is doing.
We used a 60/40 split, but it’s not one-size-fits-all. Higher equity allocation means higher long term return, but more short term volatility, so if your retirement date is 20 years out, yeah 70/30 might be more appropriate. I also know early retirees that are like 90% equity, but that’s a little too crazy for me.
Awesome post Firecracker! Can’t wait for the next! Really enjoying your blog! 🙂
Thanks! I feel the same way about your blog 😉
Loving your blog! So much I didn’t know about you guys – I’m sorry you had such an awful workplace, but we are so happy for you now 🙂 Stop by LA again on your travels xoxo
Aww..thanks Stace! Miss you guys!
Interesting read for someone slightly ahead of you by a few (many) years 🙂
I have a similar story but differ in that I did buy the house and travelled ( a lot) and stilled retired way early – not thirties though – my job was not as hellish as yours sounded.
One question: in all your numbers you leave out taxes – are your numbers net of tax?
I’m curious because your earned income certainly puts you at the upper end of earners.
Congrats on your early retirement!
And yes, all earnings are after tax.
Were you working in silly valley or Canada?
Good salaries though not crazy high…still endless treadmill to keep it in that area….. Great stuff… primarily saving.. but you’re not nutso like mustache guy….you rode through 2008/9 nicely…got a bit lucky on the QE bull run but you went with it after getting freaked in 08/09……given yourself a huge buffer for life to live the way you want. Still say you will work again!.. Way too young ..you’ll get bored….but you can choose now.
Silly valley? Bwahaha…didn’t know they called it that.
We both worked in Canada.
And yeah, we did ride the QE bull run, but we did miss out on some gains by exiting the market in 2009. Meh. Can’t complain. Life is good! And yes, it can get boring in retirement but we do lots of coding for non-profits, mentoring, and writing. Having the choice is awesome!
Another great post. Thanks.
Maybe I have missed something and if I did I apologize but did you talk about the vehicles you invested with, i.e. RRSP, TFSA? If you did maximize your RRSP contributions does the combined after tax earnings you state include the tax deduction? Also, you mentioned the bearded one steered you away from a “dividend-producing portfolio that would pay us 6%” because they may cut the dividend and the share price would plummet. So is it not true that if we have another 2008 that your mix of Corporate bonds, Preferred Shares, and Real Return bonds would also take a hit to the dividend and share price?
Keep up the good work!
Great question. I haven’t mentioned RRSP’s or TFSA’s (it would confuse our American friends), but the short answer is both were maxed out throughout our working careers, and yes the after tax income accounts for those deductions (I simply copied the final after-tax income numbers from our tax returns, which includes everything we did tax-wise).
As for dividend cuts to corporate bonds/preferreds/real returns, the reason he steered us away from dividend-chasing on the stock market is that when a company runs into trouble, they can cut the dividend on their common shares easily, but a cut to their corporate bondholders and their preferred shares is considered a default, which risks their credit rating. In 2008, some companies did cut their dividends, but relatively few cut their preferred distributions, and even fewer defaulted on their bonds.
Oh, and real return bonds (or TIPS to our American friends) is issued by the government, so those aren’t getting cut unless the government collapses.
Thanks for answering my question on ROI and additional capital contributed. I could not see any financial advisor taking you from 500 K to 1 M in four years. You have done an amazing job of saving your earnings – congrats!
How did you and your portfolio fare in 2015?
That’s coming up in the next post…”How We Got Here, Epilogue: The True Cost of Traveling the World”.
Very good post. You’ve definitely got your lifestyle correct. Spend little, don’t buy & house & invest as much as possible. Save until it hurts.
What do you think of treating your portfolio even more simply like Warren Buffett suggests? He has said on many occasions that his personal estate (outside of philanthropy & BRK) is simply going to be 90% VOO & 10% BSV. (90% US equities & 10% short term bonds at the lowest available fee). Yield is currently 2%. Over time simple is often better. I have a large mostly US equity portfolio. I used to strategically allocate according to current market conditions as you are suggesting. I have learned over time that the market has a way of reverting everything to the mean. Success with strategic allocation depends entirely on when one initiates a strategy. Eventually the strategy becomes over utilized & the market adjusts accordingly. So things like global equity diversification, pref shares & real return bonds, HY bonds & dividend stocks might seem like a logical strategy now but this is no secret. With rates so low EVERYONE is looking for ways to enhance yield – which is why bonds of all types are so overvalued (government bonds being the most overvalued). The market has a way of reducing the effectiveness of an “effective” current strategy over time – who knows what the reason will be but it is unlikely it will be a timeless strategy. So then you’re suggesting tactical allocation which is basically market timing. John Bogle suggests that one needs to simply accept what the market is gracious enough to provide at the current time. One simply does not know what it will provide at a given point in time.
My point is that strategic allocation seems smart at first. But then everyone employs a strategy and the market treats that strategy unfavourably. The market shifts is rewards for reasons unknown when the strategy is employed. I find the best thing to do over time is nothing. Buy mostly Vanguard ETFs (ie VUN, VFV) – mostly equities & just let it go. Even monitoring performance yearly might be too often.
Let me know what you think. ?
Taken a step further a saver could do the following. Skip the house – obvious (a house is basically an 8:1 leveraged bet on a local real estate market – extremely undiversified). Instead leverage where no one else is leveraging currently: US equities. Use a modest ratio of say 3:2. Margin rates in Canada are 3.75%. The yield on a Vanguard S&P 500 ETF is ~2%. Beautifully, the interest is tax deductible. One would effectively be paying close to 1% after tax for the opportunity to own the best 500 companies in the world at a given point in time. What I don’t understand is that no one does this. Equities are currently the least loved investment. This is to be expected after a brutal secular bear market (2000-2012). ?
And as for leveraging the market, HOO BOY, don’t do that.
Anyone can sit down and look at margin investing on paper when interest rates are low and go “looks good!” The problem is that margin can be called at any time, and it typically gets called when everything’s on fire, so you lose the ability to rebalance into a storm like we did in 2008. Instead, you hand over control of the sell button to someone else, and that’s when you lose your shirt.
This is actually a great question that I’ve been asked multiple times.
I agree, there is additional risk in using preferred shares, corporate bonds, and HY bonds, and in our accumulation phase it wasn’t a risk worth taking. However, once you retire and start needing income to live, it’s really dangerous to rely on capital gains at the beginning, because if you retire then hit a falling market, you’re forced to sell into a storm and it blows up your retirement plan. This is known as sequence-of-return risk and we’ll write about this in a future article. By goosing our yield until it covers our expenses, we can’t be forced to sell into a storm and can afford to simply wait out a falling market.
Our longer term plan is that once this sequence-of-return risk fades we will exit our higher-risk income assets and return back to a traditional Indexing strategy of low-cost ETFs that track the market. The risk we take on now with these assets is worth it because falling preferred shares is something we can recover from while selling into a storm in retirement is not.
Thx for sharing your journey so far. Although most millenials are entitled (“I have a BA in ‘women studies’ therefore I should make $100K and be a director”), lazy (“double-checking my work, wuh?”), hypocrites (e.g. complaining about global capitalism while tweeting such on their slave-labour produced iPhones and sipping Starbux Frappacinos)….
…you guys are a nice role model for millenials and boomers alike, although I suspect you are on the “grandfather/mother end” of millenials! =D
Nice on the book. Is it available on Amazon?
Thanks! And I’d like to think of us less as “role models” and more like “clueless millennials that stumbled into a win and are trying to blast the right answers to the rest of our generation.”
Found your site from Turner’s blog.
We are in Vancouver doing the same thing as you!
It’s good to hear you’ve done so well.
We hope to be where you are in about 4-5 years, we are 28 now.
I try to explain what we are doing to family and friends, but they just don’t get it.
“I try to explain what we are doing to family and friends, but they just don’t get it.”
Tell me about it. I told my mom about what I did, and her reaction was “who cares? You don’t even have a house”.
They just can’t understand that the game has changed and that old tactics (like JUST BUY A HOUSE!) doesn’t work anymore. That’s why we gotta stick together and support each other because they won’t.
Stay the path and stay strong! In 4-5 years, you’ll be the one laughing.
Just thought I would catch up on your tale of reaching “financial freedom.” Really love your way of telling the tale.
I trust you interviews dozens of financial planners before deciding on Garth Turner. He does write a great blog, dispenses plenty of actionable “FREE” advice, if one reads it carefully. Yet so many seem caught in this ridiculous “Real Estate” circus.
Hey, I’m a Boomer, and even I had no desire for anything beyond a modest paid for home, with the accompanying FAT investment portfolio.
Oh, by the way, the kid graduates with honors this summer. Proud papa, and he can now ‘do his own thing’ after graduation. No pressure from us to conform to our image, as that ‘image’ is imaginary for the world we see today. Saving money, however, has NOT gone out of style, nor has achieving “financial freedom” for whatever reason you have in mind.
Great Story, and you guys were motivated ‘super savers’!!! I am impressed, (not something that happens too often these days).
Yes, we did interview dozens of advisors and Garth clearly came out on top. Most financial advisors are crooks, so you have NO IDEA how relieved we were to have found him.
Congrats to your son for graduating with honors! That’s a great accomplishment and you guys are great for supporting him on “doing his own thing”.
Thanks for the kind words on our story. We’re glad you enjoyed it!
Hello, very interesting story about saving and investing. I’ve definitely been a fan of Garth’s blog for a number of years.
I suppose I understand your perspective as my wife and I are in a similar position (we invest and rent). I also went to UW coop as well. My only caution is that I don’t think your story necessarily applies (certainly not as quickly). While co-op was useful, I never was able to find work in Toronto and thus able to really save as much as I would have liked coming out of university (adding in the onerous Masters which was essentially required).
The only other thing I was that we spend a significant chunk of cash to our moms on a monthly basis. I suppose this wouldn’t apply to you either correct? We also lived at like opposite ends of Toronto and therefore cars were mandatory.
Anyways, I’m not bashing or anything. I think it’s all great stuff. Certainly the numbers you’re posting are a bit eye-popping but hey it is what it is. If anything, I’d suggest moderating the tone a bit since (maybe I’m reading too much into it) that if DINKs aren’t closer to $1M mark then it’s all their fault. I certainly know that we do the best we can but life circumstances are what they are.
Please keep it up, I think it’s essentially a very positive message and a lot of younger folks simply don’t know there are alternatives (especially in Toronto).
While UW coop was vital in helping us gain work experience and eliminate student debt, but it wasn’t the reason why we got here. We got here by NOT buying an overpriced house, NOT owning a car, and by saving and investing. Having great salaries (though not insane…we’re not doctors, lawyers, or business people after all) helped, but many of our friends make even more than us but are struggling financially because they’ve taken on too much debt. We started this blog to show them what is possible if you choose a different path.
It’s very admirable that you are supporting your moms. I’m always in awe of others who put their families above themselves. You guys are awesome!
“If anything, I’d suggest moderating the tone a bit since (maybe I’m reading too much into it) that if DINKs aren’t closer to $1M mark then it’s all their fault.”
– I never said Millennials are at fault. The issue is that we blindly follow the “buy now or buy never” and “Work for a company and they will take care of you” beliefs without question. Everyone has their own path to Financial Independence and we don’t think you have to do it at the same rate or volume as us. In fact, by building a small side income of just 10K/year, you can cut your FI portfolio size by 250K, helping you reach FI faster. A lot of people won’t need $1M to become FI or to retire.
“Please keep it up, I think it’s essentially a very positive message and a lot of younger folks simply don’t know there are alternatives (especially in Toronto).”
– Thanks! This is what we’re striving to do. To let our readers know there is an alternative but they’re free to make their own choices.
I’m very impressed you guys kept rent low at $800 – $850 for so long. What type of place were you living in where rent was/is so cheap? Do you guys ever itch to live in a more expensivo place? B/c rent in SF is high, and I didn’t want to pay more than $2,000 a month for rent for a 2/2, I took the dive and bought a place instead in 2003. The place is paid off now and is part of my semi-passive income stream. Do you guys think you’ll ever want to buy a home?
It was the top floor of a house that I shared with the landlord. It had everything we needed, it just wasn’t fancy. SF rents are crazy high, but then again everybody works in Silicon Valley or FinTech over there. Here in Toronto, we have a strange situation of runaway housing prices but with rents that are still reasonable. Anyone who actually runs the rent vs buy analysis over here should run away screaming, but nobody ever does. It’s just “buy now or buy never.”
If that’s the case, then it sounds like housing prices are unsustainable. At the end of the day, housing prices must be determined by its earnings and earnings multiple.
In SF, house prices are high ($1.1-1.2M median), but the rent is also high too ~$4,000/month. But we’ve past the peak and are heading lower now. Whereas in Canada, it seems like it just goes up!
Yeah, even though the Price-to-rent ratio is well above the norm, people are STILL are obsessed with buying instead of renting. They all think houses will go up forever. No wonder my co-workers were so scared of losing their jobs, and willing to work themselves to death at their desks. Definitely unsustainable.
Thx for sharing your journey, particularly the msg that it’s do-able to become financially independent…and to do so without fancy financial modelling, etc.
– is the $1 million mark your combined (i.e. you and Wanderer) net worth (although since you’re married, of course, it’s ONE
– you mentioned SF…did you live there or did you work in Toronto?
Thanks and welcome to the blog!
To answer your questions:
– Yes the $1 million mark is our combined net-worth.
– no we never lived in SF. We lived and worked in Toronto.
Thanks for sharing your journey. My husband and I are on a similar path, hoping to be millionaires and travel the world/teach English in a few years. I need to reign in our spending a bit more and I am looking to lower our investment fees, but I think we can get there. It’s definitely motivation for doing the 9-5 thing for a couple more years, and great to see that other people have done it too.
Awesome! I gotta admit, travelling the world is pretty damned awesome, and I highly recommend you come with 🙂
I give you guys kudos for the rampant savings and investing but I have to say you sort of come off as born again Christians in your zeal of “The Truth.” There’s more than one path to financial independence (sorry, no capitalization) and general happiness. Everyone you seem to know with a house is miserable and in debt, and I’m here to tell you, that’s just not a universal. Some of us in the “cult” of home ownership have managed to both create a stable and relaxing home life while building a large portfolio of income producing investments (and not just stocks and bonds.)
How did you manage to pay only <$1000 for rent per month in Toronto? Which area did you live in? Rent is so high in Toronto. One bedrooms downtown cost $1700 at least now.
East York. I still have friends living there now, paying $800-1000/month. The trick is to not look for shiny downtown condos, but to move a bit more east and away from the downtown core. The place we had didn’t have pretty aesthetics but it had everything we needed (it wasn’t a basement either which was great) and only a 25min subway ride to work.
Good work! You discovered the magic formula of earn high, spend low, invest the difference.
The only thing I can’t figure out is why you are paying someone 1% to invest in index funds which you could much more easily do yourself (without the paperwork and without the fees).
And Garth? C’mon. The guy is entertaining but has been so spectacularly wrong for what, 10 years now?
Well, actually Garth was the one who kept us from shooting ourselves in the foot back in 2012. We were originally going to build a portfolio consisting of dividend producing stocks. Garth told us that was as stupid idea, and it saved our butts.
He’s also really helpful with tax minimization and as a fellow author, even gave us advice on our publishing contract for our novel. Sure, we could do it ourselves, but we trust Garth to prevent us from making catastrophic mistakes in retirement. He’s proven his worth so far.
Good job, but you can do better.
My wife and I are engineers too.
You can easily buy and pay very similar mortgage vs rent.
But rent is thrown away. Mortgage is locked away but it’s mostly yours (less intrest, not including apprecation)
Sure you need to pay operation costs of maintenence and tax etc.. but where else can I get a huge loan for very little intrest??
After a year of diligenty paying back the mortgage; get the bank to give you another loan based on new equity in your house from appreciation and buy another one. Rent the basement of first house and all of second. Rinse and repeat.
In the meantime;you should still have a simian savings. take your diligent saving practice and invest that too. Key is to be smart whichoice house you buy. Less risk of operational cost is key. (Fixes etc)
Sounds like your parading around more than you should.
Vancouver. Just bought my second place.
This is a great story. I love it. I saw your video online today on Facebook and had to google you. I did want to make a point that is overlooked. You guys had a 6 figure income level from the start and maintained it for 9 years. Your peak was $166k for the year ! Insane. Who can’t save money making a great income like that . I think it’s more thaN just not owning a house, car payment and the other things you mentioned but having a great income like yours was really a key factor to funding your cash
It’s true that our 2 engineering salaries helped, but please remember that we got there after hustling for years and getting promotions. We didn’t start there.
I wish it were true that a high salary = high savings/net worth, but it’s not. If it were true, all our friends making 6 figure salaries would be millionaires. But they aren’t. Why? Houses and consumerism.
Hope you don’t mind me asking…looks like your pretax combined income is around $260k…is that about right?
Whoa! $260K?! That level of taxes would mean we live in Denmark 😛
No, at the highest point in 2014, our pretax combined income was $213,000 (after tax= $164,000). This included overtime pay as well as regular salary. Since we used RRSP and TFSAs we were able to minimize our taxes.
Nice. Thanks for the info.
Loving your blog – certainly learning a lot from your journey. Personally, I own a house. 100% of it. Mortgage free and loving it. We bought it in 2008 and finished paying it off 2 months ago. Best decision we ever made, financially speaking (our biggest expense currently is property taxes at around $3,000/yr). Still have traveled our hearts out (how can we not? the world is beautiful!), and even though we’re not FI, we both have jobs that we love, work from home most of the time and have a dreamy life. So buying a house is not the end of the dream – it’s all a matter of perspective, I guess – and personal view.
Good for you for being mortgage free and buying in 2008! That was a good time to buy 🙂 Prices have shot up since.
Your life sounds great and I’m happy for you! 🙂
Congratulations. This is a pretty good story and reads well, and I feel a bit sorry for your job and bosses. I’m glad you were taking matters into your own hands.
Based on your information you were making ~$85k/each out of undergrad (based on your 2007 combined post-tax income of $125k). That’d put you in the 0.5% of college graduates in income in Canada with under 4 years experience using Canadian income survey results, and if they had it further segmented I’d guess you’d be in the 0.01% for people with under a year experience. As computer engineers that seems beyond unlikely. In fact, I’ll go as far to call it a straight lie.
It’d be easily fact checkable if you’d actually say where you worked. But you won’t because that’ll destroy the narrative you’ve created.
Yeah, right. Considering the amount of shit I’ve said about my previous employer, I’m sure they’d LOVE to be identified in a public forum.
As for your question, we made average $75k each pre-tax. After the first year post-grad, we became qualified to participate in ESPPs, RRSP-matching programs, and the bonus pools, which of course we took full advantage of, plumping our pre-tax income. Plus we had built up RRSP contribution room from our co-op years that we used to reduce our taxable income even further.
But I’m sure you’ll find some other detail to nitpick on to try to disprove the fact that we exist, despite the fact that clearly we do. If you think I’m lying to you, please feel free to leave so the rest of us can continue getting rich without you.
What is up with all the fact detectives???! I have been binge reading your blog and come to the conclusion that it feels amazing to have a doppelgänger. I’m continually inspired by your resolve, focus and sassiness. kind of the same boat as you except I got pregnant with triplets 2 years ago. I’m not abandoning my 8 year plan to be part of the double comma club just because they arrived. The only thing that has changed is spending extra on diapers. Not a huge dent to savings to my surprise. They actually motivate me to save more. Do keep up the good work and keep on writing.
“I’m not abandoning my 8 year plan to be part of the double comma club just because they arrived. The only thing that has changed is spending extra on diapers. Not a huge dent to savings to my surprise. They actually motivate me to save more.”
That right there is why you are AWESOME! I’m so sick of people using kids as a shield to not do anything about their situation. I’m totally in agreement with you. Kids are NOT as expensive as people think and they drive you to want more and be better for them.
I know you guys are against buying a home. But you cant deny the fact that a lot of investors have made money in at least the last 4 years in the Toronto and Vancouver market. I know of investors myself who have just invested in buying a house for the short term and have made returns in these last few years that could never be made in the stock market turning them into millionaires. Just another way to invest
Not saying you can’t make money with real-estate investing. But people do have to be aware of the ownership costs and the need to time the market. Most people jump in without thinking about it because home ownership is so coveted in society and the media. And housing in Toronto and Vancouver is so unaffordable for Millennials, we wanted to offer an alternative.
Thank the Lord I stumbled into your website recently and sign up on your mailing list, as a millennial revolutionary warrior..hahahaha?✊?
But unfortunately Im totally clueless when it comes to stock market, investing and portfolios. Even when im reading the comments all those acronyms just fly by my mind like a bullet train….im married and doesnt have any kids yet…but i do want to be financially free..when that time my baby got tired floating in the air and decide to land in my stomach…my husband and i doesnt want to be millionaires but we do want to be financially independent and if being millionaire comes our way then it will be received with open arms..haha…ok im ranting…
Anyway my question is what would advice to someone like who are totally cluless when it comes to your savings work for you?…my husband and i have saved some money but not in $$$….im hoping that since your in Canada maybe I could apply your “system” to my country….
Here in Russia to make money is a lot easier! I bought a farm land( it’s very easy even now) in 2008 for 100k$ On the riverside . In 2012 I “got” permission to change its category to private home construction and now its value skyrocketed to 850k))!
Bonds are an interesting security.
1. The rate goes up when the price goes down.
2. The rate goes up and the price goes down when the prime rate goes up
3. The rate goes down and the price goes up when the prime rate goes down
4. The longer the term of the bond, the higher the magnitude of the prime rate’s impact
Being a risk-adverse investor, I prefer short-term (less than an year) bonds. The coupon rate is low, but that is what you get for low risk.
My biggest concern is in which direction will the Bank of Canada prime rate go. I cannot see the Bank of Canada prime rate going much lower.
We prefer to stay neutral on that prediction because NO ONE knows where the interest rate will go. We’ll talk more about that in the investment workshop.
Oh, you just brought me back to the Ford era!
I am loving your posts. Thank you so much for sharing!
Tremdously motivating. You are an inspiration and now my virtual mentor. One quesiton? How on earth did you save so much monthly? Your last year peaked at 11k a month which is incredible! Thanks,
Thanks! Once we had a goal of becoming FI (hating my jobs helps as well), I tracked the shit out of everything and worked a lot of overtime to save as much as possible. Saving is much easier when you have a goal to run towards.
Hey, good to find sonemoe who agrees with me. GMTA.
I arrived at your site from reading a guest post you have at financial samurai. I have been spending almost 3 hours reading on your investment series and it’s awesome. You are so inspiring. Thanks for sharing your strategies!
Thanks and welcome to the blog, Mrs. MFB!
Hi guys, I’ve been thinking of retiring early and living off dividends for quite some time and I thought I can’t be the only person. I’m glad I finally found other like minded people 🙂 You’re totally right too. Traveling is NOT expensive. I’ve done nonstop travel for months on end and I definitely spend more living in NYC just doing my normal day to day thing.
My question to you guys which you’ve probably answered somewhere already, is your 1m portfolio purely in after tax assets? If so, do you have money in retirement accounts? I’m not sure how Canada works but something equivalent to a 401k?
I’ve been investing in a more aggressive portfolio than you guys and gauging how sustainable it is by owning a large portfolio of higher yielding divi stocks. So far, it has been good but of course anything could happen to the markets especially with Trump in power now.
I’m looking to call it quits after I’ve reached 300k of after tax income. My current portfolio yields about 10-11% and I reckon $30k cash a year will more than enough cover my expenses for being a perma-traveler. Plus I own an apt in Manhattan which I will rent which should net me more than my mortgage+tax payments.
Plus, we all know that being “retired” doesn’t mean you’re sitting on your ass doing nothing all day so I will eventually work again. Using my Dive instructor certificate to teach diving in the Maldives for starters! Anyway, props to you guys for doing it right! We were not born to pay bills and work for the rest of our lives!
Hi Johnny! Welcome to the blog and kudos for getting on the path to Financial Independence!
To answer your questions:
1) Most of the portfolio is in after tax assets, but some of it is in RRSPs (the Canadian equivalent of 401K). One of the advantages of early retirement is that we can melt that portion by slowly withdrawing it (while our income is zero) tax free, so that by the time we’re actual retirement age, we’ve paid zero taxes on it.
2) We prefer indexing investing over dividend investing because we believe the capital appreciation will be greater in the long run, and the risk lower since by not owning individual stocks, the portfolio can never crash to zero. That being said, dividend investing in the US does make sense, if you are picking stable companies that raise their dividends over time. Not knowing exactly which companies you own, I can’t comment on the risk exposure or diversification. In Canada, we tend to shy away from dividend investing since the Canadian economy is heavily reliant on oil and financials, which posts a sector risk.
3) Yes, I think 30K/year is enough for a single traveller, as long as you’re willing to balance expensive places with SE Asia, South America, etc. I would just make sure you a) buy travel insurances b) have some cash set aside outside the portfolio for emergencies c) make sure the dividends in your portfolio are solid and that you’re not just yield chasing at the expense of quality stocks.
Hope that answers your questions!
Ah interesting fact with the rrsp. With the 401k here, we are allowed to withdraw early and if you’re making 0 income, the tax will be low, but we are also fined 10% for withdrawing before 65 so it’s not as advantageous, otherwise I would stop working much sooner!
Check out our article on the Roth Conversion Ladder for how to withdraw from your 401k before the age of 59.5: https://www.millennial-revolution.com/invest/let-government-fund-retirement/
Which financial advisers do you recommend for US readers? Or can we also use Garth?
Since we’ve never invested with US advisors, we don’t have any to recommend. Garth is a Canadian advisor.
Generally, you will need a 100K+ portfolio for a good advisor to take you as a client. If you would like to learn to how to do self-directed investing, feel free to follow along in our free investment workshop: https://www.millennial-revolution.com/investworkshop/
Welp, here I am, a cool 5 hours after discovering your blog. Still here, still reading, and still in awe. I cannot wait to do a deep dive into the 17 available investing workshops (thank you in advance for those.)
SO after going back and adding up your savings column (from the net worth sharing), you saved a total of $892,914. For the most part, this is the total that was invested into indexes. Is this (early retirement), in your opinion, achievable without being able to save like that? I make around 55k gross with both of my jobs combined and am able to save $25k per year. I just became debt-free, and I am a renter. I am 29 years old. I too do not want to buy into the ‘own a house’ saga simply because I am about to be 30 and ‘that is just what you are supposed to do.’ My plan for the last year (once I was out of debt) has been to invest in Index funds as well as a Roth IRA and my 401k. People think I have lost my damn mind by continuing to rent as well as going for an investment plan made up of low-cost indexes. I say it is smart, and you guys are proof of that.
Please give me some hope by saying that even though I am single and have only have my relatively small savings ability of $25k per year, that something of your magnitude is achievable before my hair is grey. *Side note, I am starting a Roth IRA this month so deduct approximately $5k from my savings ability per year and make that number more around the $20k mark.
What?! You spent 5 whole hours of your life putting up with my insane ramblings? Woman, you deserve an endurance award 🙂
And holy shit, you make $55k/year and you save $25K/year! That’s really good! And since you can live on only $25k/year, you’ll need $625,000 to retire (using the 4% rule). $55K is not a bad salary and considering that you are only 29 years old, you will likely get raises and promotions over the years. If you can keep your expenses the same, your time to retirement will decrease over time.
What I’ve found is that after you retire, you end up having lots of time to create side income. So you actually MAKE money in retirement. So if you could build up a side income of only $10,000 in retirement, you only need ($25,000-$10,000) *25 = $375,000. Which at a rate of saving $25,000 a year and average 6% ROI, would take you only 11 years (and this is assuming no bonuses or promotions during this entire time)
If you check out my post on our Reader, Colby, you’ll see that with a 30K salary, because he saves 66% of his salary, he’s only 12-15 years from retirement (https://www.millennial-revolution.com/build/become-financially-independent-travelling/). So no, you don’t need to make or save ridiculous amounts of money to become FI. It helps but it’s not the only way. Especially if you make a side income in retirement.
Thank you very much for the quick reply and for diving into my numbers! I read about Colby and his story is awesome!
Again, thank you for the creation of this site! You guys already know this, but you’re killing it! Such an inspiration. Keep writing, keep living, and keep cursing 🙂
FIRECracker, are you invest in taxable accounts? do you happened to have any 401K , if so what’s the percentage ? Maybe you are in Canada? in US, the tax is killing the return for taxable accounts.
Yes, our Canadian version of the 401K is the RRSP. We both have RRSPs and they are maxed out.
Here’s an article we wrote on how to make your portfolio as tax efficient as possible:
how many percent of your investments are in RRSP and how many percent in taxable account?
it seems very expensive and all time high the US market, not sure if I am brave enough to jump in it. I am an real estate investor and try to sell the rental homes which have gained value to buy stock.
@firecracker, are the expenses combined for you and your husband? Or only yours?
Both of us.
Great blog, inspiring! I’m interested – what was the percentage of equities to bonds under Garth’s more subtle strategy? Was is still roughly 60/40? And can you break down how the ratios worked for each category (corporate bonds, preferred shares, real return bonds)?
What would have happened if you had 100% equities and did nothing but sit tight during the financial crisis? I understand that adding bonds to your portfolio reduces the drawdown, but it also reduces the subsequent uptick right?
So I’m curious – backtesting your chosen equity-based etfs (and assuming continued investment of 100% of your savings during the downturn) what would the final balance have been at the date of your retirement? And what would it be now?
Most of these FIRE stories involve people who had decent-paying jobs and who were relatively healthy. The ability to be financially independent does not exist for everyone and I think these blogs do a terrible job of selling FIRE as a product that anyone can have. Honestly, the percentage of people who can actively contribute $2,000 per month to savings/investing (heck, even $500) I’d imagine, is VERY small.
Hey when I grew up dirt poor in China with my parents earning 36 cents per day, I was told I wouldn’t amount to anything either. But hey, if you’re the type of person who thinks you have no control over your destiny, I can’t help you. No one can. If you actually BOTHERED to read the blog, you’ll see there are real reader cases (some earning 30K/year) who can still make it. But of course you won’t because it’s other people’s job to “sell FIRE” to you (despite the fact that I’m not selling anything I honestly don’t give a shit if you “buy” into it at all) because taking responsibility for your own life is too much effort.
Congratulations! I have been following your blog and FIRE community for about a year, I really appreciate how transparent you are about your spending and finances.
Just out of curiosity (I am a CPA by trade), what is your pre-tax income in 2014 when your post tax income was 164,000 (I will totally understand if you don’t want to share this information, as this can be a sensitive matter). I am curious to know the tax impacts/incentives on retirement saving.
Hey guys – did you use any pre-tax investment vehicles? It reads like it was all after tax savings. Or are you just not including pre-tax savings in the numbers? Just curious. Thanks!!
Just finished parts 1 -4. First of all props for your incredible ability to save. But that’s where my complements end. This is coming from an elder millennial. You spend a lot of time blasting boomers yet you spent nine years working your tail off like a boomer to make your million. You did not make your million chasing your dreams. Hypocrite much or am I missing something? This is why millennials are despised throughout the world because you are smug, self-righteous, absolutists. Sorry to crush your worldview but not all boomers are the horrible people you claim they are. My parents who are boomers worked their tails off to provide a good life for me and taught me to save and not live beyond my means. I’ve done exactly what you’ve done and what many others have done to make my million, but let’s not demonize a generation when our generation has its own problems too. I’m tired of the labels. Oh and you lose much of your credibility with your incessant F-bombs.