The Road To Early Retirement – Part 5

Long road5

The Light at the End of the Tunnel!

Yah, it’s kind of a long road, but it’s doable and it’s worth the trek. The Road to Financial Independence. The Road Less Travelled.

Let’s visit the Millennial Revolutionaries for the last instalment of their story on their journey to early retirement.

Excerpted from Millennial Revolution

HOW WE GOT HERE, EPILOGUE: THE REAL COST OF TRAVELING THE WORLD

2015

It’s been two hours since I resigned, and I’m still shaking.

Part of me is relieved, but part of me is also terrified. And since I never told anyone at work about what I’m actually doing, this matches the reactions I get.

“You’re QUITTING with no job lined up? Are you nuts?”

“Travel the world? How the hell are you going to pay for it?”

“Why would you quit? Don’t you like working here? ” (I couldn’t answer the question. I was too busy rolling on the floor laughing.)

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The next two weeks are a blur. Goodbye lunches, concerned friends (mostly asking if I’ve lost my damned mind), and endless knowledge transfer sessions for my replacement fill my days.

And after work, Wanderer and I are busy packing, selling as much stuff as possible, and consolidating the next year of our lives into 2 backpacks. It’s actually surprisingly easy, making me wonder why the hell we EVER needed suitcases just for 2 weeks of vacation.

On my last day, I have a great time shredding anything and everything I can get my hands on. But as I pack all my tchotchkes and hug my friends good-bye, I start to wonder.

What if they’re right? What if this is a mistake?

But then, I flash back to our last meeting with Garth. Together, we had carefully dissected our plan with surgeon-like precision; making sure all our T’s are crossed and I’s are dotted. We are engineers, after all.

We go over the following scenarios:

Black Swan Events? We delay our end date to June and set aside 3 years of living expenses in cash.

Inflation? We hold Real Return Bonds and Equities. 

Childcare costs? $6000 childcare credit, and NOT keeping up with the Jones’s.

Check, check, and check.

It’s all going to work out. We’re going to be fine. 

As Wanderer and I board the plane, and wave goodbye to the city that’s been home for the past decade, I can’t help but wonder what’s in store for us. As excited as I am, in the back of my head, fear still churned like big, angry, tornado.

But as it turns out, I had nothing to worry about.

 

 OUR WORLD TRIP

15 countries, 42 cities, crossing 3 continents. We travelled across North America, Europe, and Southeast Asia, all on our…*raises eyebrows dramatically*…trip around the world!

The last team to arrive…sorry I’ve been watching too much “Amazing Race”.

Anyhoo, I’m not going to bore you with every single place we visited, but I will provide you some of the most memorable, in order of most expensive (blegh) to least expensive (yay!)

ENGLEBERG, SWITZERLAND

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You know that scene in “The Sound of Music”, where Julie Andrews is standing on a mountain, twirling and singing “The Hills Are Alive…”?

Well, that’s pretty much what I did the ENTIRE time we were there. And because I have the leakiest brain ever, that was the only line I know from the entire movie. So of course, I spend all my time singing that line, and ONLY that line, at the top of my lungs, over and over.

I CANNOT understate how both exhilarating and annoying this is.

I can’t, but Wanderer can, based on him finally getting fed up and grabbing me by the shoulders saying, “BABE, if you DON’T stop singing that song, I SWEAR TO GOD I’m going to jump off this mountain.”

I’m…not allowed to watch The Sound of Music anymore.

One thing that isn’t beautiful though, is the prices, as Switzerland ends up being the MOST expensive place we visit:

  • Accommodations: $87/night (Air BnB)
    • Hotels in Zurich start at $300/night, so Air BnB saved our asses.
  • Food: $20/day
    • Good GOD food is expensive in Switzerland. So we ate at grocery stores and smuggled in pastries from Germany. This works because we only stayed in Switzerland for 3 days, but it’s the most beautiful 3 days of our entire trip. Not the tastiest, but definitely the most beautiful.
  • Activities: $75/day
    • Since we can’t just parkour our way up a mountain, we had to pay $70CAD to ride the lift, and another $150CAD to get to the Alps by train. Ouch.
  • Transportation: $40/day
    • Just getting around the city was PAINFULLY expensive.

AMSTERDAM

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The city that taught me the true meaning of the lyrics: “I can’t feel my face when I’m with you.”

PROTIP: If you’ve never dabbled with weed before, DO NOT, I repeat DO NOT, eat an entire space cake by yourself, jump on a ferry, and then attempt to pedal two miles to get home.

Trust me. Just don’t. I’m still not sure how we managed to get home, but by the time we did I thought the squirrels were trying to eat me and Wanderer was declaring, “We’re never going to get back. Hope is lost. All is lost.” Every 5 minutes.

  • Accommodations: $80 CAD/night (Air BnB)
  • Food: $30 CAD/day
    • Amsterdam cuisine very much caters to its audience: Hot, cheap, and tastes AWESOME when you’re stoned out of your mind.
  • Activities: $20/day
    • You know, in my buttoned-up white-collar cubicle dwelling days, I would have pooh-pooh’ed Trudeau’s campaign promise to legalize weed in Canada. I now stand corrected, good Sir. Weed is AMAZING.
  • Transportation: $20
    • Our Air BNB host is a bike mechanic, so he lends us bikes for the whole week. We biked everywhere for free.
    • The only cost was the $142 flight (for 2) from Copenhagen to Denmark, which average out to be $20/day over 7 days.

SANTORINI, GREECE

 

We ended up hopping a bunch of islands in Greece, but Santorini is by far our favourite. Hiking up and down white-stoned streets with the Aegean Sea on one side and rolling white clouds on the other, eating a lunch of fresh locally caught fish drizzled in olive oil, and then getting on an ATV and motoring out to a beach of black volcanic sand. This is why our host in Amsterdam kept insisting, “Go to Santorini! Just go!” Right before bellowing “LET’S DO A JOINT!”

  • Accommodations: $60/night
    • This was a crazy good deal, as we were off-season. This is actually a big discovery of ours. Since everyone else has a similar vacation schedule (Summer when the kids are out of school, or the holidays), whether you’re high-season or low-season can make a huge difference. By travelling when everyone else is at work, your costs drop dramatically.
  • Food: $38/day
    • We alternated between eating out and cooking every other day. An AirBNB host from Belgium taught us how to make Waterzooi (it’s cheap and delicious, Google it!) and we are milking that shit like you would not believe.
  • Activities: $0/day
    • In Santorini, nature is the main attraction. And it’s free! Plus I probably lost like 10 pounds from all the hiking.
  • Transportation: $5/day
    • We rented an ATV for 2 days while we were there to get to some places that were further away.

CHIANG MAI, THAILAND

We almost skipped Thailand because of the Bangkok bombing in August, but we are SO glad we didn’t. Out of all the places we visited, Thailand somehow felt most like home. The food in Thailand is like nowhere else. It completely changes your palate. (I thought Asian food in Toronto was good, but now I can’t even look at it) And it’s cheap. For a measly $3, you can have a full meal—main, dessert, and a smoothie. What can you get for $3 in North America? Half a coffee from Starbucks? Blegh.

And Chiang Mai in particular had all the modern comforts of home. Fast Internet. Good cell coverage. Even those douchey Work-Sharing places with those beanbag chairs were all over the place.

That’s why there are so many entrepreneurs and digital nomads there. I couldn’t even get a haircut without being thrown two job offers.

No matter where we are in the world, we’ll always consider Thailand our second home.

  • Accommodations: $19 CAD/night
    • We stayed at a brand new condo in the middle of the city, with a pool, gym, and sauna! All for $575 a month! What can THAT get you in Toronto?
  • Food: $20/day
    • Strangely, eating out at the hawker stalls and local restaurants is cheaper than cooking. I don’t think we cooked at all our entire time there.
  • Activities: $10/day
    • The Thais love their elephants, and aren’t afraid of showing you.
    • Countless Buddhist temples in the city, all of which are free.
    • Also, Thai massages. My GOD, there were so many massages. And the cost of one of them was actually less than just the tip we gave to a masseuse back home.
  • Transportation: $5/day
    • You haven’t truly lived until you’ve driven through someone’s front yard in a tuk-tuk whose driver insists “This a short-cut!”

And to all those wondering how we managed to fly to these exotic locales without breaking the bank, I have three words: Frequent Flyer Miles. Actually, four words: Frequent Flyer Miles & Ryanair.

So, how much did it all cost?

Are you ready for this?

Just $40,000 for the TWO of us for the WHOLE year.

That’s $55 per day per person .

Yup, you read that right. The ENTIRE trip costs less than what we spent in Toronto every year from 2006-2011 (before The Plan turned me into a Budget Nazi)

Turns out traveling isn’t really expensive at all. It was only expensive when we were working because we had to package everything into a hectic 2-week vacation package. And when you’re not limited to weekends, fighting for flights and trains with the rest of the corporate drones, the cost plummets. Heck, we even got a bus ticket from Amsterdam to Brussels for $4 each. I’m pretty sure they LOST money just driving us there!

Meanwhile, what happened with our portfolio?

It continued paying us a solid 4% dividend throughout the year. But while we were overseas, oil plummeted all the way from $110 a barrel to a low of $30. Taking the stock market and especially the TSX along with it.

Our portfolio swung from +5% to -3%. But we had seen this crap before, and we knew exactly what to do. So together, Garth and us agreed to take the extra cash generated by the dividends and rebalance into the storm. And lo and behold, by the end of the year, we were sitting back at our original position.

A yearly gain of 0% doesn’t seem that impressive, but for comparison, the return from the TSX in 2015 was -12%. We had now survived not one, but two catastrophic financial collapses with no money lost.

And now, knowing that the real cost of travelling the world is actually the same as simply living in Toronto, we realized 3 things:

  • Living in Toronto (and by extension many North American metropolitan cities) is WAY overpriced.
  • Travelling is not expensive. Travelling with other corporate drones is.
  • And most importantly, we could do this forever.

And why wouldn’t we? My last year of work showed me the damage that outsourcing could do. When a worker in India can do the job of a worker in North America while being paid half as much, we all collectively freak out. Nobody seems to win except the company. But what if we could turn outsourcing on its head? What if we could outsource ourselves? What if we could do our jobs, earn our North American income while living in a country where the cost of living is a fraction?

Right now, the press is starting to notice what we’re doing on millennial-revolution.com, and friends and family members are starting to ask us “Are you serious? Is this real?”

Yes. This is serious, and this is real. I have travelled around the world, and as of June 2016, a combination of dividends, portfolio gains, and a small income from coding and writing has resulted in a net worth that’s somehow HIGHER than when I left.

That’s right, I just travelled the world. For free.

Why was I so scared to quit again?

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Retired Buddah

The Road To Early Retirement – Part 4

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As with all worthwhile endeavours, although one needs to take the initiative and make the effort on their own, it never hurts to get a little help along the way.

Help can come in the way of books, friends, blogs, magazines, and various other media sources, however, nothing really beats personal, hands-on advice.

We re–join the Millennial Revolution couple to see how they discovered an advisor that helped them grow their savings exponentially by altering their financial philosophy and investment style.

From Millennial Revolution, How We Got Here, Part 4: The Bearded One

2012

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!

“Come again?”

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.

Spending:

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.

Category Cost/month Comments
Rent $800
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.
Gym $100
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.
Household/Gadgets $50
Gifts/Donations $175
Vacation $583 Trip to London, trip to San Francisco for a friend’s wedding (7000 in total for the year)
Savings $10,973

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At the end of the year…

Category Amount Comments
Combined income (after tax) $168,680
Total Spend $37,000
Savings $131,680
Savings Rate 78%
Investment Income $17,000
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

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2013

2013 is pretty hazy…because we spent half the year writing like crazy, and the other half drinking ourselves into a stupor.

Why?

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.

Spending:

Category Cost/month Comments
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.
Entertainment $40
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!
Gifts/Donations $150
Vacation $467 A trip to visit friends in DC + Cruise from Boston to Tampa, Florida
Savings $10,132

2013_spending_2

At the end of the year…

Category Amount Comments
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.
Total Spend $33,416
Savings $121,584
Savings Rate 78%
Investment Gain $55,000
ROI (After Fees) 8.39%
Total Net Worth $832,414

nw_2013

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…

2014

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 goe1s from a dull ache, to anger, to full-fledged rage.

“I can.”

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.3

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.

Spending:

Category Cost/month Comments
Rent $850
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.
Bills/Transportation $250
Gym $75
Clothing $20 Slightly more stuff than last year, but still bare minimum. Seriously, I hate clothes shopping. It bores me to tears.
Household/Gadgets $100
Gifts/Donations $270
Vacation $168 We pretty much skipped out on vacation this year, since, you know, the rest of our lives would be one giant vacation.
Savings $11,083

2014_spending

At the end of the year…

Category Amount Comments
Combined after tax earnings $164,000 Wanderer gets his third and final promotion.
Total Spend $31,000
Savings $133,000
Savings Rate 81%
Investment Returns $53,000.
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

nw_2014

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.

Yin-Yang-symbol copyHarley 1

Retired Buddah

Happy Birthday Mister Money Mustache!

If I haven’t already mentioned it, one of the best sources of information about how to retire early is the website: http://www.mrmoneymustache.com.

I read it regularly, and in fact, it was my inspiration for getting my financial act together and realizing that there is more to life than being a wage slave.

Anyway, that blog has just turned six years old. It has been a monumental success. So, here’s to you Mr. Money Mustache – Happy Birthday!

Check out the link below!

Taking down the old sign at the future MMM HQ building last month. Much more has changed since then! In early April of 2011, I started a blog. Although I secretly hoped that lots of people would end up reading it, it was partly just a form of personal therapy – a place where I…

via Mr. Money Mustache Turns Six Years Old — Mr. Money Mustache

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Retired Buddah

The Road To Early Retirement – Part 3

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Navigating along this winding road leading to financial freedom, we check back in with the savvy millennials who have laid out the path for their cohorts to follow. Keep saving your pennies kids.

Excerpted from: Millennial Revolution – How We Got Here, After The Crash

2010

After the happy-go-lucky-fun-times of 2008/2009, I’m finally feeling relaxed and getting back into the rhythm of things.

Work is going so well, I decide to acquire a comb! Because unlike when I worked for “The Gulag”, I actually have time to shower, brush my teeth, and comb my hair. Finally, I’m starting to look and smell like me, instead of a pile of garbage disguised to look like a human being.

My new boss, Scott, is great. He leaves Lindor chocolates for us on his desk, takes us out for team lunches, even invites us to his house for summer BBQ’s. And unlike my old boss, he actually calls me by my real name, instead of “What’sHerFace”.

One day, I come home to find that Wanderer has scattered rose petals on the floor, placed vanilla-scented candles on every surface, and even set up a massage table in the middle of our living room.

After giving me a nice, long, aromatherapy massage, he gets down on one knee, and says: ‘this is what your life will be like from now on. Marry me?”

I blink. Once, twice. Three times. I’m having trouble seeing. What is this strange, unfamiliar wet stuff in my eyes?

But just as I’m about to answer “Yes! Yes! A thousand times yes!” our 70-year-old half-naked landlord bursts into the room in his tighty-whities yelling “HEY! NO CANDLES IN THE HOUSE!”

And that’s the story of how we got engaged…

The next week, we start planning for a big, elaborate wedding. But while we’re struggling to choose between Chiavari or Bentwood chairs for the reception (on the form, I write in “who gives a shit” but that just makes the wedding planner mad), I throw my hands up, and decide fuck it, we’re eloping. So instead we go to Aruba and choose a simple beachside wedding package, consisting of Wanderer, me, and the giant pile of money we’re NOT going to blow on a pointlessly extravagant wedding. To keep my in-laws from disowning us, we agree to let my mother-in-law invite whomever she wants to the reception back home.

On our big day, our perpetually frazzled wedding planner gets all the details wrong…from the flowers (we asked for lilies, we got hydrangeas), to the color scheme (we asked for red, we get gray), to even the cake (carrot cake?!? What kind of monster are you?).

But as I stare into Wanderer’s big doe-like eyes and fuzzy caterpillar brows, I think “Who cares”? I’m marrying my best friend, and we are going build one kickass empire.

We are married. On a beach, at sunset, overlooking the Caribbean. I’ve married the boy who’s been my lab partner and BFF since 2nd year university. This turns out to be my best life decision ever.

And now that we’re married and saving up for a house, I actually start to dig into our expenses.

“Hey, do you know we’re spending $500 a month JUST on beer?” I ask Wanderer.

“But beer is delicious! We can’t just NOT drink beer. That would be insane.”

“Yeah, but you know they have beer in STORES right? Why can’t we buy beer and drink it at home?”

Wanderer looks at me, confused for a second. “I…don’t…know.”

Around here we also just woke up and realized that the ritual of paying a cover charge to get groped by random strangers who are 80% Axe body spray, also known as “clubbing” is incredibly stupid. So our food budget drops effortlessly by $500/month ($300 saved by buying beer at the supermarket rather than bars, $200 saved by no longer going clubbing) . YEEHA!

Spending:

Category Cost / Month Comments
Rent $800
Food/entertainment $1700
Bus pass/utilities/misc $300
Vacation $154.17
Wedding/Honeymoon $833.33 $10,000 total for that year which includes: Aruba wedding package: $1000, Aruba honeymoon vacation package: $7000, Wedding dresses: $100+$300 (bought from an outlet),Wanderer’s suit: $400,Hair and makeup, photographer, misc: $1200,Reception: $0 (Actual cost $10,000 but it was covered by cash gifts from guests)
Savings $8329

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Miraculously, I managed to somehow not fuck up at work, and get another promotion. At the end of the year, this is what our balance sheet looked like.

Category Amount Comments
Combined income (after tax) $145,400
Total Spend $45,450
Savings $99,950
Savings Rate 69%
Total Net Worth $380,250

nw_2010

2011

Now that we’re married, it’s time to act like real adults and start shopping for a house.

We look around the neighbourhood and find one that’s decent. It’s a semi with no parking, low ceilings, and an unfinished basement, but I do like the kickass backyard and balcony.

We ask for the price and the listing agent tells us “$750,000”.

“WHAT? But it doesn’t even have parking!”

“If you don’t want it, I have eight other buyers lined up.”1

And it’s not just this house. Let me tell you a story about “Devil House”.

You see, Devil House, is this dilapidated, two story house we see every day on our way to work. To say that it’s a fixer upper would be the biggest understatement ever. Why? Because DH wasn’t just falling over, it was inhabited by a man who would have made Charles Manson look normal. One time we walked by and saw the word UFO smeared over all his windows with what we could only hope was red paint. Another time he put up signs all over his yard ranting about the government trying to steal his eyes. And one time we walked by and saw him digging a bunch of six foot-deep holes all over his front and back yard. (This is NOT a joke. This actually happened.)

So you can imagine our shock, when, one day, we see a sign on the door that says “FOR SALE”.

“Who in their right mind would buy this house?” I ask Wanderer, incredulous.

“I bet some idiot’s going to buy it for $500k”

I burst out laughing. “No one’s THAT dumb.”

One week later, SOLD. $500k.

“WHAT?!?”

And to prove my point, a flipper moves in, slaps some dry wall and hardwood floors on it, and sells it for $800K two months later.

The floors were uneven. There was no parking. And a cursory home inspection would’ve revealed that the basement was a portal to Hell. But of course, no one bothered with an inspection because they had to drop all conditions to participate in the ensuing bidding war.

To this day, we have no idea how many bodies the new owners found under the floorboards.

Oh, and speaking of dead bodies I see every day, my team narrowly escapes the guillotine during a massive re-org, and we move to a new department.

Things are eerily quiet when we walk into the new office. No one is laughing. No one is smiling.

People find it strange that we joke during meetings. They find it strange our boss talks to us in human language, instead with barks and growls. They start whispering amongst each other whenever we are around. I suspect this is NOT a good sign.

Right around now we decide to take a break from all the fruitless, idiotic house shopping, and go on a vacation to Las Vegas. I have a blast. Literally.

When I come back from our trip, I learn that I have a new Director. She’s constantly mad, and with her long shaggy hair and sizeable canines, she kind of looks like a dog. So I call her MadDog. And my boss Scott has, somehow in the course of 2 weeks, gained a whole bunch of gray streaks in his hair. The reason why is obvious, as he is being constantly barked at by MadDog.

One day, he announces our work is quadrupling. Orders are coming from the top that our performance, which had racked up awards in our old department, was now somehow “unacceptable”, and we now needed to submit weekly reports detailing why we shouldn’t be immediately fired and replaced.

And just when I was starting to like this place…

Spending:

Category Cost / Month Comments
Rent $800
Food/entertainment $1700
Bus pass/utilities/misc $300
Vacation $583.33 Vegas, Cruise, Orlando for $7000
Savings $10575

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And at the end of the year…

Category Amount Comments
Combined income (after tax) $167,500 Wanderer gets a second promotion. Work is getting hellish for me, with lots of overtime, but at least our salary goes up.
Total Spend $40,600
Savings $126,900
Savings Rate 76%
Total Net Worth $507,150

nw_2011

At this point, our cash in the bank has peaked above half a million bucks, and we start saying, “Holy crap, this is kind of a lot of money.” The plan was always to buy a house, considering it’s the “grownup” thing to do, but… considering how my work is quickly morphing into “Gulag 2.0” and the housing market is just getting more and more idiotic, we start searching for better options.

And one fateful morning while browsing finance blogs, we idly scroll by one that catches our eye.

“Hmm…” Wanderer says. “The Greater Fool…”

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The Road To Early Retirement – Part 2

Long Road 1

As I noted in the previous post, the road to retirement is one of financial self discipline.

The earlier you get on it, the earlier you’ll get to financial freedom nirvana!

Let’s continue with more excerpts from:

Millennial Revolution – How We Got Here Part 2: PANIC”

In the depths of the 2008 Financial Crisis, the Dow would regularly dive 500+ points, and I vividly remembered the TSX dropping over 1000 points in multiple trading sessions.

Here’s the tricky thing about investing: When stock markets are going up, it’s really easy to convince yourself you’re a genius. “Oh, I came up with this system and I picked these stocks and I’ve already made $10000!” people say. Well, that’s because everything’s going up and you just got pulled along for the ride. You have no idea if a particular investing strategy is any good until you’re see how it performs when everything’s on fire.

And in 2008, everything was on FIRE.

We had invested nearly all our assets on the eve of the worst financial crisis in modern history. Within a single trading session, we had given back all the gains we had made investing. And in the trading session after that, we were in the red. And in the trading session after that, we were DEEP in the red.

“So, how was your day?” Wanderer would say after returning home from work.

“ShitshitshitshitSHIT!” Was my reply as I hunched over our laptop watching our portfolio get pounded.

I understood, intellectually, the strategy of Index Investing, and how it was impossible for your portfolio to go to zero. But there was always the caveat that it was impossible for your portfolio to go to zero unless the world ended.

And on September 15, 2008, when Lehman Brothers filed for Chapter 11, the single biggest Chapter 11 filing in US history, causing the Dow Jones Industrial average to drop a cataclysmic 1000 points, it kinda sorta seemed like the world might actually end.

People were losing their homes left and right with entire neighbourhoods getting flooded with foreclosure signs. Newspapers were running stories about the impending collapse of the global financial system (with black-and-white pictures of 1929-style bread lines, just in case we weren’t already scared enough). People were hoarding gold and canned goods. Even Derek Foster, Investment guru and self professed “Youngest Retiree in Canada” (a title that I think belongs to me now) famously panicked and sold every stock he owned.

Losses to our portfolio kept building, and it just wouldn’t seem to stop.

By the time the end of the year rolled around, the stock markets had dropped almost 50%. Our personal losses were at 30%. The difference here is because we had 40% of our holdings in bonds, which didn’t drop (in fact, they went up), but that’s cold comfort when we logged into our brokerage account at the end of the year and the screen basically said “Hey, you know all that work you did, and all that money you saved? Well, almost a third of it is gone now. Oh, and it’s probably going to get worse. Merry Fucking Christmas.”

Spending:

Category Cost / month Comments
Rent $800 We move in together because of the “frying pan” incident documented in Part 1 and our rent halved.”
Food/entertainment $2200
Bus pass/utilities/misc $300
Vacation $583.33 $7000 in total for Cruise documented in Part 1
Savings $7033

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At the end of the year, this is what our balance sheet looked like.

Category Amount Comments
Combined income (after tax) $131,000
Total Spend $46,600
Savings $84,400
Savings Rate 64%
Investment Gains/Loss -$58,000  FUUUUUUUUUUUUUUUCCCCCKKKKK
Total Net Worth $134,900

nw_2008

2009

Our first foray into stock market investing was not going well. Within a few months, we were swimming in losses with no end in sight.

Now here’s the thing. A critical part of Index Investing is to create a portfolio that balances your holdings between stocks and bonds, and then to rebalance your holdings periodically back to your target allocation. If your target allocation is 50/50 stocks/bonds, and stocks do well to the point that it’s 60/40, you’re supposed to sell enough stocks and put that amount into bonds to restore your 50/50 target. If stocks do poorly and you’re now 40/60, you’re supposed to sell bonds and buy stocks. This causes you to buy low and sell high.

We knew that rebalancing was what we were supposed to do, intellectually. And in normal markets, selling off your winners to pick up more of your losers feels counter-intuitive. But in an end-of-the-world stock market crash, it feels downright insane.

In this situation, “rebalancing” meant not only selling off our bonds, also known as the only part of our portfolio that wasn’t currently on fire, it also meant taking every last dime of our paychecks that we could spare, and throw it into a stock market that was in free-fall, all while the media screamed “the sky is falling!” at us.

This was not fun, and I remember viscerally the feeling of putting $1000 into the stock market, only to have the stock market immediately plunge and my portfolio to go down $1000.

“Where the fuck did my money just go?!?” I would scream at the screen.

But we continued doing it, because we had faith in the underlying strategy. Buy the Index, and rebalance. No matter what.

Around mid-March 2009, the S & P 500 had found its bottom. From a pre-crisis high of 1550, it had crashed and burned all the way down to 683. But then it started climbing back up. And throughout it all, we continued to buy.

Here’s an interesting thing about this strategy. By buying into a storm, with the faith that the index would never collapse completely, as the price per unit dropped we were naturally picking up more units for the same amount of money. As a result, when the recovery happened we were able to participate in the upside more strongly than the downside. The actual value of the S & P 500 didn’t recover to its original number until 2013, but because we had picked up so many units when everyone was running the other way, we hit our break-even point, taking into account interest and dividends received along the way, by December of 2009.

So in December of 2009, we made the single biggest mistake of our investing career: we exited the stock market completely.

It wasn’t because we lost faith in the stock market, or in Index Investing as a strategy. Quite the opposite, actually. That year had given me a rock-solid faith in Index Investing that we carry to this day. While everyone was losing their shit and jumping off buildings, we, lowly unsophisticated retail investors, had managed to do something most Wall Street traders and even financial behemoths like Lehman Brothers couldn’t pull off.

We didn’t lose any money in the Great Financial Crisis of 2008.

So why did we sell? It’s actually quite simple. Talk of marriage and settling down had been happening more and more, and we figured we would probably need that money in cash for the inevitable house purchase (Spoiler: HA!). So in December 2009, we exited our positions and moved completely into cash. History would prove our move a mistake, as the index would rampage higher over the next 2 years, but as far as financial blunders go, I very much consider myself lucky that this was the biggest one.

Spending:

Category Cost / month Comments
Rent $800
Food/entertainment $2200
Bus pass/utilities/misc $300
Vacation $750 $9000 for the year. Yes, we love our vacations.
Savings $7283

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At the end of the year, this is what our balance sheet looked like.

Category Amount Comments
Combined income (after tax) $136,000
Total Spend $48,600
Savings $87,400
Savings Rate 64%
Investment Gains/Loss +$58,000 Holy Shit, Money. Welcome back. I took you for granted. Let’s never fight again.
Total Net Worth $280,300

nw_2009
Coming up next: How We Got Here – Part 3.

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Retired Buddah