Featured Blog: Debts To Riches

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A few months ago, I decided to connect with my local mustachian community in Vancouver, BC. The plan was simple and appropriately frugal: Get to a nearby lake, hike, and meet personal finance nerds. That was it. No fancy drinks at a bar, and no unnecessary spending. Since I certainly don’t save >50% of my income like these guys, I was out of my depth. They all brought food from home. I had bottled water. Some of them were already retired. I never intend to retire. Some were almost millionaires. I still have debt! It was quite the shakeup. And yet, I knew I needed to meet them to reorganize my life. Though I’ve been writing about personal finance for two years now, I’m actually quite lazy and complacent, and I often have trouble following my own advice. Then, on this trip, I met Veronika.

Her story scared the crap out of me at the time. Her tuition and past living expenses resulted in a rewarding job, but she graduated in May 2015 with a staggering $130,455 in debt. Remember how $22,535 in debt led me to make a bunch of bullshit justifications about it? This news damn near killed me! And yet, Veronika didn’t seem too bothered. Quietly confident, she seemed as calm and relaxed as our retired new friends. HOW?!?

Well, I just blazed through her entire blog Debts To Riches, and I’ve gotta hand it to her. She’s executing her debt repayment plan with such laserlike efficiency, her debt-free and financial independence targets are boldly laid out in her intro: “DF: 2019 | FI: 2031”. If this doesn’t seem possible to you, I think it’s time you read her blog! It’s more than possible. She’s doing it.

Debts To Riches is peppered with money insights I haven’t seen anywhere else. She believes that “psychology > math” when it comes to saving, and this led her to write the most actionable personal finance articles I’ve read. Math is great, but what about maintaining motivation? If that doesn’t interest you, the numbers should. She started with $130,455 in debt just two years ago! As I write this now in November 2017, she’s crushed that down to $93,400 – a $37,000+ difference! Debt-free by 2019? Financial independence by 2031? I believe it. If you want insightful, eloquently written personal finance advice for real humans and not savings robots, look no further. Stop reading this.

Read Debts To Riches now.

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Let’s Start a HouseFIRE!

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You already know about FIRE (Financial Independence, Retiring Early). Heck, you might even know about LeanFIRE and FatFIRE — retiring with the expectation of spending <$40,000/year or >$100,000/year, respectively. You probably even know about CoastFIRE! Well, allow me to add more fuel to the FIRE! This post is all about “HouseFIRE”, and why you should care.

So what is HouseFIRE? Simply defined, it’s the stage you reach when you can retire from work just by utilizing your available real estate for money. That link has loads of tips, but if you’re a Vancouverite, you might have to get more extreme. Since I wrote this post, Vancouver’s average rent for a 2-bedroom unit has ballooned to $3,130, and landing even 1,000 square feet for that is near impossible! If you want to attempt HouseFIRE, you’ll need actual space. For that to happen, high-cost-of-living areas won’t work great, but nearby neighbourhoods might. You may find yourself with lots of space for the same housing cost just one town over! Here’s how I do it.

My $170,000 99-year leasehold is paid off, and it’s mere minutes from Vancouver. I have it until 2087, and the total from strata fees and property taxes amounts to $650/month (which I know is high). It’s a 3-bedroom condo, but one bedroom is currently an office for my photography business. I have the master bedroom, and a roommate lives in the remaining room. His rent covers the $650 I mentioned. My plan now is to relocate my office to our underutilized living room, and I’m turning the old office back into a bedroom I can rent out. When that’s finalized in March, I’ll be collecting $600/month on both rooms for $1,200 total. My strata obligations will most likely be near $700 by then, but I’m still looking at $500+ in profit! If I could live like “A” did, I’d be HouseFIREd! (“A” was living on $700/month, and paying $200 for rent. $500 for her other expenses covered it all!)

There are even people in my family who could be HouseFIREd. Mom, for instance, lives alone in a 4-bedroom townhome. If she took the master room for herself and rented the other three rooms to students, that could mean $1,800/month! If they chip in for utilities, that reduces her expenses even more! I think $1,800/month is perfect to live on. That’s about in line with what I spend now!

This is a great strategy for empty nesters. Instead of downsizing, they can maintain the value in their appreciating property, and have a source of extra income. Instead of thinking about retirement in just dollars, consider HouseFIRE! Can you retire on square footage alone? I bet some of you already can. Do it.

Can’t Handle FIRE? Try To HEAL!

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It’s 6 in the morning and I’m on a SkyTrain headed into Vancouver. From the looks of it, I’m the only one not on his way to work. The suit next to me is reading Bloomberg articles on his phone, and half the passengers are nodding off. I can’t imagine most of them want to be here. I’m listening to Taylor Swift on my iPhone and enjoying the ride because I have nowhere I need to be. My only goal for today was to write this, and I can do it from anywhere! This is the story of how I found freedom and lifelong happiness at 29. Hopefully, by the end of this post, you’ll be on your way too.

If you haven’t heard of FIRE before, it’s an acronym in personal finance writing that stands for Financially Independent, Retired Early. The Physician on FIRE guy? Not actually on fire. He’s just a family man who achieved financial independence at 39. You see “FIRE” kicked around a lot on the MMM forums too, and it’s a goal of many. It turns out most people don’t actually want to work for a living! I mean, given the choice between lounging by a pool in Guadalajara and a lifetime of office drudgery, most of us would be marching out on our bosses and guzzling Corona in no time! Well, I’m here to tell you things aren’t actually that simple. You might not actually want FIRE! To understand why, let’s take a closer look at its definition.

FIRE is generally defined as the stage a person reaches when the return on their investments is enough to cover their living expenses. A quick bit of math you can do to figure out your FIRE number is to take your annual expenses and multiply by 25. (If you spend $25,000/year for example, your FIRE number is $625,000. Start saving.) The reason for this is 4% interest is a generally accepted estimate of how much you can reliably make off the average portfolio. It’s somewhere between too-safe 2% GICs and somewhat-risky 7% index funds, and 4% just kinda became the default number. At any rate, I have no reason to dispute its logic. 4% certainly makes sense to people far smarter than I. However, FIRE is no longer a goal of mine. Part of the reason is the numbers are outside my grasp — I’ve done the math and I have no delusions about my ability to save — but I’ve also grown up a bit and experienced a different view of retirement. I now know what it’s like to barely work at all, and what I’ve found is it actually totally sucks! I needed to create value in the world to feel fulfilled, and sometimes, people were willing to pay me to create that value! Why wouldn’t I take the money? So what if someone might define that as “work”? Retirement sounds great on paper, but do you never want to work for anything ever again and just lie back and consume? Fuck, no!

With this in mind, I started optimizing my lifestyle. I needed freedom whenever I wanted, some work to feel useful, autonomy in my professional life, and enough money to have fun. FIRE wasn’t the solution because many FIRE followers try to frontload all their earning towards their early years working brutal hours, then they putter around not knowing what to do with themselves as soon as they retire! The Mad Fientist retired at 34, spent months travelling, then “realized it wasn’t making him happy”. Mr. Money Mustache basically went back to work doing construction and managing rental houses. If FIRE is so great, why are so many success stories plagued with ennui or employment akathisia? Well, it’s because full-on, work-hard-now-to-never-work-again FIRE is just too extreme. Fundamentally unbalanced, it takes too much effort in early life and too little effort in later life. In theory, it’s a great goal to work towards, but maybe there’s a better solution that can give you the good life now. I call it “HEAL”.

HEAL stands for Half Employed, Adjusted Living. It’s my way of describing a balanced lifestyle that involves half or less of a typical 40-hour workload, and adjusting your lifestyle to afford that freedom. You can achieve HEAL in a variety of ways, even if you’re young. For example, you can bump your income up so you only work 20 hours a week and spend the same as before, or you can go frugal so you can live off 20 hours of regular pay. For most, going frugal is easiest. Part-time work and frugality are key to HEAL. Some people even bump up their income and go frugal, and those people have it made. Though they might even achieve FIRE, they know “no work” isn’t the goal. What you want is the freedom to only work when you feel like it.

Here’s my situation: The last time I calculated my monthly spending, I arrived at $1,948.18. I’m bringing on a second roommate in a month or two, and the rent I charge him will cover my entire Bills category, eliminating at least $447.29. This puts me at just over $1,500 I’d need to cover in income. Working 20 hours a week at my low-pay liquor store job would net me about $1,100, and the remaining $400 could easily be covered by any photography booking! In fact, since I bill $400/hour to shoot weddings, even a single 8-hour booking covers me for 8 months! (The photography work is spotty, so I’m hesitant to provide monthly numbers. It fluctuates from $0 with no bookings to months like April 2016 when I somehow earned $6,353.41 without even shooting a wedding.) Naturally, any excess income from photography goes straight into paying off my debt, and once that’s taken care of, I’ll be trying to max out my TFSA! I’ve got this whole “HEAL” thing down! I’m “Half Employed” and my “Adjusted Living” made ~20 hours a week work for me!

If HEAL sounds good to you, here’s some recommended reading. First off, if you’re still unconvinced that you might actually want to work for the rest of your life, check out our previous blog post, “I Want You To Half-Retire (HR)”. Finally, consider picking up the Marcus Arce book, “HALF RETIRE – How to Escape the Rat Race Without Waiting to Win the Lottery!” At a cursory glance, the math in it checks out. I’m using strategies from it already.

By realizing I wanted HEAL and not FIRE, I’ve freed up my younger adult years to do whatever I want while working just the right amount to be even happier. Click the links in this post and all over this blog, and read them. People need work, and yes, I do intend to work even when I no longer have to! If you think of Work as a dirty word, it’s because you need a better job!

At 29, I’ve found the lifestyle I intend to have forever, and I didn’t even have to worry too much about retirement. What the heck is stopping you?

The Other Ben, or How to Retire at 33

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Ben is the most successful person I know. I’m actually embarrassed to be writing today’s post, mainly because I know I’ll never be as awesome as he is. Through sheer determination and innate frugality, he’s now on track to Retire For Good at 33. He’s 27 now, so he’ll be done in six years. SIX FUCKING YEARS. Here’s how he did it.

Those who have been with us since the beginning know there are two Bens: the dumb one – that’s me – and the smart one, Other Ben. Where I rack up Debt buying shiny things and drinking, Other Ben quietly drops thousands into his RRSP every month and doesn’t even blog about it like a tool.

He’s the kind of Ben I want to be when I grow up.

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Ben grew up in the woods, and never went to school. The year was 1999. He was living in a solar-powered house two hours out of Ottawa, and had no TV. City life was a foreign concept to him. At 11, he learned how to read, and how to code. With basic internet and online tutorials, he started learning HTML, JavaScript, CSS, and Flash. Within a few years, he mastered them, and started working on his own projects. He coded a chat system by 16. He became the webmaster for a local food co-op and started making $20/hour. He made Mac builds for The Battle for Wesnoth. He ported Frogatto & Friends to iOS. At 23, he moved to Vancouver. That’s when I met him.

Ben had many interests, but two stood out. The obvious one was software development. The second, quieter one was financial independence. He wanted absolute freedom from the rat race, and looked forward to a day when his investments generated enough passive income for him to Retire For Good and pursue whatever other project he wanted. He soon found work, and started making double what I do. He stayed there for four years.

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I messaged Ben last night. He’s in Brooklyn now, resting up before the first day at his new job. He’d just finished three months at Recurse, and I was asking him details for this post.

“What online resources did you use to learn code?” I asked.

“I started learning from people on IRC,” Ben said. “IRC was an interesting place, because often people were pretty rude and almost intentionally unhelpful when answering questions… But I hung out in the #web channel for a long time, and just sort of gradually absorbed knowledge…”

His new job makes him $100,000+ per year. His education was free.

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Ben’s not alone. I mentioned before he’s never had formal schooling. He hasn’t even been homeschooled. This isn’t really a surprise to me since I’ve always believed that modern academia is outdated in the internet age. Why bother memorizing history or doing equations longhand when you can bring anything up at the touch of a button? Mr. Money Mustache even posted an article recently where he mocked “fancy education” and simply suggested “Knowing how to Use a Goddamned Computer”. Ben figured this shit out early. I have diplomas worth tens of thousands and I’m just… me. Ben’s kicking my ass.

Formal education is the pits. In the internet age, you can learn anything for free. According to this article released by the Canadian Federation of Students, those “requiring a Canada Student Loan now graduate with an average debt of over $28,000”. Holy fuck, that’s more than I owe and I basically just partied for five years. Can you imagine what the damage would be if I were going to school too? “42% of Canadians under 30 years old still live in their parent’s home”. I got out and own my 99-year leasehold, and I don’t even have a bachelor’s degree. “In 2014, youth un- and under-employment among Canadian youth was 27.7%”. Well, that’s depressing. I have 2.5 jobs. What are these kids doing with their fancy degrees?

Being a self-starter will ALWAYS trump formal education. Ben is proof of that. Even I’m proof of that. The simple desire to get out there, make money, and be happy is NOT tied to academia. Ben will retire at 33. I take time off whenever I want. We both have a six-figure net worth, and neither of us have a degree.

Want success? Get out there and learn without paying someone to force you.

You’ll be a millionaire in no time.

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EDIT: The original version of this post was edited to hide personal details. Ben has also spoken up, and would like to clarify his goal is financial independence at 33, not necessarily retirement.

You Have A Drinking Problem

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I have a confession to make: I like craft beer, and that makes me stupid. Let me explain.

That’s not to say craft beer itself is stupid. I fully appreciate the care and craftsmanship craft brewers put into a well-balanced ale, but if you’re reading this, I’m gonna assume you’re working towards financial independence (hereafter referred to as “FI”). Craft beer is insanely expensive in BC. Look at this beer list. Let’s assume you have a basic understanding of how numbers work and avoid the $8.25 pint, but still like the idea of a “bold yet balanced Imperial white IPA hopped with Magnum, Centennial, and Nelson Sauvin hops from New Zealand” because you have a beard. That’s $7. Not the most expensive thing on the menu, but not the cheapest. Let’s roll with that.

Alcohol in BC comes with a sneaky liquor tax of 15%. Holy shit, we’re already at $8.05. And guess what, you’re not a jerk, so you tip your server 15% too. Suddenly, your 20-ounce pint is a whopping $9.26! WHAT IN THE LITERAL FUCK? Can I remind you that the base ingredients are about a buck? I don’t know about you, but it takes me about 15 minutes to down a pint. I’m paying $0.62/minute, which is like me paying my beer a wage of $37.20/hour to be in me. If that doesn’t make your head spin, you need to go back to school and learn math. Liking craft beer is stupid.

Don’t drink beer? You still have a drinking problem if you’ve ever bought a $5 latte or a $2.50 bottle of pop. The problem gets exponentially worse if this is a regular occurrence. After applying some Mustachian math, we find that even buying a single $5 latte every week over 10 years costs you $3,760! Your $9.26 beer? An absolutely stupid $6,963.52! Do the math. I’ll wait. And if you’re the type to buy a $9.26 beer every fucking day… I can’t even. Go away.

Here’s a new set of rules to live by:

1) You are NEVER allowed to buy any sort of beverage that costs more than 33% of the food you’re eating it with. Sitting down for an extravagant $15 meal? Your drink budget is $5. Live with it.

2) The next time you’re thirsty, DRINK WATER. This can be a fun mind game after a while. See how long you can keep this up before you indulge in the luxury of a goddamn Montrachet or something.

3) STOP drinking at restaurants and bars. You know that MGD your server just brought to the table? It’s less than $2 if you buy it at the liquor store and drink it at home like an unstupid human being. At a bar, you’re paying 4x more. Don’t be an idiot. We have lots of those already.

Again, I’m a lucky sonofabitch. A pint of Lousy Lager at the bar across the street from me is only $5 after tax and tip. Even then, every time I slam one of those back, I understand I’m being ridiculous and spendy. Unless you’ve already hit FI, you really shouldn’t be spending more than $5/day on drinks.

Remember: water is free and comes out of taps here. You have no idea how lucky you already are.