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.

Working Forever Might Not Be So Bad

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Taken from a previous post:

FIRE [Financially Independent, Retired Early] 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.)”

You can read the rest of that post here, though my description of FIRE isn’t as accurate as it could’ve been. For one, since this is such a huge topic, I didn’t exactly account for inflation. The truth is if you’re 30 now, you want to aim for $1M by 65 if you want to Retire For Good (RFG). This is because $1M in 35 years only amounts to $500,000 of today’s spending power, or $20,000/year in returns based on the 4% rule. This also assumes you can live off $20,000/year. Some people can’t. From this point forward, please note I’ll be using a tilde (~) to denote future value, and no tilde to denote today’s value. Here’s a post to help you math out your saving goals now, based on ~$1M/$500K/$20K. Read those links, and the math should all make sense.

In any case, I now advocate working in some capacity forever. Here’s some of the reasoning as to why, but this little bit of math should convince you that working forever might just be the way to go. (Trust me, it’s not as bad as it sounds.)

If $20,000/year is the goal, it’s very possible that someone at 65 could make that without too much effort at all. Remember, that’s only $1,667/month. In Canada now, what you can receive from Old Age Security ranges from $526-$874. Let’s aim for the low figure of $526, and subtract that from $1,667. (OAS is considered taxable income, so keep that in mind. Also, not everyone qualifies, so read this.) You’re now left with $1,141. Let’s also assume you have some savings. Let’s say you missed ~$1M by a wide margin and only landed at ~$400,000, or $200,000 of today’s value. Going by the 4% rule which spits out $667/month, that takes you down to $474. Now, I don’t know about you, but making $474/month, even in old age, seems entirely manageable to me. When retirees somehow watch 6.2 hours of TV a day now, making $474 per month working is a better use of time and will help you retain your health. This would only mean 31.6 hours per month at $15/hour. If that sounds bleak, it shouldn’t. At $20/hour, that number’s 23.7, or only 3% of your month! That’s only if you’ve completely messed up your retirement savings! If you’ve saved ~$1M, you’re done! You can coast! But if you’re like the rest of us and see yourself only reaching ~$400,000, you should understand you can work after 65 in a way that will actually be flexible, easy, and good for you, and you’ll still be perfectly fine!

Obviously, planning for old age can be kinda scary. There’s always the possibility poor health makes it impossible for you to work. This is why you should aim for ~$1M.

Society teaches us retirement is black-and-white. It’s not. Loads of retirees continue working to supplement their income. If you save properly now, you won’t have to work at 65, but you’ll probably want to anyway. I know I will. And even if you fuck up and don’t save ~$1M in this lifetime, a little bit of work after 65 can go a long way.

6.2 hours of TV time a day is 186 hours per month. Can you use <24 hours to plan yourself a more secure retirement, or are we crazy?

Let us know on Facebook. We’ll put any feedback in a future article.

Investing With As Little As $1/Day

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Let’s do this in two minutes.

Here’s some quick math to help you with your investing goals. No bullshit, no preamble. Share this with your friends to show them how easy retirement and investing can be. At 29, I’m better prepared than some 50-year-olds I know. Here’s how.

The math here assumes you’re 30 and will invest small amounts steadily until 65. That’s 35 years of growth. I invest aggressively in index funds, and I’ve been averaging around 7% annually. Let’s see what investing tiny amounts every day can do from 30-65 at 7% growth.

*****

• $1/day (or $365/year) = $53,988 at 65
• $2/day (or $730/year) = $107,976 at 65
• $5/day (or $1,825/year) = $269,942 at 65
• $10/day (or $3,650/year) = $539,884 at 65
• $20/day (or $7,300/year) = $1,079,768 at 65

*****

That’s bonkers, right? Every $1/day you put away can add $50,000+ to your retirement account? Time to bust out the ol’ piggy bank!

As for what to invest in, I can only tell you what my money’s in: the RBC U.S. Index Fund. (I also recommend TD U.S. Index Fund – e, which offers similar results, but with a lower MER.)

Depending on your goals, you might want to invest differently, so investigate options yourself and see if you can find better. All I know is I don’t worry about retirement anymore. With ~$20,000 in that index fund already and $10/day contributions, I’m anticipating ~$740,000 at 65.

Ready to do this? Calculate your numbers here, and comment with your findings below!

Not bad for a 2-minute read, huh?

I Think It’s Time We Split Up

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My friends and I fully embraced #microtravel this weekend, and just got back from an anniversary dinner in Nanaimo, BC. I could’ve theoretically gone alone, but my need to financially optimize things brought me to two conclusions: 1) “The more the merrier”, and 2) in order to avoid paying the entire cost of my trip, it made sense to split the bill with as many people as possible. Obviously, schlepping off some of the financial burden on friends is a morally questionable position, but allow me to elaborate. For me, financial optimization isn’t just about keeping more money in my pocket. It’s also about finding a win-win situation for everyone. Here’s our story.

In order to get to Nanaimo, we had to take a ferry. Our ferry ticket there was $106.65 for my car and three people. I’d brought my roommate who happens to enjoy my Nanaimo friends’ company, and one other friend who was attending the party already, though she would’ve gone on foot. They appreciated the direct ride to Nanaimo though, so the two of them ponied up the cost of our first ticket in full. Immediate savings to me: $74.70 for me and my car. When we got there, we all had a great time at dinner, and my roommate and I stayed for two nights in a $10/night room. He didn’t need a private room of his own, so savings to him: $20. Then, because our dinner was so huge, my Nanaimo friends decided to share the wealth, and we were treated to a second dinner with all the leftovers! Two great homemade meals instead of eating out: ~$40 in savings between us. And since my roommate appreciated the impromptu vacation, he took me out for a night of beers: $20! I paid for the ferry ride back. It seemed only fair. Through our entire 3-day vacation, we all included each other as much as possible to save everyone money. Everyone felt taken care of, we all made great memories, and a trip that would’ve cost me $250 alone became half that. Friends are awesome already, but when you have a bunch of them all working towards a common goal, you can all literally profit! Here’s another example.

I had a friend paying $115/month for a 3GB phone plan. Obviously, that’s terrible, so I started asking other friends what their plans were. Answers included $70 with fewer bells and whistles, all the way up to $150! My situation was super weird because I’d complained a lot at Rogers – I’m currently sitting on a 17GB plan – so I let my family join my Share Everything plan to save them some money. Months later, there was still no way I was blowing through that much data, so I signed my friends up too. Now, I have six people on my plan and their monthly cost to cover their lines is only ~$50/person! It turns out 17GB split across six people is just about perfect. Because I had an overabundance (of data, in this case) and split it across five other people, everyone benefitted. You’ll often find splitting one big thing across multiple people is more cost-effective than everyone paying for an individual portion, so why aren’t more people doing this?!?

We already do this by taking on roommates. We already do this with group rates at events. We already do this every time we order a huge plate of nachos for the table. Why don’t we do this for everything?!?

Look for the win-win situation. Bring extra friends to split the cost of a hotel room when you’re going somewhere anyway. They might dig a spontaneous vacation. (I do this for business trips all the time.) Order the 60-piece sushi combo and get everyone to chip in. You’ll all get more variety, and everyone’s meal will be, like, $8. On a road trip, don’t be afraid to ask for gas money. We’re all in this together. I once drove five people home after a party, and they all kept trying to hand me cash because none of them had to blow $20 on a taxi. Share your WiFi with your neighbour and split the bill. Split the cost of an amazing router if you have to, but you live right next to each other. Take advantage of that! Let’s just share everything and split the cost.

If we all did this, we’d all be richer and happier. Go frugal with friends. It just might save the world.

Screen Time Is Ruining Your Retirement

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*ring*

“Snffxughphlbtfuck…”

*ring*

I opened one eye. I’d slept diagonally again. Jesus, what time was it? What day was it?

*rrrrrrrrring* 

“Ugh… Hello?”

“Hello? Ben?”

I sat up groggily. “Oh, hey, Grandma. What’s up?”

“I don’t know what’s happened. The TV won’t work. I don’t know how to fix it. Can you come fix it for me?” She sounded sad and helpless. I guess when you’re retired, watching TV is a pretty big deal.

I looked at the clock. I was hoping for a leisurely office day, but so much for that. Sudden errands tend to derail hours of productivity for me.

“Sure, Grandma. I’ll be over at 2.” I hung up, and rubbed my eyes.

Man, fuck TV.

*****

It turned out to be a simple fix. Unplug the cable box, wait ten seconds, plug it back in. Too bad it took me almost an hour to figure out. Asking my Chinese grandma what settings she usually had her TV on turned into a linguistic nightmare.

As I drove home, it kinda bothered me how reliant she was on her TV. I mean, I know how bad TV can be for people, but especially seniors. Only three weeks ago, I posted on Facebook, “It’s happening again. Free time is turning into screen time, and I’d honestly rather be working.” Did you know the average American watches over five hours of television a day? And that the “average retiree spends 43.5 hours per week” (or 6.2 hours a day) watching it? This is especially troubling for us because, if you’re reading this blog, early retirement is something you’ve been thinking about. I don’t want to retire just to watch 6.2 hours of TV a day! Do you? I’ve lived it. It sucks.

But then, I realized there was an amazing opportunity here. If, in retirement, the average person could change their 6.2-hour TV habit into something more productive – maybe even something crazy like work – they could find themselves with more health and money! Read this. Choosing to continue work in a quality vocation is obviously better than binge-watching “Friends” for the sixth time, so why not just work? Work is good, as long as it’s quality work. (Think more “entrepreneurship”, less “being a cashier”. Loads of successful entrepreneurs are actually in their 50s or 60s.)

Now obviously, I’m not suggesting you shouldn’t prepare for a complete retirement. You should still prepare for FIRE (or at the very least, HEAL). All I’m saying is retirement tends to go only three ways: 1) You create a retirement in which you thrive, do all the things you’ve ever wanted to do, and are never bored, 2) you create a retirement that seems fun at first, only to settle into a purposeless existence where you’re bored, or 3) you go back to work. What if I told you #3 isn’t actually a bad thing, and can help cancel out the ennui of everyone who feels stuck at #2? Almost all the people I know thriving in retirement are still working in some way! The retired industrial design teacher I know found funding to write a book. The retired professor of psychology I know is wrapping up a year editing a psychology journal. Another retiree I know is building a house and continuing to add to his net worth! What I’m finding more and more as I get to know successful retirees is work is good for retirement. It opens up opportunities for personal enjoyment and enriches lives, but TV doesn’t. STOP WATCHING TV IN RETIREMENT.

Working past traditional retirement age keeps your brain sharp and “may even help stave off dementia”. Also, any decrease in sedentary activities like watching TV is a good thing. If you spent even 16 hours a week doing an entry-level job you enjoy – like what I do now for $13.50/hour – the ballpark math of it is you’d add ~$10,000 to your annual retirement income just to stay mentally and physically active through work. I think it’s a no-brainer. Sell the TV, and get a job doing whatever the heck you want! By this point, you’re financially stable enough that you’re retired, so even that ~$10,000 is secondary! And you’re most likely so experienced in your field, you could earn way more! You’re just looking after your physical health and mental wellbeing, and getting richer because of it!

The bottom line is if you’re retired and have a TV, that TV could be robbing you of the longevity and prosperity you’d gain from casual work. Even at 29, I see that happening to me now, so I’ve cut weekly TV time down to 4 hours. I’m choosing to work more, and invest more energy into my business. From now on, Netflix and PlayStation have no power over me. I sincerely doubt I’ll be 65 and wanting to play The Last of Us: Part XLIII.

Whaddaya think, TV-watching retirees? Is it time to go back to work?

Luxury Food is a Scam

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Every year, the Vancouver Rowing Club hosts an event they call Champagne & Caviar. It’s NOT really Champagne and caviar. We’ve gone a couple of times now, and it’s basically all-you-can-drink prosecco, other miscellaneous sparkling wines, and a lot of tobiko. Technically speaking, there’s no actual sturgeon caviar, and only about 10% real Champagne. However, with tickets priced at a very reasonable <$30, NO ONE CARES. Why? Everyone there knows it’s “close enough” and just as good! There’s no need to pay more! Let me explain.

Marketers are mostly responsible for why common things cost so much. They’re why industrial diamonds are cheap (and are literally known as bort), but an engagement ring can be $36,537. They’re why a fancy lobster dinner can cost $60 or more, even though lobsters used to be prison food. They’re why a Rolex can be $31,625 when there’s literally no reason for anyone to wear watches anymore. It turns out people like Veblen goods, and like to pay more to feel rich! It’s the most glorious scam ever orchestrated in the name of capitalism, and it’s working! Luckily, we see it for what it is. Usually.

Well, as someone who fell for luxury goods and luxury foods for years, I believe we should savour the cheap shit. I have yet to taste a $500 Champagne that gave me more satisfaction than 25 bottles of decent $20 cava. Yet, to the average consumer, everyone claims to love Champagne, all without even knowing why, how it’s made, its history, or even where it comes from! I think that’s fucking insane. I mean, doesn’t that sound a bit like pursuing someone else’s idea of value, and not our own?

Admittedly, I fell for this again just a few nights ago. Being a food nerd, I was excited to visit a restaurant that served jamón ibérico de belotta because I’d never had it before. On paper, it sounded amazing. Iberian ham from free-range pigs fattened on acorns, roaming dehesas their whole lives… I don’t know how, but they somehow made ham — the most common thing ever — into something almost romantic. I fell for it hard. As I watched them carve 60g off a jamonera centerpiece, I couldn’t wait for these wafer-thin slices of top-shelf charcuterie to blow my mind. Surely, this would make run-of-the-mill prosciutto seem like Purina! Schinkenspeck might as well be Spam! I chuckled at my culinary superiority, lifted the first slice to my mouth, and took a bite. Any second now, this would be the best thing I’d ever eaten… Yep, any second now… I swallowed. Huh. Um.

That was it?

This happens all the time. I touched on this in “Bitching and Wining”, but there’s so little difference between cheap food and expensive food, there’s really no reason to EVER pay more than $20 for a meal. Wanna try sturgeon caviar? Not for $125/10g, you don’t. Try ikura for $20/113g. I think I actually prefer it. Truffles for $275/oz? Literally everyone I know prefers fake-as-fuck truffle oil. I’ve never understood the appeal of real truffles. Every time I’ve had them, they’ve either overpowered my food or added a dirt-like component. Maybe rare cognac is your thing. Louis XIII cognac is $3,300/bottle. As someone who’s had it twice, meh. It’s not even that rare. Right now, in the Richmond suburbs I live in, I know of at least two bottles within walking distance. You’re paying to seem rich! It’s all just marketing!

I’ve had “the good stuff”. It’s a rip-off. It’s one of the reasons I’m in debt. Expensive food only tastes better because we take the time to taste it. I’m not saying you should live off 7-Eleven beef teriyaki anytime soon, but I’ll leave you with this: For some reason, 7-Eleven beef teriyaki was a better food experience to me than dining at Lasserre.

It turns out once you see through all the bullshit, food is food. No matter how rich you get – as Bill Gates once said – “it’s the same hamburger”. I’d rather pay $5 for it instead of $500.

Let us know what you think in the comments.