A while ago, I started a financial independence retire early interview series where I interviewed Canadians who are either financially independent, retired early, or close to these key financial milestones. The reason for the series is to bring more Canadian perspective as I feel there are many American financial independence retire early (FIRE) stories out there but there are not as many Canadian FIRE stories.
I haven’t posted these interviews for a while because I have to find Canadians who are financially independent, retired early, or close to these key financial milestones. One I find these individuals, I have to convince them to participate in an interview. So if you are reading this and fall into this camp, I would love to hear from you.
For this post, I am happy to welcome Duane who happened to graduate from the same engineering program as me who is currently hopping between Spain and Canada as a digital nomad.
Q1. That’s awesome that you are on track to reach financial independence next year at age 43. What sparked your interest in personal finance and realizing that financial independence is possible?
To be honest, I’ve never really deliberately set out with the goal to be financially independent by a certain age. I’ve just mostly done what has felt right financially at the time, taking cues from people a lot smarter than myself. I didn’t really start saving at all until I was probably 24 years old or so; the company I was working at in Ottawa, JDS Uniphase, gave us a big lecture on RRSPs and convinced us all to start contributing monthly. Little did I know then I was probably paying 3% trailer fees on those investments, but it was nice to start seeing the accumulation of money in my RRSP. After a while it almost started to feel like a game – to see how much I could save. But I look at finance and economics like I look at most problems, from an engineering perspective. So it has been interesting trying to understand finance better and run through scenarios in my head and on paper.
Q2. For 6 years you were working remotely, bouncing between about 40 countries with your laptop. What made you decide to become a digital nomad? What was your digital nomad lifestyle like?
Mostly the decision to become a digital nomad was the realization I wasn’t really content in my current life. I had moved out to a small town to save money while I started my own company, and while I enjoyed the slower pace of life, it started to get a bit stale after a while. It wasn’t until I had a conversation with my sister one day it dawned on me I really could work from anywhere in the world, which is when I made my first plans to go live in Argentina for three months.
People think being a digital nomad is basically like a permanent vacation, but it’s not that at all. In fact, I’ve read stories of digital nomads quitting after a few months. Sure, you get to see amazing places, but it often feels like you are just making small talk with people since you never really get a chance to know people for very long. And if you are working long hours, which I still was while on the road, you are often doing conference calls at weird hours and trying to squeeze in sightseeing in between work sessions. I’ve been to amazing locations like Rome but not had time to actually see anything because something unexpected would come up with work. Still, the highs were better than the lows, and it’s a period in my life I look on with fondness.
Q3. You currently live in Spain. What made you decide to relocate to Spain from Canada? Do you feel that you have a better quality of life in Spain versus living in Canada? What makes Spain such an attractive to live for you?
I haven’t completely left yet – I still own a Canadian company and a nice cottage up at Cultus Lake. But I felt like living in Europe for a while and experiencing a completely different culture. On my travels around the world for those six years, there were only two countries I felt like I could be comfortable in outside of Canada – Spain and Portugal. I decided to apply for a long-term visa in Spain, and was thankfully approved. Next week I’m buying an apartment here in Valencia, Spain, and hopefully will be able to start spending winters here in Spain and summers in Canada.
In terms of Spain, it’s hard to put a finger on what I like about it. Certainly, family and friends are more important here than back home, or at least people have more time or make more time for them. For example, most shops here are closed Sundays, like it used to be in Canada, and people spend more time socializing during the weekends than we typically do back home. I love that I can go for a walk at 11 pm on most nights and the streets and the bars are still full of people. It just feels electric, like people are actually living instead of just existing day to day. I also think there is a lot less emphasis on work here in Spain than back home, and I think it’s a much healthier way to live. A North American who visits for a few weeks might go so far as to call the average Spanish person lazy, but I think they just have a much healthier work-life balance.
Q4. Can you quickly outline what it’s like to apply for permanent residency in Spain?
There are various visa options that are available to people, but Spain has one of the easiest retirement visas available in Europe. It’s called the non-lucrative visa, and it’s primarily used for digital nomads and retirees. The spirit of the visa, and the nature of the term ‘non-lucrative’, means that you can’t take a job from a Spanish person and aren’t allowed to work locally. But for most digital nomads their clients are somewhere else, so most consulates (not all) are fine with that arrangement. The non-lucrative visa is technically a form of temporary residency, not permanent, and it has to be renewed several times, but in general, is valid for five years. At that point, you can apply for permanent residency, at which point you can work locally if you choose. I run a website and a Facebook group helping people understand the requirements to move to Spain – https://tapasforever.com.
Q5. You graduated from university with an engineering degree and have worked in the high tech field. Why do you think there are so many techies in the financial independence retire early community? One of the biggest complaints people have regarding the FIRE movement is that FIRE is only possible for high-income earners. Do you think this is true? Or this is a fallacy?
That’s a really good question. I think the basic principles of FIRE can be applied by anyone, but I suspect people with mathematical or analytical backgrounds probably find it easier since there is some math involved, especially when it comes to optimization tax issues. I’ve certainly found personally there is a bit of inertia involved as well – once you start accumulating wealth or finding some level of success, it seems much easier to keep being successful. That is your knowledge and network seem to grow like a snowball over time and it’s easier to make things happen and go after opportunities that you once weren’t able to.
I think many of the opportunities we can create while heading towards financial independence come out of our disposable income, which ultimately affects our savings. And disposable income, as a percentage of total income, grows faster as your earnings go up. For example someone with $3,000 of expenses making $4,000 a month only has $1,000 to play with or invest each month. If they increase their wages by $2,000 per month to $6,000 total, which is an increase of 50 %, the disposable income has now gone from $1,000 per month to $3,000 per month, a 300% increase. So I think opportunities grow disproportionately faster for high-income earners. But hopefully that doesn’t dissuade anyone from trying – it’s actually easier than most people realize to earn more money, you often just have to come at the problem from another angle.
Q6. You licensed your work to several large companies and sold a WordPress company a few years ago. Have these experiences somehow helped you get started with financial independence?
I think I was already well on my way to an early retirement before those happened, but certainly they helped a lot. I had always thought maybe one day, ten years from now, I might be able to afford a sailboat and start working fewer days per week. But thanks to the sale of my company and some consistent investing over the last 15 years, I no longer need to work full time and will probably be able to get that sailboat next year. Certainly having capital in the bank makes it easier to make well thought-out decisions based on passion, and not necessity, which is what I’ve been mostly trying to do these last few years.
Q7. You plan to continue to work once you become financially independent. Can you explain your logic behind that decision? Don’t you want to retire early and sip on margarita all day?
One of the best books I read a long time ago, or at least the one that started causing my brain to think about business differently, was the 4-Hour Work Week by Tim Ferris. One of the points he makes is that the goal isn’t to do nothing once we are retired, but to have time to do the things we want. For example, I’d really like to get better at playing guitar, and I don’t really make the time I should for it. I also am technically an electrical engineer by education, but haven’t really had time to pursue that further in my life. One of my projects over the winter is to actually build a vacuum tube hi-fi amplifier, and that will only really be possible because I won’t be working full time anymore. I also think that I still have one or two cool ideas left inside of me, so it would be nice to continue to build those out without the pressure of needing to work. And I can do all of that while sipping margaritas!
Q8. What is your investment style? Do you invest in mutual funds, index ETFs, dividend growth stocks, or rental properties? How are you diversifying your investments?
When I first started investing, I simply joined a corporate RRSP program and bought their recommended funds. Little did I know at the time but I was paying very expensive commissions. But I managed to save my first $50,000 in RRSPs basically that way. At some point I thought I needed help, so I hired a financial advisor. He immediately put me into a bunch of products I didn’t need (such as a whole-life health insurance policy) and a bunch of mutual funds where he made fat commissions. I probably would have been fine with that at the time, but once I had moved all my assets over to him, he was basically hard to get on the phone and instead would simply have me talk with his secretary all the time. I realized quickly that he was more of a sales person rather than someone who legitimately wanted me to succeed – and once the sale was over, there wasn’t much use in making time to talk to me. I fired him not long after.
Eventually I spent time educating myself and realized it was much better to invest on your own. I’ve dabbled with various strategies over the years, but I mostly follow the guidelines of the Canadian Couch Potato website. That is, diversify across various assets classes using low-fee ETFs. I own a holding company, so some of my money is tax-sheltered in a Canadian corporation, and when possible I try to stick the dividend producing ETFs there since they have a tax advantage. And the higher income items, like foreign ETFs, usually go in my RRSP. And when possible I stick the high growth items in my TFSA. But I don’t stick to that exactly, because it basically makes rebalancing difficult. In general though I have had roughly 7-9% year over year returns averaged over the last decade. And yes, there were a few bad years there, but if you are a passive investor you just have to ignore those and realize they will correct at some point.
In terms of diversification, I am invested in Canadian index funds, US index funds, European index funds, Asian index funds, emerging markets, bonds, preferred shares and real estate investment trusts. I own real estate in Canada currently, and am in the process of buying real estate in Spain. The Euro and the Canadian dollar have been flip- flopping a lot recently, so having a chunk of money based in a European asset (an apartment in Spain) is actually a pretty great diversification strategy as well since I suspect if real estate in Canada and/or the Canadian dollar go down that the opposite may be happening in Europe.
The worst mistake I made in business involved an investment in a pub I did years ago. They say you should never invest what you aren’t willing to lose, and I think people should write that number down on paper before you get started, since I lost sight of that number.
I had a friend approach me about opening a craft beer pub right when craft beer was getting exciting. So he convinced me to put in $15,000 into the pub, which would quickly (on paper) be making a lot of money. I basically did that deal on a handshake, and quickly upped my investment to $30,000, with the understanding that others were investing in it as well. When the dust settled I realized I had $30,000 invested in the pub, and was the sole investor – even my business partner didn’t put anything in.
Because I basically did it on a handshake as well, I didn’t have much say in the company, which was another mistake I made – in general never invest in anything where you can’t influence the outcome, and there wasn’t much point to being a pub owner if I couldn’t help make it a success. Even though the pub quickly started making $100k a month in revenue, it wasn’t making a profit. Not long after I had to put in another $30k to protect the original $30k – another mistake, don’t throw good money at bad money. When it was all over the pub shut down after a year and I lost $60k, which was a lot more than I wanted to invest at the time. But I’ve since recouped that on other investments, so I can thankfully just look back on it like a very expensive series of lessons that I needed to learn at the time.
Q10. Why is financial independence so powerful for you?
I think it’s mostly because it allows me the freedom to do what I want. If I want to get on a plane tomorrow and go visit a new country, both my job and my financial position allow me to. If I want to go out tomorrow and buy a new stereo, or a new guitar, I can. If an appliance breaks I can just pick up the phone and get a new one. And it’s not just limited to me – it’s nice to be in the position to help my family or friends too if and when they need it.
That said, I am pretty much a minimalist these days. It’s nice to be in the position to afford the things you want, but I try to only buy things (or experiences) that contribute real value to my life or others. While some of my successful friends are buying Teslas (nothing wrong with that), I don’t even own a car these days, and usually just walk or take the metro. I’d rather cook a nice meal at home and share a $3 bottle of wine with friends than go blow a lot of money in a restaurant. So if you have money, I think you have to find a good balance between spending it when necessary and being thrifty when not.
Q11. Do you take advantage of TFSA and RRSP? If so, how do these tax-advantaged accounts work when you are living outside of Canada? Do you plan to withdraw early from RRSP before age 71? If so, what are your early withdrawal strategies to minimize tax penalties?
Up until recently my TFSA and RRSP were both maxed out, but I had to pull a chunk of my TFSA out for the purchase in Spain. But in truth I haven’t had to deal with living outside of Canada yet from a tax perspective, simply because I am still bouncing between Canada and Spain. Because my visa in Spain is temporary, I own a Canadian business, and I only have a short-term renter in my house in Canada, I’ve been told CRA would likely take the position that I’m still a resident for tax purposes. But if I start spending more time in Spain, more than 183 days a year (which I haven’t yet done), then I’ll likely have to deal with all of that.
My main concern short term is that I would lose the tax-free capital gains exemption on my principal residence, so if I decide I want to live in Spain more than six months a year, I’d likely consider selling my cottage back home and banking the profits.
And in fact if I did that (and I’m leaning towards that route currently), I’d be completely mortgage free with a place in Spain and earning more money each month in terms of investment growth and dividends than my expenses, by a fair margin. So really at that point I would no longer have to work anymore if I wanted, but obviously since I still had high earning potential I would continue to do so from time to time.
Q12. What do you see yourself in 5 years and 10 years from now? What are the top 3 things you are looking forward to?
I’m hoping to be mostly retired by the time I’m 50, which is still a ways away. But definitely next year I should be at the point where I literally don’t have to work anymore. I was a resident in Canada for over 20 working years, which means I can take CPP and OAS when the time comes, even in a different country. So I would expect my income to go up another notch when CPP and OAS kick in, even if living in Spain, which would only make life easier since I will already have a decent income stream as of next year.
But in terms of personal goals, I’d like to get back into sailing, play a few coffee shops with my guitar, and likely start building amplifiers to sell from time to time as a hobby. Hopefully next year I‘ll have more time to pursue all three.
I don’t purposefully go out of my way to hide it, but I also don’t really openly talk about it either. Strangely I have some friends, mostly entrepreneurs, who crave talking about things like that so they can learn from each other and figure out how to get there. But others really don’t like it, thinking it comes off as boasting (which I can see in some scenarios). I do feel pretty privileged and thankful though – not many people have the earning potential I do or have had the opportunities I’ve had. The average wage here in Spain is about 1,200 euros per month – I can make that in two days when I’m working on a project. So I never feel bad about picking up the tab for some local friends, or buying people a round of drinks when I can. For me it’s not about bragging, it’s just my way of trying to pay it forward to the people I enjoy spending time with.
Q14. What would you tell someone like me who is trying to achieve financial independence? Do you have any advice for financial independence retire early in Canada?
I think just come up with a plan and stick with it. For people that don’t have one, in most cases the Canadian Couch Potato is a pretty good place to start. You can make marginally more by employing some different strategies, but for most people it’s not worth the stress. You focus more on dividend income than I do, but I do recognize it as a good strategy. But I think had I only focused on dividends I wouldn’t have had the large capital gains I did in the last few years, and those have helped a lot to get to where I am today. Having said all that, it certainly depends on your life goals as well in terms of your investment strategy.
I would encourage everyone to try and come up with good balance of short term enjoyment with a long term investment strategy. It’s great to save money and think about retirement, but I think it’s a mistake to not enjoy life as well. So set aside some fun money every month to go out for dinner, save for a trip, watch a few movies, etc. I’ve known some people who died early and never had a chance to enjoy retirement, and that’s a risk we all have to deal with. So make sure you live for today at the same time you are planning for tomorrow.
Thank you Duane for the great insight, especially on being a digital nomad living in Spain.
Dear readers, are you enjoying the Canadian FI Interview Series? Are you a Canadian that is financially independent or retired early from your career? Or close to reaching this key financial milestone? If so, I would love to have a chat with you. Give me a shout!
And in case you want to read the other interview series.
- FIRE Canada Interview #1 – Vancouver reader J
- FIRE Canada Interview #2 – How I became financially independent at age 32
- FIRE Canada Interview #3 – Why I decided to keep working despite reaching FI at 38
- FIRE Canada Interview #4 – Cash flow is the oxygen of financial independence
- FIRE Canada Interview #5 – Creating a long term plan
- FIRE Canada Interview #6 – Create a net worth statement
- FIRE Canada Interview #7 – Do Absolutely everything and never sacrifice or struggle at all
- FIRE Canada Interview #8 – Building a rental property empire
12 thoughts on “FIRE Canada Interview # 9 – Relocating to Spain”
Thank you for an interesting article, I enjoyed it.
Just one small thing:
“For example someone with $3,000 of expenses making $4,000 a month only has $1,000 to play with or invest each month. If they increase their wages by $2,000 per month to $6,000 total, which is an increase of 50 %, the disposable income has now gone from $1,000 per month to $3,000 per month, a 300% increase.”
If the person had $1000 each month to invest and it then went to $3000, isn’t it a 200% increase?
Again, thank you for this article and the site, I really enjoy the posts.
Greetings fellow expat.
I’ve been gone from Canada for nearly 20 years. The biggest culture shock for me is having to add the VAT to everything. The price you see isn’t the price you pay!!!
AnywaysI lived in Madrid for 7 years but to be honest the Spanish lifestyle isn’t my thing, ended up moving back to Germany, ahhh rules LOL
Now regarding taxation*, two thoughts. First Spain, like many countries taxes you based on your world wide income. So any money earned in Canada is taxable here but taxation agreements means no double taxation, just loads of accountants bills.
You may find that being a non resident isn’t worth the hassle of being a landlord. First off count on forking over 25% of the gross income from your rental properties. Later when you file a tax return you’ll find that number adjusted. The alternative is to have a local resident work as an agent and then you can just file a tax return. Of course than you need to declare this on your Spanish tax return. As far as I know there will be no capital gains tax but don’t quote me on that.
Regarding RRSPs no issue continuing to have that in Canada and it will grow tax free untill you cash it out. Withholding tax is 15-25% depending on the treaty. Not sure about a TFSA but imagine the same.
In non registered accounts there is no capital gains tax (yeah) but you will get hit with withholding tax on dividends (amount depends again on the tax treaty between Canada and Spain)
One other point is once you become a resident you will need to look into registering for VAT. I don’t know the rules for Spain but for Germany gross income above 17,500 means you get that hassle.
Personally I think it’d make the most sense to simply become a resident of Spain.
*I’m not an accountant so make sure you do your research
Nice interview. I like Spain too. The cost of living is a bit lower than in other European countries and you can travel to those places easily.
I think you’re right about engineers. We tend to be better with numbers. It makes it easier to contemplate FI.
Thanks Joe, Spain is nice for sure. Most us engineers are number nerds, so it definitely makes it easier to contemplate FI.
I think Portugal and Spain are the best places to retire into in Europe. These countries are easy to adapt, the language is easy to learn, people are friendly and welcome. It’s not the same case in Italy, Greece or France. Thank you for the interview. I enjoyed reading it.
Thank you German. Haven’t been to Portugal myself but really enjoyed Spain when I went there many years ago.
The next step is the one that interests me, like the previous question regarding health insurance. When you stay longer can you come back to Canada and get full health insurance later?
And registered money, it is more complicated then I imagined dependent on what you have in those accounts. You need to create a plan to remove the registered money without being taxed heavily, that takes some number crunching but steady withdrawals certainly help and you have the time to get it out before taking CPP, or in some peoples cases they might not even get OAS.
I think when you are at point of financial independence, you tend not to worry so much about taxation and what not. Sure, Spain might come around and tax me an extra 10%. So what? It’s mostly just a healthy-living-tax. So if my TFSAs suddenly become taxable, that’s disappointing, but not worth sacrificing happiness for. Roads, police, health – these are all things worth paying money for, so I don’t stress too much about trying to get out of paying taxes.
MSP in BC used to be an extra program, but it’s shortly about to be part of the tax base. So can they legitimately stop people with pre-existing conditions? I’m not sure. It’s illegal in Canada to turn anyone away from a hospital though, so I’m not too worried about it. Because my business is still based in Canada and I have property, it may be a non issue as Canada may still deem me a resident even while living in Spain. It’s a weird grey area, but it does exist.
Curious about health insurance? Are you then covered while staying in Spain? How does that work? Thank you.
Awesome read, Duane! Love your perspective on life after reaching FI. Some of my favorite days are the ones where I get to work for two hours and then spend the rest of my day doing whatever I please. There’s something about investing your time into something objectively productive that feels good, especially when you do enjoy your work. Hoping you get those coffee shop gigs up and running! I am curious if you have any insight on what cost of living is like in Spain?
Duane certainly provided some great perspective on life after reaching FI. From what I’ve heard, the cost of living in Spain is much cheaper than major Canadian and American cities. Certainly cheaper than Vancouver, that’s for sure.
@elisa. Cost of living is lower for sure. Sometimes it’s hard to see. A beer for example is about 1.50, so spanish people are often out in the evenings socializing. A night out with friends then costs $5 instead of $30-40 so I think it promotes a lot more socializing. Property tax is low (300/year), income tax is a bit higher, car insurance low ($300/yr). Clothes are probably the same and restaurants are about the same. But quality of life is way higher here. People just don’t work as hard, not out of laziness but out of respect for actually living.
@fab – I’ve kept my Canadian health insurance going for the time being, but I don’t rely on it. A requirement of my spanish visa is that I have a proper private plan with no copayments. That costs me about $50/mo. But last year I needed an MRI on my knee and from the initial doctors appointment until I was talking to the doctor about my results was only two weeks. So medical here is too notch.