The financial independence retire early movement is getting a lot of attention lately. While it’s nice to see the movement gaining traction, I feel most of the major media coverage has been very early retirement focus. I think this is paints a very bad picture of what financial independence retire early (FIRE) is about. Furthermore, most of these FIRE stories are US related. As a Canadian, I want to hear more Canadian financial independence retire early stories. Therefore, I started an interview series with a focus on financial independence retire early in Canada.
If you are reading this and are Canadian, financially independent, retired early, or getting close to these major financial milestones, I would love to hear from you.
Today I am fortunate to interview Nick and Melanie who started their FIRE journey four years ago. In four years, they went from no net worth to tracking to be millionaires in the next year or two. Amazing stuff!
Q1. That’s incredible that you went from basically no net worth to a million in about 5 years or so and you’re only 33. What sparked your interest in personal finance?
My real passion for personal finance began just after the 2008 crash. I graduated University in 2008 as an Engineer and started working but had no money with lots of student debt. I watched some very successful partners in the Engineering firm I worked for take advantage of the depressed stock prices and make a fortune. This set me on the path of alternative wealth creation outside of the standard RRSP savings and T4 income. The economy is cyclical and I wanted to be ready in the event of another economic slowdown/market crash to fully take advantage of the opportunity and have spent the past 12 years learning and investing. This crash/opportunity I have been preparing for has not come yet but I have accumulated some wealth and learned a great deal along the way.
Q2. You said that you do not believe in early retirement but rather mini-retirements. Can you explain your logic behind this?
I believe traditional retirement has two major flaws. First is that you work for 30 years and miss out on so many awesome opportunities and experiences which can only be had through long slow travel. These are the years you’re able to spend with your children and family. When you finally make it to 60 or 65 years old and retire you are not physically capable of the same activities you were decades before and your kids are grown and living their own lives.
Second is that any driven person will become lost and uncomfortable without constantly expanding their comfort zone and learning new things. I have found that if I am not learning and growing as a person I start to die a bit inside.
This is why I take mini retirements. I generally work 2-3 years then take a year off. I am currently 1 year into my latest work session and after the next two years we should be at a point where I will not need to return to work. Although I think I will still return to some sort of work after a year or two of travel as a family.
This method also breaks up my careers and focus. I get bored if I am on one path for two long. Before my first year off which was in 2010 I worked as an engineer in the mining industry and was in the Naval Reserves. Then when I came back I ran vineyards for a bit. Then into the Pulp and Paper Industry and after my last retirement year in 2018 I became a Realtor and more serious Real Estate Investor. Even I don’t know yet what I will be doing after my next retirement session but I know it will push my limits and I will grow as a person.
Tawcan: I like this logic! Well done for multiple mini-retirements already.
Q3. How did you get your wife hooked on FIRE? Is she involved in the household finance and investment?
Melanie and I had some serious discussions before having kids and we really wanted her to have the opportunity to stay home with the kids full time. In order to do this we had to become intelligent with how we spent our money and how we earned it. Melanie has always trusted me to take care of our family and over time as she saw the fruits of our side hustle and strategic life choices (like renting our own basement out as a separate apartment) she has become the one driving and pushing to reach FIRE earlier.
Mel is also my sounding board. If I cannot explain an investment in 1 minute to her and have her fully grasp the concept then either it is a bad investment or I do not understand it deeply enough and to do some more homework.
We would definitely not be where we are today if it not for Melanie.
Q4. What is your investment strategy? Do you invest in mutual funds, index ETFs, dividend growth stocks, individual stocks, or rental properties? How are you diversifying your investments?
Our investment strategy is the Robert Kiosaki three legs to the wealth stool. Real Estate, Business, and Equities. We are heavily invested in rental real estate. Real Estate tends to be equity rich and cash poor so to compliment this and increase our annual cash return we also actively invest in equities. I practice a lesser known investment style of seller put option on quality dividend paying blue chip stocks. This is like selling insurance on quality stocks and tends to be a very safe method with great cash flow. I am building out a Real Estate Sale business right now which will complete our ‘wealth stool’.
When I had a standard T4 job getting mortgages was easy. Just work with a mortgage broker who is focused on investors. Now that I am self-employed it is a bit more difficult but there are a ton of great financing options in Canada if you know where to look.
My core focus in real estate has always been cash flowing properties with potential for added value and options to increase the velocity of my capital. For example, I do two main types of investment. My favourite is older homes on larger lots where I can cash flow the house but then sever off a new lot from the original parcel. This is great for a quick return. My other core strategy is great homes in great areas where we can add a secondary suite. This increases the cash flow and allows us to increase the value of the home and refinance out some of our initial capital.
If you want to grow quickly you need to be able to recycle your capital from project to project as quickly as possible.
Q6. Tell me some of your financial mistakes. What have you learned from these mistakes?
Four years ago we had two car payments and I still had student debt that all added up to over $40,000. I would never buy a new car again no matter how much wealth we build and we now only take on debt to buy cash positive assets.
Another big mistake that no-one other than my wife and I know about is that in 2016 I was investing in equities derivatives market. This is a highly leveraged market and a great deal of money can be made but even more can be lost. I turned $30,000 into $120,000 in just 2 months during the market dip in Jan-Feb of 2016. Over the following 5 months I managed to turn $120,000 into $25,000. This is what led me to study the equities market and eventually led me to the much safer strategy of selling puts.
Q7. You have had a few mini retirements. How long were these mini retirements and what did you do? Why do you think mini retirements are the way to live rather than early retirement?
My first retirement I bought a one-way ticket to Australia and stayed for about 10 months (I was single then). On my latest retirement I took about 8 months off after our third child was born and just spent time with my family. Our next retirement will be 2022 and we are going to travel North America in an RV for around 18 months.
I think mini retirements and early retirement can be complementary to each other. Full financial independence should always be the goal I just don’t see the point in putting your head down and working really hard for a full decade to reach FI. I prefer to work hard for a few years and build a bunch of wealth then take a break and enjoy some of the fruits of your labour, rinse and repeat. This avoids burn out and even helps to prepare you for eventually reaching full FI.
I know we would have already reached full FI by now if I would have just kept working my 6 figure job as a Professional Engineer and investing on the side but the experiences and memories I made during each mini retirement is definitely worth pushing back our official FI date by a few years.
Q8. Do you take advantage of TFSA and RRSP? Do you plan to withdraw early from RRSP before age 71? If so, what are you early withdrawal strategies to minimize RRSP tax penalties?
We have no money in RRSP’s or TFSA’s. For us at our age there is not as much of a tax advantage to invest in a RRSP and we have found much larger returns when buying real estate so that is where we keep much of our capital. Unfortunately you are not able to sell puts in a registered account in Canada so we are unable to do that investment strategy inside an RRSP or TFSA.
We are however continuing to build up our total contribution amount for our RRSP’s and plan to use that growing contribution someday when we sell off some of our real estate assets to shelter the capital gains. Then draw the funds back out over several years and limit our tax burden.
Tawcan: Interesting to hear that you don’t utilize RRSP or TFSA but given your situation that makes sense.
Q9. You switch career multiple times, going from an engineer years ago to a realtor now. What has multiple career changes taught you?
The biggest thing I have gained from finding success in multiple very distinct careers is confidence. I know that if a crazy black swan event happened and we were completely wiped out financially I would be able to find a job as an Engineer or wine maker or construction or even enlist in the military again. My wife is highly educated as well and was amazing in her career so one of us will always find work. This has been the key to our success thus far. We know that the worse case scenario is that either my wife or I can get a job and worst case we would just be back to where we started just like most people.
Q10. What do you see yourself in 5 years and 10 years from now? What are the top three things you are looking forward to?
We have some big goals that we review regularly as a family. In five years we should be just getting back from our 18 months of travel as a family and I will be settling into my next career and work session. I will likely still be a realtor part time but see myself getting into coaching a bit more. In 10 years we will be in the middle of our next big retirement adventure which is to get a catamaran and sail around the world for a few years as a family. We already have two rental properties set aside for this and in ten years there should be enough equity to trade a couple of properties for a catamaran.
Q11. You have four young kids and plan to travel full time for a year with an RV. What’s your travel plan? And how are you going to fit everyone in an RV?
We plan to do a summer heading from Ontario to the west in Canada then do the southern states for the winter then the second summer up the Eastern coast and Maritimes then back through Quebec. You would be surprised how little space you really need. Melanie has gotten great inspiration from Knorpp and South. I think they have 9 kids and travelled in an RV for a year or two.
Tawcan: Wow 9 kids and travelling in an RV. That’s hard to imagine!
Q12. How do you plan to teach your kids about money? Do you talk about money openly at home?
Our oldest is 5 now and he has already picked out one of our rentals as his (which leads to the next question). He helps collect rent and check on the house and he understands now that we have a product which is the house and the tenant is our customer and we exchange value. Basically money for rent in exchange for a place to live. Kids pick up things so quick.
We speak very openly about money and when our kids ask we never give them a dumbed down answer. I know our 3 year old may not understand everything when we talk about investing and budgeting but they pick up a lot more than we ever imagined.
Q13. How are you planning to fund your kids’ post-secondary education? Are you planning to pay for their educations fully? Or the kids need to cover a portion on their own?
We have 4 kids and currently have 6 doors (seventh closing next week). The cash flow we use to invest and pay bills, then the equity being built is all set aside. One property for each child’s future and two for our ten year plan of sailing around the world. If any of our kids ever need braces or a first car or tuition or seed money for a business it will be coming out of the equity of ‘their’ property. This has been a huge relief on our path to FI since we no longer need to worry about saving any money for our children’s future.
This also helps to teach them about finances. With time we are slowly getting them more involved in their properties and eventually the will compiling the annual financial statement and tracking the income and expenses.
When we first started down this road we wanted to scream it from the mountain tops for everyone to hear. This grew old with family and friends pretty quick so now we have a rule. We share the basics of our journey once with each friend or family member then leave it be unless they ask for more.
I think if my sister or good friend were heading toward FIRE and had awesome ways to grow wealth quickly I would be a bit upset if they never mentioned it to me, which is why we share once with everyone then leave it be.
It is terrible that money is such a taboo subject in society. I believe this is one of the root causes of the ever growing wealth gap. There are lots of theories of why it is so taboo. It’s likely rooted in how we were raised and in the lack of education on the subject. People do not like to talk about things they don’t understand unless it’s UFO’s or Politics. For us we are just focused on breaking the cycle with our kids and making sure they are financially literate, hopefully passing that along to their kids someday.
Q15. What would you tell someone like me who is trying to achieve financial independence? Do you have any advice for financial independence retire early?
A lot of people just starting out (we did this to) start to research FIRE and hear these awesome stories of people reaching FIRE in a short time and at a young age. Then they get discouraged or try to find some get rich quick scheme because they feel like they are behind for some reason.
Some great advice I was given that helped me was that your financial journey is going to be like waiting in the checkout line at the grocery store. There is always going to be somebody in front of you and there will always be somebody behind you.
Everyone’s journey is unique, don’t rush it and remember to enjoy it.
Tawcan: I love the grocery store lineup analogy.
The only thing in life you can give yourself that no-one can take away from you is knowledge. Always be learning and never fear making mistakes. Mistakes are just learning opportunities in disguise.
Thank you Nick and Melanie for sharing your story with us. It’s really neat to hear more about your plans for mini retirements and that you have switched career multiple times already. I also really like that you are already getting your kids involved with money and managing rental properties. Well done!
Dear readers, are you enjoying the Canadian Financial Independence 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
- FIRE Canada Interview #9 – Relocating to Spain
- FIRE Canada Interview #10 – Kids are as expensive as you let them be
- FIRE Canada Interview #11 – Vancouverites retired in their 30’s
- FIRE Canada Interview #12 – Being a valuist
- FIRE Canada Interview #13 – Always live a rich full life for today
- FIRE Canada Interview #14 – Lifeunscripted
- FIRE Canada Interview #15 – The first million is the hardest
- FIRE Canada Interview #16 – Lean FIRE
- FIRE Canada Interview #17 – Anyone can retire within 20 years
- FIRE Canada Interview #18 – Dividend Powerhouse