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 is Canadian, financially independent, retired early, or getting close to these major financial milestones, I would love to hear from you.
Today I am pleased to have Ryan from Canadian FIRE (what a great domain name! I wish I got that domain!) and Explore FI Canada (same as this one!) to talk about his path to financial independence retire early in Canada.
Q1. That is amazing that you and your wife are on target to achieve Lean FIRE next year and FIRE around 2024. What originally sparked your interest in personal finance? Who discovered the idea of financial independence retire early (FIRE)?
We both come from families that overspend on everyday consumer goods – more succinctly that “they suck with money.” I think we were compatible financially from the get-go however we continue today to have different philosophies. She’s quite frugal and therefore a bit of a collector, where as with me…
I don’t know when it happened but some time in life I became an aspiring minimalist. Actually now that I think about it, I think the military had a big role in shaping my minimalism. Basically all the equipment and gear you are issued has to fit in two duffle bags, one rucksack, and another backpack of regular camouflage combat clothing. You are permitted 1 personal picture and 1 clock radio while in basic training and everything is in its place, perfectly. This type of hyper-organization shaped me and I can honestly say all of my possessions today could fit into those two duffle bags. Nowadays I’m a family man and homeowner so I own quite a few extra things needed for raising a kid, taking care of a lawn and of course my wife’s book collection. So we’re actually quite compatible because we don’t need to compete for space in the house – she’s a collector / frugal person so she can have it. It’s not “Hoarders” by any means, I think she has less stuff than the average Canadian but still it’s quite a lot for me.
I was the one who discovered FIRE and my wife has been cargo ever since. Seriously, I have told her before that we’re on a plane to FIRE Utopia and she’s coming along for the ride, like it or not. It’s not hard to convince a frugal person to save even more money but there are times when we’ve had to sit down and ensure we’re still valuing the same thing. There’s no sense in fighting about little money expenditures.
Q2. Did you have to convince each other about FIRE? Or were both of you onboard right away? When did you realize that financial independence is possible?
I think my wife had a hard time coming to terms with my FIRE goal. This was entirely my fault because when I described to her quitting my job and pursuing whatever passion I may choose, she took that as me being unhappy with my work and my life. I can’t blame her, I’ve often made work my life and since she has known me I have always taken my work seriously – hardly any sick days, almost no vacation, plenty of overtime, etc. I appeared to be spinning an ideal tale of a new beginning, rendering our current lifestyle unenjoyable and undesirable.
I ended up apologizing and did some self-reflection on my own before approaching the subject again. I had to wonder why a goal as ambitious as FIRE was calling to me. It turns out after much soul-searching that I didn’t want to go to work because I hated leaving my daughter at home. My wife didn’t want to end her career regardless of the amount in our investment accounts so it was up to me to be the stay-at-home parent if I so choose. Since my wife is an occasional/substitute teacher, we’re waiting for her to get her foot in the door of a full-time posting before pulling the trigger on Lean FIRE – this should hopefully be in 2020 or 2021 at the latest.
Q3. Your fixed annual expenses are around $17,000 per year, not including discretionary spending. What’s your secret for keeping your expenses so low?
It’s not a secret at all, anybody can go to my blog and see for themselves. However, it does seem unreachable for many Canadians so I’ll tackle each category here if I may:
- Housing: I bought for $315,500 in Kitchener, ON and not for the 650,000 in Mississauga, ON where I’m originally from. This local form of “geographic arbitrage” prevented lifestyle inflation and simply bought us the same house but for a lot less. Houses in Canada are drastically overpriced and while a correction may or may never come, I didn’t want to tie up so much money into locked-in equity. My wife is extremely debt averse, so using the equity in the form of the Smith Manoeuvre was off the table. Locking up even more capital than $315,500 would’ve delayed FIRE by quite a few years. My property taxes are also much lower than other expensive cities in and near Toronto.
- Transportation: We are a 1 car household. I work evenings and weekends while my wife picks up work during school hours. Not owning a second vehicle has saved us untold thousands upon thousands of dollars and has kept lifestyle inflation at bay. When you have a second car, you can shop whenever you want, get together with friends whenever you want and just plan your life much less efficiently because you’re paying a huge amount for two 3,000lbs transportation machines. While we could just use the bus or Uber for these tasks, life is much simpler when you try to combine outings, shopping and work all at once so you can get things done efficiently. Cars are very convenient, but also very expensive.
- Food: After checking my grocery bills over the last year, we’ve spent $1.6/person/meal on average, including dining out. This is made possible because we don’t dine out all that often! We don’t go through the Drive-Thru nor do either of us stop for coffee or snacks anywhere. We do all our snacking and eating at home for the most part. I should admit to all your readers that I have a special “job hack” that contributes to this number – I deliver food to restaurants and I typically don’t have to bring a lunch most days, the restaurants I go to are more than willing to feed me dinner. If I didn’t have this privilege, I’d likely be around $2/person/meal.
- Cell Phones and Plans: This is an easy one: Public Mobile! I think this is my favourite company of all time. Bringing your own phone and pre-paying for a plan is a no-brainer nowadays. Everytime you pay for a plan that costs $70 or higher, you’re just financing your new phone over the 2-year term. It’s a rip off! Go pre-paid with a $25/month plan, buy a phone case and watch your savings grow.
- Childcare: We are currently paying for childcare, around $900/month. This just began in October (2019) and if you were to recalculate my expenses including this I’m well above $17,000/year. The reason this expense isn’t included is because I aspire to be a stay-at-home Dad. The very nature of my goal will eliminate this expense so it doesn’t make sense to be included in the FIRE number. It is a short-term arrangement because I often work until 3am in the morning and any parent knows watching a 18-month old is exhausting work and I didn’t want to become sleep deprived trying to save money in this regard. My job as a truck driver hinges on my ability to complete the job safely, not just for myself or my company but for all the others I have to share the road with.
- Misc: My wife loves her long hair (it’s down to her waist) so she seldom gets it cut. She has watched a few YouTube videos and cuts my hair for me, which is a money saver sure but the amount of time I used to spend waiting for the barber and getting the actual haircut is something I can never go back to. The barber is a 2 hour ordeal in most cases from leaving the house to entering the house. What a time-waster. Even when I combine it with other outings it still takes about an hour and I just want to get home and shower afterwards (I can never shake that itchy feeling even after they wash and shampoo). My wife wasn’t perfect at first, it took a few tries but my hair always looks great and decent trimmer costs less than $40.
- Banking: There’s no reason for anybody to pay banking fees, ever. That includes the stupid “Leave $3,000 in the chequing account for free banking” What a waste. People like to think finances are complicated but it isn’t. Get a Tangerine account, EQ Bank if necessary and your WealthSimple account. There – you can hit FIRE with those alone. If you factor in workplace retirement programs, small-business accounts or taxable investment accounts, sure you can make your life much more complicated and expensive – but once your investing it really is simple. Don’t let fear complicate a simple process. Do your research and ask around on the forums, there are nearly free options everywhere. Oh, and of course never pay high-MER fees, anything above 0.5% in my books is an expensive mutual fund / ETF.
Tawcan: We are doing something very similar as your household but our annual expenses are way higher than yours.
Q4. You said your discretionary spending is roughly $100 per month. How do you keep your discretionary spending so low?
Since my wife is working during the day and I’m working during the evening and weekends, we typically don’t spend a lot of time together. This sounds sad but you should actually read this as “We aren’t bored with each other and need to spend money on outings.” This means there’s less time to spend out on the town or at shopping malls. We value both our time and money and these things aren’t valuable in our free time. Sometimes we will see a movie or head to Old Navy but most of the time we’d rather walk around in our neighbourhood where we do our best talking. Indulging in a few Netflix shows from her sister’s account (I lend her my Spotify Family account in return). Playing board games or reading books from the library to our 18-month old daughter. We don’t need to spend money to be entertained so we don’t. We also don’t value travelling right now. Seeing different parts of the world isn’t a huge deal for us – yet. I bet once we get a little older and our kids start asking where Disneyland is we might set aside a few bucks for family vacations but for now, my daughter’s favourite toys are the Tupperware containers in the kitchen so I think we’re good.
Q5. What’s your strategy that is allowing you and your wife to reach LEAN FIRE by next year in your early 30’s? 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?
We’re late twenties right now. A lot of my investments are tied up in a LIRA (Locked-In Retirement Account) from my military pension. I have picked individual stocks in this account but that was before I had heard about index investing. I am strongly considering selling the individual stocks and converting the cash to USD and buying VTI but I must admit I have done very well picking individual stocks. I am a buy and hold investor so the strategy has never been get-rich-quick or incredibly risky stocks. I’m always after the highest return in my tax-advantaged vehicles and will be leaning on the dividend tax credit in my taxable accounts later on in life.
As mentioned before, my money is in a LIRA which are tricky to withdraw from, if not impossible. My tactic will be to earn very little income and begin withdrawing small amounts from the LIRA using a form called “Financial Hardship”. I’m not sure if this is 100% possible or even ethical since I will definitely not be in any type of financial distress, but from what I’ve read it’s simply a way to prove you have little to no income. I think I’ll get over the “unethical” part quickly since I’m not stealing from society nor am I harming my financial future since I know what I’m doing. I will still have to pay taxes on any withdrawals but if I retire early and file my taxes separately from my wife, I should be able to pull money from this account but it will require further research on my part. My Lean FIRE does not hinge on this working but it would certainly remove any necessity for a part-time job which typically comes with Lean FIRE.
Q6. You were involved in the military for a number of years. Does your military experience help you in anyway on your FIRE journey? If it does, how so?
As I mentioned before, I learned minimalism from the military. Another thing I took away from the experience was a new attitude in life. Before entering the military I was quite shy and kept to myself on most issues. I never really stood up for what I believe in. Since I was young, fit and eager to work, I fit quite well inside the framework of the Canadian Forces. I could easily be told what to do and that gave me a lot of confidence in life because I was achieving things I had never thought possible or assumed I couldn’t or wouldn’t do. Being given tasks and accomplishing those tasks is great for your self-esteem. Physical challenges are an obvious go-to, I didn’t think I’d ever be able to be as fit as I was. Another is my specialized training in Military Intelligence taught me to be more analytical and much more assertive. After all, it was my job to brief commanders much, much higher in rank than I on what he or she needs to know. That type of public speaking would scare most people today and I used to be one of them but after my military experience I am now able to stand up and say what I know to be true.
Q7. Tell me some of your financial mistakes. What have you learned from these mistakes?
I had the unfortunate experience of buying $20,000 worth of oil stocks 3 months before the crash. I was just receiving my first dividends from CPG and BTE when they corrected in value, about 50% over the course of a week if I’m not mistaken. I figured the price of oil would recover and held the stocks for 3 years afterwards. I wanted to buy a house during this time (yup, I didn’t properly invest for my time horizon) and could use the money. I ended up borrowing $10,000 from my Dad so I didn’t have to sell but I ended up selling anyways a year or so later. The kicker? I had this money invested in my TFSA – this means when I withdrew my measly $7,000 worth of oil stocks, I have permanently lost $13,000 of contribution room in my TFSA. Woops? I learned from this mistake to never take risks in tax-advantaged accounts, just track the index. My LIRA is made up of individual stocks but several and quite diversified, however, I will eventually switch to VTI as I mentioned before.
Q7. You are considering Smith Manoeuvre where you use equity on your home to invest. Why is SM so enticing to you?
I am a growth investor. Leveraging debt to invest in the stock market over the very long term (minimum 20 years) while claiming the interest (tax deductible) is incredibly likely to pan out. I’d invest in a few broad indexes that cover the entire world as per my risk tolerance. Something like VEQT would be interesting, although using the Dividend Tax Credit in Canada and picking blue-chip Canadian stocks is also an excellent strategy for good cash flow (a requirement of the SM). All of this is squashed though, no matter how many charts I show my wife she isn’t interested in owning any debt whatsoever. My dreams of using the SM are contingent on a divorce.. and I like my wife more than I like money.
Q8. You have one kid with more planned. What’s your plan in terms of teaching your kid(s) about money? Are you planning to give them allowance?
It’s hard to say, my main focus these days is getting my kid to learn the potty. I think a lot of her financial education in the future depends ultimately on her personality. What kind of spender will she be? Will she be entrepreneurial? Does a spreadsheet excite her? Is she a all-in-one fund kind of gal? From my end I can teach her many different ways of managing money but I think first and foremost I have to teach her the value of money. Money enables freedom and you should waste it on silly things from time to time, not everyday. An allowance is an idea but I think I’d rather give her $100 and have her budget our grocery shopping. Let her keep the difference and see how thrifty she can get. I think she’ll learn more from experiences like that than doing chores around the house for twenty bucks.
Q9. Do you take advantage of TFSA and RRSP? Do you plan to withdraw early from RRSP before age 71? If so, what are your early withdrawal strategies to minimize RRSP tax penalties?
The TFSA is the best account in Canada, I can’t think of a single Canadian that shouldn’t use it. My RRSP is going to hold my bond allocation during drawdown. As I have revealed above, my plan is to withdraw from the LIRA. Withdrawing from the LIRA first is much more enticing since it’s a complicated tax shelter that’s hard to pry open. The LIRA will remain 100% equity and will be drawn down in small increments to keep taxes down and because I simply don’t need a lot to live on. The withdrawals will likely be the tax-exempt income and no more, which will be about 4% of the portfolio. The bonds in the RRSP will be withdrawn in the years where the market is extremely volatile and withdrawing from the LIRA heightens Sequence of Return Risk. I’m not too worried about getting my tax bracket down to 0% – Keeping it low around 10-15% is quite ideal to me.
Q10. What is your withdrawal strategy once you are living off your investment? Do you plan to tap into your principal in the first five years? Or do you plan to utilize distributions/dividends?
I’d love to simply live off the dividends and be done with the matter but building a portfolio that high would require a retirement several years from now, probably 5 or 6 more than the 2 I have planned. I’m not interested in participating in the mainstream workforce that long and I have exceptionally good cover – my wife doesn’t wish to retire anytime soon so that nest egg will likely be a reality if she continues to go that course. She doesn’t have to but I’d be lying if I said I’m not comforted by her willingness to continue her career.
Q11. What do you see yourself in 5 years and 10 years from now? What are the top three things you are looking forward to?
I’m looking forward to creating quality FIRE content for Canadians. We are so underserved in this country by the mainstream personal finance crowd and there is a giant gap in the market, especially for audio concerning the FIRE movement. This will be such a fun side-gig for me while I focus on the best part of my life – my kids. I greatly look forward to riding our bikes, teaching them to hate playing Monopoly with me and just being a curious human being about everything. If I had to make a list, I’d say it is:
- Raising my children
- Working on a passion project
- Deepening my relationships with friends, family, and members of the FIRE community who are quickly becoming my friends and family!
I will definitely keep my finances a secret from my family – most of them. My father and stepmother are savvy investors who’ve taught me the ropes and I’ve always been transparent with them about my finances. They are to this day my advisors and council. The others will never know about my blog or podcast. I avoid the conversation around the dinner table because we value such drastically different things. I don’t see a point in engaging the conversation where I reveal my values and my financial decisions behind them to be shut down by nay-sayers who think I’m doing wrong by my children or my wife. I’ve been burnt by this type of optimism before in the past and it usually leads to being on one of two sides. I’d just rather not be on either side and be impartial. I wouldn’t refuse anybody advice if they are seriously considering a path to early retirement but most people simply want to know which bank account is the best, which is fine, I’m never going to tell people to value different things in a day. All I can do is lead by example and hopefully make an impression on those who ask for my help.
Q13. What would you tell someone like me who is trying to achieve financial independence? Do you have any advice for financial independence retire early?
The easiest advice I can give anyone is to start communicating. Nobody can read your mind so if you’re interested in the FIRE philosophy, start talking to people about it. There are quite a few forums online and regular meetups in big cities. Talk to people, you’ll be glad you did.
Conversely, the hardest advice I can give you is to save 50% of your take-home pay. If you are serious about choosing this path, you need to fill up your TFSA and RRSP starting NOW. Don’t delay, immediately begin taking action and through baby steps and begin going over each line item one at a time. Pick easy ones to crush first, then get more complicated. Talk to your HR department about your Group RRSP, research discount internet packages available in your area and what speeds you actually need, install apps on your phone that can reduce your grocery bill while shopping. Once you start saving 50% of your income (which can take a few years to get too, Rome wasn’t built in a day people!), you will find that you cannot help it but become wealthy.
If your readers made it this far, thank you! Thank you Bob for sending me all these questions, I’m honoured to be inspected by you and your readers and I hope my life story can resonate with a few of you.
I’m always looking to connect with anybody in the FIRE community. Feel free to send me email at email@example.com. You can listen to me here: www.exploreficanada.ca and I blog here: www.canadianfire.ca.
Thank you Ryan for participating in the interview. It amazing that you are so far along on your financial independence journey at such a young age!
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