If you’re so smart, why aren’t you retired already?

It shouldn’t come as a surprise that I read a lot of personal finance and investment related books and I also read a lot of personal finance blogs. When I read Mark aka My Own Advisor’s recent post titled “If you’re so smart, why aren’t you retired? I thought I would write a post answering the same question. To me, Mark proposed a very interesting question. If you’re so smart, why aren’t you retired already? I mean, how hard can it be to have sufficient amount of money saved up to last the rest of your life? After all, I did graduate from one of the toughest engineering programs in Canada, learning how to solve complicated math and physics problems, so the whole how to retire early should be an easy problem to solve right?

Let’s take a closer look on why I am not retired already. Not surprisingly, my list is very similar to Mark’s.

1. Invested in high-priced mutual funds and GIC’s

When I started working, I started investing in mutual funds because they were easily available. I never paid close attention to the MER fees. Even after reading A Random Walk Down Wall Street, and realizing the importance of minimizing fees, I still purchased high fee mutual funds. I recall having a meeting with a financial advisor at one of the Canadian banks and stating that I wanted to buy index-like mutual funds only to get convinced that active-managed-high-fee mutual funds were the way to go. What a silly fool I was back then.

Although I had high savings rate in my 20’s, I “invested” a good portion of my savings in GIC’s, getting 2% or less annual returns rather than investing in stocks and getting higher returns over time.

The fix

When I finally had a financial epiphany, I started focusing on getting our money working hard for us. This involved:

  • Shifting from high-fee mutual funds to lower cost investment products like ETFs and dividend stocks.
  • Investing in dividend paying stocks that provide dividend income that can grow over time.
  • Focusing investments inside tax-advantage accounts like TFSA and RRSP.
  • Minimizing GIC investments

2. Not being patient

In my 20’s, I was into making big money really quick. So I chased high risk stocks. I had some stellar returns but also got burned a number of times. One time I tried to day-trade Ballard Power Systems because some hot contract news. Unfortunately my timing was late so found myself in a -20% hole ten or so minutes after initiating the trade. Luckily I set a limit order sell to get out of the stock completely before getting into deeper trouble. I was lucky that I never traded using leverage or I would have gotten myself into some serious troubles.

The fix

Rome wasn’t built in one day, neither should your portfolio. I began to understand that building wealth takes time. I have been building my dividend portfolio for the long term and I am not worried about the day-to-day stock price fluctuations. I know over the long term stock prices have a tendency to go up.

I still trade non-dividend/value stocks occasionally. But I’m now smarter. Instead chasing the big bucks I am now more patient. I analyze the stocks thoroughly before purchasing. Once I purchase the stock I will set upper and lower price limits. If the stock price hits either limits I’d sell it and move on. I’m no longer chasing for the quick bucks.

3. Not saving enough/Not doing an extreme budget

To be perfectly honest, I think we can do more on the saving & cutting expenses front. Our savings rate isn’t ultra-high like some personal finance blogger families and we aren’t the most frugal household. Although we do save as much as we can and invest (we have already added $18k this year, and $35k in 2016), I do think we can do more. However, being a single-income family with two little kids has put us on a slight disadvantage compared to dual-income families. After all, if two families have similar expenses, it’s certainly a lot easier to safe money with a family income of $200k from two people than a family income of $75k from one person.

Our annual 2016 expenses of $44,138.77 for a family of 4 isn’t the lowest out there. But we eat good quality food, we enjoy the occasional dine-out, coffee, and treats, and we don’t deprive ourselves.

The reality is, if we can cut our expenses by 30-40% (hard but I think it’s possible), we can expedite our financial independence timeline significantly.

The fix

While the fix seems easy, I don’t have any plans to implement it. I believe that living on either extreme ends is no good (i.e. spending like YOLO or extreme frugality). I believe in finding your own balance between spending now and saving for the future.

For me, if it means working an extra 5 years so I can enjoy my life now while working toward financial independence, the extra 5 years is totally worth it. Is it really worth it to deprive yourself now? To me, it’s not worth it. Having said all that, it doesn’t mean we do not try to optimize our expenses so we can save money to invest every month. Again, it comes down to finding the right personal balance.

4. Not being greedy when others are fearful

Hindsight is always 20/20, but one of the biggest mistakes that I made was that I was not greedy enough during the financial crisis. Instead of buying undervalued stocks I was being fearful like everyone else. I ended up selling quite a number of stocks and sat on a large amount of cash, earning very little interests. Instead of cashing out, I should have purchased some stocks very low prices, resulting easy multi-bagger returns a few years later. But I was too busy being fearful of the sky collapsing. I was fearful of my own job even though there was no financial consequences due to my low monthly expenses and the large amount of cash reserve I had.

I missed the big picture.

The fix

After missing the great buying opportunity in 2008 I have realized how important it is to purchase equities when they are on sale. So we keep cash available to deploy whenever there’s an opportunity. Over the years we managed to snatch some pretty good stock deals. Secretly I am hoping for another market crash so we can accumulate more stocks at much lower prices than today.

The Summary

Looking back, there were a number of things I could have done to put myself on a faster path toward financial independence. If I had taken advantage of the financial crisis by not sitting on a huge amount of cash, I probably would be looking at a good sizable portfolio. In addition, if Mrs. T and I could be better at saving money and cutting expenses, we probably could be fast tracking our financial independence journey.

But we are not. Coulda shoulda woulda are three very dangerous words to use. I am happy with where we are on our financial independence journey; we have been receiving close to $1,200 in dividend income each month so far in 2017. I have learned the importance of saving for the future and enjoying the present moment. Spending time with my young innocent kids and seeing them grow up, and spending quality time with Mrs. T is much much more rewarding than fast track to financial independence.

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36 thoughts on “If you’re so smart, why aren’t you retired already?”

  1. These are good points.

    “However, I am extremely smart! No one is smarter than me! I am so great and smart, beautifully smart, one of the smartest!”

    But I am still not retired! I couldn’t do it yet. But I am on the right path! I learned trading options which generate great income and I am building a dividend growth stocks portfolio which is now picking up greatly and increasing income nicely…

    So despite being the smartest person on the planet, I am short of the capital available to invest or trade to make more money which would allow me to retire. I tried extreme budgeting but my budget is so constrained already that I do not know where else to cut the corners. But I know the culprit of it all – debt!

    So I decided to take a second job to tackle the debt. I created a good source of income – options, a great base of future income – dividend growth portfolio, now it is time to tackle the debt so I can get free.

    I think you can include debt as another point which can keep people from financial freedom. I have enough income to retire, but I have to spend it all on debt, grrrr.

  2. Great post Tawcan! A lot of good takeaways here to learn from. I appreciate you being honest about your savings rate and discussing how you have found a happy balance. It could be better, but you found what works best for you and your family. Same here. My wife and I aren’t perfect, but we are happy with where we are and are not beating ourselves up over it.

    For 1,2, and 4, I think those are lessons that are best learned the hard way unfortunately. Everyone has a period where they invest in mutual funds until they learn about fees and take a critical look at their portfolio. As for investing when there is a big sell off, I truly believe you have to experience a full economic cycle to understand that the stock market will have depressed periods and rising periods. If that was the first time you experienced the floor falling out from beneath you, then how could you be so sure things would recover.

    Thanks for the great read tonight!


    • Hi Bert,

      Yes, finding your own happy balance is very important. What’s right for you may not be right for me. Very true that some lessons must be learned the hard way. I suppose you can read about it but you wouldn’t take in the lessons without actually living through the pain.

  3. Excellent post!
    I especially like your 3rd point about extreme budgeting because I 100% agree that it’s not worth it to deprive yourself. There are definitely a few expenses I could cut back on to increase my savings rate, however, I don’t want to create extra work for myself and live an unhappy life now. For me, as long as I’m making consistent progress with my savings, passive income, and net worth, I can be happy. I like to increase my rate of savings in small steps.

    You’re doing great with the $1200 a month in dividend income! I’d say you’ve made some smart decisions to put yourself in this position. Thanks for sharing! Keep it up!

    • Thanks Graham. Depriving yourself to achieve a bare-bone minimum budget will only cause you to feel burned out in the long run. It’s better to treat yourself here and there to make sure you still enjoy your life. 🙂

  4. “If you’re so smart, why aren’t you retired already?”
    Sounds like something an indexer would say…lol

    Geez, here I am retired yet not so smart, now what?

  5. 4 strong points!

    I my head, When I saw the title, I only expected one answer: IT is a marathon, not a sprint. You added 3 more point to that.

    I als am a strong believer in point 3: DO not go for the bear bones minimal budget. IT means you live a not ideal life now and yo will base you future budget on an non ideal life, that then lasts forever.

    Our focus now is to start the desired life already now. We are not FI, far from. We will however travel quite a lot going forward, work less (and earn less) to have less stress and to be with the kids. All of that might lead to partila FI until retirement age…

    And about point 1: I sold recently 25pxt of my mutual funds to start an active strategy with ETFs… Let’s see

  6. One major thing to consider when you are comparing your expenses to other FI bloggers: How much cheaper many (most) things are in the U.S. Take a look at some food flyers online from the midwest. I mean 3 cans of vegetables for $1. Local supermarkets call it a sale here if they are 4 for $5. Then there’s cell phone costs, car insurance and of course income tax levels. It’s amazing we can save anything.

    • That is so true! I just recently came across a blogger that spends less than $100 in grocery a month for a family of two. Not sure how that’s even possible to do in Canada.

  7. I’ve always been invested in the stock market but just recently bought my first rental unit. I had a hard time finding an investment that worked numbers wise and I’m not located in a major city. Just out of curiously anyone know what the avg cap rate would be in Toronto or Vancouver now? I’d be surprised if you could find a place that would cash flow positive.

    • As I said above, I’m not convinced with rental real estate in Vancouver, especially whether it would be cash flow positive. You can probably do it if you look long and hard for a great property. We have thought about rental properties before but given all the stuff we have on our hands we probably won’t pursuit this area in the short term. But I won’t say never either.

  8. Think you hit the nail on the head with this one, the reason why we are not retired is exactly the same (minus the GIC’s). But considering I’m not enjoying my time at work, we will switch to partial FI, likely by the end of the year.

  9. Tawcan,
    I’m setting a goal to make 10k/month of passive income before calling myself retired. With 3 rentable units I am currently at 3300/month. Hoping to buy another multi next year to bring that to about 5500/month. Have you thought about rental units in your area or is it too pricey and the numbers don’t work?

    • Real estate is a bit crazy in Vancouver right now. Some newer apartments are being sold at like $1,500 per sqft. That’s really insane IMO. The laws also seem to be on renters’ side. A few friends of ours have been stuck with bad tenants and couldn’t evict them. Our friends ended up losing quite a bit of money. I’m not 100% convinced that rental real estate is the way to go here in Vancouver.

  10. Great post and it makes me think of some of my old co-workers who used to talk down to me and act like they were superior in all aspects of life, particularly investing… When I was sharing with them my investments in rental properties back in 2012, many told me I was insane to be buying, assuring me that they just knew prices would keep collapsing.

    So, early on, I learned to tune out a lot of noise, whether that be from co-workers, friends, family, etc. My lightbulb moments occurred when I started attending real estate meet up groups and interacting with those who actually were successful and had retired or reached early FI many years ago. That’s when my brain got properly re-wired and I learned how the rich think… Get greedy as hell during market bottoms and fearful at tops!

    Sound simple, but that will turbocharge early FI progress like nothing else will.

    Oh, and buying up homes during the lows in places like Vancouver will get you there in record time too! 😉

    Happy hunting!

    • Thanks Jay, hope SF is treating you well. We gotta meet up another day so I can pick on your brain some more! 🙂

      It’s tough to go against from the norms but that’s exactly what you need to do to achieve FI at a young age. Like you said, just need to learn how to tune out noises and ignore what others are saying. The key is to not care what others think about you and continue executing your strategy.

      Yes Vancouver housing prices are absolutely crazy.

  11. First of all, I don’t consider myself that smart 🙂 and because I haven’t wanted to. I’ve had an interesting and varied career until now, which has been richly rewarding both financially and experientially.

    Have you done any simulations or worked out when your dividend income should theoretically exceed spending?

  12. Hi Tawcan. I took a little longer to reach Financial Independence too…so don’t feel bad.

    Some people are gifted with wonderful high-paying jobs in stable industries. Others are not. It might take you a tad longer, but you’ll appreciate it all the more when you get there.

    I’m hoping you’ll join the club soon!

    • I don’t think there’s nothing wrong with taking a little longer to reach FI. You still reached FI before age of 65 so in my book that’s still early. The FI journey is very personal so the timeline will be different for each person. 🙂

  13. Bob,
    I think its a type but in your lat paragraph you mention that you have been making $12,000 month in dividends. I thought you were making $1000ish a month?

  14. heheh, my passive income exceeded my monthly budget 2 years ago. During the 2 extra years, I got married. I’ve used my portfolio to increase the surplus to ~$4000/mo, this surplus should cover Mr.W, and all of our traveling or international trips that we desire. There are different way to manage risks, I don’t regret not pouring 100% of my take home income into the stock market when the DOW was 7000 points, I was single. You invest what you can when you can and what you think is best for you at that particular moments. Everybody has to go through a few market shock before learning that index trading is the way to go. or the 10-50% correction is the time to jump in.

    Why I haven’t retired just yet? I still haven’t figured out what to do with my time. Maybe if we’re pregnant, I’ll quit my job. As of now, why not add more to the core, so we’d have more leverage down the road?

    • That’s awesome you’re getting this kind of passive income each month. Figuring out what to do with your time is very important. Last thing you want to do is sit in front of the TV all day and waste your time away during “retirement.”

  15. Very nice post Tawcan. I am not retired either. This is because I started from zero a decade ago, and it takes time to get savings,invest them, and get the snowball rolling.

    I would guess that I would be financially independent by the end of the decade ( forward dividend income exceeding expenses). But probably won’t retire for years after that 😉

    • Hi DGI,

      It definitely take time to build a decent size portfolio and get the snowball rolling. I think once your dividend income exceeds expenses, more options become available to you. Even if you’re working you probably will see work differently when you’re not financially independent.


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