Our Financial Independence Retire Early (FIRE) Journey – What I’d have done differently

The other day, I was discussing personal finance and financial independence retire early (FIRE) topics with someone that is starting his Financial Independence Retire Early (FIRE) journey and he asked:

If you were to start your Financial Independence Retire Early journey today. What would you have done differently?

Technically we started our FIRE journey when a teacher of ours gave us The Secret of the Millionaire Mind to read in 2011. Our interests in personal finance and a better financial being started after reading this book. Mrs. T and I then attended the Millionaire Mind Intensive course shortly after reading the book. Thanks to this 2-day intensive course, Mrs. T and I were able to get on the same wavelength financially.

But it didn’t mean that we had no disagreements nor that we didn’t make any mistakes along our FIRE journey.

Here are 5 things I would have done differently if we were to start our FIRE journey today.

 

1. Not asking for a higher salary earlier

I joined a high tech company shortly after graduating from university in 2006. In the first few years, I worked as a hardware engineer and integration engineer. I was very motivated and took on a lot of challenging tasks. When the company laid off ~15% of the workforce during the financial crisis, I saw an opportunity to become a project manager and took it. I knew that project managers usually have higher salaries than integration engineers and better career advancement path. Unfortunately, I didn’t ask for a salary adjustment until 2 or 3 years later.

At the time I was severely underpaid for what I was doing.

Before asking for a salary adjustment, I researched online to find project managers’ average salary. I then listed all the accomplishments I achieved in the past 3 years as a project manager.

I approached my manager and his manager about having a salary adjustment. I also implied that if nothing happened to my salary, I would be looking for a position elsewhere.

Because I was one of the top performing project managers, within about a month of asking for a higher salary, my salary was increased by over 30%. By keeping the same level of expenses, the increase in salary really helped us to increase our savings rate.

 

2. Investing in mutual funds and GIC’s

This mistake I have alluded several times in other posts. Back in 2011, we were holding a large number of investments in mutual funds and GIC’s. We didn’t hold many individual dividend paying stocks or index ETFs. Our investment returns were low due to the high mutual fund MERs and the low GIC interest rates.

When we realized this important fact, we started getting out of mutual funds and GIC’s, and transferred the money toward our self-managed investment portfolio. This was one of the reasons why our dividend income increased significantly in 2012 and 2013.

What we should have done was invest in dividend-paying stocks and index ETF’s earlier (like when I started working). This also meant I would have been able to take advantage of the financial crisis downturn by buying stocks and index ETFs at very discounted prices.

 

3. Having the SAVE SAVE SAVE mindset

When we started our FIRE journey, I was very much in the SAVE, SAVE, SAVE, then SAVE some more mindset. On the other hand, Mrs. T was about saving while enjoying the finer things of life, like going out to a cafe to enjoy a nice cup of hot chocolate, or going to a bakery and enjoy a nice cup of coffee with some delicious bakery. I struggled for a VERY long time about spending money on these “non-necessity” items. I just wanted to save as much money so we could become financially independent quicker.

Mrs. T felt frustrated due to my always save-more mindset. She often felt guilty if she purchased something to treat herself. The two of us also had many arguments over small purchases.

Over time, I realized that we needed to enjoy the present moment too. It was nice to go to a cafe, have a nice cup of coffee with Mrs. T, and talk. This was our way of hygge. We also enjoyed having a small amount of chocolates in the afternoon when we sat down together to have hygge. I began to adopt the “finding the right balance” mindset. I realized that it was silly to argue over little thing that we could both enjoy. I also realized that we shouldn’t deprive ourselves by going into extreme save mode; we needed to enjoy the finer things in life too! Spending money isn’t the enemy!

And this is why my motto of finding your personal balance between saving for the future and enjoying the present moment.

 

4. Chasing yield

Chasing yield is probably the number 1 mistake many dividend growth investors make when starting out. I certainly made this mistake starting out.

When we started investing in dividend-paying stocks, I knew very little about dividend stock fundamental analysis. I knew ratios like PE, debt to book, dividend yield, but one key ratio I failed to pay attention to was the dividend payout ratio. I wasn’t able to determine whether a company’s dividend payouts were safe or not.

Because of that, I purchased the likes of Liquor Store, Just Energy, Energy Plus, Superior Plus Corp, etc. Due to unsustainable dividend payouts, all of these company cut their dividends. To make matter worse, the stock price tumbled. When we closed out these positions, we ended up with big losses.

Lessons learned here? Understand stock fundamentals and the health of dividend payments. Construct your portfolio with a mix of high yield low growth stocks and low yield high growth stocks. What the right mix will depend on your investment timeline.

 

5. Trading too often based on technical analysis

Early on our FIRE journey, I had taken some investment courses to learn how to trade based on technical analysis. I was trading based on techniques like channel breaking, seasonality, trend analysis, support & resistance, etc.

Did technical analysis work? Yes and no. I made some money and I lost some money.

Overall, we came out positive, but we could have made way more money.

What I learned was that to properly execute technical analysis techniques, I needed to make a lot of short-term trades. I was trading in and out of stocks almost every other day. That meant I was paying a lot of money in commissions. Because we had a small portfolio, commission cost quickly ate into our profits.

I realized that to properly execute technical analysis, you needed to be playing with a large sum of money.

Too bad it wasn’t us.

Instead of trading in and out of stocks, I should have been buying and holding the stocks.

Want some concrete examples?

I was buying and selling Alexion Pharmaceuticals at $25-30 price range. Today ALXN trades around $130. Missed out on a 4 bagger here. I should have held onto the stock.

I was buying and selling Questcor Pharmaceuticals around $35-40 range. Instead, I should have held onto the stock and get paid nicely when it got acquired by Mallinckrodt Pharmaceuticals.

I was buying and selling Direxion Daily Semiconductor Bull 3X around $6-8 range (4:1 split adjusted price). Today SOXL trades around $150. If I had held on, I would have made almost a 20 bagger from this stock. Oops!

I was buying and selling Ulta Beauty Inc at $75-85 range. Today ULTA trades at around $250. If I had held onto this stock, I would have made 3x the money from this stock.

And so on.

You get the point.

Trading too often and wasting money on commissions doesn’t make any sense for retail investors. Buy and hold can go a long way if done properly.

 

Learning from mistakes on the FIRE journey

These 5 mistakes were hard learned lessons for us. If I were to start our FIRE journey today, I would have made entirely different decisions. I have no doubt not making these mistakes would have expedited our FIRE journey.

Would I change a thing if I could though?

No, I wouldn’t. Because we have learned valuable lessons from these financial mistakes. These mistakes shaped who we are today as investors and FIRE seekers. We are better off because of them. We also learned not to make the same mistakes again.

If we didn’t make these mistakes, I am convinced that we would have made some other mistakes.

Learn from your mistakes and move on. Don’t dwell on your mistakes.

Dear readers, what kind of mistakes have you made along your FIRE journey? Would you have changed them if you had the chance?

 

 

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48 Comments

  • Reply
    Wealthy Content
    July 16, 2018 at 3:20 am

    Awesome list Bob, some great nuggets of wisdom in there. The most difficult ones which I still struggle with is finding the balance between saving and enjoying the moment as well as leaving your investments alone and stop fidling. Great post!

    • Reply
      Tawcan
      July 16, 2018 at 1:21 pm

      Hi Wealthy Content,

      Thank you. It sure took me a while to find the balance between saving and enjoying the moment and this balance may change on a daily basis. Continue working on that as a daily practice. 🙂

  • Reply
    American Dividend Dream
    July 16, 2018 at 5:30 am

    #3 has really hit home recently for me. The others, yes they were all mistakes I made as well but I think my stress level of trying to retire early and live the life that others are living currently, has been reduced by embracing the YOLO motto. I’m not saying we are spending like crazy now but when my wife says “I’m going to the store” I’ll say something like “Ok, have fun!” and when she gets home I ask what she bought but don’t criticize anything anymore. We keep our expenses around $2000 a month for a family of 3 and I can’t see too many areas to reduce any farther. If she wants a starbucks green tea or a new shirt, when she doesn’t need either, I dont care anymore. it’s all about balance. I have embraced the fact that I’ll probably never retire early after adopting twice and my wife a stay at home mom, but that is ok. We are still saving money (small as it may be) and the most important part – we are happier than ever as a family.

    Nice post! You guys are doing really great towards your FIRE goal!

    ADD

    • Reply
      Tawcan
      July 16, 2018 at 1:36 pm

      I think most of us personal finance bloggers struggle with the save save save mindset. When you’re in that mindset, it’s hard to shift the focus to spend money, but it’s really a learning process. I think I didn’t really “get it” until Mrs. T and I had many arguments and made me wonder “what’s the point of FIRE if we can’t be both happy?”

  • Reply
    freddy smidlap
    July 16, 2018 at 5:45 am

    hey bob. i’m glad we never got caught up in trying to save every last dollar. we’ve always lived our lives well and had some of our own money to do as we wish and that’s been great. i got burned by chasing yield in the energy sector too when we were starting out. it cost some money but i didn’t need to go to mba school to learn the lesson. the loss was cheaper than the school.

    • Reply
      Tawcan
      July 16, 2018 at 1:39 pm

      That’s awesome, good job for you guys not caught up in trying to save every last dollar.

      Yes, it’s easy to get caught in chasing yield and putting too much focus on that when you’re a dividend investor. What you need to pay attention to, as well, is the price appreciation.

      • Reply
        freddy smidlap
        July 17, 2018 at 5:40 am

        i keep saying and saying that. total return is the name of the game. some of the stuff i read online makes me hope the players are playing with monopoly money and not their own real dollars.

        • Reply
          Tawcan
          July 17, 2018 at 10:41 am

          Exactly. It’s easy to be a great investor when you’re not playing with your own money. It’s different emotion when you’re playing with your hard earned money.

  • Reply
    A Frugal Family's Journey
    July 16, 2018 at 7:32 am

    We live and we learn, looks like we share some of the same life lessons. The salary lesson is one I regret the most. Rather than trying to live on less, invest 50% or more of what we make, I should have asked for a raise sooner and more often! After all, our biggest investment tool is our income. I think we would be further along in our FI journey had I took the initiative or risk to ask for a raise; or leave for a higher paying job. 🙂

    But as you say, I cannot dwell on the past mistakes. I’ve since vowed to get paid my worth (whatever that means) haha. Thanks for sharing.

    Best wishes and continued success on your journey! AFFJ

    • Reply
      Tawcan
      July 16, 2018 at 1:43 pm

      Yea I also wish I had negotiated my starting salary when I started out. That’s another lesson I forgot to mention. 🙂

      A higher income will help expedite the FI journey because it is the biggest investment tool. You’re absolutely correct.

  • Reply
    Money Beagle
    July 16, 2018 at 8:24 am

    Making mistakes is perfectly OK as long as you learn from them and put measures in place to avoid repeating them.

    • Reply
      Tawcan
      July 16, 2018 at 1:44 pm

      Exactly. Making the same mistake again and again gets painful.

  • Reply
    Joe
    July 16, 2018 at 9:04 am

    We all make mistakes. It’s part of the journey, right?
    I still struggle with the save save save mindset. These little purchases don’t make me any happier so they aren’t important to me. They are important to my wife, though. So same as you. Now, I’m trying to be more relaxed about these little purchases.

    • Reply
      Tawcan
      July 16, 2018 at 1:49 pm

      Exactly, mistakes are a part of life. If you don’t make any mistakes in life, I’d say that’s a very boring life. 🙂

      I wouldn’t say it’s the little purchases that make us “happy.” If I look at it, it’s about the purchases that allow us to spend time together and enjoy each other’s company. That’s important to Mrs. T and I.

  • Reply
    Mr. Tako
    July 16, 2018 at 9:12 am

    The biggest investing mistake I ever made was thinking I could predict the future. There’s been a couple times I was right, but one really bad example of when I was wrong. So I got out of the crystal ball game.

    Some people say that investing is all about predicting the future, but I now think that’s wrong-headed. I can’t predict the future any more than a fortune teller can tell me about my future.

    • Reply
      Tawcan
      July 16, 2018 at 1:50 pm

      Haha I wish I could predict the future too. I used to think I can do that too but realized I was a fool trying to predict the future.

      Even the stock analysists can’t predict the future. I mean, they are at most 50% correct with their “stock analysis.”

  • Reply
    Owen @ PlanEasy.ca
    July 16, 2018 at 10:22 am

    In hind sight there are things I could have done differently to accelerate my FIRE journey. Take on more risk with a more aggressive portfolio, use the Smith maneuver to write off interest charges, invest in rental properties, but this is only because hind sight is 20/20. Overall I’m comfortable with our decisions on the route to FIRE. It might not have been mathematically optimal but we also felt very little stress along the way.

    • Reply
      Tawcan
      July 16, 2018 at 1:51 pm

      Yes hindsight is 20/20 but taking on more risk can come to bite you in the rear end as well if there was an economic downturn.

      • Reply
        Owen @ PlanEasy.ca
        July 18, 2018 at 9:09 am

        Absolutely! I think people in general over estimate their tolerance for risk. Or at least don’t update it as often as they should. My finances aren’t quite recession proof yet, but it’ll pretty resilient to a economic downturn.

  • Reply
    DivvyDad
    July 16, 2018 at 11:39 am

    One of my costliest mistakes was not learning when to sell a stock, and when I was freshly out of college and about to be married I had quite a few stocks make multi-bagger gains but saw all of them crash back down to a loss because I didn’t know when to sell.

    Your description of #3 sounds just like us, as I am all about saving while my wife likes to enjoy the here and now. We’ve had our fair share of arguments over the years about it, and I think part of it is our backgrounds and experiences. My wife grew up without much money while my family wasn’t rich but we weren’t lacking either. Once we were married, my wife was a SAHM and I had jobs that I did not enjoy–so I was focused on doing whatever I could to stop working as soon as possible while she wanted to enjoy life. I have gotten much better, and she has compromised as well (we are currently doing the zero day challenge to be more mindful of spending).

    I also had a spell with seasonality, but fortunately only pursued that with a few thousand dollars. It never worked out as expected and after losing about $1-2k, I stopped that experiment and put it into BAC and SIRI that have earned me back more than I lost.

    Great look back at some mistakes, and like you, I wouldn’t really change a thing because I am happy with where we are now and the lessons we have learned along the way.

    • Reply
      Tawcan
      July 16, 2018 at 1:54 pm

      Yes not knowing when to sell is a mistake that many investors make as well. We become too emotionally attached to a particular stock and we just want to hold onto it regardless of how the company is doing. That’s a mindset you need to change for sure.

      It’s tough when you have arguments over spendings with your significant others. This is why I think it’s crucial to get on the same wavelength financially, take time to review things, and go over any concerns one of you may have. Communication can go a long way in a marriage. 🙂

  • Reply
    Mr. Robot
    July 16, 2018 at 12:19 pm

    Great list Tawcan, thank you for sharing. I’m about 1.5 years in, big mistake on my part was not starting sooner. I was a fairly big spender on material things about 10 years back and that is something I view now as a long learning period. If only I had invested al that money I would be much further then I am now.

    • Reply
      Tawcan
      July 16, 2018 at 1:55 pm

      I think all of us wish we can start sooner. Only if our parents could have started an investment portfolio for us when we were born right? Talk about taking advantage of the power of compound interest.

      The important part here is that you have started and you’re well on your way for financial independence.

  • Reply
    Chris @ Mindful Explorer
    July 16, 2018 at 2:31 pm

    You said FIRE journey not “PRE” fire journey which I was going to say was waiting far too long to discover the FIRE mindset and terribly investing money with Investors Group (yes I lost my pants on backend charges when I clued in) . Then on the FIRE journey not investing enough by being even more frugal at my highest income years. Great post Bob

    • Reply
      Tawcan
      July 17, 2018 at 10:47 am

      I think many people knew the concept of FIRE beforehand but just didn’t know exactly what FIRE meant. I mean, people retired early way before the term FIRE was invented. 🙂

      Now you are FIRE’d, are there specific things you think you can do to be more frugal during your highest income years?

  • Reply
    GYM
    July 16, 2018 at 3:03 pm

    I used to try and do a bit of technical analysis too and trade too frequently. Big mistake.

    Congratulations for getting a 30% raise- that is huge! Good for you for being firm about looking for employment elsewhere if you didn’t get what you deserved.

    • Reply
      Tawcan
      July 17, 2018 at 10:44 am

      If you have a lot of money to play with, I can see TA working. Commission just eats into the profit margin too quickly.

      Yea 30% raise was HUGE, but just to show how underpaid I was.

  • Reply
    Daniela
    July 16, 2018 at 6:51 pm

    Thanks for this post! I’ve just recently discovered FIRE. I love the idea of financial independence but I am still figuring out what early retirement means to me.
    Husband and I co-own a fairly new small business so saving hasn’t been in our agenda for a long time. We also live in Vancouver and have yet to buy our own place.
    I wonder what tools you use for self direct trading. I currently have some invested with wealth simple and some mutual funds at the bank (which I hate now because I bought them before I knew about other options and have yet to see it recover its book value before I sell). I have been thinking about moving my investments to the new one-solution Vanguard portfolio and also buying some dividend paying stocks.

    • Reply
      moneyhelp
      July 16, 2018 at 10:08 pm

      I am planning on starting an RRSP with the one-solution Vanguard portfolio (VGRO) as well, I just haven’t pulled the trigger yet. Currently investing in index ETFs in my TFSA and some individual dividend paying stocks in my margin (non-registered) account, but debating on repeating the same funds in my RRSP as I have in my TFSA. Not sure yet, thinking of waiting and researching some more.

    • Reply
      Tawcan
      July 17, 2018 at 10:43 am

      Early retirement can mean a lot of things. For us, we are not focusing on the early retirement part. We are focusing on the financial independence part. We probably will continue working (either part time or full time) despite being FI.

  • Reply
    Buy, Hold Long
    July 17, 2018 at 5:30 am

    Thanks for all the advice.
    This is important to all investors new and old. I too have made some of these mistakes but learning from those mistakes is what makes you a smarter investor in the long run.
    Thanks for sharing your story and I hope it helps others too.

    • Reply
      Tawcan
      July 17, 2018 at 10:41 am

      Exactly, don’t be afraid to make mistakes, just make sure you learn from them.

  • Reply
    Passivecanadianincome
    July 17, 2018 at 5:39 pm

    nice post Bob.

    great to hear from a seasoned vet! lol

    im guilty of a bunch of these as well. Just looking at my portfolio gains shows that dividend aristocrats etc perform better than non.

    The dividend raises are a huge bonus.

    I was hardcore penny pincher when we were in debt payoff mode. Once that phase was completed i lightened up alot. We need to enjoy our money as well

    thanks for your advice
    cheers

    • Reply
      Tawcan
      July 18, 2018 at 10:31 am

      Haha I wouldn’t quite call myself a seasoned vet just yet. :p

      That’s great to hear that you’ve lightened up a bit from the hardcore penny pincher days. It’s good to be able to enjoy life a little. 🙂

  • Reply
    Dave
    July 19, 2018 at 6:30 am

    Making mistakes is part of the process. We all make them in our career and with managing money. The trick is to learn from our mistakes. Once an error has been identified, a successful person will make the required changes to get them back on the right track.

    • Reply
      Tawcan
      July 19, 2018 at 10:00 am

      Exactly, great summary. 🙂

  • Reply
    Fuller
    July 20, 2018 at 4:30 am

    Hey no-longer-secret Bob 🙂 Thanks for the tip on the ‘chasing yield’ : something I just realised I do! What advice or rules of thumb do you advise to help avoid this pitfall? (Note: I don’t intend to deep-dive into company’s balance sheets… so simple is better)

    • Reply
      Tawcan
      July 20, 2018 at 9:43 am

      Hey Fuller,

      Generally, I ask myself these questions:
      1. Does this company provide products/services that I use regularly? If I do use it regularly, is it hard to switch to its competitor?
      2. What is the dividend payout ratio?
      3. Is the earning per share growing? Or is it decreasing?
      4. What’s the PEG ratio? Is it below 1.5?

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  • Reply
    Mr. Thrifty
    July 21, 2018 at 2:18 pm

    Bob, thanks for being willing to share your mistakes. It sounds like they were all teachable moments, and it takes a humble person to grow through setbacks.

    We’ve found #3 to be particularly important. The pursuit of financial independence is a marathon for most of us, and it’s important not to lose sight of the “why” along the way. Also, not addressing things that need work because of an aversion to spending and buying cheap things often ends up costing more in the end.

    Keep the great content coming!

    -Mr. Thrifty

    • Reply
      Tawcan
      July 23, 2018 at 10:48 am

      Thank you Mr. Thrifty, I think many of us FIRE seekers eventually realize that #3 is very important. Being constantly in savings mode all the time just isn’t healthy.

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  • Reply
    Team CF
    July 24, 2018 at 7:08 am

    Dude, can you mind read 😉 That’s pretty much the same things we/I would do differently too. Wisdom does come with age eh?

    • Reply
      Tawcan
      July 24, 2018 at 7:49 am

      Haha does that mean I’m getting old? :p

  • Reply
    JoeHx
    July 26, 2018 at 10:30 am

    It was probably easier to chase dividend yields than dividend payout because, as far as I can tell, dividend yield is typically listed on a broker’s site (for instant, on Robinhood) but dividend payout is not. However, they do list price-to-earning ratio.

    Which led me to think – if dividend yield is dividend/price, price-to-earnings ratio is price/earnings, and dividend payout is dividend/earnings, then the dividend payout is just the price-to-earnings ratio multiplied by the dividend yield.

    I checked. for all the individual dividend-paying stocks I own that have those two numbers, the dividend payout ranges roughly from 10% to 30%. Except one – Gamestop – whose PE ratio is 295.60 and dividend yield is 9.37. That might mean that yield is unsustainable or my math is wrong.

    • Reply
      Tawcan
      July 27, 2018 at 1:25 am

      That’s a good way to think about it. Obviously, a higher yield and higher PE ratio would result in a higher payout ratio. You’re correct that Gamestop has a crazy payout ratio over 100%. The dividend is not sustainable at this point.

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