Financial Independence Will F*ck You Up

Financial Independence Will F*ck You Up

Ooh, look at you. Such restraint in the title. Would you like the Nobel Peace Prize?

Why yes, I would, Italics Man. I think I deserve it after putting up with you.

Let’s talk a little about Nelson’s sexy new job. It must have been a great opportunity, since I quit writing about stocks to do it.

That new job is…

Just building up anticipation here, don’t mind me…

(whispers) I work in a grocery store.

(ducks as tomatoes come flying from the crowd)

Why in the actual hell would you go work at a grocery store?

First off, remember that I’ve spent much of my adult life in the retail industry. My first real job was working in a grocery store (the same one as today, actually). I stayed for almost six years. After becoming a terrible real estate agent, I went back into the industry for three more years as a potato chip salesman. It’s nice to start a new job and not have a crazy learning curve.

As I’ve mentioned before, retail is clamoring for brains. Most chains have their share of long-term employees, but most of these workers have zero hope of ever advancing past entry level. They just don’t have the intelligence or work ethic needed to excel. They’re decent at being told what to do, but never level up past that stage. Grocery is competitive as all hell; it needs people who can truly drive sales.

And apparently, one of those people is me. At least, according to my new bosses. I’ve been tapped to move up the ladder. Management has put me into a sort of half-assed advanced training program and has me in charge of certain parts of the grocery department to try and prepare me for the next step.

Grocery management is a decent living. Department managers regularly earn more than $50-60k per year, with store managers pushing six figures. Hell, even as a guy who just works in a store, I feel I’m more than adequately compensated. Certain chains invest in their staff. Others don’t. One of the reasons why I work where I do is this company is squarely in the former category. And it shows; they have some damn fine grocers.

Despite the opportunity staring me in the face, I’m not entirely certain I’m going to go for it. And it’s all because of damned financial independence.

How FI is BS

Thanks to years of aggressive saving and some savvy investments, I’m fortunate enough to be in a position at 34 years old to not have to work. I continue to drag my ass in every day because I know time off only means something if you have something to measure it against. When every day is a treat, it’s no longer a novelty. Suddenly, taking every day off is like having a job.

But while I’m a big advocate of doing work, I find myself with less motivation now that I know each paychque just goes to further increase the big pile of money at my disposal. I should be working my ass off towards getting promoted. I should be telling management to send me to a new store the minute a department manager opportunity opens up.

But I’m not. Instead, much to their chagrin, I’m hemming and hawing and coming up with reasons why it’s not a good idea to accept a promotion. I don’t want to move. I’m not sure I’m ready. I want to make sure the manager is someone I can work with.

It’s all nonsense. The reason why I’m dragging my feet is because money doesn’t motivate me any longer. Sure, there are plenty of other reasons to take a promotion, but y’all gotta admit the cash is a huge motivating factor. And if the money doesn’t motivate me, then it’s all about the challenge of a new position. But why bother taking on huge potential frustrations when I don’t need the money?

This is what financial independence has done to me. Suddenly, I understand these early retirement bloggers who threw up their hands and decided work was stupid. It’s really hard to get motivated under such circumstances. Why work so hard when you don’t need to? Why not just have fun instead?

There’s a lot of good that comes with financial independence. We all know about that. But nobody ever talks about the bad. Sapping motivation is not a good thing. Early retirees are, generally, smart as hell and great with money. They’re probably people who should stay in the work force long-term. Unfortunately, there just isn’t much sense trying to talk these people out of it. As I’m finding out, the default response to “fuck you” money is “fuck it,” no matter how much I want it not to be.

Want to Retire Early? Move to Rural Canada

Want to Retire Early? Move to Rural Canada

Retiring early is tough. I don’t care where you live.

Not only do you have to maintain an ultra-high savings rate for a long time, but you’ve got to constantly say no to temptation. That might be easy for some of you, but society has conditioned us to believe things like a big house and a fancy car are the byproducts of success. The only thing successful about that guy riding a bike is his ability to get DUIs.

And then you’ve got to invest successfully. This is harder than it looks. Sure, we’ve got low-cost index funds you can just stick your cash into, but they still don’t take away the human tendency of selling at the exact wrong time or raiding accounts to pay for the aforementioned new car or house.

There’s also the timing aspect to it. I’m a firm believer thoughts of early retirement spike during bull markets. People feel good and their investments are doing great. There’s nothing holding them back! Nobody is looking to retire under 40 when the market is hitting 2009 lows.

Still, it’s expensive to retire in the United States. Life in most of its major cities is expensive. An apartment in New York, San Francisco, or Chicago is as expensive as it gets. Smaller cities are cheaper, but if this thread is any indication, early retirees want nothing to do with rural America.

These folks would rather live in places like Costa Rica, Thailand, or even Mexico. They point to amenities like a cheap cost of living, better climate, and greater access to medical care as perks, as well as focusing on the adventure of living in a foreign country.

That’s all fine and good, but take it from a guy who’s lived abroad. It’s annoying. The only expats you meet are drifters with no sense of direction or English teachers, who are only slightly less insufferable. Getting the right food is annoying, and sometimes all you want are those chips you can only get at home. Even going to the damn store and getting garbage bags can be an adventure. And if you end up in the right country, you’ll get stared at. Constantly.

I don’t regret my year abroad. I can just see it from a different perspective.

Besides, it’s a whole lot of work for not a bunch of benefit. Here’s how you can retire early in rural Canada on the cheap.

First up, housing

Want to buy a decent place for under $100,000? It’s not only possible in rural Canada. It’s easily accomplished.

Here’s an 1100 square foot house in Hanna, Alberta, for $89,900. A one-bedroom condo in Swift Current, Saskatchewan is going for $99,900. A three-bedroom condo will only set you back $90k in Moose Jaw. There are 27 properties in Portage La Prairie under $110,000. Fredericton, St. John, and other places in New Brunswick have hundreds of properties under $100,000, including this brand new mobile home.

And so on.

These places aren’t in the sticks, either. They’re all towns with reasonable amenities. They have hospitals, department stores, decent schools, and are even relatively close to major airports. They might not offer as much to do as a major city, but hobbies in these places don’t cost much anyway. And there are plenty of free things to do, even in places like Swift Current.

Next, health care

I really don’t understand why early retirees are so obsessed with low-cost health care in developing countries. They’re not going to the doctor four times a week.

If you’re a reasonably healthy person in your 30s or 40s, any small town hospital will be enough to keep you healthy. Most things that go wrong when you’re younger are easy to fix anyway. Any moron can do stitches if you fall off your bike.

The big advantage retiring in Canada versus the United States is you don’t have to pay health insurance premiums. Let’s face it. Any health care plan that has a $10,000 deductible is no health plan. It’s an insurance policy only. All you’re protecting is against major injury. So why not come to Canada, where the major stuff is already included and you can get insurance to pay for the minor stuff (dental, eyes, etc.) for less than the price of a terrible U.S. plan.

Currency difference

Good news, Americans. Thanks to our crummy dollar–or your strong one, depending on your perspective–your cash now goes farther than ever.

Only have $800,000 to your name? Convert those bucks to Canadian and you’re suddenly a millionaire with $66,000 left over. If only it were that easy to convert zero dollars to 800,000 of them.

Everyone talks about taking advantage of this when going to sexier abroad countries. Why not Canada?

Taxes

And finally, let’s talk about taxes. Specifically how you’re going to pay for an early retirement inside the socialist paradise of Canada. Somebody’s gotta pay for that sweet health care.

First of all, you won’t pay much in tax if you’re just receiving dividends and you keep your income under the $50,000 range. It’s even better if you split that income between you and your wife. If you’re both earning $30,000 in dividends and that’s it, there won’t be much tax to pay.

Next up are sales taxes, which are certainly a bigger deal in Canada than in the U.S. Some areas of Canada charge a 13% sales tax. Most places in the U.S. are between 5-8%. If you’re really worried about that, move to Alberta, the only place in the country without a provincial sales tax.

And that’s it

The bottom line? It’s pretty simple. If you’re looking to retire early, rural Canada offers cheap housing, reasonable taxes, access to a decent amount of amenities, and free health care. And your currency goes farther here than in other countries. You could do a whole lot worse.

How To Become a TFSA Millionaire

How To Become a TFSA Millionaire

This should go without saying, but I’m going to say it anyway. After all, this post does need an intro.

If you’re not investing in TFSAs, you’re missing out. My TFSA is more maxed than Carrie Bradshaw’s credit card, and yours should be too. TFSAs offer advantages like the ability to withdraw money whenever you want without taking a tax hit, and the flexibility to add cash back into them after you take it out.

Even though I’m still a huge fan of RRSPs, and think if given the choice, most people should contribute to them first, there’s still plenty of room for someone to invest in their TFSA too.

When somebody asks me whether they should invest in their TFSA or RRSP first, I like to say it doesn’t really matter. Just pick one and save.

Many diligent savers have one big goal–to end up as a TFSA millionaire. This might seem like a pretty lofty goal. Interest rates are lower than my IQ. Stocks (at least here in Canada, anyway) have gone basically nowhere in the last decade. Bonds have done relatively well, but there’s no way that bull market is continuing for the next decade. And so on.

This uncertain environment has caused many savers to just throw up their hands and keep their cash parked at the bank, collecting a measly 1% yield. That’s not so bad for an emergency fund, but it’s a terrible return for a TFSA. At that rate, the only way you’ll be rich is if you get frozen for 1,000 years.

A Futurama joke? Don’t mind if I do.

Bank Teller: Okay, you had a balance of $0.93.

Fry: All right…

Teller: And at an average of 2.25% interest over a period of 1,000 years, that comes to 4.3 billion dollars.

Anyhoo, let’s figure out how you can become a TFSA millionaire.

The math

It turns out it isn’t that hard to the TFSA to seven figures. Let’s run some hypotheticals, bitches.

That never gets old.

Scenario #1

  • Borrower is 25 years old
  • Has $5,000 to put towards this year’s contribution
  • Has $5,000 annually to invest for the next 30 years
  • How much money will they end up with at 55 earning 6%, 8%, and 10% annually?

First, 6%:

tfsa-6

Look at that, kids. You’re already halfway to being a TFSA millionaire, and all it took was an investment of $155,000. Not bad.

Next, 8%:

tfsa-8

An extra 2% really makes a difference. That’s the beauty of compound interest. Just 2% more annually gets you like 33% more at the end of a lifetime of investing.

Finally, 10%:

tfsa-10

Would you look at that? We’re basically there, and all it took was investing five large a year for 31 years and earning 10%.

Look. It takes a lot of work to consistently invest over the course of a few decades. And you have to make sure you don’t do anything stupid like raid the cash for a nose job or glitter or whatever it is you kids buy these days.  Consistency is the key, as well as getting decent returns.

Best case scenario

Next, we’ll build a slightly more aggressive scenario.

  • Borrower is 25 years old
  • Puts away $5,500 for the next 40 years, until traditional retirement age
  • Has already saved $41,000, the maximum contribution room
  • Same return scenarios, 6%, 8%, 10%

6% return

tfsa-max6

Well, that was easy. It turns out giving the investment an extra ten years to grow really does wonders.

8% return

tfsa-maxed-8

Hey rich old guy! Can I have a loan?

10% return

tfsa-maxed-10

(angels sing)

So it turns out it’s really not that hard to become a TFSA millionaire. All you need to do is max the thing out day one, continue to max it out, wait for a while, don’t do anything stupid, and you’re golden. I guess all that is easier said than done, but it just goes to show it’s certainly achievable.

What to invest in

You already know what to invest in. Just put your cash in a few ETFs with low fees, hold on to them for a while, and you’re in business.

I don’t think it’s going to be that easy going forward.

It’s not so much that passive investing sucks. It sure beats mutual funds (except maybe these kick-ass ones), and with the average person not knowing the difference between an income and a victim impact statement, most have no business investing in individual stocks.

But at the same time, we’ve still got to be smart about what we invest in. Both Canadian and U.S. stock markets are expensive, and it’s likely both will barely keep pace with inflation over the next decade.

So what’s a wannabe millionaire to do? There are plenty of options. You could put your money to work in Poland, Turkey, or other cheap European stock markets. Energy is still a very inexpensive sector. Canada’s REIT sector is still relatively attractive. Or you could buy Aimia shares like I have in my TFSA.

Even if you max out your TFSA going forward, you’re still going to need a decent return to get that bad boy to $1 million. It’s certainly possible to do so investing in the way that’s become standard. I just don’t think that’s going to be the ideal solution over the medium-term. Local stocks are just too overvalued.

Conclusion

It turns out it’s not going to be that hard to become a TFSA millionaire, especially if you save a lot. It’ll take patience, a halfways decent return, and making sure you don’t take out money at an inopportune time, but it’s very possible. The only issue is inflation might make that windfall look less impressive when the time comes.

Instead of Retiring in Your 30s, Try This

Instead of Retiring in Your 30s, Try This

Us here at Financial Uproar (me and my 52 helper monkeys) are no fans of retiring super early.

There are a number of reasons why. First, I LURVE money, and want to make more of it. I see no reason to stop doing so early. I’ll just go do something else if I get bored.

I also think taking our hardest-working and most motivated employees from the workforce in their prime working years isn’t good for anyone. Somebody with FU money is far more likely to stumble upon something truly remarkable than the guy who is 14 different kinds of screwed if he gets fired. The wealthy guy can afford to take a few risks; to try and create something worth creating. The poor guy is going to play it more safe than a Mormon on prom night. ZING HE’S STILL GOT IT.

But, alas, no matter how much I shout, y’all don’t care. I know very reasonable people who insist on hanging up their proverbial skates right when their working lives are about to get really interesting. HOW DARE THEY DON’T LISTEN TO ME. I ought to murder them all…with love. And axes.

While most of us don’t have the desire to permanently stop working in our 30s, I think many of us would like the freedom to change jobs, take a year or two off, or be able to start a business without worry. I know I went from working for the man to self-employed, and it was terrifying. Let’s not talk about how many times I wet myself.

So rather than retiring early, allow me to propose another option.

Mini retirements

I can’t take much credit for the originality of this idea. Tim Ferriss came up with it before me, and he probably ripped it off of somebody else. I’m pretty sure the first guy who came up with the idea was Benjamin Franklin, but keep in mind my research skills are about as through as a 7th grader throwing together a last-minute homework assignment.

The concept is simple. When working, save your ass off. Create that huge savings rate everyone is always talking about. And then when you inevitably get tired of your job, quit it without hesitation. I’d recommend not playing your boss’s head like a bongo drum on the way out the door, but hey. I’m not your mother.

bongo

At that point, you’re free to do whatever you want. Fancy a trip to the French Alps? Go ahead, Captain Pretentious. Want to start your own business? Feel free to work really hard before throwing up your hands and getting a real job. Wife about to have a family? Cool beans. Somebody’s going to have to get yelled at.

And so on.

The whole key is what happens next. After taking a few months or even a year or two to recharge your batteries, it’s time to get back to work.

This arrangement offers the best of both worlds. It allows someone to have the advantages of spending some of their prime years traveling, learning a new craft, or one of the million other things folks who retire in their 30s end up doing. And then it makes sure they get back to work before their resume turns to dust and they become unemployable.

Imagine you were an early retiree who wrapped up your working career at 35 during the top of a long bull market. You have $1 million in the bank. Suddenly, stocks are down 40%, and you’re only looking at a nest egg of $600,000. The whole plan looks shot.

So you decide to go back to work. But the combination of a poor job market and the giant gap in your resume make you all but unemployable. What’s an early retiree to do?

I’m sure plenty of these retiring early folks have planned for such contingencies. Still, backup plans are good. I’ve always found work comes easy when I’m not exactly looking. The opposite is true when I’d really like to find something.

Let me tell you a secret

Come close. I’m going to tell you kids something that’ll blow your collective minds.

There’s no such thing as people who retire in their 30s.

Every last one of them has something that keeps them busy. Some build an online presence. Others build houses. Some freelance. And some take care of the house/kids. The point is all of them end up working in some sort of capacity again. The work might not be paid, or very glamorous, but they do it.

When you’re financially independent, you can make the decision to switch from a very demanding career to an easier one. You can take a break from working. Or you can travel. You can do anything you desire, including retiring.

The point? Get financially independent and then let the rest take care of itself. Once you get to that point, all sorts of options open up. I’m a fan of taking time off between jobs myself, but hey. Whatever floats your boat.

Maybe You Don’t Deserve a 30 Year Retirement

It’s good to be old in 2016.

People suck up to seniors almost as much as they suck up to attractive women. Older folks get priority seating on the bus, discounts pretty much anywhere, all sorts of funding from politicians, cheaper car insurance rates, and probably 1,874 things I don’t even realize. Sure, they gotta put up with an increased chance of death and a little impotency, but that’s a small price to pay for FREE SHIT, BABY.

The biggest rip of all are pensions. Seniors think that just because they’re been working for a whole bunch of years that means they can sit back, relax, and get paid hundreds of dollars each month to nap and bitch about arthritis. Pretty sweet gig if you can get it. No wonder all those internet guys are jonesing to retire early.

This whole notion of retirement is a relatively new one. Back in the day, you pretty much worked until you couldn’t, which took you until rocking chair time. You’d spend the last few months of your life stubbornly stinking up your kids’ house until you finally kicked it. Man, what a time to be alive. Well, not really alive, anyway.

Germany is credited with coming up with the first pension, right around World War 1. Back then, average life expectancy was just a few years beyond the retirement age, so legislators knew the cost wouldn’t be onerous. In other words, Olaf would kick it before his pension cost the government a whole lot.

The ol’ Great Depression changed everything. People ended up poor as balls, which meant they were more likely to cut up and eat grandpa than take care of him. So left-wing governments elected at the time started instituting small state pension plans.

Over the years, these plans have grown and grown. Politicians have been generous giving benefits to retirees, knowing they’re the only people that actually vote. The gradual aging of our population has ensured that these retirement benefits are in place far longer than our forefathers ever anticipated.

Somebody who retires today at age 65 can reasonably expect to stay retired between 20 and 25 years. By the time you or I (but mostly you, I eat a lot of red meat) decide to hang up the proverbial working skates, we should be able to expect a retirement that lasts at least 25 or 30 years.

Blame the seniors. Blame personal finance blogs. Hell, blame your dog for all I care. All I know is society has this expectation that our golden years should last almost as long as our working years, an expectation that needs to stop. The Ponzi Scheme which is our retirement benefit plans just can’t handle it.

Stop expecting to retire for 30 years

Think about the expectations of today’s millennial generation, a group of people we can universally agree are worse than Satan mixed with Hitler mixed with Warren Buffett’s evil dog.

Yes, Warren Buffett has an evil dog. I can’t believe y’all didn’t know that.

They delay working for years after they hit 18, maybe doing summer jobs while they’re at home from college. They’ll hit the workforce at age 22 if they avoid grad school, something that’s becoming increasingly unlikely.

They’ll then work for between 40 and 45 years, giving them a retirement age somewhere in their early-to-mid 60s. Many of them will take extended breaks from the workforce, for whatever reason. Most will end up procreating, something that’s a proven wealth sap. Some will even take time off after they get a pet, an actual thing that exists.

And millennials wonder why people laugh at them.

By the time it’s all said and done, the average working person today is probably going to end up working between 35 and 40 years and then expecting to take it easy over the next 30 to 35 years. Add on the first 22 years which are supported by parents, and we’re looking at a whole generation that has an expectation of working, at most, 40% of their lives.

How exactly does that work? Sure, I get we’re more productive these days than we even used to be, and richer too. A lot of people end up getting subsidized from things like inheritances too. There are also lots of examples of people who didn’t want to retire at 60 but found themselves laid off. So I get all that.

But planning to only work 40% of your life? Have we gotten that soft in only a century?

I recently visited a friend who decided to take early retirement around his 61st birthday. He’s now 64 and bored out of his tree. He’d love to get a part-time job, but doesn’t really want to do anything physical. His days are spent fishing, watching TV, playing fetch with his dog, and concocting elaborate plots on how to kill his wife. It’s not a bad existence, but he’s the first to admit how pathetic it is. He craves something to do, he’s just not sure what it should be.

It also takes a ton of resources to have a 30 year retirement. Never mind things like public pensions or old age security (AKA welfare for seniors). You’ve got to save your ass off pretty much your whole working life to be able to afford that life of leisure. Is that really the best way to go about things?

This whole movement of mini retirements makes more sense to me. If you’re burned out, take a few months or a year off when you’re 35. Use some of your retirement savings if you have to. As long as you don’t screw yourself, you’ll be fine. Make up for that time off by working a sweet office job into your 70s.

But it’s hard to convince me that somebody who takes several sabbaticals during their working career deserves the same sort of extended retirement we’ve all come to expect, especially if you believe that traditional retirement is already too long. Hell, even if you’re a Walmart greeter, at least you’re getting out of the house and doing something.

Anyhoo, I’ll wrap this up. It’s amazing that we live in a time and place where we can realistically expect a retirement to last 25 years (starting today) or 30-35 years (starting in a few decades). It’s also amazing that sex androids exist, but that doesn’t necessarily mean you should use one. Perhaps retirement should come with a similar attitude.