Shortly after graduating from college, Tim Stobbs was in a job he despised. The thought of spending 40 years toiling away at the place led to some drastic thinking: Maybe he could retire early.
So instead of waiting for 65 to roll around, he set his sights on 45. Now in his 30s and raising a family, the blogger, author and engineer is on his way to reaching his goal.
For others who find themselves wishing that their post-career life would happen sooner than later, Tim says to get started saving money right now. Don't wait. And after you've started saving, start educating yourself on investments and the best ways to save money.
"Yes, this means you won't be like everyone else, but when the average person is overweight, heavily in debt and not that happy working until their 60s," he says, "screw average; dare to be different."
The blogger behind Canadian Dream: Free at 45 says his family of four lives on less than $30,000 a year, but doesn't feel poor in the slightest because they've aligned their spending with what they value the most in life. Here he shares tips and insight on how planning your own early retirement:
Tell us about Canadian Dream: Free at 45...when and why did you start your site?
I started the blog back in November 2006 as I started planning my early retirement, which at the time I just picked 45 out of thin air as an idea. Freedom 55 was good, so Freedom 45 had to be better, right? I didn't have many people to talk about my plans, so the blog was a great way to meet like-minded people and learn from them. Also, I like to help others, so I figured if I shared my story of learning about early retirement, I could help other avoid some of my mistakes.
What's your background and/or interest in personal finance?
I developed my interest in personal finance very young - when I was a little boy, I was taken to the bank to buy some Canada Savings Bonds by my parents. At the bank, since I had $500 saved, they informed me I could get a term deposit that would be even more interest than the bonds. So I was hooked then with the idea that my money could earn more money for me. Then as a teenager I read The Wealthy Barber and got hooked into personal finance.
My early retirement obsession didn't develop until I was working in a job I hated after university; at that point in my life, the idea of never working again had a lot of appeal. I'm largely self-taught through reading a LOT of books over the years and following the finance section in the newspaper.
What's you're philosophy about money and how you spend/save it?
My philosophy is you don't need much money in reality to be happy. In fact, you can live a fairly low-cost lifestyle that helps you retire earlier just by focusing on spending money on things you care about and saving money on things you don't care about.
So in our case, my family evaluated our spending and cut back on things we don't care about...like our power bill to free up money to buy fresh produce from the farmer's market. Or we figured out ways to meet our wants on less, like we all love to read, but we borrow most of our books from the library. We tend now to only buy a few books a year that we really love.
When did you decide you wanted to retire at 45? Why was it important for you to get out of the work world earlier than later?
As I mentioned above, early in my working career I was in a job I literally hated. I mean, I felt sick on Sunday night before going back to work. So I know this wasn't a sane way to live, and then I came across the idea of early retirement, which had a huge appeal obviously at that time. So I started reading blogs and books and realized it was actually possible to not work for 40 years prior to retirement; if you planned things right, you could get out by 50 or even younger. So after the famous Freedom 55 commercials, I started planning for Free at 45. Now I don't hate my job, but I still like the idea of having the freedom to pick my work based on interest rather than income.
How did you figure out how much you'd need to save in order to retire early?
We have a mortgage-free house worth about $400,000, plus we need at least $600,000 or $700,000 in investments. So all total, a bit over a million dollar net worth to retire. While that doesn't give me a retirement with golf every day or Hawaii every winter, it will be comfortable lifestyle with lots of time to do the things I like the most like reading, writing, cooking, gardening, making wine...basically I have so many hobbies I can't see getting bored.
Once you set your retirement goal, what steps did you take to start saving?
The easiest thing to do to help you get to any retirement goal is make the saving automatic. If the money goes out of your checking account the day after you get paid, you can't miss it. Then start looking at your spending for ways to reduce it on things you don't care about. Then you will start saving even more and still have some money to spend on what matters most for you.
For example, I love good wine, so I learned to make my own and buy $180 wine kits. Which sounds like a lot, but when you consider I'm making equal to $20 to $25 bottle of wine for $6/each, it is a bargain. Saving for retirement isn't about denying yourself, but rather getting creative with how to meet your wants for less.
What sorts of investments did you make (or are you making) to help reach your goal of early retirement?
I'm sort of lazy when it comes to investing, so I tend to keep my investments fairly simple. I use index funds for our RRSP accounts since most mutual funds fail to outpace the market. We divide the money into four main funds (U.S. stocks, Canada stocks, international stocks and then bonds). Overall, I can manage our RRSP investments in like 15 minutes a year when I rebalance them (sell the ones that went up to buy more of the ones that went down).
Then when it comes to our TFSA accounts, we buy individual stocks that mirror the bills I get every month. So we own banks, utilities, telecoms, real estate income trusts, which pay dividends. Overall, we are doing well with this plan, as our TFSA accounts are over $85,000 combined for my wife's and my accounts.
What are the toughest parts of saving for an early retirement - what sacrifices should we be prepared to make? Things that might surprise us?
I think what surprises people when I talk about early retirement is the fact there are no sacrifices for my plan. I'm not giving up anything that I value. It comes down to a trade-off, are you willing to live a more modest lifestyle in order to get out of work 20 years earlier? In my case, I'm more than willing to give up 20 years of pointless meetings, paperwork, office politics in order to have 20 more years to do things that I love like drink wine, cook and write. I don't need a lot of money to be happy, and I'm more than willing to be more thoughtful about my spending to get there.
This doesn't mean we don't give up things - we just tend to plan a bit more. For example, last year we took a month-long trip and drove from Regina, S.K. to Gander, Newfoundland, to visit some family. It was a great trip; I just don't expect to do it every year. So this year we had a more modest vacation and camped in Banff, A.B. I enjoyed both trips, but in different ways.
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