RPF0129-Tim_Stobbs

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00:00:30.320 | Welcome to the Radical Personal Finance Podcast.

00:00:32.320 | My name is Joshua Sheets.

00:00:33.600 | I'm your host.

00:00:34.320 | Today is Friday, January 2, 2014.

00:00:38.360 | The first show of the new year and I think it's appropriate that we kick off the new year with the discussion of financial independence and early retirement, one of my favorite themes.

00:00:48.240 | Today, I'm going to share with you an interview with Tim Stobbs who is the author of a blog entitled Canadian Dream Free at 45 and then also a book with a similar name, Free at 45, of how to achieve financial independence at an early age.

00:01:04.360 | If you are planning on enhancing your financial life here in this new year in 2015, then perhaps this is a great place for you to start by listening to someone else's comments and someone else's experiences.

00:01:18.560 | This show is from a Canadian perspective but it's not intensely Canadian.

00:01:23.480 | It's a little bit of discussion on the advantages and disadvantages of pursuing financial independence within the Canadian context versus other cultural contexts.

00:01:33.760 | But the principles and ideas are indeed universally applicable.

00:01:38.560 | So I hope you enjoy today's show.

00:01:40.200 | Tim is a regular guy working on his goals.

00:01:43.040 | Very interesting story.

00:01:44.280 | It's a really great interview.

00:01:45.520 | I will be back with you on Monday, the 5th of January, back from the holidays and I'm excited about a brand new year with all of you.

00:01:56.200 | Been a lot of work over the last six months to build up the show to the point where it's been now but we're only just getting started.

00:02:01.760 | I have an intense focus and commitment to transforming this show into a world-class financial education platform where I will, in conjunction with other great teachers, teach you everything you need to know to go from nothing to financial independence within a reasonable amount of time.

00:02:26.560 | Here's the interview.

00:02:28.360 | Tim, welcome to the Radical Personal Finance Podcast.

00:02:32.320 | I appreciate you being with us today.

00:02:33.680 | No problem.

00:02:34.680 | Thanks for having me.

00:02:35.680 | I'd love to start with your story.

00:02:38.120 | So you write a blog about the Canadian dream to be free at 45.

00:02:43.600 | How did you get into thinking about early retirement and planning for your own early retirement?

00:02:48.960 | Erotically, that happened at just a low point at work.

00:02:53.120 | What happened is I was working at a job that I actually loved.

00:02:55.840 | I realized one day before going back to work and I was nearly physically ill thinking about having to go back to work.

00:03:01.880 | I went, "Well, obviously this is a very crappy way to live your life so I've got to do something better than this."

00:03:07.200 | I stumbled across the idea of financial independence around that time frame of early retirement and went, "Oh, never having to work ever for anyone else."

00:03:16.360 | I did really good at that point in my life.

00:03:18.600 | That's where I found this whole addiction into investing in personal finance and learning more.

00:03:24.080 | I really started off not owning much of anything and just picked Freedom 45 as a wild ass guess.

00:03:30.680 | A few years ago, Canada had a series of very popular commercials called Freedom 55 by London Life.

00:03:37.880 | I just went, "Oh, I'll take a decade off that. I'll do it earlier."

00:03:40.480 | Did you consider just getting a different job as maybe an easier way to get out of the job that you hated?

00:03:46.920 | It's kind of funny. I still ended up going on to a different job and actually enjoying that.

00:03:52.120 | It's just more than anything, I learned from that first job what I loathed about working for certain companies.

00:03:58.120 | I've made the conscious decision never ever to get in that situation again.

00:04:02.240 | But it seemed well still going on with the idea of financial independence anyway.

00:04:05.800 | It's kind of funny to say, but in my mind it actually is an important step.

00:04:10.760 | I love the early retirement financial independence community, but in my mind it makes a lot more sense to not start with saying,

00:04:20.680 | "How can I accumulate a million dollars so that I can be fully financially independent?"

00:04:25.160 | But rather to say, "How can I just start by getting there quicker by building a job or business or lifestyle that I think I would be happier with?"

00:04:34.080 | And then use that to fund my financial independence so that then I have the choice and I can find out,

00:04:39.560 | "Was I deluding myself or did I actually enjoy this job?"

00:04:43.760 | Yeah, you kind of hit on one of my things that commonly gets out of lost in the early retirement community.

00:04:50.080 | We tend to focus exclusively on the numbers and almost forget about the incidental thing of,

00:04:54.320 | "You should actually be happy while doing all this, otherwise what the hell is the point?"

00:04:58.040 | Right, right.

00:04:59.320 | So it's kind of funny that that's why I subbed out of my blog was about the early retirement and happiness,

00:05:04.520 | because I'm like, "There's no point in getting there in a rapid amount of time and then being miserable on the process to it."

00:05:09.880 | So I very much kind of delved into the psychology of happiness as well,

00:05:13.560 | and simultaneously I was getting financial independence and looking at that and going,

00:05:17.320 | "Well, okay, really let's build life to be better across the board now and going towards."

00:05:23.080 | What are some ways that you have done that in your life?

00:05:26.400 | In particular, one of the ones I think are probably the most underutilized,

00:05:30.960 | just because the corporate world doesn't seem to allow it that much, is going to work part-time.

00:05:34.840 | Like right now I'm working 90% of my day job.

00:05:37.480 | I don't work full-time anymore.

00:05:39.080 | I haven't for... I've dabbled in and out of that lower percentages of 80 or 90% for a couple of years now,

00:05:44.960 | and I find it makes a huge difference to quality of life and satisfaction.

00:05:49.160 | My joke with some people is I don't hate work, so to speak, which is kind of funny for an early retirement blogger,

00:05:54.680 | but I just hate working full-time.

00:05:56.880 | Right, right.

00:05:58.760 | Is that an official, legislated thing in Canada where you can choose,

00:06:02.840 | "Oh, I just want to work 90% time"? It sounds fairly official.

00:06:06.640 | It's not really official. It's actually relatively hard to get your hands on it.

00:06:11.440 | In my company, I found out that one of the first guys ever to do this,

00:06:16.400 | other than for maternity kind of type of benefits for the policy used,

00:06:19.760 | was only maybe five years ago when that first happened.

00:06:23.960 | So, generally speaking, it's a relatively new development for a lot of corporations to allow it.

00:06:29.120 | Our company's had a policy in the books for eight years or so to allow it in theory,

00:06:33.880 | but very, very few people get it approved.

00:06:36.240 | Interesting. You are right.

00:06:38.240 | Even in the US, what is more common, if you're working for a large company,

00:06:42.160 | as many large companies, will allow you to work a four-day-per-week, ten-hour-per-day schedule

00:06:49.120 | instead of the five-day-per-week, eight-hour schedule.

00:06:52.400 | In my mind, if I were in a job or business that permitted that,

00:06:57.320 | I would do that in a heartbeat just to compress the amount of time working.

00:07:02.240 | I've actually seen multiple people do that here, too.

00:07:05.200 | In Saskatchewan, where I live here, it's relatively recently been written into labor law

00:07:09.040 | to allow that to happen before it was off the books for a lot of people doing it.

00:07:14.240 | It's cropping up here and there. It just depends on the business somewhat,

00:07:17.440 | whether it aligns to letting that work or not.

00:07:19.680 | I've had a few friends over the years who've done that kind of compressed work week thing

00:07:22.720 | and wouldn't trade it for one world. They love it.

00:07:25.440 | Very similarly speaking, for my case, my reduced hours works out to every other Friday off.

00:07:32.560 | So what happens is I work one full week and the next week I take that Friday off.

00:07:36.880 | I mean, there's multiple advantages to it.

00:07:38.960 | First, you have entire days cleared of your normal day-to-day commitments,

00:07:43.760 | but not necessarily planned to be fun days.

00:07:46.240 | So if every Saturday is a fun day with your family and you have every other Friday off,

00:07:51.200 | that gives you a whole day when most of the world is in that work week schedule.

00:07:56.640 | So you can easily use that day as a focus.

00:08:00.640 | But then it also perhaps allows you to avoid the rush and crush.

00:08:04.160 | Every two weeks I have to go out during rush hour to go to a meeting that's down south of where I live,

00:08:09.360 | down in Boca Raton. I have to drive during rush hour.

00:08:12.080 | I sit there in traffic on I-95 saying, "Why does anybody do this?

00:08:15.680 | Why on earth do you sit in traffic at this horrific time of day with everybody else?

00:08:21.200 | Why don't you go into work at 5 a.m. or at 11 a.m. and work on some kind of off-peak hours just to avoid this?"

00:08:28.080 | It's funny, actually, that's coming up more and more as people are starting to realize,

00:08:33.280 | or at least some workplaces are letting you tweak things a little bit.

00:08:36.640 | Another thing they've let us do at our workplace,

00:08:38.400 | I actually start work half an hour early for the express reason.

00:08:41.040 | I live in a smaller city where there's really not much traffic.

00:08:43.760 | Honestly, I can get anywhere in town in about 15 minutes.

00:08:46.320 | I still hate traffic.

00:08:49.120 | For me, it's the most wasteless, pointless thing in the entire cosmos.

00:08:52.480 | I purposely start work a little bit earlier and get out of work a little bit earlier for the

00:08:56.240 | express reason to avoid our mini-traffic jam we have here.

00:08:59.040 | How did you come across the idea of being financially independent?

00:09:03.280 | Was it something you read online, a family member who was doing it?

00:09:06.480 | How did you first come up with the idea?

00:09:07.920 | I think I just came across a blog or something.

00:09:12.560 | I can't even remember what. This is over six years ago,

00:09:14.800 | so it's going to be fuzzy in my memory a little bit of what happened exactly.

00:09:19.120 | Just came across a reference to it and went, "Wow, that sounded pretty good,"

00:09:23.200 | and then looked into it and realized that, shockingly enough,

00:09:26.160 | that I was an engineer making fairly good money that you just run the math and go,

00:09:30.160 | "Oh, I'm not that far off of a relatively early retirement.

00:09:34.080 | A little bit of planning here."

00:09:35.040 | I started iteratively getting into realizing how the numbers work

00:09:39.600 | and learning a bit more about that as it went along.

00:09:42.080 | When you picked the date of being free at 45, how many years from 45 were you?

00:09:48.480 | About 15 at the time.

00:09:50.880 | Okay. Are you on track for that?

00:09:52.640 | Actually, it's been steadily reducing since then.

00:09:56.480 | My last iteration, I'm just writing a series of posts now

00:09:59.120 | where I'm going to try to make a run for it at 40.

00:10:01.120 | Good for you.

00:10:02.400 | I'm 36 right now, so another four years, give or take.

00:10:07.040 | Good for you. What are you going to do with your time?

00:10:11.920 | Big one is I love writing.

00:10:13.200 | Actually, it's funny.

00:10:13.920 | I wrote a post on this a number of years ago about selling out your dreams

00:10:17.840 | and then buying them back afterwards.

00:10:19.280 | I always loved writing, but I was acutely aware in Canada

00:10:22.320 | that most writers make next to no income, so it's a good way to slowly starve to death.

00:10:26.480 | So I went, "No, I'm not really interested in that."

00:10:29.680 | So I went with my father, who was an engineer at the time,

00:10:32.480 | and talking to the idea of, "Well, I'm good at math and science.

00:10:34.880 | Why don't I do engineering instead?"

00:10:36.240 | So I went, "Okay, great."

00:10:37.360 | So I went and did engineering and got a degree, got a good job,

00:10:40.560 | made some good money, and still kept my hobby of writing.

00:10:43.840 | But I've just decided that, you know what?

00:10:45.520 | I like writing more than I like engineering by a long shot,

00:10:48.400 | so I'm just working towards flipping careers, basically, in the long run here.

00:10:52.320 | It's to be able to quit my job, not necessarily to make anything

00:10:55.200 | a side job in the long run, and just enjoy writing because I actually enjoy writing.

00:10:59.440 | Have you made any money from your writing?

00:11:01.440 | A little bit over the years.

00:11:03.280 | It's kind of funny.

00:11:03.920 | I wasn't really planning on it.

00:11:05.600 | It's one of those hobbies you just sort of start because you're interested in doing it.

00:11:08.720 | The blog was kind of almost a pointed thing I started just to

00:11:12.800 | have a conversation with people about, "I'm thinking this on my way off base,"

00:11:16.800 | or helping other people out and learning a little bit about it as it went.

00:11:19.680 | And that led to several other opportunities.

00:11:21.760 | I did some freelance articles for the Toronto Star,

00:11:24.320 | and then I self-published my own book,

00:11:27.040 | which all in all actually did make me a lot of money,

00:11:31.040 | but it made me a little extra money,

00:11:32.320 | which is kind of a nice little bonus for a hobby that I do it because I enjoy it.

00:11:37.680 | How else has the blog served you?

00:11:39.360 | I've recommended to many people that they keep a blog,

00:11:42.560 | but I'm interested in hearing how it has helped you or hurt you over the years.

00:11:48.480 | I think most of all it's helped me with regards of my own accountability.

00:11:52.800 | When I write something down or think things through,

00:11:55.920 | I'm very much one of those people that think better with talking it through with people.

00:11:59.760 | So I tend to find the blog is an excellent way to throw random ideas out and have people

00:12:04.160 | give me some feedback on what worked for them or not worked, and help iteratively learn better

00:12:08.720 | how to do my own plans.

00:12:10.240 | For example, I've done my retirement calculation series a number of times over the years,

00:12:14.400 | and iteratively it gets a little bit better every time I do the calculation set.

00:12:17.360 | Just basically feedback from people, "Well, have you thought about this?

00:12:21.440 | Or have you included that?"

00:12:22.480 | And I went, "Oh, that's a good point," or "Maybe we should include a factor for this."

00:12:25.920 | And so it's gotten a little bit more complicated, which is a bit of a downside,

00:12:30.000 | but I think it's a more accurate projection as I've gotten along.

00:12:33.120 | Do you not feel a little bit strange about telling everyone how much money you have?

00:12:36.800 | Not really.

00:12:39.360 | I've got this real bizarre thing of...

00:12:41.280 | I work for a crown corporation up here in Canada.

00:12:44.480 | So the reality is what I make every year is actually published in an annual report

00:12:49.280 | because I make over the $50,000 threshold.

00:12:51.600 | So I've been known...

00:12:53.600 | Like, publicly, you can research how much I make down to the last dime.

00:12:56.880 | Wow.

00:12:58.000 | For years.

00:12:58.960 | So it's one of those bizarre...

00:13:00.320 | I've already had public disclosure on that.

00:13:02.160 | So I'm like, "Really?

00:13:03.360 | Your net worth after your income is already posted online is really not much more of a

00:13:07.280 | step forward."

00:13:07.840 | What kind of corporation did you say that was?

00:13:11.120 | A crown corporation.

00:13:12.080 | What does that mean?

00:13:12.720 | It's a corporation run by the government for the benefit of the people of the province.

00:13:17.440 | For example, Saskatchewan is a relatively small jurisdiction,

00:13:19.920 | so it doesn't really pay to have multiple power companies trying to produce power in

00:13:23.280 | the same jurisdiction.

00:13:24.240 | So what they did is just created a power company that runs it for them.

00:13:27.360 | Got it.

00:13:28.880 | Understood.

00:13:30.560 | What is your strategy with regard to how you are planning to fund retirement?

00:13:37.440 | Are you investing in stocks?

00:13:39.280 | Are you buying real estate?

00:13:40.320 | Are you building up businesses?

00:13:41.680 | What's your plan?

00:13:42.400 | Mine predominantly is more on the investment side of the house.

00:13:46.560 | While I like real estate, we're currently in a bit of an acid bubble here in Canada

00:13:51.360 | with most of our real estate.

00:13:52.400 | So I'm kind of avoiding that in the short term.

00:13:54.320 | Actually, it was very shocking the other day.

00:13:56.560 | The Bank of Canada governor came out here and said that overall they estimate the market's

00:14:01.200 | overvalued anywhere from 10 to 30 percent, depending where you live, which is kind of

00:14:06.000 | they've been silent on the issue for a number of years.

00:14:07.760 | So I kind of avoided that in the short term here.

00:14:10.240 | I might get into it a little bit later.

00:14:11.920 | But more realistically, I'm going with investments.

00:14:15.840 | And there's a combination of various things.

00:14:17.600 | I mean, exchange-traded funds are tax-sheltered accounts.

00:14:20.800 | Just a simple couch potato portfolio, as per Dan.

00:14:26.800 | Which I believe you interviewed just a couple of weeks ago.

00:14:28.320 | I did.

00:14:28.720 | He was my first Canadian financial advisor I ever talked to.

00:14:31.920 | Yes, I did.

00:14:32.480 | Yeah, I kind of like Dan's portfolio approach quite a bit.

00:14:36.800 | So I kind of mirrored my savings off that.

00:14:40.320 | Then my work has a relatively good pension plan that's got really low fees in it.

00:14:43.600 | So I invest in that.

00:14:45.200 | And then finally, we have our tax-free savings accounts, where I put in our individual stock

00:14:50.560 | picks into those.

00:14:51.920 | Interesting.

00:14:52.800 | So the tax-free savings accounts, explain again how those work.

00:14:56.800 | How do they work within the context of early retirement planning?

00:15:00.560 | Well, tax-free savings accounts kind of are similar to your guys' Roth IRA accounts in

00:15:06.080 | broad terms.

00:15:07.520 | I think the biggest difference is the fact that everyone's familiar with the concept.

00:15:10.960 | You can put the money in, it grows tax-free, and then you can take it out tax-free in the

00:15:14.480 | tail end.

00:15:15.440 | In Canada, though, when they actually created these accounts, they did it a step further,

00:15:19.360 | so to speak, than your guys.

00:15:20.800 | There is no retirement thing attached to it.

00:15:26.000 | It's basically you can use it as much as you want at any point in your life to save

00:15:29.120 | for anything, theoretically.

00:15:31.200 | So a lot of people have been using it for house down payments or saving for vacations

00:15:35.120 | or absolutely anything and everything is possible with it.

00:15:38.000 | But a lot of times, because of the tax-free savings account, which I think is the biggest

00:15:43.280 | misnomer the government ever did on this thing, people use it as just a plain savings account.

00:15:48.160 | So their tax savings is very peonically small because they're not really saving much money

00:15:52.480 | on it.

00:15:53.600 | It's a shocking thing to me.

00:15:54.720 | I talk to people here and they don't really realize you can hold stocks in these accounts

00:15:58.160 | and the growth on that is significantly better than what you get with just sheltering your

00:16:02.960 | measly 1% savings.

00:16:04.160 | Steve Kerr (00:10:00): People don't use it.

00:16:06.000 | I mean, buying stocks is not common in an account like that?

00:16:09.600 | David Gardner (00:10:04): Not up here.

00:16:11.040 | They haven't wrapped their heads around it for whatever reason.

00:16:13.360 | I just don't get it.

00:16:15.440 | Like I said, I think it's almost the naming convention thing where people don't realize

00:16:19.040 | that, yeah, it could be a savings account, but it can be a lot more than that.

00:16:22.560 | And so me and my wife have both done that.

00:16:25.200 | In our case, our account performance has been substantially better than the average person.

00:16:30.560 | Now you can put around $25,000 in per person.

00:16:36.400 | It's a set amount you're allowed a contribution from every year, about 5,500 is the current

00:16:41.440 | uptick every year.

00:16:43.360 | So combined, we should have only about $50,000 in contributions, but combined value of our

00:16:48.160 | accounts is pushing almost 95,000.

00:16:50.080 | Steve Kerr (00:10:42): And you can take it out, including the interest

00:16:54.960 | and the gain, you can take it out at any time.

00:16:57.920 | There are no age restrictions.

00:16:59.280 | David Gardner (00:10:48): None whatsoever.

00:17:00.960 | So that's kind of the ultimate early retirement savings vehicle.

00:17:04.720 | Canadians are sitting on, but we don't utilize as much as we should.

00:17:08.000 | It's really, really ironic.

00:17:09.680 | Steve Kerr (00:10:56): That is insane.

00:17:10.880 | David Gardner (00:10:58): I know.

00:17:12.080 | Steve Kerr (00:11:01): I mean, you guys have such what I consider

00:17:17.280 | to be an exorbitant tax rate.

00:17:19.040 | Why would anybody ever invest outside of an account like that?

00:17:23.760 | If you can shelter all your capital gains, you can shelter all your income taxes.

00:17:29.040 | It sounds like I'm speechless.

00:17:33.760 | David Gardner (00:11:19): No, I agree with you.

00:17:36.400 | It's one of those things.

00:17:37.360 | What's interesting though is the competing one is that people are used to their registered

00:17:43.040 | savings plans, their RSPs here, which are more like your guys' 401ks.

00:17:47.440 | So what they do is they contribute to those and get a tax refund back.

00:17:52.240 | So because as you've mentioned, our taxes are quite high, that's a pretty good chunk

00:17:56.160 | of change when you put money into those.

00:17:58.160 | So people are kind of used to that as being, "Oh, look, I put money in here and I get a

00:18:02.960 | good tax refund back."

00:18:04.800 | But then ignore the fact in the longer term, those accounts, you eventually get taxed when

00:18:08.480 | you take the money out on the tail end.

00:18:09.920 | It's tax deferment.

00:18:12.320 | It's not tax avoidance.

00:18:13.360 | Steve Morrison (00:11:56): But can't you do both?

00:18:14.400 | David Gardner (00:12:00): Well, yeah, you can do both.

00:18:16.160 | And the one's based on your percentage of income, your RSPs.

00:18:18.880 | So what happens is that one scales up.

00:18:20.480 | And so you'll probably, the average person that's allowed 18% of last year's income

00:18:24.880 | goes into your RSP accounts at your limit, while the TFSA accounts are flat rate, regardless

00:18:30.480 | of how much income you make.

00:18:32.160 | So your TFSA, while longer term, younger people can use that to finance their whole retirement.

00:18:38.000 | The reality is if you're towards the tail end of your working career, you will not be

00:18:41.520 | able to shelter enough money in there to make a huge dent in your retirement savings.

00:18:44.960 | So it's a bit of a generational problem.

00:18:47.680 | What the older folks aren't used to using it and the younger folks don't really realize

00:18:51.200 | what it can do in the long run.

00:18:52.400 | Steve Morrison (00:12:37): Wow.

00:18:54.960 | Can you own alternative investments?

00:18:57.360 | Could you purchase real estate within the account?

00:18:59.600 | Can you purchase some various types of alternative investments?

00:19:02.800 | Do you have any idea?

00:19:03.680 | David Tenenbaum (00:12:50): There is a degree of latitude with that.

00:19:06.720 | I mean, you wouldn't be able to buy real estate directly.

00:19:09.040 | You wouldn't be able to theoretically hold a mortgage in your RSP.

00:19:12.160 | And I believe that would be technically possible in TFSA.

00:19:15.200 | But of course, the average person right now doesn't have enough money to do that in those

00:19:19.360 | accounts yet.

00:19:20.000 | Steve Morrison (00:13:02): Interesting.

00:19:21.440 | Do you teach people in your book?

00:19:24.640 | Is your book focused on just telling your story or are you trying to teach people how

00:19:30.080 | to become financially independent within a Canadian context?

00:19:33.840 | David Tenenbaum (00:13:16): I was more about teaching people how to be

00:19:37.040 | financially independent.

00:19:38.320 | I do touch a little bit on some of the motivation, like my story there of hitting my job is really

00:19:42.240 | the start of the book and kind of touch on that.

00:19:44.160 | But I don't get into too much on the investment side of the house.

00:19:48.080 | I kind of touch on those relatively lightly other than some broad contextual pieces people

00:19:51.840 | need to understand about their account types and what they can do in broad strokes.

00:19:55.440 | But it's more about the whole process of how do you plan and then how you would run through

00:19:59.680 | a series of calculations of estimating whether you're close or not, and then simultaneously

00:20:04.560 | weaving that through with how the heck do you get yourself more happy while doing all

00:20:08.320 | this?

00:20:08.560 | I find it very shocking the average person who blows their job as much as they do in

00:20:13.920 | North America and doesn't do anything about it.

00:20:16.320 | It just blows my mind the number of unhappy people I meet in the office.

00:20:20.240 | I'm like, "Why are you even working here if you're this unhappy?

00:20:24.560 | Seriously, folks."

00:20:25.360 | (Laughter)

00:20:26.320 | Dave: When you talk about happiness and as you studied happiness, what ideas and techniques

00:20:32.160 | do you teach people to build a happier life?

00:20:34.800 | Matthew: I think the biggest one is we've got to get off this consumer train wreck that

00:20:39.760 | we all decided is this constant upgrade or buy or better or next thing and realize we

00:20:45.920 | are sitting in the top tier of world standard of living.

00:20:49.200 | Look around people.

00:20:50.160 | Everything around you is awesome, so why the hell are you not enjoying it a little bit?

00:20:53.760 | Stop asking for the next iPhone.

00:20:56.480 | Instead, maybe go, "Oh, you know what?

00:20:59.680 | Realistically speaking, the iPhone 4 to iPhone 6 has almost no feature differences."

00:21:04.240 | (Laughter)

00:21:04.880 | It's okay to have your old phone.

00:21:06.720 | It will not kill you.

00:21:07.520 | Dave: Right.

00:21:08.560 | Do you have any idea why that happened?

00:21:12.080 | Do you have a perspective as far as a society-wide perspective?

00:21:16.560 | Matthew: I think what ends up happening is a very easy thing to do is we don't give

00:21:21.120 | ourselves permission to actually explore what our spending means for us.

00:21:25.520 | We tend to follow the crowd or default think.

00:21:27.760 | When everyone else is doing it, it's so easy to follow along with the concept.

00:21:31.680 | Regardless of the fact that everyone else really isn't happy anyway doing it, it's

00:21:35.440 | one of those terribly erotic things.

00:21:36.800 | We almost don't give ourselves permission to just think outside of the box and customize

00:21:40.800 | our spending to what we personally need, not rather than what we think we need based on

00:21:45.920 | our soul.

00:21:46.480 | Actually, that's one of the core stones of my happiness side of the house is to reduce

00:21:51.440 | your spending is really just look at what your spending is and then optimize it towards

00:21:56.720 | your personal preferences.

00:21:58.080 | For example, one of my classic things is I say, "I don't like my power bill.

00:22:01.760 | I get really no joy in paying it off every month, so I've lowered my consumption of

00:22:05.760 | power and free up cash flow to do other things like, 'Oh, I like to go out with my family

00:22:11.200 | and do things, so I'm going to spend less money on my power bill and free up more money

00:22:15.120 | to go swimming with my family or go ice skating with them or whatever else that feels interesting

00:22:19.680 | or will help us out being a more happy family together."

00:22:23.200 | What are the most frequently asked questions that you've gotten from your readers?

00:22:29.520 | Beyond the disbelief of it's even possible to retire that early in Canada.

00:22:35.520 | [laughs]

00:22:38.000 | That tends to be the most common one.

00:22:39.680 | After that, it's a bit of a hit and miss spread of questions.

00:22:43.200 | It always surprises me the intelligence of the average reader out there in blogs in general

00:22:48.960 | because I get all sorts of questions that just astound me once in a while for the level

00:22:53.040 | of detail and realizing that I tend to write at a probably middle range viewpoint of not

00:23:01.200 | overly technical, but I wrote this while I was the odd person commenting something that's

00:23:05.120 | extremely detail-oriented.

00:23:08.000 | The other day, I was talking about the 4% withdrawal rule and one fellow sent me a question

00:23:14.720 | on that asking a little more in-depth detail about the fees involved in your investing

00:23:20.000 | and how that drastically changed the results of whether you could use that rule or not.

00:23:23.440 | I thought, "Well, good for you.

00:23:25.200 | You've actually read that study to realize that point."

00:23:27.920 | [laughs]

00:23:28.400 | Right.

00:23:28.640 | When you say disbelief, I want to go back to that.

00:23:32.880 | Is that the most frequently asked question that you get?

00:23:35.440 | People say, "How is this even possible?"

00:23:38.240 | I think that tends to happen a lot because a lot of people don't understand that it's

00:23:41.520 | entirely possible to restructure your spending and be very happy with it.

00:23:45.760 | For example, we spend probably about a little less than $30,000 a year on everything, but

00:23:50.880 | the thing is I have a paid-off house.

00:23:52.240 | Reality is it's pretty cheap to live if your basic happiness is reading books from

00:23:57.520 | the library and going to the odd movie now and again.

00:24:00.880 | Right.

00:24:02.800 | I have certainly seen that myself.

00:24:05.360 | What's interesting is if you can—I don't know how to teach this.

00:24:09.680 | I personally think that we are conditioned into group think where we don't look to

00:24:19.360 | understand who we are and we don't necessarily look to understand what's important to us.

00:24:23.840 | There are many effects of that.

00:24:26.160 | One of those effects it makes for an easily governed population.

00:24:30.800 | One of those effects it makes for an easily marketed to population.

00:24:34.160 | You got to find the little niches for your product, but it seems much easier to market

00:24:40.080 | to a homogenous group than to not.

00:24:42.640 | But it's so easy to simply just step out and—well, maybe it's not easy.

00:24:47.280 | It's relatively simple.

00:24:49.120 | If you can step out just to simply actually look at your needs and recognize, as you said,

00:24:54.240 | we live—everyone listening to my voice—we live in some of the most prosperous nations

00:24:58.800 | in the world where in a world where the average person lives on, what, a few dollars a day

00:25:04.800 | and most of us have hundreds and thousands of dollars available every day, every week,

00:25:10.560 | every month, it seems absurd that we can't build a beautiful life that's run a little

00:25:16.960 | bit more efficiently.

00:25:17.920 | But in order to do that, you have to get free of the cycle of essentially impressing others

00:25:22.960 | and have to get free of the cycle of fitting in.

00:25:25.360 | That's not easy to do for many people.

00:25:27.920 | - Well, the reality is, too, what tends to happen, I think, is a little bit of your personality

00:25:33.280 | makeup.

00:25:33.680 | There's been a broad theme of—you read some of the early retirement forums here and

00:25:38.560 | there on various things, and you come to the broad conclusion that there's almost a personality

00:25:42.320 | type that tends to go with it, that people who are going after their retirement tend

00:25:46.160 | to be the ones that value their independence over everything else.

00:25:48.960 | And so we tend to structure our lives, be willing to be different because we value that

00:25:55.520 | independence, and some other people aren't prepared to do that in broad strokes.

00:25:59.200 | So, for example, my wife and me have completely different viewpoints on this whole idea of

00:26:03.680 | early retirement.

00:26:04.560 | I'm going after it from an independence of determining my own faith point of view.

00:26:08.560 | She loves the idea from a completely different point of view.

00:26:11.360 | She loves the security aspect.

00:26:12.880 | For her, there's nothing better than knowing the fridge breaks, that she can tomorrow go

00:26:18.160 | buy a new one, slap it on the credit card, and pay it off at the end of the month, and

00:26:21.440 | no problem.

00:26:23.760 | So it's finding those different motivations for everybody and then realizing that that's

00:26:28.080 | how you start things.

00:26:29.200 | And I agree with you, we tend to do a lot of groupthink, and that's almost a byproduct

00:26:33.920 | of an earlier age where you tended to have very homogenous media coverage of things.

00:26:38.880 | Nowadays, with niche blogs and podcasts and such things like that, it's very easy to get

00:26:44.400 | a more alternative point of view out there on stuff.

00:26:46.640 | The issue is, it's realizing a lot of people are still not mentally prepared to make that

00:26:51.680 | leap in their heads of going, "It's okay not to be like everyone else.

00:26:55.680 | We spend our early childhood trying to conform in school, and then trying to break out of

00:26:59.680 | it.

00:26:59.920 | It's really kind of ironic."

00:27:01.600 | I joke with some people here that our education system keeps saying its objective is to create

00:27:06.880 | critical thinkers, but then they quash that in their little formality of how they process

00:27:10.640 | them through their grades.

00:27:11.920 | So it's one of those terrible ironies.

00:27:15.440 | We have this desire to be critical thinkers, which we mean actually talking back to the

00:27:19.600 | teacher now and again.

00:27:20.880 | Right.

00:27:21.120 | The audience is expecting me to jump on that theme and talk for about 15 minutes because

00:27:27.680 | that's a huge, huge deal for me, but I'm actually going to step right past it and go on.

00:27:34.400 | Good for you.

00:27:35.360 | Go on from it because I've preached far too much on that theme.

00:27:41.120 | I'm interested in your developing thought process and then your wife's developing thought

00:27:46.960 | process.

00:27:47.760 | Did you come across the idea of early retirement and then present it to her?

00:27:51.920 | Did she come across it concurrently?

00:27:53.840 | How did you learn to work together toward the same goal?

00:27:56.800 | And I guess the pre-question to that was, do you share the same goal of early retirement?

00:28:02.560 | If so, how did you work together to get there?

00:28:04.480 | Actually, it's kind of funny.

00:28:06.560 | My wife and me started off in totally different tangents here.

00:28:09.600 | I explained my hobby and stuff, and she went, "Well, okay, is this affecting how we're doing

00:28:14.800 | our current life?"

00:28:15.600 | No.

00:28:16.000 | "Okay, don't care.

00:28:16.720 | Go ahead.

00:28:17.120 | Have fun, dear."

00:28:17.680 | She ignored it really for the first several years entirely.

00:28:21.120 | It's only after a while she actually started reading my own blog and going, "Oh, I just

00:28:26.800 | really want to figure out what's going through your head a little bit more on some of this

00:28:29.680 | stuff because they talk about odd things here and there and she'd be confused," or something

00:28:32.800 | like that.

00:28:33.440 | So she started reading the blog purely to understand where my headspace was at to save

00:28:37.680 | on time on conversations later on.

00:28:39.280 | Then she kind of stumbled across the idea that from her point of view, she really doesn't

00:28:44.560 | care about your whole early retirement plan.

00:28:47.440 | She wanted it from a different angle of wanting that security aspect.

00:28:50.480 | After she realized that, she also realized something else too, that she has a different

00:28:55.280 | viewpoint of me.

00:28:56.080 | Like, I don't mind some work.

00:28:58.000 | I actually enjoy writing, so I plan to do some of that when I'm, so to speak, retired

00:29:02.400 | from my day job.

00:29:03.760 | She's got a different viewpoint if she doesn't want to do that.

00:29:06.400 | She's in a very much enviable spot.

00:29:08.240 | She runs her own daycare business in the house right now and basically hires and fires clients

00:29:13.840 | that she wants and does it because she enjoys the job, not because she needs the money.

00:29:18.160 | So she's pretty much in an ideal headspace already.

00:29:21.440 | So on the career front, she's ahead of me and by virtue of that fact, she has no desire

00:29:28.160 | to necessarily stop working at the same time I do.

00:29:30.480 | She'll probably keep working for several years after the fact and just slowly scale

00:29:33.760 | out.

00:29:34.400 | One of the ideas she's batting around in her head is to just switch to doing school

00:29:37.920 | age children only.

00:29:39.360 | So she'd do a little bit of care and mourning, have most of the day free, a little bit of

00:29:42.880 | care in the late afternoon, evening and then be done for the day.

00:29:46.080 | And from that point of view, she's willing to work quite a bit longer than me and then

00:29:51.840 | come back through later on and then stop entirely.

00:29:54.240 | Do you guys have kids?

00:29:56.560 | Yeah, two boys.

00:29:58.320 | How old are your kids?

00:29:59.200 | The oldest one is almost 10, the youngest one is 6.

00:30:03.040 | So with regard to your, I guess, financial independence date, you said you're, how many

00:30:12.400 | years do you anticipate longer until you are financially independent currently?

00:30:16.400 | About four more years.

00:30:18.160 | Okay, so at that point in time, then I guess your boys will be 14 and 10, if all goes as

00:30:24.160 | planned.

00:30:24.640 | Have you thought, do you worry about being financially independent at a time when they're

00:30:31.840 | essentially setting up their own independence?

00:30:34.160 | Have you thought about doing something different so that you can spend more time with them

00:30:38.880 | at a younger age?

00:30:40.960 | Well, actually, this is one of those things of it, there's never a right answer, I think.

00:30:44.880 | And you always torture yourself with having better scenarios that I could have done more

00:30:48.960 | time with them younger or something else.

00:30:51.280 | I very much enjoy my 90% time right now because what I do is I load up those days where I'm

00:30:55.920 | off with stuff and errands I need to do.

00:30:58.480 | And so our weekends are largely free to spend with the children then.

00:31:01.280 | So I've kind of done, structured that to help on that front.

00:31:04.640 | But my more concerning thing with my kids is a little bit of educating them a little

00:31:09.600 | bit about preparing them for when daddy stops going to work every day.

00:31:13.760 | And it's going to be an interesting shift to have them wrap their heads around the fact

00:31:19.840 | of explaining, no, you're, we're not rich, daddy and mommy are, you're not.

00:31:24.560 | And ramming that home in their heads.

00:31:30.480 | Because one of the things me and my wife wanted to do is we both didn't get much financial

00:31:35.120 | support through our education.

00:31:36.880 | Like my parents paid for about a year and a half of my university, then switched me

00:31:39.840 | over to a line of credit.

00:31:40.880 | And she took student loans out for the entire time she was in school.

00:31:44.240 | And we both decided we wanted to help with our kids' education, but we weren't willing

00:31:49.360 | to sacrifice everything, everything, everything for it.

00:31:52.800 | So for example, I have no delusions that my children are going to Harvard.

00:31:56.640 | If they do decide to go that route, that's fine.

00:31:58.720 | I've got some money saved for you, but I have no intention of paying for a ludicrously

00:32:03.360 | elite school because you decided you want to go for it.

00:32:06.560 | Right.

00:32:07.060 | So we've been keeping some money taxed aside for them for educational purposes, and they're

00:32:12.640 | kind of aiming about $80,000 in total.

00:32:15.120 | So about $40,000 per kid to be sort of their setup money in their lives to help them get

00:32:19.760 | started.

00:32:20.560 | Primarily for education, but realistically speaking, if they don't decide to pursue higher

00:32:25.040 | education, that will take it out and use it for other things.

00:32:28.560 | What's the college environment in Canada like?

00:32:31.120 | Is it, is it important?

00:32:34.560 | Is it societally important to have a college degree in the job market?

00:32:38.960 | There's probably more acceptance of alternative kind of things nowadays.

00:32:45.680 | We've gone through a lot of changes in the last few years.

00:32:48.400 | It used to be almost assumed for a lot of people that you should go get a university

00:32:52.240 | degree, and that was important.

00:32:53.440 | But what's happened nowadays is realizing that with oil and gas development in Alberta

00:32:58.720 | and other areas of the country, that trades can do very, very well as well.

00:33:04.080 | So there's been a lot more push to diversify education, even down to the high school level

00:33:08.960 | now, of accepting the fact that trades are a very viable option for a career for kids

00:33:13.040 | going forward.

00:33:14.160 | So I wouldn't hesitate for either one of my kids if they decided to go that route,

00:33:18.720 | because if your talents lie more in your hands, why shouldn't you do something you enjoy

00:33:22.560 | and you still get paid relatively well to do?

00:33:24.960 | How are you planning to teach your children about setting up their financial plans?

00:33:31.680 | What percentage of your income you're going to train them to save, things like that?

00:33:35.360 | What are your plans for teaching and training them to handle money?

00:33:38.240 | Well, we're very much keeping it in a sort of a staged approach.

00:33:42.160 | I'm not going to really teach them the more advanced stuff until a little bit later on.

00:33:45.920 | Right now, what we've done is started them both on an allowance system early and teach

00:33:50.080 | them the whole concept of delay gratification.

00:33:52.400 | I was really happy with them the other day of last year or so.

00:33:56.800 | They started saving because they owned this big Lego police station.

00:34:00.080 | It was expensive, like over $100, and they were really pumped and wanted to do it.

00:34:03.760 | And we kind of suggested, well, if you guys buy it together, you could get it for sooner.

00:34:07.440 | But oh, that's a great idea.

00:34:08.960 | So they figured they could share it.

00:34:10.720 | And then they started talking to some other people and various grandparents and stuff

00:34:15.200 | and telling them they were saving money for it.

00:34:16.800 | And they saved their gift cards from Christmas for it and a bunch of other stuff.

00:34:19.920 | And then, lo and behold, they actually built up enough money to actually buy the thing

00:34:23.600 | themselves.

00:34:24.240 | So I was really, really impressed with them that they literally saved for like four or

00:34:27.920 | five months straight to buy this police station.

00:34:30.880 | That's really great.

00:34:32.560 | That's totally-- I mean, all the studies always go back to the famous marshmallow experiment.

00:34:38.080 | It's been done in various permutations.

00:34:40.960 | But if there's any one habit or character trait that seems to underpin those who are

00:34:49.520 | either financially successful or successful as measured in other metrics, be that career

00:34:55.040 | advancement, other metrics, it seems to be the ability to delay gratification and to

00:35:02.000 | do the work now and enjoy the benefit down the road.

00:35:04.320 | Oh, no.

00:35:05.600 | And that's one of the key things.

00:35:06.640 | And so realistically, that's what the whole allowance system was about, is giving them

00:35:10.880 | enough money to buy or do certain things, learn from their own mistakes, do silly things

00:35:16.800 | with their money.

00:35:17.440 | Let's get it out and get it over with.

00:35:18.960 | I'd rather you flop in your face when you're eight years old than trying to do it when

00:35:23.840 | you're 25 and starting out in life.

00:35:25.600 | So it's kind of a safer learning environment to do it this way.

00:35:29.040 | I laughed.

00:35:30.240 | My youngest son actually was enamored with the vending machine swimming pool the longest

00:35:35.680 | time.

00:35:36.080 | We explained, well, if you really want a pop, bring your allowance money.

00:35:39.440 | You can buy your own pop.

00:35:40.400 | It's your allowance.

00:35:41.120 | You can do what you want with it.

00:35:42.640 | So he did that, and he was very proud of it and everything else.

00:35:44.960 | And then he realized, he's like, well, we have pop at home.

00:35:47.280 | So why don't I just pay all my money for pop?

00:35:50.160 | I've got a pop of what?

00:35:51.680 | It was really funny to see the lights go off in his head and go, this didn't turn out

00:35:56.880 | that well.

00:35:57.360 | [laughs]

00:35:58.000 | Kyle: Isn't it interesting how you have to set up opportunities and permit failure?

00:36:04.800 | And hopefully you can do it at times when failure is not catastrophic.

00:36:10.480 | But what a valuable way to spend a couple bucks on a pop at a vending machine so that

00:36:16.240 | you can learn the lesson associated with it later on down the road.

00:36:20.960 | Matt: Well, that's an interesting thing.

00:36:23.600 | I think as much as people give video games a bad habit, I think it teaches one kid something

00:36:28.800 | very, very important that I didn't really have a lot growing up, is that it's okay to

00:36:33.040 | fail.

00:36:33.680 | Like, honestly, we get so worked up making sure it succeeds in everything that we kind

00:36:38.720 | of step back and don't realize it's okay to screw up.

00:36:41.600 | It's bloody well useful.

00:36:43.520 | I have made so many errors in my life over the years on various things that it's just

00:36:48.160 | amazing to me to realize that, you know what, we don't give enough credit for failure.

00:36:52.240 | It's okay for you to go through life and go, "Hmm, I got out of university and thought

00:36:56.560 | I was entitled to a car," because this is what you do when you're a graduate.

00:36:59.440 | "So I bought my first new car out of university.

00:37:01.440 | Did I need to buy a new car?

00:37:03.280 | No.

00:37:04.240 | Was it probably the best decision of my life?

00:37:06.160 | Not really, because I signed up for lease and large payments and everything else."

00:37:09.360 | And it was like, "But I had a career and I thought I deserved it."

00:37:12.560 | So it's like, well, I learned that in my early 20s.

00:37:15.280 | If they can learn that a little closer to 15, they're light years ahead of me.

00:37:18.080 | One of the most frustrating pieces of advice that I used to read is when people would say,

00:37:24.480 | "Get busy failing."

00:37:25.600 | If you read business leaders, they'll often say, "The more you fail, the better it is."

00:37:30.080 | And that's always been frustrating to me because nobody wants to fail.

00:37:33.680 | But I'm starting as I grow and as I mature as a person, I'm starting to see the value

00:37:40.720 | of failure and starting to see it for myself as I watch, especially in my work in the past

00:37:47.680 | as a financial planner, that has given me a unique insight into situations.

00:37:53.440 | And many times I've had a client that will talk with me and they'll talk with me and

00:37:58.000 | they'll say, "I'm going to do this.

00:37:59.360 | I'm going to do this.

00:38:00.640 | I'm going to do this.

00:38:01.920 | I'm going to do this."

00:38:03.280 | And year after year after year, they still haven't done it.

00:38:07.600 | And the reality was it would have been better if they'd said, "I'm going to do this.

00:38:10.720 | Okay, did you think about it?

00:38:11.680 | Did you think carefully?

00:38:12.880 | Are you willing to accept the downsides?

00:38:14.400 | Yes.

00:38:14.720 | Okay, go."

00:38:15.280 | And then it fails.

00:38:17.040 | And then they go do something else.

00:38:18.880 | And by the time we got to the third or fourth year, they would have failed at two or three

00:38:22.880 | things and probably found something that actually worked that they couldn't see behind it.

00:38:28.240 | But since they're still stuck in a system sometimes of, "I'm going to do this.

00:38:32.400 | I'm going to do this.

00:38:33.040 | I'm going to do this," they never get a chance to get started and figure it out as

00:38:36.480 | they go along.

00:38:37.200 | And this is a current obsession of mine of how can we make failure okay?

00:38:44.160 | How can we encourage failure?

00:38:46.160 | How can we build it and plan for it so that you can learn to deal with failure?

00:38:52.320 | Because if you look around from a financial perspective, if you look at business people,

00:38:57.520 | the average business owner who is wealthy has had some failed businesses.

00:39:02.640 | But for people who have never run a business and have never failed at a business, have

00:39:06.800 | never gone bankrupt, if you look at them, they often have this fear of failing.

00:39:12.080 | But if you look at those who have massive businesses, I think of many times some of

00:39:16.240 | the people who have empires.

00:39:18.640 | The three that come to mind are Richard Branson, Donald Trump, and Warren Buffett.

00:39:23.840 | Richard Branson, I can't put my finger on which of his companies have failed, but I'm

00:39:29.360 | certain that several of his companies have failed and have gone through bankruptcy.

00:39:34.320 | Donald Trump, his casinos right now are in bankruptcy and going through that.

00:39:38.240 | Warren Buffett, Berkshire Hathaway, the flagship company was a completely utterly failed investment

00:39:45.680 | that because he failed with the textile factory that was Berkshire Hathaway, turned it into

00:39:49.600 | a holding company.

00:39:51.080 | So in my mind, like you said, this is why school and education is such a big deal to

00:39:55.440 | me, we shouldn't be praising, I mean we should be praising effort, not necessarily results.

00:40:02.600 | And we should be encouraging failure because that's when the envelope is pushed.

00:40:07.340 | And it's a totally different mindset than we have culturally right now.

00:40:10.680 | No, I agree.

00:40:12.360 | It's really interesting to watch my own kids grow up and develop and learn things.

00:40:17.720 | They are a little bit more comfortable with failure than I would say I ever was.

00:40:21.360 | And I had to kind of evolve into it.

00:40:23.560 | I was a strong introvert growing up, so to me, talking to people was just sort of a "huh."

00:40:28.720 | And now I sit here and I've done umpteen different media interviews and such things after my

00:40:32.200 | book came out.

00:40:33.200 | I kind of laughed, it was terribly ironic that I ended up on the national newscast here

00:40:36.400 | a couple years back after my book came out.

00:40:39.240 | So people were like, "Oh, I saw you on the news, blah blah blah."

00:40:42.240 | And I was like, "Yeah, it was a three hour afternoon, longest interview of my entire

00:40:47.280 | life.

00:40:48.280 | I was exhausted by the end of it."

00:40:49.680 | But it turned into a great little piece of inspiring people how to actually go about

00:40:53.840 | retirement planning.

00:40:54.840 | Right.

00:40:55.840 | It's interesting, I look at even my life, and we're just hitting on a theme that for

00:41:03.000 | me is important, and especially important for early retirees, because you know what?

00:41:06.360 | You might fail in your retirement plan.

00:41:08.680 | Maybe your spouse gets sick and you have hundreds of thousands of dollars in medical bills that

00:41:12.600 | aren't covered by your insurance.

00:41:14.660 | And so therefore your retirement plan is staved off for longer.

00:41:18.880 | But you might fail at anything.

00:41:20.800 | But if the fear of failure holds you off, I think in college, I was so scared of getting

00:41:25.920 | bad grades.

00:41:26.920 | I always got good grades.

00:41:28.140 | But in college, looking back now, in order to maintain a high GPA and getting good grades,

00:41:33.440 | I wasted so many opportunities to take classes that I was interested in, but I didn't want

00:41:39.360 | to take them and get bad grades and mess up my GPA.

00:41:41.580 | So I took classes that I was good at.

00:41:43.540 | And looking back on it now, I think, "I was an idiot.

00:41:47.440 | How cool would it have been if I had taken all these different classes?

00:41:50.360 | And who cares about the failure?

00:41:51.640 | I'm paying for it.

00:41:52.800 | I don't care.

00:41:54.040 | I don't have to meet society's expectations to be able to put a 3.89 GPA on my resume.

00:42:02.240 | Like why not?

00:42:03.600 | Where else in life does somebody have the opportunity to explore the things that they

00:42:08.640 | may or may not be interested in and try a whole bunch of stuff?

00:42:12.080 | No, I agree totally.

00:42:13.080 | Actually, with early retirement, one of the last chapters in my book, I touch on this

00:42:16.680 | and I kind of harp on it a lot with other people, is this.

00:42:19.160 | Have backup plans.

00:42:20.680 | Basically, plan your retirement, keep it reasonable, but the reality is this.

00:42:25.720 | You can't cover every contingency in your plan.

00:42:28.640 | It's physically impossible to brainstorm every possible permutation of government policy,

00:42:33.800 | taxation development, and everything else that will happen in the next 40, 40 years.

00:42:37.600 | So don't even try.

00:42:39.220 | The odds of you getting it right are so minute, it's not even bother to go after.

00:42:44.700 | So really, I just harp on the idea of have some backup plans.

00:42:47.400 | Have some contingencies.

00:42:48.400 | Like one of the backup plans in mine is this.

00:42:50.480 | I don't use the house equity at all for anything in my plan.

00:42:54.040 | It's just sitting there like an albatross not being used.

00:42:56.560 | And the reality is, yes, I'm acutely aware of things could go wrong.

00:43:00.000 | I could screw up.

00:43:01.120 | I may have to go back to work.

00:43:02.840 | But the reality is this.

00:43:03.840 | At least I have something sitting there as sort of the backup plan in case things go

00:43:07.880 | sideways and buying me some time and some flexibility going forward.

00:43:12.040 | Other couple of little basic ones is this, is have some slush funds of cash available

00:43:16.280 | when you start your retirement.

00:43:17.900 | The biggest thing I've seen over and over again is people taking money out during a

00:43:21.280 | down market and it's like going, "It's so easy to avoid.

00:43:24.680 | Just keep two years slush fund in your freaking bank account for cash of just rolling GIC

00:43:30.160 | or whatever.

00:43:31.480 | Any investment, I don't care what, as long as it's relatively available and that will

00:43:34.640 | help buy you time when things go sideways.

00:43:37.280 | So when the market's tanking, you can sit there and go, "Oh, I'll just sit on the

00:43:40.480 | sidelines for a couple of months.

00:43:41.480 | Thank you very much."

00:43:42.480 | Absolutely.

00:43:43.480 | People have this idea that just because you stop working, you can never work again.

00:43:50.260 | And I'm telling you, I haven't.

00:43:51.660 | The only person so far that I brought on the show that stopped working and hasn't earned

00:43:56.340 | any money in retirement that I was able to find was Doug Nordman who retired at 41 and

00:44:03.540 | he's actually made a good amount of money since retiring.

00:44:07.220 | He just gave it all away.

00:44:08.220 | He gave it all to military charities from his books and from his blog and all of that.

00:44:12.980 | He just has given the money away.

00:44:15.100 | But there's this idea we're so connected with our corporate identity, our jobs.

00:44:23.140 | Who are you?

00:44:24.140 | What do you do is the question, not who are you.

00:44:26.540 | And so one of the biggest challenges even with traditional retirement planning that

00:44:31.420 | I've learned is if you don't help a client transition their identity, you find it's

00:44:38.300 | a major part of successfully retiring.

00:44:40.580 | Even if you're 65 years old and you're going to retire at that traditional age, so

00:44:44.900 | much of our identity is wrapped up in the work that we do instead of who we are that

00:44:50.980 | you've got to fix that psychologically to help people through it.

00:44:55.220 | Oh, I agree totally.

00:44:57.060 | The biggest thing I think to do from the happiness aspect is to bridge yourself from

00:45:01.060 | your current state of where you are in your work and your identity and everything else

00:45:04.020 | and how to build a new identity that's independent of your current work one and going forward.

00:45:07.620 | Like one of the ones I say with people that you have to kind of focus on a little bit

00:45:11.780 | at least be aware of the issues.

00:45:13.340 | Most people don't really consciously aware of this until they go through it.

00:45:16.540 | Think about all the friends you have in your life and then think back to how you met all

00:45:19.860 | of them.

00:45:20.900 | The average person will discover almost all of them had some inspiration and some level

00:45:25.300 | of work at some point.

00:45:26.860 | And so your social interactions were largely out of your work.

00:45:29.300 | So when you retire, that's only gone if you take that away.

00:45:32.580 | And then how are you going to fill that in, that void?

00:45:36.020 | And that's how you get a lot of unhappy retirees regardless of the age coming out is they didn't

00:45:40.180 | they plan the money side down the last dime, completely ignoring the other 2000 hours a

00:45:45.060 | year that was your job and suddenly is now available.

00:45:48.340 | You've got to consider you can't play golf every day.

00:45:51.580 | I don't care who the hell you are, what you're trying to do and how much you love it.

00:45:55.140 | The average person that won't work as a strategy.

00:45:57.660 | So you have to develop interests.

00:45:59.460 | You have to develop relationships and hobbies outside of your current thing and then build

00:46:03.620 | that up slowly.

00:46:04.980 | So I love the idea of people that can manage to pull this off or they've reduced their

00:46:08.620 | amount of work slowly over a number of years and then stepped out of work on a slow basis.

00:46:13.900 | I think if employers were more willing to put policies in place to support that, it

00:46:18.140 | leads to a better succession planning going forward because there's nothing better than

00:46:22.860 | someone who wants to be at work and doing their job.

00:46:26.060 | I think about if you could have a situation where a retiree goes, "I'm going to pay that

00:46:30.140 | over three years.

00:46:31.140 | I'm going to start drop down to 80% time, then maybe 60 and then maybe 40 over a couple

00:46:35.300 | of years."

00:46:36.300 | How beneficial that'd be for them because they free up their HR budget to hire a new

00:46:40.220 | employee who's junior and get umpteen years of training with the senior one.

00:46:43.780 | And by the end, you have a senior person around who's happy to be there.

00:46:46.860 | You can assign them a special project or something and they'll get it done and then they'll go.

00:46:51.380 | They'll be happy to leave.

00:46:53.180 | Right.

00:46:54.180 | It's an interesting idea.

00:46:55.580 | I wonder if it would be … I guess it seems like it's such a small percentage of the

00:47:01.380 | population who is able to run their lifestyle on a lower amount of income.

00:47:10.220 | Most people it seems in our society, their income equals their outgo and/or their outgo

00:47:16.380 | exceeds their income.

00:47:21.300 | So there's not a lot of margin there.

00:47:23.820 | But it would be interesting if somebody has margin, if they are an aggressive saver.

00:47:29.660 | I know I would … if I were working in a career that was having a slowdown and we're

00:47:34.300 | saying, "We want to pool … we need to reduce our costs.

00:47:39.820 | Would anybody like to volunteer to work 50% of the time for the next … we anticipate

00:47:44.780 | this is going to be for about six months."

00:47:47.940 | Then that would be a real benefit to an employer and to an employee to have almost a sabbatical

00:47:52.860 | where it's just 50% of the time or to be able to take a sabbatical.

00:47:56.500 | And then as the general market trend, whatever market it is, comes back and they can just

00:48:02.580 | step back into their job.

00:48:04.420 | Yeah.

00:48:05.420 | I agree with you.

00:48:06.420 | It would be nice to see that evolve.

00:48:07.420 | Actually, I ran into a situation of when my second son was born, I took seven weeks of

00:48:11.500 | parental leave off.

00:48:13.820 | My wife being self-employed didn't qualify for any government coverage on that.

00:48:17.860 | So I actually capped in the program instead as the other parents and then my work was

00:48:23.340 | going through a bit of a slowdown.

00:48:24.340 | I was doing a consulting firm at the time.

00:48:26.420 | So my boss kept saying this to me over and over again, "I don't understand why you

00:48:29.820 | want to take the time off, but to have you off the books for seven weeks right now is

00:48:32.820 | really helpful.

00:48:33.900 | So I'm approving this anyway."

00:48:34.900 | Right.

00:48:35.900 | So it's funny that I got time alone with my family and that new baby and enjoyed it

00:48:42.740 | immensely.

00:48:43.740 | And financially, we had savings so we could afford to do this.

00:48:46.340 | It was a conscious choice on our part.

00:48:49.380 | But the reality is a lot of companies aren't really set up to realize that that's a good

00:48:53.660 | thing or even talk to their employees like it's a good thing.

00:48:56.300 | It tends to be this all or nothing approach to employment, unfortunately.

00:48:59.980 | And as you see self-employment take off, it's almost interesting that some people have realized

00:49:04.180 | that's the route to go in regards of be your own employer and fire and hire clients as

00:49:09.660 | you need based on your interests.

00:49:12.380 | My wife's in a really envious situation of the fact that she very much picks her clients

00:49:16.340 | based on personality and how they're going to do and their children are going to interact

00:49:21.020 | with the rest of the kids going on.

00:49:22.660 | So she's very, very, very picky.

00:49:24.500 | So she interviews a lot of potential clients but only approves a handful of them.

00:49:28.740 | And she's very much in a market where the supply does not meet the demand at all.

00:49:33.380 | So she can't afford to be picky.

00:49:35.220 | Wow.

00:49:36.220 | I think we could take that and apply that though as engineer.

00:49:38.860 | I think it's awesome that she's in that situation.

00:49:41.220 | My immediate thought is how can I be in that situation?

00:49:44.740 | And I think many of us, if we're running our own businesses especially or professional

00:49:50.080 | services in some capacity, we either can do it or we can create a plan to get there.

00:49:56.740 | There's always been a benefit to me of my industry, which is financial planning, is

00:50:00.860 | that I could choose who I worked with and there were clients I just didn't like them

00:50:04.700 | and I never called them back.

00:50:06.300 | And I fired two clients and actually formally said, "I'm not willing to work with you

00:50:16.180 | because I don't want to work with someone who is not a win-win."

00:50:19.500 | And that comes back to that self-direction, self-ownership.

00:50:23.580 | I see one of the fundamental primary benefits of early retirement and teaching that as an

00:50:29.420 | approach is that it can build self-confidence under us as individuals, which will affect

00:50:37.220 | or can affect every aspect of our lives going forward.

00:50:40.660 | If you have savings, even if you're not saying, "I can never work again," but if you have

00:50:45.260 | a year's worth of income in the bank, you're less likely to go after a client who's not

00:50:51.460 | a good fit for you because you need the money.

00:50:53.900 | You're less likely to do a deal that's not a great fit for you because you need the money.

00:50:58.220 | Usually you have some time and so you can work towards those great clients or those

00:51:02.820 | great deals or those great businesses.

00:51:05.180 | You can do them better or right.

00:51:09.500 | And in that sense, you can really, I think, build stronger businesses, stronger relationships,

00:51:17.980 | stronger customers.

00:51:19.820 | And much of it starts from being on that solid foundation.

00:51:23.320 | And I think over a lifetime, that can make a dramatic difference in someone's quality

00:51:27.760 | of life.

00:51:28.760 | I agree.

00:51:29.760 | It can be helpful.

00:51:30.880 | But the same concepts can even be applied to an employer situation.

00:51:34.180 | Like right now, part of the reason I got my 90% time approved is I'm in a situation where

00:51:38.460 | I have 10 years worth of savings.

00:51:40.460 | Living expenses saved up.

00:51:42.300 | I really am brutally honest with my bosses about my situation and what I'm doing and

00:51:46.860 | what I'm interested in.

00:51:47.860 | They're aware of my plan to retire early because hell no, it's on the internet.

00:51:51.580 | Pretty hard to hide.

00:51:53.740 | But the reality is they trust me because I've proven again and again, I'm here to give you

00:51:57.700 | my best advice.

00:51:58.860 | I'm working for you.

00:52:00.500 | But the reality is I also won't put up a certain degrees of bullshit.

00:52:03.540 | I will tell them where I think they're making a mistake.

00:52:06.140 | And some people are terrified to do that because they feel they're so dependent on their job

00:52:10.180 | because they're leaving month to month, just trying to keep their things going on.

00:52:14.940 | So any degree of savings, I think, buys you that degree of confidence and satisfaction

00:52:20.340 | knowing you can talk to your employer and go, "Hi, I'm not interested in working full

00:52:24.060 | time.

00:52:25.060 | I'm doing these other things in my life and I need the additional time.

00:52:27.400 | Can we come up with an agreement that will work?"

00:52:29.940 | Right.

00:52:30.940 | What percentage of your income have you strived to save over the last six years that you've

00:52:37.260 | been focusing on this project?

00:52:38.260 | Well, it's scaled up quite a bit over the years because I really kept the expenses largely

00:52:43.300 | similar over the course of the years, even with kids and everything else.

00:52:45.980 | They've kept it quite below inflation in that regards.

00:52:48.780 | What we've managed to do is right now I'm saving about 65% of our income coming in.

00:52:52.780 | Great.

00:52:53.780 | Awesome.

00:52:54.780 | I would imagine you might be familiar with, especially with your writing and reading about

00:53:04.580 | early retirement and financial planning within other cultures and other countries.

00:53:09.200 | Do you think that you have it better as a Canadian, better off?

00:53:13.320 | Is it easier to do early retirement with a Canadian?

00:53:15.560 | Is it more difficult?

00:53:16.560 | Do you have any concept of the scale and the impact that living in Canada has made to your

00:53:21.960 | life?

00:53:22.960 | I think Canada offers a really big benefit to early retirees that our basic health care

00:53:29.200 | is all covered by government.

00:53:30.880 | So as you mentioned, the fact that we do pay quite a bit more taxes, so you have to be

00:53:34.200 | more aggressive in your tax planning front.

00:53:35.680 | It's kind of the price you pay for it.

00:53:37.480 | The option is this.

00:53:38.560 | I know after my son was born, 10 weeks early, and he had two rounds of neurosurgery, I didn't

00:53:43.240 | have a bill for anything.

00:53:44.400 | I didn't pay a dime, not one freaking dime.

00:53:46.800 | Why?

00:53:47.800 | Because our society as a whole was accepting the fact we pay more in taxes up front, but

00:53:52.600 | that also means then that we don't have this disaster situation ever occurring where I'm

00:53:56.600 | going to have, oh, half a million dollars of debt from one medical procedure.

00:54:02.960 | So from that end of things, it does change the context of, you'll notice in Canadian

00:54:07.200 | law, we don't really talk about insurance all that much for health care at all because

00:54:11.000 | it's kind of an incidental side one of, you have to worry about your dental and your vision

00:54:14.480 | and maybe some extra drug coverage at best, but the reality is all your basic stuff is

00:54:19.120 | already covered by the government.

00:54:21.200 | So it's kind of, I've heard some people who have read the blog from a U.S. perspective

00:54:25.200 | comment, it's almost refreshing to see someone who's not paranoid about health care in Canada

00:54:28.960 | because of her situation.

00:54:31.560 | And so it does create a bit of an oddity of, it's not easier or harder, but the worries

00:54:38.120 | are quite a bit different of, I don't worry about those situations that most people in

00:54:42.560 | the States would have going, well, how am I going to cover health care?

00:54:45.280 | Do I have enough save?

00:54:46.280 | If I have a big issue, if my wife gets sick, do I have to go back to work?

00:54:50.040 | That doesn't really ever enter my head.

00:54:52.480 | The option is though, my taxes are a heck of a lot more, so I have to be a little more

00:54:56.400 | forward thinking on that front and organizing and being aggressive on the tax planning side

00:55:00.520 | to kind of compensate for it.

00:55:02.080 | That would seem to certainly be the easier thing to do.

00:55:04.640 | I don't know much about the Canadian tax system, but any progressive tax system and any progressive

00:55:12.640 | tax system is relatively easy to work among, and especially when you can build out the

00:55:22.000 | ability to live a great lifestyle on not much money.

00:55:27.600 | That allows you to take advantage of all the deferral accounts, and those deferral accounts

00:55:31.520 | can help over time.

00:55:33.160 | And then because you don't need to make much money, you don't need, excuse me, because

00:55:35.840 | you don't need to spend much money, you don't need to make as much money, and you don't

00:55:39.440 | need to save and accumulate as much money to live a great lifestyle, and so therefore

00:55:43.360 | you can avoid the strong penalties for doing well with a progressive tax rate.

00:55:50.680 | I mean, to me that would seem the easier thing to do.

00:55:53.000 | Am I wrong, right?

00:55:54.000 | What do you think?

00:55:55.000 | No, I think you're kind of on the broad strokes of what makes it easy.

00:55:58.840 | You do have to think about it, and it's not earth-shatteringly difficult, but you do have

00:56:02.520 | to remember that the reality is as you keep saving, your interests get aligned with the

00:56:06.960 | business community a lot more, and you realize the tax code is really set up for businesses.

00:56:12.040 | And that whole investment thing, it's very much encouraging that end of things.

00:56:15.680 | And so as such, I've noticed that the more I save, the more I agree with the tax system

00:56:21.880 | here and the progressive nature of it.

00:56:24.000 | So yes, the people who are making millions and millions of dollars are paying a lot of

00:56:27.640 | tax in theory, but the reality is they have a ream of options available to them to kind

00:56:32.360 | of defer, hide, otherwise manipulate their tax bill into something a little more reasonable.

00:56:37.600 | As people like to think Canada's really expensive, but really when you get aggressive on your

00:56:41.960 | planning side of things, it's pretty easy to bounce things off.

00:56:44.560 | Like what happens for me is my marginal tax rate, the most tax I pay on that last dime

00:56:50.080 | of dollar I make is about 40%, which sounds really high, but when you consider after I'm

00:56:55.000 | done filing my taxes each year, my average tax rate is only 20%.

00:56:59.800 | All right, what's the highest marginal bracket in Canada that you know?

00:57:06.600 | Not much further past that, it's pushing almost 50%.

00:57:09.200 | Okay, well that's, we're up to 55% in the US and the highest brackets when you bring

00:57:13.560 | in the extra taxes with the Affordable Care Act.

00:57:18.240 | So it's interesting that it's comparable at this point for high income earners.

00:57:25.800 | So I think my guess is that your brackets are probably at a lower, do you have any idea

00:57:32.080 | where you enter into that top bracket as far as how much income puts you in ballpark?

00:57:36.240 | Oh, I can't remember off the top because the issue is here we have dual brackets.

00:57:40.800 | We have each province has their own tax brackets and the federal government has its own tax

00:57:44.160 | brackets on top of that, so they don't always align.

00:57:46.040 | It ends up these weird little permutations that crop up.

00:57:49.160 | Crudely, I'd say maybe about 150,000 is where you start entering up towards the top

00:57:53.960 | or end.

00:57:54.960 | So that would be the difference because in the US it's much more, depending on the

00:57:58.880 | makeup it's much more, it's much closer to 400,000-ish, higher or lower to get you

00:58:05.720 | into that top bracket depending on the structure.

00:58:09.760 | So that would be one of the major differences.

00:58:12.520 | Last question that I have and then I'll give you the final word to share anything

00:58:15.520 | that you want to share, but the last question on my list is what are the biggest objections

00:58:21.560 | that you get on the blog or as a result of the book?

00:58:24.560 | Some people come over the book and they say, "Well, this is just a stupid idea."

00:58:28.600 | What are the objections that you get most commonly?

00:58:32.040 | I'd say probably the most common two objections I get is one, people like to complain, "I'm

00:58:37.680 | all theoretical.

00:58:38.680 | I've never actually done it.

00:58:39.680 | I'm not there yet because I'm still working towards actually getting there," ignoring

00:58:42.600 | the fact of what I've saved or accomplished in the last six years.

00:58:45.960 | Like somehow the fact that I've already got $300,000 saved is nothing, which I kind

00:58:51.800 | of laugh at because I'm like, "Well, really, given my age, a lot of people do not have

00:58:56.080 | that much money in the bank and a paid off house.

00:58:57.720 | It doesn't really happen that frequently."

00:59:01.080 | The other big one is they don't believe it's possible to live on that low amount

00:59:04.120 | of money.

00:59:05.120 | It seems to be the other common one that crops up.

00:59:07.720 | They just seem flabbergasted that you can spend so little amount of money and still

00:59:11.640 | be a middle class existence that's pretty normal and happy.

00:59:15.560 | That's where I get back to that whole aspect of the key thing is to really personalize

00:59:19.240 | your spending.

00:59:20.240 | It's not that it matters to you to spend accordingly.

00:59:22.280 | My wife likes clothes a lot more than I do.

00:59:24.960 | I can wear the same three pair of jeans all week and I really don't care.

00:59:29.480 | She cares a lot more and so she tends to keep her spending cash and puts that into clothes

00:59:34.120 | because she cares about that.

00:59:35.520 | But even with her, she's kind of aware of ... Sometimes she gets into these mindless

00:59:39.900 | buying patterns where she's like, "I'm not really even enjoying what I bought.

00:59:43.880 | This is silly."

00:59:44.880 | Because she works in daycare, she doesn't want to wear her nice stuff during the day,

00:59:49.200 | during the week because, hello, she has kids throwing things or other craft projects that

00:59:53.600 | get messy clothing.

00:59:54.600 | So she's realized that she's changed things around a little bit.

00:59:57.960 | On the weekend, she wears her nice stuff now.

00:59:59.760 | So she's always outdressing me everywhere we go.

01:00:02.280 | That's fine.

01:00:03.280 | Right.

01:00:04.280 | You know what's interesting to me?

01:00:07.120 | Both of those objections are absolute stupid logical fallacies, but yet they're pervasive

01:00:16.280 | in both of our cultures.

01:00:18.880 | They're certainly pervasive in the US context and in the Canadian context, it sounds like

01:00:22.840 | they're pervasive.

01:00:25.440 | Number one is, the first one is an ad hominem attack.

01:00:28.040 | Well, who are you to say that?

01:00:30.080 | Instead of dealing with your actual argument and trying to find a flaw in your logic or

01:00:34.240 | in your argument and disproving the argument, it's an attack on you that just because you

01:00:38.640 | say this can be done but you haven't done it means that it's not possible.

01:00:42.840 | And then the second one is basically personal incredulity, simply saying that just because

01:00:50.080 | I find it difficult to believe, it's therefore not true.

01:00:53.560 | Well, just because you find it difficult to believe doesn't have any bearing on whether

01:00:56.960 | it's true or not.

01:00:58.280 | So this is on a societal perspective.

01:01:04.160 | It seems as though societally speaking, we have lost the ability to think in terms of

01:01:08.080 | logic and fact and we resort to fallacies instead.

01:01:16.640 | And it's a shame because if somebody can start and identify those fallacies that just be

01:01:24.120 | – if they can identify the fallacies, they can gain and they can join you and me on our

01:01:29.240 | early retirement journey.

01:01:30.680 | Well, that's actually true.

01:01:32.240 | I've actually been struggling with this.

01:01:34.640 | Since I wrote the first book, I've been trying to come up with how – that was the

01:01:38.880 | core of my problem was how do you get people to get past this default point of view thing.

01:01:43.200 | And so I've been struggling for multiple years here trying to come up with a format

01:01:47.120 | of a book that would work to try to actually deal with that exact issue of teaching people

01:01:51.880 | that your life is largely constructed defaults.

01:01:54.560 | You didn't decide much of anything of who – where you live, what job you're in,

01:01:58.560 | everything else was very unusually defaulted decision-making, not per se conscious in a

01:02:03.160 | lot of cases.

01:02:04.320 | And so you don't really realize how different your life could be if you just let it.

01:02:11.240 | And then even the harder thing is then how do you transition from one lifestyle to another

01:02:15.200 | lifestyle, which is where I'm struggling to write a book on it.

01:02:18.280 | Absolutely.

01:02:19.280 | Well, Tim, this has been fun.

01:02:21.520 | Do you have any final words of encouragement or thoughts that you would like to leave with

01:02:25.280 | the audience as we go?

01:02:27.360 | I think the biggest thing is to get comfortable with disbelief of things.

01:02:31.400 | A lot of people say they don't believe it's possible for me and I'm like, "Well,

01:02:34.520 | I don't really believe it's possible to waste $100,000 a year of income every year

01:02:38.520 | on a lifestyle that looks largely similar to mine," which I'm doing on 30.

01:02:42.560 | So it's finding out you're comfortable being yourself and realize it's okay to

01:02:48.240 | do that and aim for that and then structure your life around that.

01:02:51.880 | Give yourself permission to be different.

01:02:53.960 | It's okay.

01:02:55.040 | It's supposed to be different.

01:02:56.040 | We're not all clones.

01:02:57.040 | We're not all coming from the same little vats of whatever DNA.

01:03:00.000 | We all have different opinions and thoughts and patterns.

01:03:02.520 | So build your life around you, not what everyone else tells you to be.

01:03:05.960 | Tim, this has been fun.

01:03:07.480 | I appreciate you coming on and I look forward to following your journey.

01:03:11.880 | If you ever would like to come back on and share with us again, you're welcome anytime.

01:03:15.840 | Thanks a lot.

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RPF0129-Tim_Stobbs_Interview