Posted by Robert on September 3, 2011
This is a guest post by Robert, who lives in Calgary and works as a financial adviser retired at 34. He is married, has three kids. Robert and his wife then plan to return to school and become teachers, eventually living and working overseas.
The rich get richer. It’s a well-known aphorism, usually used as a complaint about the unfairness of life in a material society. But it also holds the secret for people who want to join the ranks of the rich. If you want to get richer, you have to act like the rich. In order to get richer, a person needs to have the mindset that they are rich, and they need to make decisions the way rich people make them.
I lived in Taiwan for two years, in the capital city, Taipei. It is a huge city of almost seven million people. What really struck me while I was there were the dichotomies: new vs. crumbling, density vs. parks and open spaces, busy vs. leisurely, and especially rich vs. poor. I was impressed by the numbers of brand new luxury cars and, at the same time, the number of motor scooters. I was surprised at the number of businessmen and, in a different setting, the number of street vendors. I was surprised at the wide gap between the richest and the poorest. So I reflected on my relative position. Most days, I would walk to work and then eat at a hole-in-the-wall restaurant. But many days, I would ride in a taxi with rich friends to an expensive restaurant in a fancy hotel or shopping district. Poor people don’t have that experience. I realized that how much money I spent was irrelevant to my place in that society. In fact, I had opportunities that weren’t available to poor people, so I must be rich. And if it was all in my mind, I would continue to be “rich” when I returned to Canada, whether I had the money or not.
Simply having an education, a good job and a steady income puts me in the luckiest 5% of the population of the world. Why should I worry about competing with others to scrape out a little more and feel a little richer? Instead, I can spend my mental energy and my effort on making the same decisions that rich people make. Because I’m not poor, I don’t need to steal (even MP3s) or borrow money (for a bigger TV) or waste my money on vices (like cigarettes and beer). I’m not judging others, just deciding that isn’t what I want for myself. Instead, I sharpened my skills that relate to my interests in personal finance and investing. I read books, like Wealth, by Stuart Lucas, that describe how the rich make choices. And then, through some trial and error, I started taking actions that increased my wealth.
There’s no secret about how to get richer. Luck may magnify the amount a person is able to accumulate, and the speed with which they can do it, but it almost always follows the same pattern: work, save, invest, protect. Money isn’t there as rewards and punishments for intelligence or hard work. Smart people aren’t always wealthier than people of average intelligence. (By extension, not all people are wealthy because they are smart.) Not all hard workers are rewarded equally. That’s why I don’t think getting rich is a function of being smart and working hard. I think it’s a result of making choices the way successful rich people have.
The key is taking personal responsibility. No one else is going to come along and make you rich. The government can’t make you rich. No one but you is able to coordinate all your actions and choices that are required to put your finances in order. And waiting until later doesn’t move you toward success. Only by deciding that it’s important to you to be richer, by deciding that you’ll make the same types of choices that rich people make, and by starting now, can you make progress toward becoming richer. You can’t control the economy, or the stock market, or the government’s policies, but you can control your own mindset. And even if you don’t succeed right away, you’re probably already among the richest 5% of the human family.
Are you rich? How do you know?
Posted by Robert on March 28, 2011
This is a guest post by Robert, who lives in Calgary and works as a financial adviser. He is married, has three kids and plans to retire at age 35. Robert and his wife then plan to return to school and become teachers, eventually living and working overseas.
I didn’t begin my career thinking, “I want out as quickly as possible.” I’ve been fortunate to be able to work in financial advice, where I have a real interest. I enjoy talking with people about their finances and helping them organize for more efficiency and a greater probability of success. Having said that, it was my second choice, and I’ve always wanted to live with my family overseas. That’s my dream, and when I started thinking (over two years ago) how to realistically achieve it, early retirement presented itself as an idea that would allow me to mitigate as much of the risk as possible. If I’m financially independent, then I know my family will be stable, working only to cover the cost of the kids’ school and any extras, such as travel. But how do I explain this unorthodox life choice to others?
My concerns were first, that people wouldn’t understand. Why would I want to limit my lifestyle to a fixed income, when I could continue to be successful at work and earn six figures? And second, that people would feel jealous, wondering why I’m able to stop working before 40 when they’re uncertain about being able to retire at 65. I first had to tell my parents, since I work with my father and we will be moving their grandchildren far away. I must admit they were shocked. When we sat down with them, in our house, and explained what we wanted to do, the timeline we had in mind (six years) and the amount of money we have and need, they were surprised by the audacity of our plans, but also supportive that we were able to find something to be excited about and to work towards.
I work in a small office of under 10 people. Everyone at work knows of my plans, but I have explained that “I’m going back to school to become a teacher in a couple years, then moving abroad.” I leave out the “retirement” aspect, because I don’t know how to answer the obvious question, “How did you manage that?” and the implication, “and why am I nowhere near?” But it keeps coming up in little ways. Recently, one of the administrators came to me and said, “We got a notice that your life insurance isn’t paid for and will expire. Aren’t you going to pay it?” I explained that my house is paid for now, so it became unnecessary. She asked, “How did you manage that? Did you sell some investments?” Actually, I had, so I agreed with that, but she paused and asked, “Don’t you need the insurance to take care of your wife and kids?” They’re already taken care of because we are working toward financial independence. But I just said, “Don’t worry, we’ve thought of that and they’ll be taken care of.” I didn’t want to say more, and she left it at that.
A few weeks ago, my wife and I met up with a friend of my parents, whose family I had grown up with. We’re both involved in some similar projects around public education, so we were describing to her our plan to go back to school and then teach in international schools. She thought that was great, but pointed out that I have a good paying job and asked why I would leave it. “I’ve gone as far as I can in this job” is something I like to say. “I’ve enjoyed it and I’ve really learned a lot. Now I’d like to move on to something new, something that makes a difference in another way.” She liked that, but she’s smart. She asked about the money, and I admitted that we’ll have enough. “To retire?” she asked. She had guessed what I meant and she was impressed. I realized that many people equate money with intelligence and assume that smarter people have more money and people with money must be smart (not necessarily true). But I wouldn’t expect her to be jealous, since she has a six figure government income and her husband has a public pension.
A couple of my clients at work were personal friends before they became clients. One in particular seems to be on the traditional hamster wheel: earn more, spend more, repeat. I know that he’s worked quite hard to have more money, which he seems to use to have some of the nicer things in life. But he doesn’t seem to understand the fundamental idea of saving and investing. He asked me just the other day: why do you seem to be transitioning out of the business? I found it easiest to explain that I’m planning on going back to school. For him, this seemed to be a fully satisfactory response.
With all the people above, I don’t have a standard explanation of my situation and plans. I still don’t feel comfortable explaining that if I had to stop working, I’d be financially secure, and that will allow us to launch the next part of our life. There’s no secret how to get to this point (earn good income, stay out of debt and live below your means). But not everyone can do it and I fear that people may feel jealous of what they don’t have and don’t understand. Maybe that’s selfish and irrational and I should use my situation as an example for those around me. What do you think?
Posted by Dave on January 12, 2010
I started writing this post while somewhat hungover after a night out in Toronto with friends from University that included a bar that had 343 different kinds of beer on it’s menu. This was an expensive night (with that many different flavours, I felt it was my duty to try to get through as many as I could) that I don’t regret (other then the tiredness and sore head in the morning) and got me thinking about other things that I buy or spend money on that I know are a waste of money and are counterproductive to my end goal of retirement at 45, but I do anyway because of various justifications. Over the years, I have also learned how to limit the amount of money I spend on these activities in order to at least have some semblance of budgeting with my vices, which are as follows:
Video Games: This “hobby” is probably my most expensive habit. I own an XBox 360, Wii and Playstation 3, which means in total, I have approximately $1,000 worth of hardware that all play essentially the same games (in my defense though, the PS3 was a wedding present). Trent at the Simple Dollar gave tips on how to reduce the cost of video games by buying only games that have long-time playability, reducing your cost per hour to a minimum. I don’t have an attention span long enough to continually play a game for months and months and after I have beat it, I rarely feel the need to return to it to play it again. Up until a few years ago, this meant that I would be trading in games for 25% of what I bought them for to get new games, something that is not entirely desirable. Now, I spend $17 per month and rent games over the internet through zip.ca. I pick the games I want to play and the company mails them to me as I mail them back. This allows me to play several more games then I normally would for a flat fee, thus limiting the expensive ownership cost of the games. The only downside of the service is that I never know what game I’m going to get, which is kind of interesting sometimes.
Golf: I love to golf. If I had a choice, I would spend most of my summer wandering around courses in the area. This is a very expensive hobby as well, with equipment and usage costs, a person could spend significant amounts of money over a season. I have limited my costs in couple of ways:
- I golf in the evenings, utilizing “twilight” deals offered by most public courses in the area. For most courses, it works out to 25-50% just by starting the round later.
- I limit golf equipment spending. I limit club purchases to at most one per year. Golf balls can also be expensive, but you can find deals online on used balls. In my experience, a $0.20 golf ball will go just as far in the bush, or just as deep in a pond as one you’ve spent $1-$3 on. Last year I bought 10 dozen used balls for $30 + $10 shipping. These should last me several years and work just fine.
- I budget year-round for this hobby. I could fix the playing cost by purchasing a membership, but in general unless you play 50+ rounds at the same course during the day, it doesn’t work out to be cheaper then paying on a per-round basis.
Gambling: This vice actually costs me the least amount of money per year, and actually allows me to make a little bit of profit on a per year basis [If I pick the right teams, which I didn't do yesterday when I went 1 out of 4 in the first round of the NFL playoffs 
]. I found a gaming site that accepts bets as low as $1 per game and use this, reducing my risk, while still allowing a wager on the game, which is really all I want. Profitability is uncertain, but if bets are researched (similar to stocks), I think that a skilled person could make decent long-term profit through betting.
Beer: I’ve been led to believe that most people also enjoy beer (unless I’ve been watching too many football games), which can get expensive to drink in Canada where alcohol and tobacco are taxed significantly. This year, I am going to start brewing my own beer, mainly because I enjoy making most things from scratch, but also because I believe if I learn to do it well, it could lead to some cost savings down the road, after purchasing the equipment. Right now, I just drink cheaper beer, after finding a few brands that I enjoy (I’m not sure if it’s available elsewhere in the country, but I would highly recommend Brava Light). It would be healthier to give up beer altogether, but it is something that I enjoy occasionally, and it’s just tasty 
.
How about you, what are your vices? How do you fit them into your financial plan?
