Tag Archives: Early Retirement

Should You Stick with a Job You Hate in the Pursuit of Financial Independence?

I recently hit a net worth milestone: $200,000. That’s more than I paid for my house. It’s a fair amount of money and I’m proud that I’ve made it this far. But it is nowhere near enough for me to stop working.

The pursuit of financial independence is my passion. It gives me hope for the future and is the reason I haven’t quit my current job despite the fact that I hate it. But sometimes I have to stop and ask myself if sticking this out is the right call, when I could be living a different life and doing something else to earn a living.

It’s Official: I Hate My Job

I am at the point in my still-early career where I go to work solely for the paycheque. I don’t go because I care about the work I do. I don’t go because I enjoy it on any level. I go because I need to earn money to fund my needs and wants.

I went to university for almost a decade because I wanted to work. I wanted to be good at something, and to love it enough to want to do it even when things got hard or boring. What do you do when you’re halfway through your program of study and realize, “Uh oh. This is not what I want to do, especially for the next several decades”? Well, someone with more guts and imagination than myself might have cut their losses and tried something else.

Not me. I’m a coward but not a quitter. I quickly gave up on finding the “meaning” in my work that millennials supposedly value above all else. If I could just be sort of OK at my job, and not hate every part of my work day, that would be good enough.

I sort-of half-got what I wanted. I’m marginally competent to the point where I can get through the day. My hope to not hate all of it never did pan out though. I find my job stressful and unpleasant to the point where thoughts of the past day and worries about the next day bleed into all the time I’m not at work.

I Really Should Quit

Forty hours a week is a lot of your life, no matter what anyone says. One time an acquaintance said to me in justification of his multitude of hobbies, “I just have so much time outside of the 9-to-5, even with volunteer work and a family!” (True story. I kind of wanted to punch him but didn’t.) I figure this must be a function of having a tolerable sort of job, one that doesn’t leave you exhausted and empty when you get home.

You can always make more money. It’s time that is valuable beyond all else. Every hour you spend at work is an hour you will never get back, and if you hate it, that’s an hour of your precious life that you can never spend doing something that makes you happy.

I’m barely 30 years old. There’s time. I could try and wiggle my way into a related career. Selling my house would be easy enough and living in a city isn’t the end of the world. I could find my way back into academia. I could get started in a new line of work, or maybe even learn a trade, which would allow me to continue to live where I do. I’m sure I could even earn the same amount of money I make now doing something else – perhaps I’d start my own business – if only I was a little more driven, a little less risk-adverse.

I could make a change. Most of us could, I think. Is the job you are doing right now really the absolute only thing you could do to make the amount of money that you actually need?

So Why do I Stay?

I said that I don’t quit my job because I need the money. That’s not the whole truth though. I am very fortunate in that I don’t need near what I earn in order to pay my expenses. So in reality, the reason I stay is that this job feels like my best shot at achieving financial independence as quickly as possible with as little risk as possible. That, and I love where I live.

There’s switching costs to consider as well – when you’re occupying a niche position in a very small town, chances are good that a job or career change will also require relocation. And depending what you want to do, you may need a whole lot more training and education.

At the end of the day, there’s a biggest fear of all: after all those costs have been swallowed, you wake up in a new job and realize you’re just as miserable as you were before.

I’ve done the math. Unless I have a really clear idea of what I would like to do instead – and a very high degree of certainty that it would work out – this is where I should stay. This is about as high a salary as I can hope for in my field, and combined with the low cost of living in the area, I feel like I would be crazy to not stick this job out for as long as it lasts.

The Economics of Settling

So maybe I’m settling. I could do something different; I could live a very different life. But right now, FIRE makes more sense to me than anything else. I may not do it forever, but right now it is the blueprint for my life. Building my financial house allows me to keep the panic at bay. Decreasing my dependency on the system – grocery store, utilities, regular paycheques – helps keep me sane.

When financial independence is your goal, then looking at your work situation through a strictly economic lens makes sense. And that means picking the job and the location that gives you the biggest differential between salary and living expenses. That last point is key – you will get further ahead making $10,000 a year less if the smaller paycheque is earned in a place where your net housing/transportation/etc costs are $15,000 less.

Hating almost everything about my job is what drives me to pursue financial independence. I’m not sure if I would do this if I liked my job. That being said, I’m actually pretty happy with my standard of living. I like my house, my car, the food I eat, and the things I do. I honestly don’t think that living in a bigger house, driving a nicer vehicle, or eating more meals in restaurants would make me significantly happier.

Due to circumstance (a big part of this is my simply being willing to live in the middle of nowhere), I am unlikely to make a higher salary than I am making right now without making some serious changes. And when I say “willing to live here,” I should stress that if I was financially independent and could set up camp anywhere, the little pocket of Canada I call home would be pretty high on my list.

Sometimes my life here feels like a holding pattern. Like I’m waiting for some grand opportunity or inspiration to fall from the heavens and hit me in the head. When that happens, I can quit my job, abandon my life here, and head off into the world to do something new. The rational, pessimistic side of my brain knows this is unlikely. We reap what we sow, and this is the life I have designed for myself. Which is fine, because when I am gathering and splitting firewood, or harvesting vegetables from the garden, or foraging out in the woods, I often think, YES! This is exactly what I’m supposed to be doing. This is good. And I just have to leave this idyllic life for a big chunk of most days for a while longer, and one day I’ll be free.

FIRE Rocks

What I love about early retirement extreme is that even working toward it for a short period of time is beneficial. You can build up an emergency fund or jump-start your retirement savings in a few months when you’re saving 50-75% of your paycheque.

Living below your means is good insurance. In effect, I’m building my own pension – the longer I keep doing what I’m doing, the higher my net worth and the greater my passive income. Like a pension, I only get what I put in. In this case, there is no guarantee I’ll have enough to live off of if and when my current employment comes to an end. But the more I have, the less desperate I’ll be to take the first new job that comes around, and the more flexibility I’ll have to go back to school or consider positions that pay less but that I might enjoy more.

I couldn’t justify sticking it out for salary if everything I earned went out the door to pay expenses and buy shit that I really don’t need. (I’m very pointedly not counting things that contribute to self-sufficiency as “shit I don’t need.” For example, my honey bees). Money has to buy me an awful lot of happiness to make up for the unpleasantness that goes into making it.

Money is important no matter what anyone says. But I don’t think of money is something to be used to buy stuff. I think of it as a tool we use to buy safety, security, and eventually freedom. And that, for me, is the essence of FIRE.

Summary: At Peace with Inertia

Maybe as millennials, we are just a bit spoiled. I know I am. And I also know that spending 35-40 hours a week at a job where I make a good deal more than the average worker is hardly the worst thing that has ever happened to a person.

Besides, the majority of people hate their jobs. This is a normal thing, right? After all, if work was fun, no one would need to pay us to do it.

So how much do you have to hate it to want to build your life on the foundations of early retirement extreme? Is it worth it?

I don’t know, to be honest. I didn’t really expect to come to any great conclusions with this post alone. It’s just my explanation for what and why I’m doing what I’m doing at this point in time. I hope it’s of interest to someone out there, and I always love to hear others’ stories if anyone’s up for posting in the comments.

Today I went to work and it sucked. Then I came home and went outside to work in the garden before coming in to do some cooking and baking. And all of that was good. Tomorrow I’ll head out in the backcountry to do some foraging. And after that, only time will tell. But for now, this FIRE stays lit.



Gardening for Food: Back to Basics and 2018 Review

Although there are still a few patches of snow on the ground, work on the garden started weeks ago. My house has seedlings crowded by the windows. The outdoor beds have had their winter damage repaired and are being weeded. A few pea pods have been planted outside as an early spring experiment, and the first round of kale and spinach seedlings are already up and growing in the greenhouse. They will provide the first homegrown greens of the year, and then be replaced with the eggplants, tomatoes, and bell peppers that will eventually outgrow their indoor container homes.

The vegetable garden is a key part of my life here. My goal is to produce more and more of my own food every year. Now, while the season is still young and full of promise, is the perfect time to take stock of the previous year and make sure that this one is even better. This is an economic exercise, since FIRE is the overarching goal. But let me also ask you to keep all the intangible benefits of the vegetable garden in mind as well: increasing food security, reducing environmental impact, and getting the healthiest food you can eat.

I am re-reading an excellent book that I came across last year: Gardening when it Counts: Growing Food in Hard Times by Steve Solomon. The majority of gardening books I’ve read approach gardening as a hobby, which is fine – I’ve gleaned something valuable from almost all of them. At the end of the day however, there is a large gap between viewing this is a pastime with some sort of budget vs. an activity that eventually saves money and contributes to financial freedom.

Solomon’s book takes the view that the vegetable garden exists to provide the gardener with a harvest that takes the place of grocery items, be it by choice or necessity. I strongly recommend that anyone who is approaching gardening with a FIRE mindset read this book. There is a boatload of both practical advice and technical detail. Even if you don’t end up using everything in the book, there are still a ton of little nuggets of wisdom and ideas that will make your life easier and your garden better. For example, knowing which seeds are easy and practical to save, and which are better purchased is critical knowledge for a successful cost-effective garden.

Lessons Learned

The methods in this book are best suited for folks with fairly large plots of land for wide plant spacing (which allow for bigger healthier plants and a lot less watering) and large compost piles. I have the space, but still find myself falling back on a more intensive style of raised bed gardening to get around my clay-heavy soil. At least now I have an explanation for why some widely-acclaimed methods did not work for me.

Last fall, I set up two new raised beds using the lasagna method. This basically involves filling the bed with thin layers of alternating organic material (I used horse manure, grass trimmings, and autumn leaves over a cardboard base layer), which ideally results in a rich planting bed the following spring. Unfortunately, mine hasn’t really broken down much at all at this point. I did find some earthworms, which can only be a good start.

The explanation? Lasagna gardening is at its core just sheet mulching without an existing soil base. If you live somewhere where it freezes over winter, decomposition grinds to a halt. So in retrospect, building a lasagna bed in autumn (as recommended almost everywhere) and expecting to find a nice loamy soil ready to go in early spring was probably not realistic. There are several things I could have done better: built the bed earlier in the summer, added in some agricultural lime, added a thin layer of poultry manure to decrease the carbon/nitrogen ratio, and dug the layers into a small amount of decent soil. As those things weren’t done, at this point I need to be aware that it may be a couple more months before those beds have adequate nutrition available for growing vegetables.

My compost pile is also not as decomposed as I would have hoped. Making good compost is not as simple as many sources would have you believe. The quality of the final product varies considerably based on both starting materials and process. My simple continuous pile (which contains an excess of yard waste) is a small step above what Solomon calls “low quality compost,” since at least now I know to leave tree bark, rotten wood and conifer needles out. I should have a bit of finished material for this year, at least.

And if you’re truly starting from scratch? Solomon goes through the basic tools that you need (a shovel, a rake, a hoe, and a file), how to buy them, and how to use them. My life was made considerably easier last spring when I learned that shovels could and should be sharpened!

2018 Expenses and Production

I felt like last summer was my first as a real gardener. I’d managed to grow tomatoes, lettuce, and a few herbs in containers on balconies previously, but now I had hit the jackpot. My very own land to prepare and plant. My garden last summer wasn’t huge, but I think my first year went pretty well. Seeing as this is an economic exercise, let’s start with the numbers. First up: expenses.

  • Seeds: $17
  • Seed potatoes and onion sets: $12
  • Two strawberry plants: $9
  • Soil (by far the biggest expense. I topped up the raised beds in the greenhouse and filled containers with Promix, and also put some in my first new 4 x 7′ raised bed, which I extended with rotted manure and less expensive bulk soil): $101
  • Ant traps (ants were taking over the greenhouse at one point): $6
  • Five 7 gallon fabric containers for eggplants and indeterminate tomatoes: $22
  • Assorted Jiffy pots for seed starting (I usually use cardboard egg containers, but the pellets were convenient for delicate roots and the larger size peat pots for starting pumpkin and squash): $8
  • Grand total = $175

I also didn’t start from scratch. Freebies I received with my house included a simple greenhouse ( 8 x 10 feet, with two 2′ x 7′ raised beds), scrap lumber that I used to build additional raised beds, and a few miscellaneous containers and garden tools left by the previous home owners. I also scored a couple hundred liters of manure from nearby livestock owners. Finally, I started the year with a lot of free seeds. Some I purchased in previous years, some have been collected over the years from various seed sharing events across Canada, and some I saved myself from my trusty old container gardens. I also picked up a dozen 1 gallon containers (perfect for basil, mini bell peppers, and cherry tomatoes!) left by a recycling bin, to add to my original collection.

Outputs

I did consider weighing all my harvested food, and then crunching the numbers to determine the exact value of my harvest…but it didn’t happen, so instead here are some back-of-napkin rough calculations. I strove to keep my estimates on the conservative side.

  • Saved an average $10/week in groceries over the garden’s most productive 16 weeks from June through September: $160
  • Saved $5/week over an additional 12 weeks (May – just leafy greens, and October/November, when I was still enjoying my potatoes and winter squash while munching on the fall harvest of spinach and kale): $60
  • Herbs for the year, dried and frozen (basil, oregano, parsley, dill, mint, green onions, and chives): $20
  • Rhubarb, berries, and kale that were still in the freezer at the end of November, as well as the tomatoes and bell peppers put away in salsa, chili, and pasta sauce: $20
  • Grand Total = $260

I was also pretty generous about giving stuff away – increasing one’s social capital is always a smart idea, and good karma is priceless, right?

What Should I Grow?

When I think about which vegetables I want to grow, I try to choose crops that are expensive to buy, high-yielding and nutritious, easy to grow, require minimal resources, and store well. The following table gives each crop a score out of 5 in each of those categories. The total score is simply the sum multiplied by 4 to get a score out of 100. Further explanations of how the categories are scored are found below the table.

Vegetable Selection

VegetablePurchase PriceNutritional ValueLikelihood of SuccessResource Intensiveness (Time to harvest, space, feed, care)Ease of StorageTotal Score /100
Raspberry5455492
Basil, oregano, and other herbs5355488
Strawberry5454488
Garlic534*4584
Leaf lettuce, kale, collards, and spinach5455284
Peas3554380
Zucchini4553380
Beans2554376
Pumpkins and Winter Squash3542576
Potatoes1552572
Onions1354572
Bell Peppers5432368
Carrots243*3568
Tomatoes4432364
Broccoli244*3364
Cucumber3333360
Corn153*2356
Celery332*3356
Eggplant3331352

Ideal Crops are:

Expensive to buy. How much would it cost to buy this item at the grocery store? This varies depending on store, location, and season. It is a rough estimate based on my experience, and considers “cost per kg” more than “cost per serving.”

Nutritious. Considers yield and caloric density, as well as vitamins and minerals. Everything on the table is good for you. Taking a survival gardening approach, I generally gave calorie-dense, high-yield vegetables that I can build a meal around the highest scores. Crops that boast a high dose of essential minerals and/or vitamins were next, while lower-yield stuff scored a 3.

Have a high likelihood of success. This metric is based mostly on my personal experience if it is something I’ve already attempted to grow. Scores with an asterisk are veggies that I haven’t grown myself, and are based entirely on what I’ve read or heard from other local gardeners. For context, I am in USDA hardiness Zone 3 or 4, depending who you ask.

Minimally resource intensive. Crops that need little space, can survive a drought, don’t require a lot of extra soil amendments (compost/fertilizer), and have a short time to harvest are best for economy of time and money. Bonus point for perennials (raspberries, strawberries).

Good for storage. Ability to keep well for months is key if we’re getting serious about food security and making a difference in annual grocery spending. 5 can be stored with very little effort and no freezer, 4 does well in a freezer, and 3 requires a bit more effort to process before freezing, or needs to be canned. Greens with a long growing season get a 2 since you can in effect store them in the ground for use into the fall. I found that the vast majority of my crops can be stored overwinter one way or another.

Also note that the vegetable has to be something I’m actually going to eat. Not much point in growing kale if you’re not going to eat it. Only veggies I like made it to the table; apologies if I missed someone’s favorite.

Grow Potatoes. Lots of Potatoes.

A word on potatoes. I love potatoes, but almost didn’t grow them because they are cheap to buy and require a fair amount of space and compost to grow (see table). On the other hand, they are very easy to grow and store well for months after harvest. The real benefits? Potatoes are a surprisingly nutritious source of vitamins and minerals, and perhaps most importantly in a survival garden, they are a calorie-rich, high-yield crop. We’re talking more than 10,000 kg per hectare, according to our friend Steve Solomon.

Potatoes are apparently very easy to grow in containers. I balked at buying enough containers and soil to grow the 15 plants I wanted, so instead I dug a 16 foot row (18″ deep and 12″ wide) and mixed the dug out clay with a large amount of composted leaves and manure. I hilled up the potatoes with grass clippings as they grew, and after harvesting a bumper crop, I left all the organic material in place over the winter.

Fast forward to a couple weeks ago, when the snow over the bed finally melted. I pulled back some of the decomposing grass, and underneath was rich, dark soil with very few weeds, and all the clay clumps nicely broken up. My plan is to use this bed for something else this year (pumpkins and winter squash most likely), since growing potatoes in the same place two years in a row allows yield-lowering disease and pests to build up in the soil. As soon as the ground dries a bit more, I’ll dig out a new potato patch for this year somewhere else on the property. And repeat the whole process next year. Table be damned. In my mind, potatoes are an ideal crop – high-yielding, easy, nutritious, and a tool in the crusade to turn my clay lawn into productive garden.

Final Thoughts

Jacob Lund Fisker (who literally wrote the book on Early Retirement Extreme) touched on growing, storing, and preparing food, but there are quite a few FIRE success stories that make no mention of a vegetable garden at all. Gardening is very important to me and my plan. However, it may only be a good cost-saving measure for those who enjoy it. Perhaps I’m just not particularly skilled or efficient with my time, but I spend a huge number of hours working in my garden. Mostly digging – breaking up clay, digging in compost, and of course digging out weeds and the ever-encroaching grass. Also starting seeds at this time of year. Transplanting. Watering. If you did the math on my “profit” of $90 ($265 – $175), well, I probably would have been better off working some sort of temporary job for a weekend.

On the other hand, my efforts are cumulative. Each year my growing space gets bigger. And a big reason my garden work takes so long is that I love just being there, puttering around and looking at my plants. It makes me happy. As anyone who hates their job with a passion knows, it can be a challenge to find a truly immersing escape. How wonderful is it that this thing that I love also produces one of the basic requirements for life?

If you want to give vegetable gardening a go, my advice would be to just pick a few things you like to eat, add some compost to your soil, and start growing. Along the way, learn everything you can from books and blogs and videos. Perhaps most importantly, make friends with nearby gardeners to find out what works in your area. At the very least, you’ll have found an inexpensive hobby compatible with a ERE-friendly budget.

How does producing your own food play into your FIRE plan? Do you think gardening is worth the time and effort?

Trappings of Rural Life

My FIRE strategy is predicated on rural living, which means cheap housing on a parcel of productive land. Moving out of the city was an easy decision for me. Crowds, traffic, and expensive housing are not things that hold a lot of appeal. Similarly, going back to the suburbs of my childhood wasn’t really a consideration either, since the additional expenses of a house and yard coupled with a long commute hardly seems worth having a little bit of outdoor space of my own. A truly rural community, on the other hand, offers everything I want. I am very grateful for the quiet and privacy of my lovely little plot of land that I enjoy for a very reasonable price tag. I have learned, however, that there is a lot of work and expense that goes into maintaining a rural property. So I have to ask – is living rural really that different from being a home-owner in the suburbs? Is a rural property just a money pit, or can it be maintained on an early retirement extreme budget?

During my years as a student, I managed to maintain a pretty minimalist lifestyle in various cities around Canada. I had the romantic notion that my low-impact apartment life would transfer over very naturally into a similarly non-materialistic life on a cozy little homestead. Turns out living in a house in the country actually does require more stuff than living in an apartment in the city. It started innocently enough when I first rented a house in my new tiny town. A snow shovel here, a longer extension cord there. No biggie.

Then I finally bought a place of my own and suddenly found myself with nearly two acres of land, a rather long driveway, far too much lawn, and logs that definitely were not going to fit in my wood stove as is. I realized very quickly that I was missing most of the toys and tools that the majority of my neighbours had. Snow blowers. Riding mowers. Power tools. Tractors. Trucks. And here I thought I had managed to avoid the suburbs with its ostentatious cycle of buying large lawn accessories and paying them off. Had I made a mistake? Not really. I had to spend some money, but I managed to avoid going overboard. Here’s how I’ve handled some of the main regular tasks on my property so far:

Keeping the House Warm

I am sold on the whole heating with wood thing. The wood stove takes a significant chunk out of my winter electric bill, creates a warm and pleasant living space, and makes my lifestyle a little more self-sufficient. Additionally, with little more than a good annual cleaning, the wood stove will likely last a lifetime without requiring replacement or major repair.

I started last winter with a full woodshed courtesy of the previous homeowners, but this year I had to source my own supply. There are three big ticket items that would have made this a much easier proposition: a truck, a chainsaw, and a log-splitter. My other option was to buy firewood for $250 CAD / cord, split and delivered. (I need about a cord and a half to get through winter.)

I opted for none of the above. I still had some wood left over from last year as a start and went to work procuring the rest. It took a good part of my summer and fall, but I managed to fill my woodshed for next to nothing. Here’s how that looked:

  • Firewood from own property. This included some that was already split and stacked, as well as fresh deadfall and blowdown that I chopped up by hand. ~25% of this year’s total.
  • Scored a large amount from a friend’s yard clean-up. This was a one-off event which I was very grateful for. I even got some birch and balsam fir. ~50% of this year’s total.
  • Coupling plant-foraging hikes with wood-gathering excursions. There is a lot of deadfull and cut-down along non-motorized recreation trails. I’m not sure if grabbing this is legal so I tried to stay a bit surreptitious. Everything I took was at least a year old and it didn’t look like anyone was coming back for it anyway. ~25% of this year’s total, and by far the most labour-intensive. I think I’d have a pretty hard time getting my whole supply this way.

All firewood brought back to my property was transported in my little car. Fuel costs were quite minimal since I was able to combine my wood gathering activities with outings I’d be doing anyway. No truck needed.

There were definitely times when I could have used a log-splitter. Double that on the chainsaw (though I admit I find the thought of actually using one intimidating). Fortunately I didn’t have too many big logs that required sawing this year. Sawing by hand the few that I did have was time consuming but doable.

I spent even more time splitting wood. The good news is that if this skinny little city girl can split logs, odds are you can too. A splitting awl is the most popular method but a sledge hammer and metal wedge requires less skill. I managed to score the latter tools second-hand and I’m very happy with the combination.

Next year I may have to buy a cord, but expect I’ll be able to get at least half a cord from my own property and foraging elsewhere again. I don’t intend to buy a truck, log-splitter, or chainsaw anytime in the foreseeable future.

Snow Clearing

Gone are the easy days of apartment-living where snow removal was someone else’s problem. Now I have a driveway and a big one at that. I think you know where I’m going with this one – that shovel I bought back in the rental house is getting a bit more use now. It’s good exercise. And if enough people around you have tractors and plows, someone may be willing to help you out. I’m very lucky to have a neighbour down the road who’s plowed me out after a couple of major storms both this year and last. Homemade baking is always good way to say thank you.

So no snow-blower purchased this year, and I have no intention of getting one. During major storms, my road is often not plowed for a couple of days, so I’m not getting out even when my driveway is clear. That’s enough time to shovel it myself if I have to.

Keeping the Grass from Taking Over

I may have a rural property, but there is still almost an acre of good old lawn. The more rural you are, the further you are from the societal pressures of having a perfectly manicured sea of green around your house. Phew! The ridiculousness of North America’s obsession with lawns is beyond the scope of this post, but suffice to say the last thing I want to put time and money into an environmentally-deleterious status symbol.

That being said, letting the whole yard go back to nature isn’t ideal for a couple of reasons. First, I want to eventually turn a good chunk of the present lawn into a vegetable garden. The only thing harder than digging up clay soil with short grass is trying to dig up clay soil with waist-high grass. Building raised beds on top of tall grass doesn’t work so well either. Secondly, wildfire is a very real risk in summer, and having a ring of short, watered grass around the house is a wise firebreak.

The only thing harder than digging up clay soil with short grass is trying to dig up clay soil with waist-high grass. Building raised beds on top of tall grass doesn’t work so well either. Secondly, wildfire is a very real risk in summer, and having a ring of short, watered grass around the house is a wise firebreak.

So I knew I’d have to have some lawn, but first off I needed to decrease the size of it. I’m letting a fair amount of previously-manicured lawn grow wild and that seemed to work fine last summer. I’m also focusing my efforts on turning as much lawn as I can into garden. What could be more important than producing my own food? So last summer when I wasn’t splitting firewood, I was digging up lawn to make room for potatoes and pumpkins. I don’t feel like I’ve made much of a dent in the area that requires mowing so far, but it’s a start. Every year I will have a little more land dedicated to growing vegetables.

And the remaining ~0.75 acres that I still have to mow? I thought about livestock or taking a chance on a second-hand mower. I’d love to be able to say that I got a flock of sheep, or managed to barter my way into free lawn care, but I admit I went the conventional route on this one. I spent $500 on new self-propelled push mower, and I don’t regret it. The self-propulsion is a luxury that I am very thankful for in the heat of summer. (Also l’d much rather save my energy for expanding and tending the garden!)

Conclusions

So there you have it. This is what I learned:

  1. Do stuff by hand. Exercise keeps you healthy, and you can also save money on a gym membership, as well as on labour-saving tools. If physical work outdoors is not something you enjoy, this style of early retirement extreme is probably not for you.
  2. Get creative – scavenging and using social capital are always options, as are any other ideas you might come up with to avoid buying something.
  3. When you do have to make a purchase, buy as low down on the food chain as you can (e.g. car over truck, push mower over riding mower).

When I look around, I sometimes feel that there is a very fine line between suburban and rural lifestyles. Having a larger property can become a gateway for lifestyle inflation and an excuse to buy bigger versions of all the home and lawn toys found in the ‘burbs. If both FIRE and living rural is what you want, you have to find your own path to having a functional and economical homesteading set-up, and not just another suburban house and yard that ends up costing reams of money.

Rural or suburban, homeownership is expensive. There is a great argument for renting. Your house costs you money each month in the form of insurance, property taxes, routine maintenance, and larger repairs and upgrades. Then again, where I live, all of the above plus a monthly mortgage payment (assuming you put 20% down) is less than renting an equivalent property (and both options are cheap). If you can carve out a livelihood in a place like this – and want to stay once you achieve financial independence – buying can be justified.

What about all the time spent actually doing the maintenance? By the conventional argument of specialization (i.e. get a lot of education and make a lot of money doing the one thing you’ve been trained to do), it would make a lot more sense for me to work more hours and use that money to pay someone else a lower hourly rate to do the other stuff for me. But oddly enough, I actually like looking after my property. And I definitely find it more rewarding than the hours I spend at my job. Actually, most days I’d rather clean my bathroom than go to work. You will have to put your own dollar value on time not spent at your day job vs time not spent working on house and property to determine if it’s better to consider trading more time for more money. (And if your answer is “Not being at work is always better!” then you are probably on the right track with early retirement extreme.)

I believe that FIRE is about finding the balance between using brains, muscle, and social capital to avoid unnecessary spending, while buying what you need to maintain a reasonable quality of life. My first year and a half on my home sweet home has been good and I have no regrets so far.

What do you need to keep your property running? Are there any expensive tools you absolutely have to have? What are you able to get by without? Or are you taking a pass on homeownership in order to avoid these sort of questions?

Pay Down the Mortgage or Invest? Looking through the Lens of Asset Allocation

Introduction

As you might have seen in my first post, my paper assets (cash, stocks, and bonds) now exceed my remaining mortgage debt. Pretty neat to think that I could be debt-free and own my house outright today if I so desired. Instead, I’ve been making prepayments and continuing to invest at the same time, and basing the amount of money directed at each activity on my asset allocation plan. Am I on the right track? If home ownership is part of your FIRE strategy, how fast should you pay off the mortgage?

My Current Situation

  • House purchased for $172,500 in Autumn 2017 with 20% down.
  • Took out a 25-year mortgage of $138,000 at 2.98% 5-year fixed.
  • Mortgage payment: $325, twice a month.
  • Allowed to make prepayments totaling up to 20% of starting principle annually, at any time during the mortgage year.
  • I’ve been making prepayments of between $1000-$1500 each month.
  • As of February 15, 2019, there is $112,708 remaining on the mortgage.

Why I Still Want a Mortgage

Aside from the fact that I’d have to pay a penalty to terminate my mortgage prematurely, there are three big reasons why I want to hold on to it: liquidity, diversification. and growth. Let’s dig into those a little further.

Liquidity

In most cases, buying and selling real estate is costly and time-consuming. There was a span of a couple of months between when I first saw my property and the day I moved in, and mine was a very simple transaction! There’s never a guarantee that I’d be able to sell my house that quickly at an acceptable price in the future. There’s also no way to liquidate a fraction of my house. On the other hand, any proportion of my paper assets can be turned into cash at the click of a mouse.

As an additional bonus, part of the growth from my portfolio comes in the form of dividends, interest, and distributions. Right now I re-invest everything my portfolio kicks off, but if needed the portfolio can improve my cash flow without my actually selling assets. (Although this doesn’t apply to me, you could get some cash flow from your house in the form of roommates or a home business).

I should mention that you can get money back out of your home using a reverse mortgage. I considered the Smith Maneuver: selling investments to pay off the mortgage, than borrowing against the house to buy back the investments. The rationale for this is that borrowing money to invest is a tax deduction in Canada, while interest paid on a mortgage on your primary residence is not. In my case, the difference between my mortgage interest rate and the rate I’d have to pay to borrow the money was larger than the tax break I’d get.

Diversification

If I paid off my house today, my portfolio might look something like this:

  • Personal residence: $175,000
  • Cash: $2000
  • Stocks: $3000
  • Bonds: $1000
  • Having almost 97% of your entire net worth in one asset is risky – doesn’t matter whether we’re talking about one property, one business, one stock, or even a group of stocks from a single country or sector. Whether it comes down to a collapse of the local economy in my one-industry town, or a broader real estate decline in Canada, having the vast majority of my net worth in one single property in one single place is more risk than I’m comfortable with.

Growth

Growth is the big one. This is the major determinant for how long it will take someone to attain financial independence. Putting nothing on my mortgage but the regular payments, and piling every last available dollar into investments is arguably the fastest path to the highest net worth.

Consider asset appreciation. In the long run, the stock market as a whole outperforms the broad real estate market. In the last 30 years, average annual growth in Canadian real estate prices was around 4.7% while the TSX offered annual returns of 8.3%. Might seem hard to believe given the crazy appreciation of Vancouver and Toronto home prices, but I’ll place my faith in historical averages over bubbles any day.

Bonus: a mortgage offers potential additional growth through leverage. Let’s say the $200,000 property you bought last year has increased 5% in value, and you’ve only put $10,000 on it so far. Congratulations, you just made $10,000 (if you sell the property and pay off the loan), giving you a 100% return on investment. Someone with $100,000 in equity can only claim a 10% ROI, and that drops to 5% for the owner with no mortgage. Debt can be a powerful tool for building wealth, and a mortgage is pretty much the best interest rate you’ll ever get. Caution – leverage in any form is a double-edged sword and losses are magnified to the same extent as profits.

Ultimately, keeping the mortgage provides the best protection from inflation. First, there’s all that extra growth being generated from the stock portfolio that you’re building instead of making extra mortgage payments. Secondly, there’s the fact that the principle component of your mortgage is fixed in today’s dollars, while we expect the property to appreciate at at least the rate of inflation. (Then again, it might not. Real estate and stock markets crash. But again, we’re talking averages over long time-frames here.) Think of this as a gift to your future self – ten years from now when a dollar will buy you less food, fuel, toys, etc. than it does today, that dollar will still buy you the same amount of equity in your home as the day you moved in. And should the inflation rate exceed your mortgage’s interest rate, you’d actually be making money just by having a loan.

Why I Make Prepayments

If having a mortgage is so great, why do I make prepayments at all? Well, there’s the obvious argument that prepayments reduce the total interest that I’ll pay over the life of my mortgage. The amount of interest I am paying each month is getting smaller a lot faster than it would be with regular payments alone. My books therefore look better – more money going toward assets and less toward expenses every month. But those of us doing early retirement extreme shouldn’t care about freeing up cash or making our statements look better. In the building stage, the work is just that – maximizing net worth to create passive income for the future.

I will warn you that this side of the argument is coming more from a place of emotion than reason. Paying off the mortgage and eliminating debt feels good. I like knowing that I’m getting closer to owning something as big and tangible as my house outright. Maybe I have been a bit indoctrinated by the stereotypical Canadian dream, but I like having my own property and owing as little on it as possible. I feel very fortunate to have found a place close to work that I love living in now, and would be happy to stay in once the 9-to-5 is ancient history. If I’m going to spend money on anything, my little homestead that offers shelter, security, and an ever-growing portion of my food supply is going to be it.

And you know what else? It’s an easy way to build wealth. Paying down the mortgage requires almost no effort at all compared to the trepidation and decision-making that comes with picking stocks. Hell, I still find purchasing a low-cost ETF in line with my asset allocation to be more stressful than throwing cash at my mortgage. The interest savings on my mortgage are a guaranteed rate of return, and that 2.98% is better than I can get from a high interest savings account. (There are now some 3-year GICs with better rates, so I will likely start plunking cash earmarked for prepayments in there – arguably a similar loss of liquidity as paying down the mortgage but with a smidgen more growth).

Houses and stocks are both susceptible to market downturns and subsequent decreases in value. That market value really only matters when you go to sell. Here’s the difference. If the resale value of my house plummets by 20% overnight, of course I’m not going to be thrilled regardless of my debt-to-equity on it. However, unlike any of my paper investments, my house still provides me with something of very high personal value regardless of its market value: a safe and comfortable place to live.

The Compromise: Asset Allocation

Taking the above into account, I settled on a compromise and simply added home equity into my asset allocation model. Just as I have target proportions of Canadian, US, and international equities in my stock portfolio, I set my home equity at a maximum of 33% of my total net worth. Is this a somewhat arbitrary number? Definitely. But that’s OK – the beauty of asset allocation is that as long as the proportions are fixed, more cash will flow into equities that are undervalued. Once my house is paid off, that magic number of 33% will decline as I continue to build net worth outside of my residence, which is why I call it a maximum instead of a target.

Before I wrote this post, I googled “asset allocation invest vs. mortgage” to see if anyone else had hit upon a similar strategy. Instead, I found discussion centered around what a mortgage actually is in the context of a personal portfolio. Most notable is the idea that holding a mortgage negates the need to hold any bonds or fixed income at all. This is best detailed in a recent article in the Globe and Mail by Benjamin Felix. In short, he explains that taking out and holding a mortgage is the equivalent of issuing, or selling, a debt instrument. Following this train of thought, holding a mortgage is the opposite of, and therefore cancels out, buying debt instruments such as bonds. In terms of cash flow, the interest earned from your bond holdings cancels out the interest you pay on the equivalent portion of your mortgage.

Huh. Makes sense. I keep 15% of my stock portfolio in bonds. Would it be logical to exit my bond position entirely, and apply these funds to my mortgage? If buying bonds in my portfolio is really equivalent to holding a mortgage (selling a debt instrument) then the answer would have to be yes. But when I thought about it, my conclusion is that they’re really not.

The logic holds when you look at an isolated transaction – sell your bonds and use the cash to make a mortgage prepayment. But I wanted to work out how my whole financial picture would change over time as my portfolio increases and my mortgage decreases. I tried to plug in some hypothetical numbers that would allow me to keep my asset allocation constant while plunking money into stocks and onto my mortgage, and ignoring bonds completely. The results were non-nonsensical. Adding $10,000 to my net worth and distributing it between 85% stocks and 15% mortgage prepayments increased my stock holdings, and therefore the weighting of stocks…but nothing else. Suddenly the reason was clear. The big problem with equivocating bonds and mortgages is that the mortgage lives on the opposite side of the balance sheet. Bonds are assets, but the mortgage is a liability.

This realization changed my thinking. Eliminating my mortgage won’t actually change the asset side of my personal balance sheet one bit – the entire value of my home is still sitting there – but it would decrease my liabilities, and eliminate leverage for better or worse. The bonds have their own job. They exist to cushion the asset side of the balance sheet against heavy losses during the next bear market. My home may or may not contribute to that end as well, but the presence or absence of a mortgage is inconsequential.

If a mortgage doesn’t change my asset allocation, then I also need to change the question. I started by asking “How much home equity should I have?” but the question should be “How can I best distribute my pool of resources among my assets to strike a balance between returns and safety?”

My perspective has changed, but my process really hasn’t. I’m still making prepayments – and limiting them to keep my home equity at a maximum of 33% of my total resources. My asset allocation model tells me where my incoming cash goes. It is a guideline to ensure that I continue to invest and build a diverse portfolio instead of over-doing the easy and feel-good mortgage prepayments.

In the end, my answer to the whole pay-off-the-mortgage or invest debate is a resounding “both.” How about you? What is your strategy – hold that mortgage for as long as possible or pay it down? Would you consider paying down your mortgage in lieu of having bonds in your portfolio?

The Beginning (and my start-of-2019 finances)

Welcome to my small contribution to the Early Retirement Extreme / FIRE (Financial Independence, Retire Early) movement. If you’ve found my blog, there’s a good chance you’re familiar the concept. In case you’re not, the idea is simple enough. Instead of working for forty years while dutifully saving 10-15% of your income and retiring around age 65, you save 50 or 80% (or more!) and retire a few decades earlier.

Readers will find me more extreme than some and less extreme than others. I’m hoping to offer a unique perspective as someone going it alone in the wilds of rural Canada, braving long winters and enjoying cheap housing far from any urban centre. My posts will focus on personal finance, rural living, and reducing the grocery bill through gardening and foraging.

A little background…

After a fairly boring middle-class upbringing in the suburbs, I followed the recommended path of getting lots of post-secondary education so that I could have a career, make lots of money, and otherwise become a successful contributing member of society. Turns out I don’t much care for the whole career thing after all, and spending loads of money on stuff I don’t need is not my idea of a fulfilling existence.

Enter the ERE / FIRE movement. Finally, a way out! By the time I learned that there was a name for it, I was already well on my way. I paid off my $20,000 in student loans within six months of graduation and then went to work building up my cash reserves and the small stock portfolio that I had started while still in school.

…and fast-forward to today.

I managed to parlay all that education into a well-paying job in a little town with a very reasonable cost of living. Because the local population is small, my professional community even smaller, and my role putting me somewhat in the public eye, the details of said job will have to remain confidential. The important point here is that I really, really don’t want to do it any longer than I have to. I know this begs the question of whether I should just try and find a job I like better. It’s a reasonable debate in the ERE world and one I’ll certainly be addressing. Either way, I’m looking very forward to a future where Sunday evenings aren’t soured by an insidious sense of dread.

I bought a decent house and nearly two acres of land. Possibly crazy to buy property when my employment situation is tenuous at best, but what can I say? It was cheap and I love both the place and the surrounding crown land where I forage and explore. Whether buying or renting is optimal for financial independence, and whether one should use a mortgage or pay cash are definitely on the list for future posts.

So how is the wealth-building going? Well, here is my financial position as of January 23, 2019. For context, I am dangerously close to my 30th birthday and I joined the full-time workforce a little less than four years ago.

Net worth (all values in Canadian dollars)

Assets

Cash (TFSA and unregistered high interest savings accounts): $31,559

Canadian stocks (sheltered in TFSA): $22,105

US stocks (unregistered trading account): $5,808

Personal residence (conservatively-estimated market value): $175,000

Exchange-traded funds (RRSP): $60,570

Total: $295,042

Liabilities

Mortgage: $114,260

Total: $114,260

Net worth = Assets minus Liabilities = $180,782

Notes:

I’m choosing not to count my car (which like all vehicles is rapidly depreciating in value), household goods, or personal effects as assets.

Assets also do not include wages already earned that I will receive next payday.

Similarly, liabilities do not include current balances on credit cards. (It goes without saying that balances are paid in full every month.)

2018 Income, Expenses, and Savings Rate

Active Income: $87,142. This is my after-tax income from the dreaded J-O-B, which makes all of this possible. I submit a T1213 form to reduce the income tax deducted from my paycheque, but still expect a small refund this spring.

Passive Income: $2513.05. This includes interest on cash accounts, dividends, and distributions. The majority ($2076.85) is sheltered in my TFSA and RRSP. $212.28 is interest from unregistered accounts and is taxed as earned income, and $223.92 is from the US portfolio and is taxed as foreign dividends.

Expenses: $33,828 (Actually $34,132, minus the $304 I got back from cash-back credit cards). Note that I count the interest component but not the principle of each mortgage payment as an expense.

2018 Savings Rate (from active income) = ($87,142 – $33,828) / $87,142 = 61.18%.

There it is. Those numbers raise some questions. Am I sitting on too much cash? Should I be aggressively paying off the mortgage or focusing on filling up the extra room in my TFSA? Should those US stocks be sitting in a registered account? Am I spending too much and where can I cut back? That’s what this blog is for – a place to work through questions like those, and maybe offer some guidance to others who are asking the same things.

At the same time, I want to hold myself accountable to the path I’m choosing. This blog will force me to justify all the little nuts and bolts of my FIRE escape, be it the asset allocation of my portfolio, my target net worth, or whether early retirement extreme is even what I should be doing with my life. I don’t have answers at this point, or even a concrete timeline for my liberation from my 9-to-5. Looks like there’s a lot to do.

Let’s get started.