-Written by Steph
Given the current uptick in readership of our blog, along with the overall increased interest in financial independence and early retirement (FIRE), it seems timely to do a post that thoroughly describes the exact system we use in our pursuit. We’ve fine-tuned it over the years, and have come up with a strategy that allows us to build wealth quickly on average incomes and with minimal ongoing effort. Here it is!
Our system consists of four pillars:
- Minimalist Philosophy
- Low Spending
- Intelligent Investing
- Increased Income
Those four things cover everything we’ve ever done, and continue to do, to reach early retirement. Let’s go into a little more detail about how each of them works.
This one is simple. We just don’t buy things! But it goes beyond that as well. Having minimal possessions means we can comfortably live in smaller, cheaper housing. Cooking is much faster and more efficient when you have few enough kitchen gadgets that you know exactly where everything is and never need to dig around looking for things. It’s even gotten easier to keep our place clean, because I don’t need to move things around much to vacuum, or dust a bunch of knickknacks.
Capsule wardrobes are also a great minimalist option that we’ve both been doing for years. When all your clothes match, fit, and are pieces you really like, you can get away with having a lot less of them. I’ve also found I’m less inclined to go out and buy new pieces, and when I do buy new things, I’m very particular about buying only things that go with several other pieces I already have.
We also take a very minimalist approach to books and video games, which are two categories a lot of people struggle with. We do this through a combination of using the library extensively, buying digital versions of things where possible, and selling physical copies of video games after we’ve played them. Reselling games also helps us keep our gaming costs extremely low – close to zero dollars – while letting us play all the latest games.
For further reading, The Space Efficiency Project gives a summary of the process we went though when downsizing and minimalizing our studio apartment.
This is the category where we really shine! We limit our spending to 30-40% of our income. That’s all spending – every penny of it. Saving 60%+ of our income is central to our early retirement strategy. We really don’t do anything too bizarre, like live in a van or eat tree bark. Because we post extensively about these topics already, I’ll just give a brief summary of the things we do in a few of the bigger categories, and include links to earlier posts.
We’ve been living in a housing co-op for a little over six years now. These are a great option in Vancouver, because they operate at cost (i.e. LOW RENT) and are extremely stable – you basically never need to worry about getting kicked out, unless you do something really bad or stop paying rent. Members need to contribute some volunteer time to keep the place functioning, but it’s quite minimal in a co-op of this size – we each contribute maybe three or four hours a month, and that’s well above the average here.
One factor that’s always been critical when we’ve looked for apartments has been proximity to work and amenities, because that allows us to easily live car-free. Neither of us even has a driver’s license, let alone any sort of non-human-propelled vehicle, so we’ve always been very careful to choose apartments that fit with this part of our lifestyle.
The nice thing about this category is that it’s very set-it-and-forget-it. Once you secure cheap housing, you can forget about it and just enjoy the increased monthly cashflow for the next several years.
This is an older post, but Housing in Vancouver chronicles some of the other low cost apartments I’ve had in Vancouver over the years, to show some of the options available outside of co-op housing – and there are many.
We’re not that good at keeping our costs low here – we average around $9,000/year on travel but we do get good value for our money, because that budget takes us all over the world! For reference, here’s what a year of travel looks like for us.
To briefly summarize our travel strategy:
- Go wherever you get a good price on flights
- Go to less-traveled destinatons, like Guatemala
- Rent apartments rather than hotels or hostels
- Look into other options than flying, like sleeper trains or coaches
- Cook your own food
- Negotiate prices (especially in Mexico and Asia)
- Go to non-touristy restaurants for better food and prices
- Take public transit rather than taxis
- Try to arrange day trips yourself rather than booking tours
- Figure out the logistics before you go – things like how to get into town from the airport are a lot easier to figure out when you’re not exhausted and groggy after a 13 hour flight
We’re not too stringent on any of them, though – for example, we book tours if we want to go to places that are difficult to reach on our own, and have been to many places where there’s no need to cook because the local food is extremely cheap. We only try to negotiate prices in places where that’s a culturally appropriate thing to do. And some places, the public transit is just way too confusing for us to bother with if we’re only there a few days.
We have so many posts about this already! But just to summarize, here are the main things we do:
- Cook 99%+ of our food at home, from scratch
- Shoot for zero waste, and generally hit around 1%
- Prepare our meals for the week on the weekend, and portion everything out so it’s convenient to grab
- Bring lunches to work every day
- Meal plan around cheap staples
- Shop at multiple stores
- Shop sales and utilize store rewards programs
- Eat strictly vegan (for ethics, not to save money, but still)
- Invite people for dinner at our place instead of restaurants
- Buy generic where possible, without sacrificing quality
- Shop with a cat stroller to increase our carrying capacity
As mentioned, we have MANY posts on groceries. Here are a few of them, for convenience:
The above categories – housing, travel, and food – constitute 80% of our spending, so everything else is somewhat trivial. We just follow the general principle of doing things ourselves (hair cutting, clothing repairs, fixing things), wearing things out completely before replacing them, and not buying things, and that keeps our other costs pretty low. Most of our hobbies are also very cheap – hiking, biking, D&D, video games, spending time with friends and family, and reading fill up most of our free time.
For video games specifically, Cel did a very detailed post on keeping costs low.
One thing you may have noticed if you’ve been reading our blog for awhile is that many categories that other people would have are strangely absent altogether. We don’t have categories for things like cars, kids, alcohol, makeup, data plans, and so on, because we have none of those things! Sometimes axing a category altogether can be much simpler than trying to cut back on it.
Our investment philosophy is very simple – we believe in passive, low-cost index investing, set up in a way that requires minimal effort and maintenance. We’ve been using a local robo-advisory service, WealthBar, since 2015 for convenience, and it’s been fantastic. The important thing to keep in mind with using any sort of advisory service is that you need to keep the costs down, or you eat away at your returns too much. I think a good rule of thumb is to keep your expenses under 1% if using an advisory service, and considerably less if going the DIY route.
A great resource for Canadian index investing is the Canadian Couch Potato blog, particularly if you decide to go the DIY route.
We’re pretty much done with this one at this point! When we first started our journey in 2012, our combined income was only about $38,000 because Cel was working at a grocery store and I had a crappy warehouse job. We now gross about $80,000 combined, which is the most we’re going to shoot for since we’ve got a pretty short time frame until retirement already.
It was a pretty straightforward process. Back in 2012, we both decided that we wanted to work our way up to decently paying office jobs, so we took two different paths to make that happen. Cel took a few courses to upgrade his Microsoft Office skills, and found an entry level typist job, which he was able to leverage into an administrative assistant job over time, then switch industries for increased pay. I took an entry level, part time, contract position in a large office to get relevant experience and references, which I was able to leverage into a full time position elsewhere, before switching industries for a better work environment and not having to wake up at 6:30 every day. At this point, we’ve both settled in for another five years of working before pulling the plug, and don’t anticipate any huge income increases in that time.
And That’s It!
That concludes our simple, four pillar early retirement strategy. Hopefully you’ve enjoyed this look into our approach, and feel free to leave a comment if there’s anything critical that you think I left out – I’m happy to edit and add whatever anyone might find useful!