047 - The Cult of Home Ownership Millennial Revolution

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0 - 97 Jonathan Mendonsa Hey guys welcome the show. For those of you that are finding this for the first time my name is Jonathan and my co-host name is Brad. Together we are a pharmacist CPA a combination out of Richmond Virginia. The show is dedicated to life optimization strategies both focusing on the personal finance aspect but also on general techniques that you can use to break the hamster wheel and reclaim your time in your life. It's a biweekly show on Mondays and Fridays Mondays we introduce a new topic or idea. Fridays is more or less a crowdsource show where we talk about our thoughts in the episode and bring in feedback from our community. Today we have a fantastic episode for you we're going to be speaking with Bryce and Christy from millennial revolution dot com. Now Christy is somewhat infamous for being Canada's youngest retiree. She used to live in one of the most expensive cities in Canada. But instead of drowning in debt she rejected homeownership. What resulted was a seven figure portfolio which has allowed her and her husband to retire at 31 and travel the world. Their story has been featured on CBC The Huffington Post CNBC BNN Business Insider and Yahoo Finance. To date it is the most shared story in CBC history and their viral video on CBC is on the money has garnered over 4.5 million views. So with that introduction. Welcome to the Choose the ChooseFI radio podcast. Arlight guys we're super excited to have you on the podcast today. I would love to just hop right into this country and talk a little bit about our main topic today which is going to be how to break the hamster wheel specifically in Canada I guess. But before we do that we'd love to hear a little bit about your backstory. Christy how did you discover fi and what really got you on this path.
backstory, debt, travel
98 - 237 Kristy - FIRECracker from Millennial Revolution So even though I rant about it overpriced housing in all this housing stuff initially. What's really funny is that I was actually trying to buy a house in Toronto because everybody was trying to do that. So we had actually built up a pretty massive downpayment of half a million dollars and that was actually towards a house. And what actually made me run away from housing got me really scared was that we went to a whole bunch of open houses and each one was actually worse than the last. And then there was this one house down the street from us that looked like it was condemned. And there's been times in which we walk by and there's just random holes in backyard and there's signs talking about UFOs in the windows and just all sorts of creepy stuff. And then I figured OK nobody's going to buy this house there's no way it's going to be on sale. There's no way. And then one day the it actually has a For Sale sign. And then when I looked it up online on MLS I found out that it's being. They're asking prices close to half a million dollars. And that was I was like has got to be a joke like nobody's going to buy this for half a million dollars. Lo and behold somebody actually bought it sold within a week and then just within two months they actually slapped some paint on it fixed it up real quick and then turned a profit by selling it for $800000. At that point I was like right away this housing market has completely gone crazy. And at the same time my work was getting super stressful and I had coworkers who were getting blood clots. I had coworkers who collapsed and almost died at their desk. And at that point I just decided I wanted out. There's no way I wanted to get into this housing market with this kind of turnover a couple just flipping houses and speculators all over the place. So what I did at that point was I looked around to see if there's any other way that I could get out of the horrible job and not buy a house. And that's when I discovered JL Collins that's when I discovered money mustache and this entire FI community which I credit to basically saving me from going down that housing being trapped on the rat race. And what happened was that now that we've been retired for for two years every time we come back home and talk to our friends. I can see Ghost Christie there like what could have happened to me if I had bought the house and if I had stayed in that horrible job because everybody is super stressed out all the time they're waking up in the middle of the night panicking and I know exactly what that was like. I used to be there and I'm just really grateful that the FI community and to have discovered this path and not be in that situation because it sucks.
housing, savings
237 - 264 Jonathan Mendonsa Yeah. In particular at that point you made about going back and seeing ghost Kristie. There's so many different like specific points in time that I can think of where I look at this alternate version of myself that didn't make these choices and I'm just so grateful that I did choose this path and I'm not even at FI right now. But just the fact that I'm on this path is so rewarding in and of itself. Bryce what about you what did this. I mean obviously you're on a very similar path with Christie but what did this look like for you from your perspective.
264 - 316 Bryce - Wanderer from Millennial Revolution I mean we're both engineers so when we came up to this whole thing I was looking at all this stuff in terms of just numbers and the numbers just didn't make sense. People are going into so much debt and Kristy was saying people were like dropping almost dead at their offices and stressing out and they're all in service to this house and that just fundamentally didn't make sense to me. Especially since you could rent so much cheaper in the city. It just seemed like it was a cult. People did not consider the idea that it was OK to not buy a house. And when you make an assumption like that you start doing weird things. It doesn't matter how much money I have. Just corral together, beg borrow steal a downpayment from friends and family and then just buy just go into massive amounts of debt and go into as much debt as you can and that doesn't make any sense to me. So I introduced her to a lot of this FI stuff and then we're just kind of go oh this is much better. Gee would you rather be chained to this house for the next 25 years. Or do you like to quit. Come travel with me and then never have to work again. And that was a really easy sell.
debt, families, travel
316 - 337 Brad Barrett So my question for you is OK you found this FI path after looking for houses et cetera but you literally saved $500000. At that point. So that suggests to me that you guys already had a significant savings rate. Like talk me through the Prior to FI psychology of where you were with your finances.
housing, savings
337 - 390 Kristy - FIRECracker from Millennial Revolution So for myself because I grew up poor in basically in rural China. I had to develop pretty frugal habits just out of necessity. Whereas Bryce is kind of like a normal person and he was just generally like middle class so he didn't really he wasn't really on board with the whole frugality aspect of it. And part of that was actually fear that we wouldn't be able to afford a house or part of that wasn't me trying to shovel as much money away as possible so that we could actually get a house. So that was actually driven partially by that and partially out of necessity because of growing up poor when we had reached that target. I think at that point I had kind of converted Bryce a little bit towards being more like not just being like the regular person and be more efficient with our spending. I think another factor that added to that that helped us save that much money is that we're both engineers we don't really care about aesthetics we care more about the practical side of things. We're both pragmatists So I think those are the factors that basically got us to that size of a portfolio.
390 - 425 Bryce - Wanderer from Millennial Revolution If I could just jump in here for a second. The pattern that we just describe here one person as an engineer or someone who's good at optimizing and the other person who had experience of some kind of poverty growing up talking to a lot of the people as we get to know the other bloggers in this concept it's a pattern that I keep seeing over and over again which is interesting. So one person had an experience growing up with not a lot of money in childhood and then that caused them to have this healthy fear of debt as well as a natural savings rate because you had no choices. And then the other person would then say hey that's a lot of money let's see what else we can do with it. I keep seeing that pattern over and over and over again but it's an interesting kind of pattern I keep seeing.
blogger, debt, health, savings
425 - 450 Brad Barrett Yeah I agree completely. I also find that there are certain definitely personality types and certain professions so I've found in my experience that accountants engineers software developers and military officers actually are 4 that kind of just spring to mind immediately that I find some commonality. I'm not sure what it is amongst our brains but it seems to lend itself towards being open to at least.
accountant, military
450 - 472 Bryce - Wanderer from Millennial Revolution The military officer one is interesting. The idea that I can tell they've seen in so many war zones and they've seen so many failed states that they just don't trust any one except themselves. They've seen governments collapse. They've seen entire countries collapse and this kind of stuff so that comes from a desire to be independent and a desire to be safe because they know how bad things can get when governments collapse.
472 - 508 Jonathan Mendonsa You know I think it's a very interesting perspective and I'm going to play a little bit of devil's advocate here. I feel like maybe what you guys are describing are the early adopters of FI. I think that as we define it more and as it becomes more mainstream it does start to grab a much more diverse group of people including people like me the reluctant frugalist, people that realize that life is a bunch of choices and to get what they ultimately want they need to make some sacrifices early on. I think that as we start to define the perimeters of this space more, people latch onto this concept for wildly different reasons which is why what is your why become such a compelling conversation.
508 - 554 Kristy - FIRECracker from Millennial Revolution Absolutely and I think this is why the safe withdrawel rate 4 percent and then the expenses are different for different people like different people are going to require different size of portfolio in order to live a comfortable life. Because my definition of a comfortable life is going to be different from someone else's. And what I want to do with my time after retirement is going to be different from someone else's as well. And that also follows the concept of what I like to quote from Jim which he likes to call F-you money which is what's more important than retiring is the F-You money because at that point you can actually decide whether you want to continue working and have more of a lavish lifestyle or you can actually quit and do your own thing. So everybody has their own version of FI and their own version their own amount of FU money that would make them happy. And basically it's you find your own path to FI. And there's many many paths there isn't just one type.
554 - 560 Jonathan Mendonsa I tell you what guys I have a feeling we're going to need a sidebar for sidebar. I mean this is a conversation that could go in so many different directions.
560 - 647 Bryce - Wanderer from Millennial Revolution Fit into a multi part series because there's a lot of stuff especially after going to Chataqua that we realized about the FI community there is what I call Level 0 which is running away from something bad. Right. And that appeals to a lot of people because I like to say there's like 80 percent of people hate their jobs and the other 20 percent are lying to themselves. So that's easy. That's always an easy sell. But then there's the level 2 or Level 1 Choose FI which is what do you do after that what do you build after that. And that's the conversation that we started having a lot with Jim and Vicky and all these other people and agree we're going to be continuing having that conversation at the next Chataqua and like this kind of stuff because there is what FI does is it frees up all these people from having to worry about money and then it frees up all these creative skilled people and everyone just going what can I build now and that is a very very interesting problem to solve. And again a very constructive community versus the people that are still trapped in the money economy the conversations are always just complain complain complain. How am I going to get out of it. I mean what is the goal of everybody's career and it's to for it to eventually end. Everyone wants to get to retirement at 65. for a lot of people they didn't even realize that that was possible. Life is so hard. And what I keep telling people is it's only hard if you don't understand money if you understand money life is incredibly easy. If you don't it is just the most difficult thing to get out of bed every day. And it just never gets easier. But if you don't spend money then it's life is easy. So guys we have a lot of content that we want to cover with you but I think before we go any farther I should set this up by playing a voicemail that we got from David from Canada.
647 - 767 David - (voicemail contributor) Hey Jonathan. Hey Brad. My name's David. Recent listeners you guys I actually found used through a radical personal finance. podcast. And once I heard you guys speak on that show I knew right away I wanted to listen to you and subscribe to your podcast right away been listening for the past couple of weeks and I just listened to the why of Fi episode. today wanted to let you know. It's just great. So I am basically a pretty young father of three kids married for about four years now and just working with my wife to get out of that. We're here in Canada so the housing rules for first time homebuyers were just changed. And it's not really a good climate to buy a home. We were always dreaming of buying our own place. We could invest money into it. Actually we sell it later and also pour some love into our home because the rental markets here could be a little bit rough. People don't really care about their rental homes. So one has to ask what you guys think. about that I know you've touched on getting out of debt. We have some credit card debt. We've got some auto loans unfortunately some of that lifestyle creep that you guys have talked about. And I wanted to know what the best way to kind of recover and start working towards FI is. And what kind of steps I should take. I mean we're already paying off our loan and paying off her debt as we speak but ultimately dreaming of FI and dreaming of not having that weight on my shoulders every day. So Yeah I just want her to know your input on that. And also is wondering if you guys could do some sort of analysis for me give me some sort of answer. Is it worth it just to keep renting you know from a fire perspective or is it better or better off going out getting a 30 year mortgage you know and basically being stuck paying that off for years and years and not really planning on moving my family anytime soon. But just thought I'd check in and see if she had any insight on that. I want to give you some feedback you guys are great. Love your show. It's been truly eye opening for me and I'm really enjoying it. I can't wait to hear more. Thanks.
debt, families, housing
767 - 786 Jonathan Mendonsa Alright so David first of all thank you so much for the question. And Christy and Bryce are going to help us tackle this. We want to take that approach and handle this a little bit more holistically and then hopefully by the end of this episode really give you a great answer to this question so I can hear the weight of that societal pressure bearing down on David in this question. I mean it just comes through in the voicemail. What are your thoughts on this guys.
786 - 925 Kristy - FIRECracker from Millennial Revolution So coming from an Asian background that you need to buy a house is even more prevalent because it's gone to a point where it's basically sacrilegious to not buy a house. Like not just renting and not doing that. You can disowned basically within within our culture. So for us it was very very difficult to stop buying a house and actually do what we're doing because that's the exact opposite advice that my parents have been giving me my whole life and not having like a group of support around you and having everybody else saying that you're an idiot and all this FOMO, which is fear of missing out which is a term that millennials used or a lot these days is even more difficult. There's a lot of headwinds against us for making the decision to not buy a house. But one of the things that helped us a lot was actually just doing the math doing the math. That's why we like to say math shit up on our blog a lot because it really comes down to looking at the numbers and seeing if it really makes sense. When I say do the math I don't mean just going into a property like a mortgage calculator and then just looking at your monthly payments and saying yeah I'm good to go yeah this is the same as I'm done. there are so many other costs with homeownership that nobody tells you especially not the banks especially not real estate agents because when they actually get the money once you make the transaction that they're done. They've already made their money, then they can walk away and now it's your problem. So that's why I say that we need to be very careful when you actually do those calculations because we need to add in the property taxes need to add in the maintenance which actually could change from time to time you don't really know what that is. Usually they recommend using one to two percent of the value of the property per year for the maintenance cost in Toronto. We also have land transfer tax. And then on top of that there's a lot of closing fees that you need to keep track of as well as insurance. So there's all these additional costs that the mortgage calculator doesn't tell you real estate agents don't tell you that banks don't tell you that because once they make the sale they're done. That's all up to you and I haven't even gone through the cost of the mortgage itself. And with interest rates going up. So I would say that. In this case my advice is definitely to do the math and make sure that that actually makes sense for your situation and don't get pulled into this fear of the fear of missing out as a very very powerful powerful feeling. And if you make decisions based on feeling rather than math you will always end up having making a bad decision because you're making a bad decision emotionally and only based on the fact that you're missing out on something rather than the actual numbers.
insurance, tax
925 - 946 Bryce - Wanderer from Millennial Revolution It's kind of funny because if you listen to the language that he used he already kinda knows what is the right thing to do. But he is asking for some kind of a confirmation because I think he can frame the question Should I still continue renting. Or do you think I should get stuck with this 30 year plan. I did say that. It's never too good to be stuck in anything. So he kind of knows it's a bad idea but he's not completely sure. Right. I mean that's what he's asking.
946 - 970 Jonathan Mendonsa And I think we can riff off the math that you guys have already done. I mean you wrote an article would we be richer if we had bought a house. And it's kind of a retrospective look at the last three years which is perfect because Canada's home market has been on an absolute tear over that period of time. So I think it would be very interesting to kind of pull some detail from that article and maybe we can give those to David as just something that he can use looking forward to see how he wants to tackle this problem.
970 - 1117 Bryce - Wanderer from Millennial Revolution Yes sure. I mean like people were asking us if we had bought a house during that during that period of time in which we are investing would we have come on ahead. And during that time the average house in Toronto had gone up about $100000 over the three years. So that sounds pretty good right. But if you actually break down the number of costs that come into owning a home that don't happen when you own a portfolio like for example there's just to sell the thing. First of all you can't get that equity out unless you sell it so you sell it. Do you have to pay a 5 percent real estate commission. So the K-State that we're looking at was the average home in 2012 and increased from half a million dollars and in three years it increased about 6 22. So that's pretty good. That's like a 7 7 8 percent year over year again. And on the surface that would seem like it's you know fantastic. Yeah but what people don't realize is that a house has so many hidden costs to it that eat into your gain that are not present for a portfolio. So for example this person wouldn't get the equity out and sell it that six hundred and twenty two thousand dollar house. You have to pay a 5 percent real estate agent commission that's $31000 right there in Toronto which is where this scenario is. There is an additional municipal and provincial land transfer tax that's additional $12000 right there over the three years there's property taxes that total of about $10000. And we're not making these numbers up there's these are actually calculated based on property tax calculators and stuff that the city provides there's lawyer fees of a thousand dollars each time or $500 each time to buy and sell. That's an additional thousand dollars. You have to get a home inspection that's five hundred dollars. There's home insurance over three years that's about $100 a month. Thirty six hundred dollars over the three years. There's maintenance they say you should set aside one to three percent of the price of your house for maintenance stuff breaking windows breaking and pipes bursting and this kind of stuff. So that's an additional $15000 over three years if you just take a conservative one percent. Then there's the utilities that's an additional $9000 do you add all the stuff up and the total cost of just concerned of costs of just owning that damn house over the three years was about eighty eight thousand dollars. So that one hundred and twenty five thousand dollars that everyone thought they did most of it got eaten up by these additional costs. No one ever talks about that kind of stuff. So I mean it is a very very disingenious kind of I call it funny real estate math. Whenever a person who is like a real estate person comes into blogging started arguing it's so easy to kind of poke all these holes in this kind of stuff and then when you do it you realize that it is always a good idea from a real estate agent's perspective to buy and because they get to make money off of it they don't particularly care whether you make money off of it but they get to make money off it.
blogger, insurance, tax
1117 - 1161 Jonathan Mendonsa Yeah I never ask a barber if you need a haircut. This is incredible guys like that math is is mind blowing and frankly this is a blind spot even in my own mind. So to me just right out the gate. Those numbers sound shockingly big I mean you have this $500000 house. Three years later it's worth six hundred and twenty two thousand dollars. That's just you made 122 grand and you're sitting there thinking how could I lose in a housing market like this. The numbers you just spit out those those numbers are remarkably real. Right. I mean that's not just pulled out of thin air. There's some research behind it those are reasonable numbers. That's not a straw man. And $88000 of that profit was just eaten up in these behind the scenes fees that you just don't realize that you're incurring.
1161 - 1166 Bryce - Wanderer from Millennial Revolution And that's During three straight years of 8 percent gain. So if you're anything less than that you're underwater really easily.
1166 - 1186 Jonathan Mendonsa And that's not even including the fact that many people feel the need that they need to stage their house that they need to do these beautiful upgrades that they need to refurnish the kitchen countertops because HGTV tells you that you need to make these upgrades before you try to sell the house. All that goes out the window so I just have to sit back and say that that I am shocked at how bleak that math really is.
1186 - 1217 Bryce - Wanderer from Millennial Revolution Yeah. To be honest we thought we would go in pretty. It would come out pretty balanced. Yeah. We thought it would be like our portfolio rampager had 70 percent year over year during that time the House did at the same time with the offer and we didn't expect it to be that far behind. And you know no one ever talks about that a house is just not an investment. It is a place to live. And anytime anyone says oh it's a great investment they're trying to sell you something. So housing is a really sneaky kind of thing that everybody seems to think that it's always a good move. But if you break down the math behind it it's shocking how bad it is as an investment.
1217 - 1221 Jonathan Mendonsa Now I don't want to cheat people with that light bulb moment but the key here is that buzzword investment.
1221 - 1309 Brad Barrett Yes. What strikes me with the math actually is the appreciation. So this in your example your hypothetical it went up about one hundred twenty five thousand dollars over three years. So if if you told just someone off the street that their house went from five hundred to 622 they'd be doing absolute backflips. That's a huge windfall right. But what was most interesting to me actually was that you said it's a seven point eight percent year over year gain. And that to me it actually illustrates the value of compounding in the stock market interestingly enough. So we talk about compounding and the rule of 72 here. People don't take a look at long enough timeframes. So if you had five hundred thousand dollars invested in the stock market and theoretically it grew on average 8 percent and that's kind of the general number we use here at a ChooseFI you would anticipate that 500000 to double after nine years. Right because that's the rule of 72. You take 72 divided by the percent return and that gets you the number of years. So in this case nine years. So you would expect that 500000 to go to a million dollars in nine years. Now I don't know about you but no housing market I've ever been in. Do I see how housing prices double in nine years. So almost by definition somebody is looking at this and saying wow a hundred twenty five thousand dollars but that's only seven point eight percent return which is about what we'd expect in the stock market which is fascinating to me.
housing, stocks
1309 - 1324 Bryce - Wanderer from Millennial Revolution And another thing I forgot to mention here was that this analysis was done assuming that you just took that amount of money in cash like he bought a half a million dollar house mortgage with cash. There is no mortgage in this thing. As soon as there's a mortgage this 7 this 8 percent year over year gain becomes negative.
1324 - 1359 Brad Barrett Yeah that's. That is absolutely astounding. So everyone needs to do the math and I think that that's my next question for you guys is David calls in and like you said he is kind of alluding to the fact that that he knows it's not a good idea to get quote unquote stuck with this. Right. But how would he do the math. So you got to show the real estate commissions and all of that. But how would someone who's trying their best to figure this out without needing a Ph.D. in mathematics like how would they compare rent to homeownership. Like where where does it make sense I guess to buy a home. Is there an instance like how do you walk people through that math.
1359 - 1394 Kristy - FIRECracker from Millennial Revolution OK. So for deciding to buy a home usually I'd like to use the 1 percent rule I can call a pad has mentioned this on her blog before on afford anything dot com. So basically the rent should be one percent of like the monthly rent should be 1 percent of the cost of the house and she breaks down the math to say because she isn't real estate industry. So she has a lot of experience in this and she actually breaks down the math to compare it with the stock market and the opportunity cost that you would lose if you were putting everything into a home and you were incurring all these costs. And so that is the rule of thumb that we like to use the 1 percent rule.
1394 - 1425 Bryce - Wanderer from Millennial Revolution So for example if you're if you're if you can rent a place for a thousand dollars and you're thinking about buying really you should be only looking to see to buy a place for 100000 dollars. So what that rule does is it forces you to have a really conservative view of how much home is a good deal and what that does is it compares it to how much you could afford to live there as rent. So that's the rule that she uses to buy houses and she actually is actually able to make money on housing because she only looks at properties that she can acquire for really really cheap.
1425 - 1462 Jonathan Mendonsa You know. I think that's the difference in the FI community and the difference in this conversation it's all about how you're framing it and it's that word investment when you're talking about purchasing a home if you're saying my home is a great investment. No it's very likely that your home is a garbage investment. It could be a great place to live. It could be a great choice for you for providing a place for your family and it could allow for a lifestyle that you want to have. But I think the FI community latches onto the idea of Do you really understand what the word investment means. Because obviously based on the numbers you just showed that is not a great choice for you to put your money as opposed to low cost index funds which I think that's generally where you guys have landed as well right.
families, indexfunds
1462 - 1463 Kristy - FIRECracker from Millennial Revolution Correct.
1463 - 1469 Jonathan Mendonsa So let's go ahead and take a few minutes and talk about how leverage enters into this picture. Because I think we kind of glossed over that. How does that affect the numbers.
1469 - 1520 Bryce - Wanderer from Millennial Revolution In this scenario when you have a mortgage there's now interests that you're paying out interest. And. People keep saying oh rent is throwing money away well interest is throwing money away. So every dollar that you spend towards interest it just goes to make the bank richer. So when you add leverage into this kind of thing it increases the cost of owning this thing because now you're paying interest to the bank as well as in Canada. Is CMHC fees which are insurance premiums that you have to pay if you don't have a big downpayment I think in the states is called FHA or something like that. OK. So that adds a whole other kind of level of cost to that thing. And the reason why people still see leverage as a good thing is they look at how much money they put as a down payment and then they say and then they build in some whacko assumptions about how the pomos going to depreciate by a certain percentage and then they say and then they compare that to the amount of money they put down and say wow look how much money I put down.
1520 - 1563 Kristy - FIRECracker from Millennial Revolution Without considering any cost without realizing that. I think JL Collins put this best which is if you are paying a mortgage you are renting someone else's money you're renting their money basically. So the fact that people just look at how much money gets made and then just use the amount of money that they put down on the down payment say oh look I'm They made a $400000 profit. That's real estate math. Now you're not considering any of the costs and you're not considering how much money you're paying into the mortgage. All that has been totally disregarded. Right. It's like starting a business and saying I need a million dollars a year. Well and how much are you spending all the expenses don't matter let's just look at the amount of money they are making and then they're actually spending $2 million. They're actually in the in the hole. Right. You can't just look at one side of the equation and ignore all your expenses.
1563 - 1605 Bryce - Wanderer from Millennial Revolution Leverage always makes sense when the underlying asset is going up forever. But as you guys know housing does not go up forever and when it comes down it's just as easy to go underwater. And then I think people in Canada are now understanding how scary that is now because it is starting to happen where it doesn't take a lot of housing price movement in that. On the downside. To turn your jumbo mortgage into an angle that just you can't get out of because once you're underwater on the mortgage you can't even sell the house to get out of it. You have to come up with a check just to get back to zero. So leverage and going into debt. People have been strangely comfortable with that. And I think the big difference between us and a lot of FI people is we don't trust debt and that's kind of why we never went into it. And that's kind of why we were able to do the FI thing.
debt, housing
1605 - 1628 Jonathan Mendonsa So we've decided that your home is not a great investment. I think that Brad and I have come to a similar conclusion even though I should state for the record that both of us are home owners. I certainly don't think that we view it as an investment vehicle and I think that's the Asterix that really needs to be communicated in this episode. I am curious though since you guys obviously are taking care of your living expenses through rent what are what vehicles are you investing in.
1628 - 1711 Bryce - Wanderer from Millennial Revolution Low cost index funds. The ones run by Vanguard and just investing in for us the TSX which is the stock exchange the S&P 500 as well as the European EFB index. So what we did was we built a portfolio around back then when we had half a million you know kind of dollars and we were we built it so that it was a 60 40 split So 60 percent equities 40 percent fixed income. Jim would call me a giant wuss for doing that. But that's what we did and what really helped for that when the stock market crashed and everything. Like all the equity stuff was going down the fixed income stuff actually kind of went up. And what this approach tells you is that when your target allocation for example 60:40 starts to get out of whack it tells you what to do. So if it goes up 50 50 it tells you that you're supposed to sell off some bonds and then buy into equity. And during the 2000 in 2009 crash just was telling me to throw as much money as you can into a stock market that was plummeting which is extremely counter-intuitive to say the least. And it was scary as hell to be completely honest with you but because we did that we kept picking up units as the stock market was crashing. And then when it eventually rebounded we were able to participate in the upside stronger than we participasted in the downside. And as a result within a year of 2008 of late 2009 we had managed to recover all the money that we lost in the stock market crash. And that's I think something that not even most most people were able to claim. We didn't actually lose money in the stock market crash. That's how powerful index investing is.
indexfunds, stocks
1711 - 1762 Brad Barrett Yeah that's remarkable and that shows the power of having a savings rate and living below your means and be able to just dump money into the stock market in good times and bad. Right you're still buying the underlying assets right if you buy the S&P 500 or VTSAX you're buying every company a little piece of every company in that index and it's still the same company regardless of whether the stock market had a crash or not. And you're buying it on a 50 to 90 percent sale rate depending on how big the crash was. So I think that's an important point for people to remember. I'm curious how often you rebalance your portfolio and also like how you actually came up with that 60:40 split. Like you said Jim might call you a wuss because he would probably suggest you should be in 100 percent equities based on your age. I'm curious where you came up with them.
indexfunds, savings, stocks
1762 - 1783 Bryce - Wanderer from Millennial Revolution It was just just kind of reading finance books and this kind of stuff. I mean like 100 was just too aggressive for us. So we were kind of figuring somewhere between 75 25 and then we kind of sort of said on 60:40 you know what is. Well you know we did a lot of analysis as to how much volatility we were willing to accept and in 64 we just kind of like Goldilocks not too hot not to cold it's just it was just right for us.
1783 - 1797 Kristy - FIRECracker from Millennial Revolution I think it makes sense for people in the accumulation phase to be at 100. But now that we're actually retired 60:40 works well for us especially since we can actually live on partially the dividends that come out of that portfolio as fall. So it suits our comfort level in terms of risk.
1797 - 1821 Bryce - Wanderer from Millennial Revolution Yeah at the time we just started investing so we were a little bit so kind of nervous about it. So 60:40 was kind of our waiting dipping our toes into the water. The intent was I think as we got more comfortable with how the stock market works to kind of move closer to 75 80 like increase our equity exposure as we got more comfortable with it and then the stock market crashed and then we were really really glad that we didn't do that at the time. And then after we retired we're stuck with that allocation.
1821 - 1841 Jonathan Mendonsa So what's really cool about this is that when I first hint that your home was a poor investment channeling your all of your extra income to a good investment vehicle which we agree you're in very friendly company that low cost index investing is the way to go. You've now bought your freedom and I think the overarching premise is that buy your freedom rent the rest right guys.
1841 - 1914 Kristy - FIRECracker from Millennial Revolution Exactly. So what that has allowed us to do is actually travel the world which has always been one of my dreams because growing up poor we didn't really have any vacations. That was a complete luxury, we didn't have any money for that . So we actually discovered after we quit that it's less expensive to travel the world than it is to live in Toronto. A lot less expensive. The first year that we traveled the world we split our time between Western Europe Central Europe and Southeast Asia. So we went to places expensive places like the U.K. We spent a month there we went to Denmark which is probably the most expensive place we went to. Actually Switzerland as well. And then when it got too cold in November we went to Southeast Asia and then hung around Singapore Thailand and Malaysia and Vietnam. And because that cost balanced out the places the cost of living in Southeast Asia is ridiculously low. We only spent $40000 traveling the world in one year and in Toronto you could easily spend 60 to 80000. So it was it was a no brainer. It was like why would I stay here and buy a house and be miserable when we can travel the world for a lot less and be happy. And in Thailand you can you can get massages for twelve dollars and you can get a meal easily for under $5. So it was a no brainer.
1914 - 1966 Bryce - Wanderer from Millennial Revolution Yeah. So when we came back and we added all this stuff up and we kind of went how much would be spent $40000. Well when we retired we are four percent number was $40000. We had a million dollar portfolio and that is $40000. So he kind of went Holy crap we could just do that forever so soon as we learned we just kind of turned on it. And and what ended up happening is as we got better at traveling and we got better at realizing what the high cost base was a low cost place at a time average your time between the two countries to lower your cost. Our spending has actually gone down this year which is our second year traveling. I think we're coming in at around $30000 of how much we actually spent traveling. Like again just around the world including Europe and the U.K. and all these kind of places and because we built our retirement assumptions with the $40000 yearly spend because we're now spending $30000. The more we travel the more money we make. We're getting paid $10000 a year to travel the world. That's insane isn't it.
1966 - 2006 Jonathan Mendonsa That is remarkable and that's a total reframing. So to everybody else to the watching world the outside the community you guys are spending $40000 a year on travel. Are you crazy. Who does that. That's insane. In the community your life cost $80000 a year because you refuse to be flexible. We embrace flexibility and as a result of that our life only costs $40000 a year and we can pick up and follow the weather to the best possible place to be at any given month of the year and in any given country of the world. And at the end of the year just by looking at our personal capital account we see that we get paid 10 grand to do this to embrace this lifestyle and you guys are living in a little hut either.
2006 - 2079 Kristy - FIRECracker from Millennial Revolution No. Like to give you an example of what the cost of living is like and places around the world that people haven't been to. People are so used to living in Toronto and then they're paying they're like whatever. Fifteen hundred $800 a month rent. We go to Thailand and it's a brand new condo a new build. It has a swimming pool it has a sauna. It's walking distance everything and it only cost us $575 a month or maybe like for what 450 us. It's just at the cost of living is unbelievable. We even found recently that we went to Poland. So in Central Europe it was pretty similar to the cost of Southeast Asia. But really everything was like high standard of living everything was super nice as well. We just out of curiosity look for a place because we stay there for an airbnb. And it was only around $45 a night. We wanted to see what long term rental would cost. And they were only around again within the 600 to 800 Canadian Canadian dollar range. Right which is like 500 to 697 hundred U.S. dollars a month. And these are these are nice modern condos that are very close to the center of town. So it really is amazing when you start traveling. For you to realize how much value you can get out of different places that youve never been to that people dont know about.
2079 - 2117 Bryce - Wanderer from Millennial Revolution And meanwhile we come back home and everyone is stressed out trying to pay the mortgage. Their cost of living is multiple times what ours is but they're staying in one place they're working every day They don't even get to enjoy their house because they're working so much overtime. Meanwhile our biggest decision is hey do you want to go to Japan next year or do you want to go back to Europe. That's literally the decision that we're wrestling with right now. So it's a really different lifestyle. And then they look at us to be like well you guys are crazy and I'm just kind of you know I can show you how to do it. All these problems that you have are self-imposed but it's that mental block that they kind of say well I have to do this because I have to own a house otherwise I'd be insane. And I'm like all right do you do you. We're going to do our thing after Europe you know.
2117 - 2133 Brad Barrett Yeah and that's the definition of the hamster wheel. They're just paying for these things that they don't get to use because they have to work all the time. That's just absurdity. of the highest order. And I'm curious Bryce. Has anybody ever taken you up on it. Has anybody ever said wow that's interesting. Can you teach me how.
2133 - 2201 Bryce - Wanderer from Millennial Revolution Surprisingly in our like actual group of friends some people are trying to learn from it as well. But for the most part most of our friends back here are still like oh I wish I could do what you do and it's like you can right. And then they kind of go no I can't. Back to the hamster wheel. It's just bizarre. But in terms of people that we meet in the FI community people who write into our blog who are actually curious about this kind of stuff will break down their numbers and be like Here's your pathway to do this kind of stuff and they go oh well that wasn't so hard. No it's not that hard. That's what we keep trying to tell people. We're not doing anything crazy here. We didn't buy Apple stock at $2. We didn't start a billion dollar business in our garage all we did was we made slightly different choices choices that are accessible to you. And the biggest mental block that people have is that oh we have to own a house and I'm just like when you break that assumption all of the rest of life becomes really really really easy. But they just don't want to do that. And I'm just kind of like OK fine if that's what makes you happy. Great but they're not happy. They complain incessantly about how expensive everything is here and I'm just like you just come with us. And then they're like no. It's frustrating but you know what. There's only so much you can do by lecturing somebody if they are actually curious and they actually want to come with. We're always willing to help but we have to let them come to us first.
2201 - 2226 Jonathan Mendonsa I think I've found that over and over again I think Brad's had a little bit more success with his you know inner circle if you will with the I think he presents a little more strategy. I have found it's better when other people come to me they have to find this concept on their own. And then I can steer them. I can shorten that path for them. But you have to have that light bulb moment on your own. And then when you're primed for it then yeah you can you can feed that information but otherwise it's just brickwall man.
2226 - 2285 Kristy - FIRECracker from Millennial Revolution Yeah absolutely. And to that point. Even before we quit we knew we had enough we did all the numbers we got people to vet the numbers in the FI community. But even when it came time to pull the trigger I was terrified. No matter how many people how many I've seen JL Collins do it I've seen MMM do it. It doesn't matter how many other people had already done it. I was still terrified. Right. So you really have to be the person who is in the driver's seat and then decide that that's what you want to do and then get comfortable with it over time. And then after two years like the longer we stay retired the more confident we get. And really right now and looking back on my why was I so terrified. It's really not that scary at all. But really the person has to make that decision themselves. They have to be one in the driver's seat. You can't steer them in the direction that you want to. You want to they will be scared. Because we've all been indoctrinated into thinking that we have to live this life like we have to run the hamster wheel and if we get off we're going to die. And no it's actually amazing but you really have to find out yourself. It doesn't matter how many other people have done it before.
2285 - 2313 Jonathan Mendonsa So I'm curious guys you guys have traveled all around the world. You said you've continually gotten better at this. What tools or systems or practical advice could you give to people that are interested in this journey and not specifically with the index investing but more just the idea of renting your life out. You know in different countries what are these tools that you've found that have been very effective look like an Air B and B. I mean what could you recommend to people how would they get started with this geo arbitraged that truly is international.
geoarbitrage, indexfunds, travel
2313 - 2390 Kristy - FIRECracker from Millennial Revolution Air B and B has been life changing really. We basically live on air B and B. So what we found is that it helps you cook when you have a kitchen and you have laundry and that already saves you a ridiculous amount of money. And not only that it helps you be healthier because you're not eating out all the time. On top of that when we meet air B and B hosts It's basically local people. Right so they can give you all the secrets. You know you should stay in this area and this area makes more sense in this other areas less crowded is less expensive. So then you actually start learning from the locals where the best places to travel to. Like where do I book flights. What are some discount sites I can use to book buses and things like that. So AirBNB has been instrumental in helping us save money while traveling. Another thing we like to do is travel hack. So that's basically sign up for credit cards and they give you frequent flyer flyer miles when you sign up and then you can use that towards flights. We also use a lot of budget airlines in Europe for example Ryanair easyJet Wehling is the one we went on recently and as well as taking buses and I think the bus company was called Megabus. We actually traveled from Amsterdam to Belgium and it cost us two pounds. That's it. I'm like you guys are losing money driving us from Amsterdam to Belgium I don't know how they do it but Megabus is huge and now great for saving money.
cooking, health, savings, travelrewards
2390 - 2391 Jonathan Mendonsa I bet it was a hybrid.
2391 - 2427 Bryce - Wanderer from Millennial Revolution Yeah could be I might. My theory was there was like a couple of pounds of cocaine in the trunk and they were using us as cover. But you know after we're not going to ask and I was like yeah you don't ask a question like that but. Well yeah. Like in Europe moving around is like costs next to nothing because of budget airlines and budget bus companies we don't actually have those kinds of things in North America and I was kind of I was really surprised. We flew from so Glocke here to Berlin and it was at a cost X $20. Like it's almost like a bus ticket but it's a plane. So you kind of realize that North America is one of the most expensive places in the world to live. But the rest of the world is not like that.
2427 - 2465 Brad Barrett Yeah those budget airlines are wonderful. I remember flying between Dublin and I think Brussels Belgium and I think it was one pound. So it. It's crazy and under $2 to fly one way. So I'm curious on a real tactical level so when you move to a new city let's say you're moving to Budapest for a month or two. You go through Air B and B are you looking for long term rentals or are you basically going to do a night by night thing until you have a sense of where in the city specifically you want to live. And then also like are there ways to save money through air B and B once you've found the place you want to live for X number of weeks or months.
2465 - 2556 Kristy - FIRECracker from Millennial Revolution We generally like to stay for about a week initially because we're doing more of a long term travel. I don't like to move around every couple days it's just kind of tiring AirBNB. A lot of hosts actually give you 20 percent off or some discount when you but for a week as opposed to a couple days. I've booked places in which it was actually cheaper to book for the entire week than book for five days. And I'm like OK well I can just throw away those two days like why would I not do that when we are in Southeast Asia. We tend to book out for about a month in Thailand because we get massive discounts as a result of that as well. The first time that we were traveling we actually weren't as efficient because we didn't know which places to go in Europe so we actually spent a lot of time in Western Europe when there was actually way better stuff in Central Europe that I didn't know about. And there was way better stuff in Southeast Asia. So I think initially it was just kind of get in there stay there a week someplace maybe stay there for five days check it out and see if that's a place that really kind of jives with our lifestyle and our interests. And if we actually like it will end up staying longer. One of the reasons why we like Europe so much is it's so easy to switch countries if you don't like the one that you're currently in. It's like oh OK I'll just take a Ryanair flight or just take a bus and then go to another place. And for example on where U.K. The cost was was quite high and the weather wasn't great. So we ended up going to Belgium and then after that we went to Germany and then Germany. The cost was a lot lower and we enjoyed that a bit a lot more. And then we went to Greece and we absolutely loved it. And then Singapore was amazing for food as well so generally we like to get in and check it out and we don't like it just go somewhere else.
2556 - 2616 Bryce - Wanderer from Millennial Revolution And after we've done that for a while we kind of started realizing the tricks and where people stay. So here's an example. We were just in London and you figured OK you fly into London is going to be expensive because you know you need a hotel in downtown London or something like that. Now the locals actually stay in downtown London. There is this city between Gatwick Airport in London called East Croydon. No one knows what it is called because it's like a suburb of London but it's one train ride and you go right down to London Victoria Station for like £5 but because nobody knows about it all the rentals we see didn't make it just a two star train ride away from downtown London for 60 to 80 US dollars a night. And when we went into we found the AirBNB we checked into the place the hosts were like hahaha you figured out the secret that we know right and I'm like yeah. So you figured out these kind of weird price anomalies that you wouldn't normally see if you're in Europe. And after a period of traveling you know all this kind of stuff in your head and then you can take advantage of it by booking longer periods of time in low cost areas that still gets you all of the cool stuff that you would see from living in downtown London.
2616 - 2644 Kristy - FIRECracker from Millennial Revolution Yeah. And I think that's a huge advantage of doing long term travel because when you're when we were on vacation we didn't have time to find out any of this stuff because we just get like a package you know packaged deal for the two weeks right and then there that's not in travel agencies interest to give you the best value. They just you know throw everything in there and whatever makes them money they'll just sell your package right so that's one of the things we discover is that when you actually can stay there longer and then talk to the locals and figure these things out you can actually optimize.
2644 - 2652 Jonathan Mendonsa That's awesome guys. There's like so much information there. It's unfortunate that you guys don't have like a blog or something that you could document all these secrets of world travel.
2652 - 2679 Bryce - Wanderer from Millennial Revolution I know this is a lot of information. And yeah it's the challenge is almost in trying to teach someone this stuff is not to blast them with everything all at once. It's like you need to feed bits of information in bite sized pieces and then allow them time to digest it and then wait for him to come back a little bit. So I'm trying not to blast too much. And so like like even right now I'm trying to hold back as well because I know too much information too confusing right.
2679 - 2747 Jonathan Mendonsa This is awesome guys. Guys like I wasn't expecting to get this deep into Geo arbitraging these tips are very valuable. I mean what's really cool about this community is that our audience respectively will be able to do this stuff and if they're going from scratch this is a lever that they can pull within five years. And even if they're not at full fi you get to make these choices. Once you've broken the hamster wheel and it doesn't take 25 times your annual expenses to break the hamster wheel it is just making a few decisions like not burying yourself in debt to get the mortgage like not paying for the overpriced cell phones and the two brand new cars in the driveway it's just making the slightly more optimized choices that gives you the space between your expenses and your savings. And that allows you to get to do this creative stuff and then once you can make these creative choices you get to do what Bryce was talking about what's the next bite size challenge that I can tackle and I'm excited to see this community free itself from their immediate geographic location and actually get a chance to see all these really cool things that are out there for them to explore. It turns this game of life into a really cool puzzle and you get to figure out which aspect you want to work on next.
debt, geoarbitrage, savings
2747 - 2836 Bryce - Wanderer from Millennial Revolution Yeah the one of the biggest things about travel is that you start realizing if you stay in one city, Everyone just thinks that there's only one place to live and that's the current city that they're having and when you start moving into other cities you start to spend more time with other companies you start to realize that other countries do things in very different ways. The assumptions that you had before were not non-universal So for example we have a lot of American readers. We actually have the biggest demographic that we have despite the fact that we're Canadian and one of the biggest things that they worry about is health insurance and health costs. And you go into a hospital and you have $10000 of medical debt and that's a really big concern for them. So they kind of go I'll never be able to retire because of that. And then when you realize that by the way no one else in the world are medical costs that high when we're doing the Chataquas and someone asks this question were like What do you do about that. And then I was like well I had to get my teeth cleaned at some point in Mexico and I had to go to a doctor in Thailand. I had to do an EKG at some point and it cost me you know 30 bucks for the cleaning and $40 for an EKG and I could see the American people in the audience just glare at each other and they're like What the hell. And I'm just kind of like. Yeah. Like medical costs. No one else in the world actually worries about it to the extent that you guys do. But if you were to live in other countries like that worry is just gone. You have that. Yeah. There is insurance but it's not nearly as expensive as as it is for you guys when you are living in the U.S. because your medical expenses are so high you don't realize this kind of stuff until you start traveling and then you start to say oh this other country this is better than where I'm currently living and this other country this is actually better and then you start to realize oh hey there's actually other ways to live besides just where I grew up right.
debt, health, healthinsurance, insurance, medical, travel
2836 - 2866 Brad Barrett And Bryce that speaks to just expanding your horizons through travel. Right like that's a much larger point that you're a little myopic look on the world is gone. When you travel to in one year like you guys do too many many different countries you're seeing all different cultures and people and realizing that just people are people no matter where they are no matter where they came from. So I think that's an important point for people to remember is this really does expand your horizons. So I just wanted to put a bow on that for sure.
2866 - 2918 Bryce - Wanderer from Millennial Revolution Yeah. This is a story that I like to tell to people like we were we were going to Mexico earlier this year and all our friends and family is like oh god you're going to get killed. Right. Because it's so dangerous in Mexico and all we hear about in the news are people getting killed and kidnapped and this kind of stuff. But we actually went into Mexico it was totally fine. We were staying with an Air BNB host in Cancun. The guy was a scuba diver instructor and we were talking to him about because we got a paddy in Thailand about how great you can if you're scuba diving start or you can travel around the world and pick up jobs all over the place and then you can kind of pay for it as you go. And then we were talking about how much we enjoyed our time in Thailand. And then he said oh gee Thailand I hear it's dangerous. And I was like seriously like everybody thinks their city that they live in is the only safe place in the entire world and everywhere else is Dragons be here. That attitude is just prevalent everywhere. And then when you realize that hey they think Thailand is dangerous. We think Mexico's dangerous and all that is just kind of like putting blinders on your face.
families, travel
2918 - 2947 Brad Barrett Hey guys I'm curious. You said you started out with a $40000 yearly expense with travel and then you knocked it down to 30000 for a listener out there saying I wonder if I lived in one of these ultra low expense places like Thailand without giving up on quality of life because Chris you're describing massages and four course dinners for a couple of dollars. Like how much could you reasonably live on in one year in Thailand while still living like a really nice life.
2947 - 3029 Kristy - FIRECracker from Millennial Revolution Oh man for an individual you could live on 15000 to 20000 U.S. dollars and be extremely happy in Thailand and the city that we visited that we really enjoyed is called Chiangmai. That's the second largest city in Thailand. And basically you could rented a condo with a swimming pool and a sauna for about 400 to 450 U.S. dollars a month and probably last because when we are there we just found the first one that we came across if you actually knew the locals and optimize You could probably get it down even lower the food. Would it not cost you more than I would say 15 U.S. dollars a day 15. Probably 10 to 15 U.S. dollars a day. You could get massages for $12 for an hour. Including tip. There's all sorts of free activities you could do in the city as well because they have a mountain that you could hike up and basically just food everywhere. And the condo that end and didn't even have a kitchen because it was just cheaper to go out to eat because it was just the same as how much you would spend in cooking and in other places and the food was amazing. So one of our favorite places to eat was a place that served seafood and they literally served the food on a table and the unit of measurement was a table of seafood. It's like would you like half a table a full table a double double table the table and then they dump the seafood that you select with the sauce and then they give you these plastic gloves and you just eat it you just eat it straight off the table.
3029 - 3029 Jonathan Mendonsa Wow.
3029 - 3032 Bryce - Wanderer from Millennial Revolution Man talking about this and make me want to go back to Changmai. I think we need to.
3032 - 3039 Kristy - FIRECracker from Millennial Revolution And the bill for that was 16 Canadian dollars. So that's like 12 U.S. dollars.
3039 - 3040 Brad Barrett For a table of seafood.
3040 - 3043 Kristy - FIRECracker from Millennial Revolution For a table for the two of us.
3043 - 3159 Bryce - Wanderer from Millennial Revolution And there's even cheaper places like i mean like we're in Cambodia and in a city called snow. Everything is on the U.S. dollar but everything there is dirt cheap I mean get a beer for 50 cents you can rent a room in a hotel for $100 a month. U.S. dollars. And there's actually a community of ex-pats like I think there were like British and Canadian ex-pats that figured that all kind of were passing through Cambodia for one reason rather than just being like holy crap I could live here for I could live here for next to nothing. So there's like there's a enclaves of Canadians and Americans and Australians in sinookville in Cambodia who've all figured out the secret that it's just kind of like with just the money in my savings account now I could live here forever based on the interest in this kind of stuff. Right. So it's a really like you really start to learn how there are other ways to live out there. And it's really not that expensive. Yeah we actually met this couple in Vietnam who are from Australia and they said that when they were in Australia they were struggling because the guy was had a very stressful job in I.T. and he had to have open heart surgery because he almost died from the panic attacks and the stress. And he said that he needed to make a change. So while they were taking a year off to travel they discovered Vietnam and it was always his dream to actually open up a massage like Spa in a foreign country and they really liked Vietnam. So they met some locals and researched how to actually open a spa. While we were there his spa actually basically rocketed to the top 10 of that city which was in trung. And they said that they basically have settled in Vietnam running their business. And she started an orphanage that saves like 22 local kids there and they are not planning to go back to Australia. And whenever their friends and family ask them like when are you coming home. Their answer is this is like we could either go back to Australia and struggle and not be ahead or we could be here and already be ahead and living our dreams. So we met a lot of ex-pats as we were going to South East Asia and it was really obvious because you could live a luxurious life for 20000 U.S. dollars a year easily.
families, savings, travel
3159 - 3163 Jonathan Mendonsa You guys are going to get blacklisted from this ex-pat community for sharing all their secrets.
3163 - 3169 Kristy - FIRECracker from Millennial Revolution I know. We totally are. whoops.
3169 - 3192 Jonathan Mendonsa Well Brad has this mental list that I've adopted as well for a food budget a reasonable price is $2 per person per meal. But that is taking into account that you are going to be making this at home. You know you're not eating out your entire budget that you just described involved less than $2 per person per meal in some cases. And it was totally eating out not just eating out but filling up the entire table with food.
3192 - 3208 Bryce - Wanderer from Millennial Revolution Eating out every day. That's what it was like in Thailand. And to recap we were making money while we were stuffing our faces of seafood. It's just I keep trying to tell people this is possible. I can show you how. And they just don't believe me. But it's we would reveal on the blog and it's all true and we're not making stuff up here.
3208 - 3236 Brad Barrett Yeah it's just challenging that orthodoxy right. Everybody has these preconceived notions that to live the "X" dreamright the American dream the Canadian dream. You have to buy a house and live in the suburbs and have two cars and go on expensive vacations every single year. Well if you're just a little more optimized you can save a significant amount of your money. I mean you guys retired at or around 30 right. I mean you couldn't. How long could you have worked for eight years something like that.
3236 - 3238 Bryce - Wanderer from Millennial Revolution Yeah nine years we retired at about 31.
3238 - 3268 Brad Barrett That's not impossible. It doesn't matter if you started at 22. No that's fine that would be all well and good. But anybody listening to this can start today. Right. You can make these changes and just challenge those hang ups. Challenge the orthodoxy and make a change. And who knows. Nine or ten years from now you could be traveling with Christy and Bryce somewhere throughout the world. It sounds silly but it is extremely possible. And we're trying our best here to get that through to you. It is doable you just have to take action.
3268 - 3290 Bryce - Wanderer from Millennial Revolution Yeah that's what we emphasize as well we do not repeat not hit any home runs. We did not buy Apple at $2. We did not start up like snap chat or something like that. We just we took some I think some pretty pedestrian moves of I don't think I'm going to buy a house that is going to keep renting and and saving money in investment accounts. And as a result we set a record in Canada for youngest retiree but we didn't do anything heroic. Everyone can do this.
3290 - 3330 Jonathan Mendonsa It's really cool and I think what you guys have done is continue to challenge the norms that society tells you you have to do and in particular I see your focus being on this idea of first of all that you have to get a stem job you have to buy the house you need to be the loyal employee that works in the same career for 40 years. And then at some point down the road you can retire in the United States with Social Security or with your pension in Canada or some cases in the United States and you guys are just flip that on its head and everything gets more interesting. And so I'm curious one going back to our initial question of David who's in this position. What would your advice be for him and for his growing family. You know he's working on paying down these debts he's just discovered the fi community. Do you have any general thoughts or feedback you'd want to pass on to him.
career, debt, families, socialsecurity
3330 - 3361 Bryce - Wanderer from Millennial Revolution Well the solution for getting out of debt is is never take on more debt. So continue paying off debt and learn about how to invest learn how to use low cost index funds learn how to project how far you are from retirement and do that money isn't complicated but you do have to learn about it you don't get that known knowledge by default. So use use the blogs like ours use your podcast keep learning and soaking in information and you'll eventually be able to figure it out. And if he wants more specific advice because we don't have the actual numbers right into our site and then we'll do a better case study on him because that's what we do on our side.
debt, indexfunds
3361 - 3363 Jonathan Mendonsa Christy anything you want to add to that.
3363 - 3403 Kristy - FIRECracker from Millennial Revolution So basically my advice is to not follow the fear of missing out sentiments all the real estate agents pushing houses out you your friends saying you're going to miss out on this all the gain you need to really just decide for yourself because when you make emotional decisions you have to live with that for the rest of your life. Whereas a lot of the times when other people are pushing really really hard for you to do something it's really for their own interests. They have either they are really afraid that their house is going to go down and they need to be part of this big bubble and they need everybody to be on board. There's usually some kind of reason why they're doing that. So I would say don't fall into the FOMO mindset and make your decisions based on numbers not based on emotions.
3403 - 3439 Jonathan Mendonsa I think that's so fascinating in particular with regards to the idea of everybody is trying to sell you something. What is so compelling to me about our fi community and the different bloggers that we referenced in this podcast that you guys you know obviously have great connections with on your site as well as we don't have anything to sell you. We're just we're just saying hey the water's great over here we're having a great time. Come join us. Your life will be better. And I think that to me that is something that initially I kept looking for the weak spot. I'm a very skeptical person and when I heard this idea that you can retire early I was thinking what's the what's the trick to this. You know and there just isn't one. It's just the math works for you.
3439 - 3451 Bryce - Wanderer from Millennial Revolution We just want we just want other people to be just as happy as we are. That's our motivation. Because when you don't care about money anymore you don't have to go out and sell stuff that you don't believe in. Because I don't care I don't need any more money.
3451 - 3496 Kristy - FIRECracker from Millennial Revolution And to that point this is why we keep getting on a daily basis of all sorts of offers for sponsored post the basic credit agencies trying to get people into more debt. We say no to all those offers. It doesn't matter how much money they offer us because that's not once you have enough that is not what drives you anymore. What drives you is how can I give back and how can I help other people rather than my own naked interest of making money or my own naked interest of keeping by the value of my home up or my portfolio. None of that stuff matters. And that's why I think the fi community it's so easy for us to get along with each other because we really don't want anything from each other when you really know that people are just there to be authentic and to have your best interests at heart rather than just pushing things at you because they need a commission.
3496 - 3506 Jonathan Mendonsa All right guys well this was a lot of fun. We actually did cover a lot of ground I'm very excited about how this came together. But before we let you go we want to give you the chance to tackle the hot seat. Are you ready for this.
3506 - 3511 Kristy - FIRECracker from Millennial Revolution Yep. Let's do it.
3511 - 3538 Speaker In a world drowning in debt and rampant consumption trapped by the chains of lifestyle inflation these questions highlight the secrets of those who are broken free. Welcome to the choose F-I hot seat.
3538 - 3544 Brad Barrett All right. We'll start with question number one for both of you your favorite blog. It's not your own.
3544 - 3572 Kristy - FIRECracker from Millennial Revolution JL Collins definitely JL Collins because out of all the bloggers He is the one that gives you a step to step breakdown of how to invest and actually get to FI. I read a lot of blogs from other people which is great in explaining how to be motivated and how to save and all this stuff. But the really the JL Collins has the way has this way of breaking down investment advice that's easy for you to digest and it's very practical. So I would say JL Collins.
3572 - 3581 Bryce - Wanderer from Millennial Revolution Yeah I think. When we met up in Chataqua we got along famously for exactly that reason he he's one of the people that actually breaks down the investment side of it and tells you step by step how to actually do it.
3581 - 3596 Kristy - FIRECracker from Millennial Revolution Because there are so many financial advisers out there that really don't have your best interests at heart trying to sell you things that really just make them commission rather than teach you how to invest. And Jim just cuts through all basically excuse my language but just cuts through all the bullshit.
3596 - 3637 Jonathan Mendonsa Yeah I love that. And I think it's valuable to point out how much you appreciate and like what Jim's doing but aren't necessarily doing the exact same thing as him with regards to maybe your allocation. With regards to maybe the specific fund you're in and I think that's a valuable point to people that what. Jim laid out for us was this simple path to wealth this kind of framework approach your baseline of investment. And I found that incredibly valuable it has de-stressed my life in a very tangible way. And you don't need to agree with him on 100 percent of exactly what he's doing to still benefit from the framework. The other half of that is I appreciated what you were saying about financial advisors and I think it's very interesting because I believe you guys actually either do use a financial advisor or have used a financial adviser. And I'm curious about your perspective on that.
3638 - 3700 Kristy - FIRECracker from Millennial Revolution Yeah. So our financial adviser is actually independent so he's not actually working for any of the big banks. And the reason why we chose him as he has a similar philosophy to Jim's Which is he wants to like he he basically advocates for index funds which is unheard of when it comes to financial advisors. He doesn't need the money so he's independently wealthy. He's basically FI So he's not working for the banks and actually pushing product. And the first time we met him he actually called us idiots which is perfect because I'm very skeptical whenever someone's like oh you're a genius. And we could do all sorts of these tricks for you and get you 20 percent returns and I just do not trust any of those snakes. The snake oil salesman. With our adviser he actually told us because originally we were trying to do dividend investing and we are trying to just focus on the returns on the dividends and not focus on allocation and not thinking about indexing at the time because right then I think we were trying to copy Derek Foster's method of flat out index investing so he actually picked out a lot of holes and what we what we were understanding in our strategy. So that helped a lot.
3700 - 3706 Bryce - Wanderer from Millennial Revolution So the short answer is his name is Garth Turner. He's also a blogger. He runs the blog called greater fool. He's also financially independent.
3706 - 3713 Jonathan Mendonsa It certainly would not seem to be a great plan to to rely heavily on a financial adviser that was paycheck to paycheck.
3713 - 3714 Kristy - FIRECracker from Millennial Revolution Exactly.
3714 - 3735 Bryce - Wanderer from Millennial Revolution Absolutely. The industry is rampant with conflicts of interest. So we use him because it also gives us like a tax advice. He's also a published author so we helped him give his advice on how to publish our first book. He's also. So that's why we did it but the the methods that he uses are just the same that everyone else. All the FI bloggers talk about which is index investing. If he wasn't there we would have we would have we would be just as fine without him.
blogger, indexfunds, tax
3735 - 3805 Jonathan Mendonsa Historically I have always separated out certified financial planners from the FI community as kind of being at odds with each other. I have actually as we've been doing this more and more become aware of financial planners that are within the FI community. And I think there is room for those two to coexist and in fact really benefit. But I think what they're making money off of has to be different. Clearly in my mind charging for assets under management doesn't fly in my mind. I could never see myself recommending that. But on the flip side of that I will pay for information information that can actually increase or supercharge my path to FI that's extraordinarily valuable. So in that light there does open up a door for this idea of a fee only planner and specifically a fee only planner that whereas a bunch of different hats that can help mentor you down this road. And so we've started to make some great connections over the last six or seven months and I'm excited to see where that goes because the place that many of us start is you don't know what you don't know until you do. And clearly if you can align yourself with the right person that there is room. I appreciate seeing that you guys recognize that there is information that you don't have and that there is a person that can help guide you to that information. And I'm sure that the model that you guys are using is one that's mutually beneficial for both of you.
3805 - 3869 Bryce - Wanderer from Millennial Revolution Absolutely. But the danger about when people say oh use a financial advisor or any other robo adviser or well you know these kinds of companies when people say should I use it too. And what they're actually asking behind the scenes is if I just go with this guy does that mean I can stop learning all this kind of stuff. And that's the absolute worst way to use either a financial visor or robo adviser or if you just outsource your knowledge to somebody else then that somebody else can screw you. But so when I say so when someone asked me that question I keep I keep telling them that's not the right question I ask what you should be doing is learning how to do all this kind of stuff yourself. It's like figuring out how to build a low cost index portfolio, figure out how to create an asset allocation that works for you figure out how to rebalance it and do all kinds of stuff yourself when you can actually do that maybe then seek out a financial advisor or a robo-advisor that then add an additional layer of value. But if you just kind of go when when can I turn my brain off. Can I just go sign up with this adviser then you're going to be in trouble because nobody cares more about your money than you do. So that's kind of where I approach those kinds of questions.
3869 - 3921 Brad Barrett And this also speaks to not being doctrinaire about anything. I think that's what Jonathan and I try to be open minded here. And you know you just talked about hiring a financial planner right like that's something that while is generally looked down upon in the FI world you just made a compelling case for someone adding value to your life. And of course you're going to pay money for that right like I am. I'm a CPA so I theoretically should know accounting and tax but it's a huge industry and there are certainly holes in my knowledge so I'm actually personally hiring Keith from the wealthy accounting to help me with some consulting issues because he can add value to my life and save money. So I mean that's something that I'm not embarrassed about one iota because I'm learning in the process and I'm helping become wealthier and get to FI quicker because of spending that money. So to me that's an absolute no brainer.
3921 - 3959 Kristy - FIRECracker from Millennial Revolution Absolutely and sometimes it's all about having somebody who's there to guide you and having that support as well because some people. The worst thing you could do is just sell. When there's a market crash just freak out and sell everything. And some people know how everything works. But they would like that person to that kind of talk them off the cliff and be like OK this is why I shouldn't sell at the bottom of the trough and this is a long term game. And I you know I need to get into that mindset so sometimes it's helpful to have someone who actually has your back and someone who isn't trying to screw you by selling you all these bad products to just make you understand during that time because it is really scary and nobody will really understand how they will react when there's a market crash for someone to talk you off that ledge.
3959 - 3965 Jonathan Mendonsa Question number two your favorite article of all time and this can be one that you wrote or somebody else's.
3965 - 3997 Kristy - FIRECracker from Millennial Revolution I mean I have to go with JL Collins again why your house is a terrible investment and I don't think I have to explain why I love that article. It's just like when I read that I was like OK this is like he is my spirit animal. Clearly like we are extremely aligned on everything and in this article and I love how the comments. I think a generator over 200 comments and just had so much discussion over people who came on the blog and just started arguing about how that's absolutely not true and pride of ownership and that about things that have nothing to do with math it was just extremely entertaining to read. How about you Bryce.
3997 - 4029 Bryce - Wanderer from Millennial Revolution I mean like that that kind of inspired the kind of thing that we had towards the site. And then when we launched this and the funny thing is we became friends with Jim because he saw the video that's on the top of our site where Christie in front of a camera and basically yelling at rumors and the funny thing is Jim is a boomer. So. So he wrote back to his like Ha ha this is awesome. Let's talk and then we started like skyping each other like regularly and this kind of stuff and I was like wait a minute didn't we spend that entire video yelling at you. And then he was like yeah but you were yelling at us you yelling at me for the right reasons. So at that point we would be BFFs.
4029 - 4033 Brad Barrett All right guys question number three your favorite. life hack.
4033 - 4144 Kristy - FIRECracker from Millennial Revolution OK so favorite life hack actually comes from one of Brice's ex coworkers. So the life hack is the past doesn't matter. What do we do now. And this coworker of his actually came from a war torn zone. He lived there growing up and basically the advice was when something really bad happens like when you have no time to actually think about what's happening because people are dying and there's war. All you can do is just pick up a bucket of water and just put out the fire and do what it is that needs to be done to help at that point. You can't be blaming people you can't be pointing fingers you can't be like what reflecting what about what happened because at that moment you just need to do something you need to realize what it is that you need to do. And this became really useful advice at work because whenever people started pointing fingers at each other which inevitably happens whenever there's a software release something would go wrong and then the QA would blame the developers developers would blame the business allies they would blame the project managers and it would just be a huge mess. But then when in the midst of all this blame you're not actually doing anything to solve the problem. So I found this to be the best piece of life advice I've ever heard because any time that we run into an issue for example like one we have a problem with the flights or where we have a problem with accommodation. There's no fingerpointing there's no oh you should have taken care of that. And why did we not look at another place to stay and why did we mess up on the flight. It didn't matter at that point it was just like stop. We don't care what happened in the past. What do we do now. And I find that this advice is actually really useful in terms of FI and for finance as well because everybody has made financial mistakes in the past. Everyone. We're all human. We all made mistakes. Nobody is perfect. But the thing is you need to forgive yourself and move on. Instead of dwelling on what happened in the past just figure out what you need to do to fix your finances. Now the past doesn't matter what we do now to fix it. And it really has been life changing because every time we run into an issue we use this advice doesn't matter whose fault it is what do we do now.
4144 - 4187 Bryce - Wanderer from Millennial Revolution Yeah I mean like people when they say you know the two of us are going to be traveling all over the place and this kind of stuff it's like Oh you two are going to kill each other you are going to fight and we never ever do because we just do the anything anytime it anything goes wrong it doesn't matter. What do we do now. It really comes in handy when for example we do reader cases for people and people show us their numbers and show us or finance a lot of the times there's embarrassment there's shame involved just like I should have done this in journal that. And the first thing I do is it doesn't matter. Just pretend that the person who made mistakes in the past was a different person and that person's gone now what do we do now. And then that just resets the conversation and then we kind of go oh OK well I guess why don't we try this. Why don't we try that rather than we just either not want to show us the numbers or just be hung up on past mistakes like oh I shouldn't have gone to this much debt and this kind of stuff. So yeah it's just stop what you're doing. The past doesn't matter. Just move forward.
4187 - 4190 Jonathan Mendonsa Alright question number four your biggest financial mistake.
4190 - 4252 Kristy - FIRECracker from Millennial Revolution Ok so I've actually written a post about this it's called Confessions of a former Purse addict. And people are quite surprised when they read this article. They're like really you. So back in 2010 after we got married I started having this obsession about Coach purses and that was when I was in my buying phase where I was getting basically hit of dopamine to my brain by buying these purses and researching them online and things like that. Fortunately a lot of them were actually returnable. So I think I got up to my fifth purse and then at that point I was just like wait why am I. Why am I doing this like this is not I don't need all this stuff like it's the consuming part of me that's taking over rather than the creating part because at the time I was trying to write a children's novel. So I at that point I kind of snapped out of it and then I went back to writing but that basically just shows that anybody can be susceptible to all this marketing. Like all the marketing on the Internet and basically your friends trying to show you that you're missing out on this great thing. So I would consider that probably my biggest financial mistake but luckily it didn't really do that much to my budget because I just returned all the purses.
4252 - 4270 Jonathan Mendonsa It also strikes me that the flip side of that is even cooler and it's how quickly your interest can be changed and if you can get that dopamine fix from maxing out your 401 Ks or from just firing on all your FI cylinders you can get dopamine from things that actually advance your financial future. You know in a really really cool way.
4270 - 4287 Kristy - FIRECracker from Millennial Revolution Exactly. And that's the thing when you're actually creating you end up having this like it is this energy that and happiness that keeps going versus when you're consuming it. It's very short. It's short fuse all this on it's gone and then you have to get more right. So that's what I discovered that then that it was a lot better to create than consume.
4287 - 4288 Jonathan Mendonsa Bryce anything to add to that.
4288 - 4314 Bryce - Wanderer from Millennial Revolution No I mean I heard. That's why I wanted her to tell hers because her storie's more more interesting for me. For me it just I would honestly kind of go. I didn't really like just out of kind of coincidence. I didn't really step in it too badly. The only thing I would really change is maybe actually go 100 like a with a higher equity allocation back then and in 2008 I would have it would have bounced back a lot higher but that's you can't complain too much after not losing any money in 2008 so I don't I don't have any too many things I regret from that period.
4314 - 4323 Jonathan Mendonsa No don't be embarrassed Brad and I are making a wall of fame of the few people that have been able to successfully say I don't think I really made any financial mistakes. It's a short list. You're on.
4323 - 4324 Bryce - Wanderer from Millennial Revolution Cool.
4324 - 4330 Brad Barrett Yeah we're up to a couple now. Very very nice. All right question number five. The advice you would give your younger self.
4330 - 4385 Bryce - Wanderer from Millennial Revolution I think I think it's OK to make mistakes especially when it comes to starting investing. They get really scared and that goes through this kind of analysis paralysis kind of thing where especially when you start investing there's so much stuff going on so many do I buy this mutual fund do I open this brokerage account what do I put inside of a 401k or what I put inside of like a roth IRA and this concept and because there's so much complexity seemingly complexity to investing it makes people just kind of freeze up and say I'm not going to deal with this now maybe I'm going to deal with this next year. And that's actually the exact wrong way to do it because what you want to do is you want to get in there and try it and you want to make mistakes early on in your career. And when there's not a lot of money involved and the longer you kind of delay that figuring out how money works the worse off shape that you get or your retirement gets delayed because you are doing things that it takes more time to compound. And that just hurts everyone. So it's just like go ahead try it out make mistakes and learn from them and then recover. And that's kind of what I would think I would tell my my my younger self.
401k, brokeragechoice, career, ira, roth
4385 - 4395 Jonathan Mendonsa Nice guys. We do have a bonus question for you guys. Your favorite purchase made on Amazon.com last year or if not Amazon I guess you know an alternate third party online vendor.
4395 - 4416 Bryce - Wanderer from Millennial Revolution Honestly probably our plane tickets to Chatauqua because that was the last best spending ever. That was the coolest thing I've ever been privilege of participating in as a speaker. And once we did that and we realized how much we enjoyed like actually just it you know Face-To-Face helping people with their with their finances and this kind of stuff we're just kinda like oh man we're going to do this more.
4416 - 4425 Jonathan Mendonsa All right. Well maybe that will be an opportunity for us to explore the future give you some more opportunities to do case studies on the choose FI podcast maybe in the future. But we're going to see you guys soon maybe at fincon right.
4425 - 4426 Kristy - FIRECracker from Millennial Revolution Yep.
4426 - 4431 Jonathan Mendonsa And then I hear rumors that maybe you're be joining us at Camp FI in Florida next year is that a possibility.
4431 - 4434 Bryce - Wanderer from Millennial Revolution Yeah we're still figuring out the logistics on that one but definitely for fincon.
4434 - 4452 Jonathan Mendonsa Alright you guys. Well before we let you go there's a ton of people that for sure going to want to connect with you guys not only to our Canadian audience. That is very interested in your take on their specific situation in the housing market but just generally speaking this reframing of the problem that you guys have tackled. And what is the best way for people to get in touch with you.
4452 - 4470 Kristy - FIRECracker from Millennial Revolution So they can e-mail me at firecracker dot revolution at g mail dot com. Or they can go to the website at. W w w dot millennial dash revolution dot com millennial has two ends just in case some will spell it with one n.
4470 - 4481 Brad Barrett YUp and will definitely link that up in the show notes so don't worry about that. And yes we'd love to have everybody keep in touch with you it's a wonderful blog. It's absolutely hilarious. So definitely check it out.
4481 - 4482 Kristy - FIRECracker from Millennial Revolution Awesome. Thank you so much for having us.

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