It’s official – I’m a millionaire. A part of the 2 comma club. The 7-figure net worth club. I have my first million. Wow, it still feels weird to type. They say the goal is to retire young and rich. If that’s THE GOAL then I guess I’m done…that’s it – no more goals for me – I’ve achieved it all. Because hey, being a part of this elite club where it’s all champagne and red carpets is the be all end all – right? Well, not really – I feel the exact same having reached this goal as I did before I surpassed the million threshold. I do love having the freedom to do what I want, when I want. I never have to work for anyone ever again – it’s an amazing feeling. The best purchase I’ve ever made was buying my freedom. Want to know how I did it? Stay tuned. To be honest, being a millionaire was not really part of my original goal. My original goal, when I set out on this journey 7+ years ago, was simply to reach financial independence and have the ABILITY to retire early (which clearly doesn’t need to require a million dollars). It has always been about buying my freedom – the freedom to have FU money – the freedom to choose anything, anytime. In the beginning it was fueled from a burning desire to not have to work in a job I didn’t LOVE (which up until now has been every job I’ve ever had).
If you have followed my other posts then you know that, goals without measurable objectives are just dreams. If you don’t break a goal down into a set of smaller objectives you will likely never achieve it. The goal of being able to retire or being FI (financially independent) can be objectively defined as having 25x your annual expenses in account (such that you can live off the interest only, leaving inflation adjustments in the portfolio each year – aka the 4% safe withdraw rate re-engineered). Given my idealized spending levels of about $2000/month to live a KICK-ASS middle class lifestyle, I need about $625,000 in net worth invested to be FI and retire. So, a million is way more than is necessary. In fact, given my current Duplex Living House Hacking living situation with a tiny house as an additional source I don’t even need much more than $250,000 to be considered FI or retired. However, I am extremely conservative and continue to ask myself the “is it enough?” or “will it last?” questions that lead one to never truly retire and be happy. When is enough, enough? I think we can draw a clear line in the sand that 25x your annual living expenses in a portfolio (not including non-investable assets like vehicles or technologies etc.) is the cut-off. It’s the point where you are now FI. One could conceivably fade in and out of retirement if they let their living expenses creep up and lifestyle inflation to destroy their portfolio. At a $5000/month spending level one needs well over a million in their portfolio to sustain their living – and it’s much easier to control ones spending than it is to earn a million dollars. I strongly advocate for controlling spending – learn to do MORE with LESS.
Okay, so how did I do it? The answer isn’t as sexy as you might expect – primarily I did it through saving and investing while working an average job and creating an extraordinary side hustle in Real-Estate. I like to think I saved my way entirely to financial freedom but the truth is I also did extremely well in Real-Estate with a unique angle in buying properties and converting them into cash flow machines through renovation and remodel. I’m going to walk you through my net worth figures (all assets minus all liabilities = net worth) for the last 8 years from the age of 18 until 25 to give you a clear picture. If I hadn’t gone to university and later Ivey I suspect I’d have retired much sooner. I plan to add in notes along the way to explain large jumps (like the double in net worth over the last year largely due to Real-Estate appreciation – both forced through renovation and organic in my local market).
Here is the net worth progression to the best of my memory…Here goes a trip down memory:
Year 1 – Age 17-18 (I’m in my 1st year of University here), approximately 0 net worth, but it was about $13000 prior to paying my tuition. I had just used my $13,000 in savings from my high school job at Tim Hortons to pay for my university tuition and living costs. I’ve had a job working 20-30 hours a week since high school (it was minimum wage, but hey, it was a job!)
Year 2 – Age 18-19: $18,000? (I had a great summer job and an awesome side hustle where I was able to earn and of course save over $10,000 working for the Canada Border Services Agency commercial division – I worked so hard to get this job!). During this year I also picked up a number of great scholarships and a great part-time job working at the university as well as tutoring – amounting to over $15,000. I received a contribution to my education from my RESP my parents had put away for me (which we let grow in year 1 since I was able to self-fund my first year). THANK-YOU SO MUCH – without this it would have been nearly impossible to get through school debt-free and given the below poverty income of my mom this is very commendable – you are awesome! This whole year I lived in a tiny 7 by 8 foot all-inclusive bedroom near the university for $299/month (ALL IN). Keeping expenses low was the key to my success. FRUGALITY. While everyone else drank & partied & traveled, I worked, studied hard, and became consumed with personal finance! I was dead set on retiring by the age of 29.
Year 3 – Age 19-20: approximately $75,000? – this includes our 1st house which I spent hundreds of hours learning to renovate and turning into the perfect HOUSE HACK rental situation. Almost all of our net worth was in the house at this point and all of our earnings went towards my expensive $27,000 annual tuition. The roommates and basement apartment I made covered all of our living expenses – I do mean everything, including food. We lived FRUGALLY! My girlfriend, now wife, is included in this total because we decided to buy a house and move in together around this time (we’d been dating for many years at this point). We opened joint bank accounts and have been sharing all of our savings together since. Her parents had covered the cost of her college education and she worked as a residence advisor earning well over $10,000 per school year. We split the downpayment on our first house 50-50 and I was able to convince a bank to give us a mortgage (due to a number of factors – after receiving about a dozen NO!s from most other institutions…after all our parents weren’t wealthy and we were students). My wife graduated from her 3 year program in GRAPHIC DESIGN and began working a full time job making approximately $38, 000. I did dabble a little bit with day-trading and active investing with spare funds between having to make tuition installments, but I never made more than a few thousand.
Year 4 – Age 20-21: Approximately $90,000 – again most of the net worth is in our house and our shared car. We did well just to survive my $30,000 tuition and books costs associated with my last and final year of the Richard Ivey School of Business. Our increases in net worth were due to a small stock portfolio I had built up from my side tutoring business and part-time job, and the forced appreciation of our house through renovation. Again, this entire year we lived for free with the HOUSE HACK scenario we created. Living for free is awesome! See my house hacking articles. My wife worked full-time again making about $37,000 canadian. Side hustle as a tutor making $30/hour cash about 10-hours per week lasted well into my 5th year (while working at my FT job). Side hustles are awesome!
Year 5 – Age 21-22: ~$150,000. I’m working full-time as an IT Consulting Analyst ($50,000 base salary) in research after graduating at the age of 21 with an Honours Professional Business Degree from the Richard Ivey School of Business in Finance & Accounting. We got married just after I graduated school, but before I started working. We did this on a budget! My wife is working Full-time in graphic design, but was laid off (due to a merger) for part of this year until she found a new job about 3 months later …in marketing again making about the same salary (37,000). We continued living in our first house for free with roommates and a tenant in the lower. A few of these roommates have become life friends and I don’t regret it at all! Living for free was awesome. This year we saved around 95% of our after tax salaries due to the house hacking situation. I became obsessed with retiring early driven by my hate for getting up at 7am to go to a job I hated 50-60 hours a week. I put on a good front and was focused on getting promoted so I had to work hard and put in a lot of FREE Over Time. I looked to Real-estate for better returns than I was getting in my stock portfolio. I had the gun powder now to put a downpayment on at least a second or third rental property. I purchased my second rental property at the end of this year – a duplex near the university.
Year 6 – 22-23: ~200,000-$250,000 – depending what you value my properties at net of commission and closing costs. Both working full-time. I am promoted to Senior Consulting Analyst – $55,000 base salary, a tiny bonus of $1000 for performance. Wife in the same role, same salary $38,000 – but she had a defined benefit pension plan (essentially they contribute a percentage of her salary to this plan which we ported to an RRSP when she retired from her job in 2017). Her total compensation might have been around $40,000. We acquired a 3rd rental property and decided to sell our first home sometime around here giving a lot of equity cash-out. We decided to buy a lot and build our DREAM HOME– a 5 bedroom, 4 bathroom, 2+ car oversized garage new modern California style design inspired stone brick house. This was a stupid idea in hindsight. Thankfully, I’m an optimizer at my core so I used my thriftiness to acquire materials well under market value, negotiate amazing deals with the builder (I got them to throw in free Granite counter upgrades etc.), so, in the end we built this house below market value. We moved into this house and no longer enjoyed free-living. Thankfully I am a shrewd negotiator and great at deal hunting – I managed to find a 2-year fixed mortgage with a broker on ratespy.com (no I’m not getting paid to promote them) at 1.84%. Yes, I was borrowing at well below 2% interest – 80% loan to value. This is a key success factor in my real-estate portfolio as well – I played lenders against each other for my business and always got the bare bottom market price. I avoided things like CHMC insurance, shopped for the cheapest insurance rates (40/month/property) and always got the lowest cost material/labour. I cranked out great rents from the properties I had – I suspect around $900/month net profit per property (about $1800/month) which we used to supplement our living costs in the giant house (which surprisingly had a very low mortgage payment that was similar to someone with half the house cost because the rate was so low we effectively paid no interest). I should add that we also lived in a rental condo (owned by our builder) for 5 months between selling our old house and moving into the new one – which the builder paid for entirely since they screwed up on our contract. This was an awesome win! Throughout this time we added a basement apartment to the new house where we lived. Savings rate well into the 80% range during this time for both our salaries – we were saving like crazy. I think during this year we were definitely saving over $6000/month – nearly all of our after-tax. By the way, I’ve paid almost no tax because of tuition write-offs, rental write-offs etc. that were carried over from my expensive education and many renovations. We sheltered income in RRSPs, TFSAs etc.
Year 7 – 23-24: ~$500,000. Promoted to Manager ($60,000 base salary). Wife still around $38,000 base salary buts he is off on maternity leave this year making 55% of her salary on Canadian EI. Acquired another rental property (#4), and then just after I turned 24 I acquired 2 more rentals. At this point we are living entirely off rental income, even in the big dream house. We decide we want to downsize into a duplex as our end-game. We love the idea of having double or triple what we need to live coming in passively as a safe hedge. Best of all in this year – my daughter was born. My daughter was born when I was 23 and it was a small setback in terms of my financial trajectory due to the immense time and energy a newborn requires, but it was the best thing that ever happened to me. I wouldn’t trade it for any amount of money. Just because you have kids isn’t an excuse not to retire! In fact, it motivated me to retire that much sooner – since we are strong believers that time, and not just money, spent is critical to good upbringing. Spend time with your kids, not money. They don’t want you to work, to make money to buy them things…they want you to spend time with them and give them experiences!
Year 8 – 24-25: ~$1, 000, 000. Put our house up for sale and sold it for a tidy profit given the strategic upgrades we made (we built the house with resale value in mind– we avoided upgrades that didn’t have good resale value – like custom lighting or personalized upgrades). I acquired 7 more rental properties in this year. 5 of these properties were done as joint ventures – up until then I hadn’t joint ventured a property, but my buy, renovate, refinance, rent strategy was starting to gain traction in my friend circles (I was making money fixing up properties with both equity and mad cash flow) and a friend of mine offered to fund our deals to create more cash-flow – we bought 4 properties together. I quit my job in 2017 at the age of 24. My Wife quit her job mid 2017 as well. We moved into one of my bungalow rental duplexes acquired in 2015 (the one I converted into a duplex from a single family). We live on the main floor in the 3-bedroom unit and it’s amazing – we have a super modern 1000 square foot home all on one floor with a guest room and a huge treed, fenced backyard off the back deck. We enjoy our Tiny House as an addition source of income through AIRBNB and the lower apartment covers our mortgage and property taxes. We are living the dream! I retired at the age of 24! I realized I wanted to sell my portfolio and cash-out because I’m too heavily invested in Real-estate and I’m looking to create more passive income (I don’t want anymore tenant calls! And I don’t want to manage a manager – I’ve already fired 2 property managers!).
Now – January 2018: I am 25 still. Current Net Worth over a million (depending how much you value my real-estate holdings net of commissions, closing costs, and tax liabilities). We live in the duplex w/ tiny house in the side yard and we love it. For now, it’s our slice of heaven. I’m working on divesting my real-estate portfolio. I went from 15 properties down to 10. I have 3 more properties set to close before 2017 is ended, so I should be down to 7 properties. The goal is to scale down to 2-3 properties and a large ETF portfolio sprinkling in tax-preferred dividends that cover about 2x our annual expenses. In our current situation (if you include the rental income from our other unit in the duplex and the Tiny House revenue) we collect well over 3x what we need to live each other.
Well that feels like a really short summary of the last 7+ years of my life – I’ve left a lot out. I feel as though I could write a book about all of the things that happened over these past years. I’ve omitted some of the best parts of my life over this time for the sake of space. Perhaps I should write a book on this – if anyone actually wanted to know. My message is a lot more important than my story! Spend Less, Earn More, and Invest the difference with a focus on Maximizing returns! You’ll have your freedom sooner than you know (often less than 5 years).
Notes – Approximately $400,000 of this current net worth was just saved from our day jobs. If invested in the S&P500 index passively over the same time horizon I’d have approximately $680,000 and be financially independent without having invested in any real-estate other than my first house which we lived in as our primary residence. Let’s not forget another $250,000 of this net worth was saved from rental income profits – not appreciation. So, about half my current net worth came from gains in real-estate, many of which were forced appreciation through renovation work. My local market Real-estae has appreciation about 10-15% since I started this journey, much worse than the S&P500, and slightly better than inflation. However, I was able to use leverage to my advantage – see my previous posts about the power of leverage! $500,000 in capital/cash can get you a $2,500,000 real-estate property portfolio at 80% loan to value using leverage). So, a 10% increase in value = $250,000. Therefore, 10% increases in the real-estate property portfolio lead to 50% increases in your invested cash and capital. 50% return on investment is fantastic! (What this doesn’t include is return on stress and return on energy and return on time – all of which are terrible with real-estate when compared to other, more passive income streams).
The key success factor is saving and living frugally. A lot of people could make the type of money we made and spend all of it on fancy cars, lavish dinners out, fancy trips etc. A lot of people also could have the net worth I have now, maybe even at my age, and still not be retired because they don’t know how to make a dollar stretch (keep the spending down and live frugally!) MORE with LESS!
Despite having reached my #1 goal of financial independence and retiring early before the age of 25, I still set goals for myself because without a purpose …well life is pretty boring – we all need goals to work towards. We all need to find our purpose. I think my purpose is to be a great dad, husband, and educator! Let me be your Money Coach!