I have these flashes burning in my mind at times….

A few days ago, I took a day off in the middle of the week to go to the spa with my wife. We had breakfast together, spent the day relaxing and came back at 5pm to pick-up our kids and fall into our family routine. Taking days off like this is one of the most powerful things that could happen to my mind. It’s an amazing time helping to me disconnect from reality.

When I arrived at the restaurant for breakfast, I had this flash again: Why is this not my life each week? Why do I work most of the time when I could be enjoying life fully?

I’m sure you’ve entertained these kinds of thoughts at one point or another in your life. Waiting to hit 65 and to finally retire doesn’t resonate with me. I’m 31, turning 32 towards the end of the year, so waiting another 33 years is way too long to wait before enjoying life fully. I’ve mentioned a few times that I want to become a millionaire quickly in my life. My online company is the main factor that will determine if I will worth over $1M or not. At the moment, it looks like I won’t be able to create the growth I need from my company to be worth that much in 4 years. Does this mean I can’t retire at 35? Let’s find out!

WHERE I’M STANDING NOW

According to my latest net worth statement, I show a total debt of $312,303. The first point to retire early is to kill your debts ASAP. Less debt means less income required to make everything work and then, it’s all that much easier to pull the plug and enjoy life! Here’s my debt situation in detail:

In the next four years, I’ll pay able to pay off my personal loans in general as well as for the car and pool. At this rate, I think I should be able to clear my personal line of credit as well. Therefore, the only debt that will stand will be my mortgage. I won’t be mortgage free in four years, far from it, but I can concentrate on that debt solely. However, I will consider a car loan payment as I will always have to pay for one car loan at least…

HOW’S MY BUDGET?

Now that I know that most of my debts will be gone, it’s time to take a look at how much do I need to spend monthly to keep my current lifestyle. If I calculate a $250K mortgage at 5% over the next 25 years, this makes a payment of $1,500.

When I add all my expenses together, I need $5,787 per month to keep my lifestyle as is. This includes all my expenses + $325/month for my childrens’ tuition (RESP contributions). I won’t consider any RRSP contributions at this point since I will already be retired. I just need to generate $5,787 per month. Let’s put it at $6,000 to make sure we are safe.

I’m well aware that $72,000 per year (after taxes!) is a lot of money to generate in order to keep my lifestyle. Am I exaggerating? I don’t think so as we spend $1,200 in groceries (a family of 5 requires a lot of food!). Since we eat a lot of vegetables and fish, it’s getting expensive… I have also considered vacations, car maintenance and home improvement/maintenance in the budget. Basically, everything is covered .

WHAT I CAN DO IN FOUR YEARS

There are a few things that can be done in order to make this dream happen. The first one is the level of bonus I can get from my day job for the next four years. Technically, this amount varies greatly from roughly $15,000 to…. $100,000! I don’t expect to make $100K in bonus as this would be an exceptional year. However, if I can maintain an average of $25K to $30K per year over the next four years, this would greatly boost my debt repayment. On top of my regular monthly payment, if I add an additional 10K per year (‘cause there are a lot of taxes applied to the bonus!), I could drop my mortgage to 200K or maybe lower in four years. This is definitely something I have to work on…

Cutting down on my budget could be another thing I could do… but you and I both know this ain’t gonna happen. If early retirement means not drinking wine, not eating great food, not going on vacation and not keeping my big house, it’s not gonna happen. There are things I’m ready to sacrifice to retire early, but not my lifestyle.

The next big factor will be the amount of cash my company can generate in the future. I’ve previously wrote that I could draw $3,000 monthly from my online company tomorrow morning without firing anyone. Note that in that post, I wrote I need $5,000 per month to live but I think that $6,000 would be more realistic over the long run . I think I could definitely grow my online company a lot faster if I was working 40 hours per week on it instead of 10! But would it be considered retirement?

WHAT’S EARLY RETIREMENT ANYWAY?

I guess it all depends on your definition of early retirement! Two of my university buddies took that route a while ago and they are living freely without being fully rich per se. The difference is that they work hard sometimes and take long vacation throughout the years as well.

I don’t see myself doing nothing to going to restaurants and spas I think will need challenges to make my life worth it. However, building your own empire is something truly exciting. If I have to work 40 hours a week on my computer and have the opportunity to take 2-3 months off per year, I think that’s early retirement. If I can take my 40 hours per week at the moment I want to do it throughout the day, I think this is early retirement.

Basically, for me, early retirement is simply doing what you love to make money when you want to do it.

WHAT THE WORSE COULD HAPPEN?

After looking at my situation, I think the worst would be to retire at the age of 40 or 45… seriously. Each year working at the bank means at least 10K in debts paid off + 10K in additional savings (considering my employer stocks, pension plan and RRSP contribution). So If I wait until I’m 45, my mortgage will probably stand at 150K or maybe lower where my RRSP + pension plan will be sitting at over $250K.

I truly start to believe that at worst, I’ll be retiring at 45… I can’t technically not imagine waiting at the age of 58 where I would reach full pension at my day job… that’s quite interesting already, isn’t?

INSPIRATION FROM WHO’D DONE IT

Throughout the years, I’ve had the opportunity to meet with a lot of people who had accomplished early retirement as per my definition. Some of them are doing it the extreme way (cutting down their expenses and live frugally), I’m not this kind of guy Some others are making a lot of money and enjoy every moment of life too. I guess it’s all in the balance of life!

Here’s a short list of people I’ve met and inspire me to live freely and work for my own pockets…

Quinn @ Cubicle Free

This guy made over $400K in one year from one if his website a few years ago. He is now living freely and keep working on his online empire.

Pat Flynn @ Smart Passive Income

Pat is continuously working on blog and other web projects. He is definitely not retired per se, but he can truly do whatever he wants with the amount of money he is making right now.

Sam @ Financial Samurai

Sam has taken the hard way of working hard in a very demanding field and save most of his income to achieve early retirement. I’m not willing to make those sacrifices but man, this guy is inspiring!

Mr. Money Mustache @ Mr. Money Mustache

Once a successful engineer, I’ve meet Mr. Money Mustache at FinCon12 in Denver. This guy applies the true meaning of early retirement extreme by living frugally.

Joe @ Retire by 40

Joe recently stopped working and now takes care of his family. This is another great example of someone who had worked hard to save money aside.

Adam Baker @ Man Vs Debt

My friend Adam is living from one project to another without really worrying about the future. His life is quite inspiring while I’m not sure I would be willing to be on the edge all the time as he is!

Martin @ Start Free Lancing Now

Martin (MD!) did exactly what I should have done after my bachelor degree: never get a day job! I’ve been stuck in the golden pay check dilemma for years now while he enjoys freedom by working on his own websites and other gigs.

Readers, do you have other inspiring people pushing you toward financial freedom and early retirement?

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Do you want to be rich?

I always thought that being rich meant living in a mansion. I figured that if I had a million dollars one day, I could buy the best house in town. All I wanted was a nice house and maybe a little Ferrari. Then I grew up and realized that for a million dollars I could only get a nice condo in downtown Toronto. I learned that a million dollars isn’t all that much and that a nice house will depend on where you want to live. You can get a mansion in the middle of nowhere for the same price as a tiny home in a big city. But I digress.

What does being rich mean to me now? It means to be flexible enough to spend money on what matters to me. It means to have the money to do what I want to do without stressing about it or putting everything on my credit card.

I wanted to share a story with you guys today.

My parents are both immigrants. They came to Canada in the mid-80s and struggled from the beginning. They always worked hard and gave us everything they could do. I imagine it’s not easy raising three boys.

I know that I can never pay them back. But I can try.

I really wanted to surprise them one year. I’ve always wanted to send them on a trip. I had some good money saved up in one of my savings accounts. I really wanted to shock them. I knew that $1,200 was a lot to hand over. I wasn’t sure if I could spend this money.

I finally just said screw it and decided to buy them an all-inclusive trip to the Bahamas. It was a lot of money but I knew that they deserved it. They were totally caught off guard when I handed them a card with a piece of paper in it. They didn’t know how to react. At first they were upset. Then they were happy because they realized they got to avoid the Canadian winter for a few nights.

I see being rich as being able to spend money the way that I want to. Due to my frugality in some areas, I was able to spend my savings on sending my parents away with a pretty sweet gift.

I wanted to look at two important questions…

Does being rich mean that you can afford expensive purchases?

Not always. It just means that you can prioritize and have anything that you want with some planning.

The problem with most of us is that we want everything at once. That’s fine if you inherit some money. Realistically, we can have anything we want with some planning.

You should be able to consider yourself rich if you have the ability to plan for purchases and buy anything that you desire with some time.

Does being rich mean that you don’t have to work?

For some the idea of being rich involves not having to work and freedom from the 9-5 world. For me it’s the choice to work when you want and how you want. It means that you can quit a job that’s causing you stress without worrying about what you’re going to do next.

I had a debate once with a buddy who made way more money than me. He makes great money but has to break his back for it. He says it’s worth it because he can maintain an expensive lifestyle. I said it wasn’t worth working 16 hour shifts because you’re missing out on life. He could easily work less hours and just cut back on junk. However, it’s important to note that we all have our own life philosophies. To me being rich involves having more time and flexibility. For others, a lavish lifestyle is what makes you rich.

This is why I’m curious to hear…

What does being rich to you?

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I’m writing this post while still on vacation, but something just struck me and I need to share it with you…

Not so long ago, I was sitting on a nice balcony, glass of wine in hand, talking with my wife about how great our life is; we are young, healthy and have awesome kids and great friends to share our happiness with. We were at the vacation property we rented, right after all our friends left after a great weekend where we had fun, ate well and laughed a lot. This is when my wife looked at me and said:

“Why don’t we go home early?”

And she laughed.

That question was a half joke half statement. We are living a great life at home, why would we want to rent a vacation property for a week? This is when I start thinking about mini retirement.

Do You Believe in Mini Retirement?

If you have read The Four Hour Work Week you probably remember Tim Ferris’ mini retirement. In his book, he suggested that we should enjoy life right now through mini retirement (6 to 12 months trips) instead of working all your life and “pulling out the plug” at 65.

This is surely an appealing concept since we would all love to learn to work just enough to go to our next mini retirement and enjoy life most of the time. Unfortunately, after we dream a bit, reality is waiting at the corner to slap us in the face so we realize that our day job doesn’t let us do this (thanx to the Dream Crashers!). It’s also very hard to picture a family of 5 in mini retirement as the whole process described in his book looks like an individual goal. I’m not saying you can’t do it, just saying that things get a little bit more difficult when you crunch your dream with reality.

This is why I had in mind to retire early. My worst case scenario includes a complete retirement at 55. But I’d like to retire much younger than that. Here again, you can tell me it will get harder when I try to match my fairy tale with reality!

If Retirement Is Far Away And Mini Retirement Is Nearly Impossible – What’s Left?

This is when I came with a new idea: why not transform my whole life into a mini retirement?

And this is when I noticed that I’m almost there already!

1. I work 4 days a week at a job that I love
2. I benefit from passive income
3. My wife stays at home which definitely increases our level of happiness
4. I enjoy a nice 6 figure income and don’t lack for anything
5. I live in a nice house with enough land to enjoy privacy when I’m on my patio!

You work all your life to finally stop when you are dead tired and hope to live healthy for a dozen years before slowing down for good (do you know a lot of marathon runners at the age of 77?). But I found that there is another option: you could start enjoying your life right now and never have to wait until you’re retired.

Since I still can’t do an early retirement extreme, I have to focus on something else. The concept of enjoying my life right away is similar to a mini retirement. The only difference is that I need to reduce the word “mini” to “teenie weenie” and take three days off in a row each week instead of 6 to 12 months like Tim suggests. Since I work four days a week already, it’s not impossible to achieve. On my “work week day off” I usually do some blogging (for about six hours). I actually enjoy this time alone in my basement and would probably continue to do it anyways if I was going to retire.

Then, what I need to have is a list of things I normally do on vacation or that I would do if I was retired. When you think about it, things shouldn’t be that different once you are retired. But have you noticed that you may do things you never do while you are on vacation? For example, I never read a book during the year. The only time I read books is when I’m on vacation. However, I spend countless evenings at watching mediocre programs on TV once the kids are asleep. I’m starting this very week to read once a week in order to enjoy more books from now on!

I recently came back from a soccer tournament where I was coaching. This was such a fulfilling experience that I thought I should do more of this during my time off. I don’t need to wait until I’m retired to get involved in my community, I just have to use my “boring” evenings and transform them into mini-retirement as well!

How many times do you do something that bores you to the bones but still do it anyhow? I think that retiring is synonymous with doing what you like. But if you don’t do it while you work, why would you start when you retire? I think this is something to think about

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“Who fails the most usually wins.” — Seth Godin

I recently read the book, Poke The Box (Seth Godin), and totally loved the general idea behind it. This book got me thinking about the idea of failure and taking risks in your 20s.

After reading this book, going through personal experiences, and reaching out for feedback, I wanted to put together the brief guide to dealing with failure.

My thoughts might be a little bit scrambled. I just wanted to get all of my thoughts on failure out there in one article.

You can’t always play it safe. This is my main belief when it comes to trying new things and failure. Obviously nobody wants to fail or be viewed as a failure. However, that’s the risk that you take when you don’t play it safe. That’s the risk that you take when you do something a little dangerous.

There’s also the other side to not playing it safe. You can see some huge rewards. You know the classic saying, “the greater the risk, the higher the reward.” This holds true both ways. Great risks could lead to failures or they could lead to a huge success. You don’t have to look far for examples.

Being realistic isn’t about giving up. Too often do we avoid doing something, give up, or play it safe just because we want to be realistic. I find that being realistic is just an excuse to give up. I don’t think Mark Zuckerberg was worried about being too realistic when launching Facebook.

I totally recommend getting in the habit of starting things. It’s important that you plant. Following trends and doing the same stuff as your friends is easy. The real risks come in starting different things. This is why sometimes you have to throw yourself out there and see what happens. This is what happened with my first eBook launch. I started something new and learned from the experience.

At the end of the day you need to remember that failure is not fatal. Failing is just an event. One idea doesn’t work. You have the opportunity to give up or move on to the next plan. Failure isn’t the end of the world and it certainly isn’t the end of your goals. It’s just a one time thing. What’s the big deal?

Remember my article on the full-time blogging reality check? I vented about how the launch of my first premium guide was a complete failure. I was totally frustrated that I put in so much work into something and saw no results. When I wrote the article I felt like giving up because I had failed. Instead of feeling sorry for myself, I decided to go back to the drawing board and work on something new. Recently I released Start Freelancing Now and sales have been much better this time around. I also love the concept and have been able to coach some really ambitious people.

I plan on going and going. I’ll likely fail many more times, but who cares? Who remembers the failures?

You can compare this to your romantic life. If you didn’t take the courage to ask your current partner out, you would be regretting it. If you never took a chance or put yourself out there, you would feel much more worse. Not trying is a lot worse than failing if you asked me,

The truth of the matter is that not starting is expensive. Failing is cheap. Not starting means that you don’t do anything. It means that you don’t take action and don’t try anything new. Do you really want to regret not starting?

Have you failed at recently? Have you tried anything cool? Share your failures and we’ll laugh together.

“Just hanging out has nothing to do with boldly going where no one has gone before.” — Seth Godin

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Last week, I posted my net worth statement showing a great increase in terms of net worth and, unfortunately, a big increase of my debts also! Lance @ Money Life & More pointed out that my asset increase was based on illiquid assets:

My Pension Plan (+29.2%)

My Home (+1.7%)

My Online Company Shares (+34.2%)

These three assets grew by $48K! This wasn’t a 1 month increase but a yearly update that I do. It was a coincidence that we reassess the value of our company and I received my pension plan statement in the same month. Since I added a pool to my house, I decided to increase my house value at the same time. Nevertheless, none of these assets are liquid. My pension is frozen for the next 30 years, my house would take six to twelve month to sell and my online company shares are based on a personal assessment and I doubt I would be able to sell them overnight. The assigned value is more to reflect the dividend it generates as a “real” cash flow into my pocket.

Is Liquidity a Problem?

One of the basics of financial planning is to acquire insurance… and then an emergency fund. You can build you emergency fund with two techniques:

1-      You put money aside

2-      You open a line of credit that you don’t use

In my financial structure, I have decided to use my employer stocks as my emergency fund. I invest about $650 per month so my emergency fund is building up quickly. I do have a risk of market fluctuation. If the stock was to fall by 50%, I would lose 50% of my emergency fund temporarily (this is what happened back in 2008!). However, since my employer is adding 25% to my savings, I have a buffer of 25% + a dividend yield of almost 4% before losing “my money”. I preferred this way of savings instead of dropping my cash into a money market fund at 1%.

I Have Too Much in Illiquid Assets

While I’m happy with the way I’ve setup my emergency fund, I’m not happy with my overall asset allocation. Besides my employer stocks, I have no other assets that can be accessed quickly. I do have my RRSP account (which is a retirement account) but I would be taxed fully on any withdrawals. This is definitely not a good strategy! When you think about it, most people are stuck in the same situation; they have a house, a retirement plan and… nothing else on the side.

After I got my pension statement last week, I’m questioning my strategy on one point: should I contribute the maximum into my RRSP? I’ve been maximizing my RRSP contribution for the past five years. Therefore, I have no more contribution room but the current year. When I looked at my pension statement, it shows that I could retire at the age of 55 with a 48K pension. At the age of 60, I would reach $55K. If I wait to take my full pension at 65, I would reach a 70K annuity!

Therefore, everything I put aside in my RRSP would be added to this pension. This sounds like gravy to me. This is why I’m now thinking of using my year-end bonus to invest in a Tax Free Savings Account (TFSA) instead of contributing to my RRSP. This would increase my liquid assets and would not hurt my retirement too much. On top of that, my RRSP withdrawals would be taxed on top of my pension payment and my TFSA withdrawals would be tax free. This is something to think about!

Paying Off Debt

The other option I have with my year-end bonus is obviously to pay off debt. I’m already putting the focus on this part of my balance sheet this year. I’m still debating regarding what I’ll do with my “last” 5K (investing it in a TFSA or paying off more debts). The thing is that I don’t pay much interest on my debts and this is why it’s tempting to invest instead of paying off more debt.

Dropping the balance on my line of credit would increase my emergency fund and liquidity. This would be a pretty good idea too! On top of that, it would help me protect my financial situation in the event of interest rate increase.

Are You Liquid?

My guess is that I’m not the only one in this situation; are you liquid? Do you have a lot of money in a money market fund? Do you have access to a big chunk from your line of credit?

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