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!
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:
|CREDIT CARD||$6 831||$5 092||-25,5%|
|LINE OF CREDIT||$19 597||$19 918||1,6%|
|HELOC||$263 015||$262 803||-0,1%|
|CAR LOAN||$12 586||$11 284||-10,3%|
|Personal Loan||$8 333||$7 916||-5,0%|
|Pool Loan||$5 370||$5 290||-1,5%|
|TOTAL||$315 732||$312 303||-1,1%|
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…
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 ;-).
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?
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.
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?
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…
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 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 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!
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 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.
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 (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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