Better than anything I've seen from professional money managers.

"The "What IF" Retirement Planner© is an excellent tool!  For the first time in my life I was able to use a simple, easy to use tool that actually gave me a realistic and fact based view of my possible retirement age based on different scenarios.  Better than anything I've seen from professional money managers. Thank you Ross and Shal!" Robert Whig,  Amateur Investor (... and Young Wealthy Retiree Wanna Be) Toronto, Canada

December-5-2008

Canadian Money Saver Article:  March/April 2009 Retirement in Your 40s As two engineering graduates fresh out of Queen’s University in the late 1980s, my wife and I had exciting careers ahead of us. Twenty years later, after achieving senior management positions, we both chose to hop off the corporate career path and begin the next exciting chapter of our lives – early retirement.  We were 43 years old and almost everyone told us that we were too young to retire. What did they mean, too young to retire? We weren’t planning to crawl under a rock and stop living. On the contrary, very early in our careers we recognized the value of saving, investing and building our nest egg so we could reach financial independence in our 40s. We wanted to ensure that we would be healthy and able to live an active lifestyle after we chose to stop working.   Three Simple Steps We credit our success to 3 main steps that we believe are simple enough for others to follow:    Plan - Make your personal retirement plan.    Track - Record your actual data.    Revise - Adjust your plan, as needed. Being engineers, we were not afraid of numbers and crunching out calculations to ensure that our savings, expenses, investments and key assumptions lined up to meet our goal of retiring in our early 40s. Looking back, neither of us recalls telling anyone about this goal. I think we both feared that we might not have been able to pull it off. Well, we did, and we’re now confident about our approach. So, we are willing to share it with others. In the Plan step, I developed an Excel file that would allow us to input our assumptions in numbers and then have the formulas do the calculations for us. I was 22 when I started my first retirement spread sheet. It had been a bad week at work and I wondered exactly how much longer I would have to work! My wife still gets a kick out of calling me “the spreadsheet guy”. We used this file to explore many “what if ” scenarios and we often used the file as a tool to help us whenever we were making any big financial decisions. We knew that the choices we made along the way would impact our retirement goals. Our Excel retirement planner put things into dollars and “sense” for us so that we could make wise decisions. Making the plan, however, was just the first step. As many of you know, life is full of surprises and that is why tracking your plan is important. This gives you visibility to how you are actually doing so that the plan is not just “pie in the sky”, i.e. something you’re wishing for rather than something that you can really achieve. In the Track step, we recorded our actual savings, expenses, value of investment portfolio etc. This gave us realistic numbers for our personal situation. At the beginning of each year we had the previous year’s actual data so we could review how we performed against our plan. In most years we were ahead of our plan and this motivated us to keep on track. Early retirement looked more and more realistic. In the Revise step, we were able to adjust the plan by changing any numbers that we identified as needing updates. For example, if our yearly expenses grew we could choose to increase that number or figure out ways to decrease our expenditures. Similarly, if our savings ended up higher than expected, we could bump that number up based on actual values. It is important to note that the above 3 simple steps together really make up a process that we followed year after year. Each year we got smarter and the process got easier with better results.   Tips That Worked For Us As we were promoted in our careers, we did not significantly increase our standard of living to match our salary increases. Instead, we used most of our additional income to increase our savings and the money available to invest. We invested our money in several areas: real estate for rental income, mutual funds, index funds and dividend-paying stocks. I have always enjoyed learning to do my own investing. Since 1993 I have subscribed to Canadian MoneySaver (CMS). I have received some of my best financial investment education and ideas from CMS. I am actively using David Stanley’s “Beating the TSX” model published regularly in CMS. I have read books such as The Wealthy Barber by David Chilton, Financial Pursuit by Graydon Watters and numerous real estate books. More recently I have followed some of Derek Foster’s strategies and have increased my focus on dividend-paying stocks. By growing my financial and investment knowledge I was able to increase my rate of return. Over time I moved away from investing in mutual funds and learned to reduce what I paid in MERs (Management Expense Ratios) and other fees, thus leaving me with more to invest. I learned to select good companies to invest in and manage my emotions so that I could wait to purchase their stocks when they were “on sale”. We usually keep some of our savings in cash so that we have money to invest when the sales are on. Looking back it seems like it was quite an easy path to follow. Just learn about money-saving techniques from others, many of which get mentioned in CMS, and then actually carry them out. To be honest, it does take effort and discipline to actually take the actions, but it is well worth it. The alternative is to keep working until you are 65 or older and frankly that seems like it would take a lot more effort. Sharing Tools and Knowledge   Now that we have actually achieved our early retirement goals we have the confidence that it can be done. We don’t just have a survival plan. We have a plan that provides a lifestyle similar to our lifestyle while we were both working. No, I take that back. We have a lifestyle that is much better than when we were both working. We have the gift of time which allows us to travel more, exercise more, read more, create more…well, you get the idea. Believe it or not, we are even electing to do some part-time consulting work. We enjoy sharing our engineering, operations management experience and knowledge with others still developing within their careers. We also enjoy sharing our early retirement stories with others. Recently, we set up a simple website to share tips, tools, and strategies with others wanting to grow their financial knowledge. We re-built our “What IF” Retirement Planner so that it’s very easy to use with no previous financial knowledge and have made it available to others on our website. Within 1 hour you can have your retirement plan in action. We hope that any myths that retirement planning is complex, expensive or time consuming will disappear. By building your financial knowledge one small step at a time, early retirement can become a reality for you, as it did for us. The true benefit of planning for and achieving retirement is having the time to choose and do the things you really want to do in your life, even if that includes working from time to time. Here’s hoping that you too will enjoy retirement (or financial independence) earlier than you think! Ross Grant, P.Eng, Retiree, Toronto, ON (416) 431-3184, ross@firstmillion4you.com.