My plan is to retire early over my passive income. While today I need to work to pay my bills, my goal is to eventually let my money work for me so I can enjoy more time with family and friends and to dedicate myself to more interesting and intelligent activities than repeating the same tasks again and again and again like if every day was the same until I die.
To reach my goal of early retirement, the equation is simple :
Spend less than what I earn + save the difference + invest wisely in dividend growth stocks
Most bloggers out there who seek to retire early are doing so by the use of extreme frugality. And, while I respect that, I want to live a balanced life, have a lovely wife, raise my (future) kids in a nice neighborhood and own a piece of land. I want to take the time to enjoy the journey until I reach my final destination: retirement! Because, after all, I could die tomorrow…
By 2018, I want to be debts free. By 2020 I want to be mortgage free. By 2026 I want to receive at least 24,000$ in passive income per year (including income from my intellectual property which can be seen as more active than passive but still recurring income) and then I want that income to grow forever at a rate higher than inflation (I seek 8% per year).
On an average Joe salary, reaching all my goals would be next to impossible! After all, I still have +/- 35,000$ in personal debts, a 165,000$ mortgage and I would need at least a portfolio worth 500,000$ yielding a 3,5% dividend income (17,500$) plus intellectual properties yielding me another 6,500$ per year in order to seriously consider retiring from the rat race.
So, I gave myself the objective to increase my job income at a rate higher than inflation until I reach the psychological step of a 100,000$ per year which is, here in Canada, considered like a pretty high income since the average income is +/- 35,000$ per year in my province.
Not an easy goal in such economy but… I did great so far. Having goals is very powerful and I consider myself a living proof of what setting goals and dedicating yourself to them can make you realize!
Yesterday, I received great news that will bring me close to my goals earlier than I thought possible!
Like a slave chained in a call center
Call centers are modern representations of slave-paddlers of the ancient times to my own point of view. You repeat the same thing over and over and you are chained to your seat!
I remember my younger self back in 2005 when I accepted to work in a bank’s call center for a misery… 25,000$ per year for 40 hours lost at answering the same questions more than a hundred times per day. We were more than 200 like me in the same room decorated with grey carpets, fake plants and cheap furniture.
If I had to go to the bathroom, I had to ask permission to my team leader and that time had to be subtracted from my lunch break… I felt like a slave. And like a slave, they were promising me that if I would work hard, I could free myself from the phone and become one of the 5 team leaders running the call center. Or I could get another promotion somewhere else inside the institution. But I had to stay there for at least three years to make sure the training they paid me was fully reimbursed by my work.
Three years… My work hours were changing everyday. One day it was 12h-20h, the other 8h-16h or 9h-17h… After eating, paying the bus pass and the rent, I was left with no more than 20$ in my pockets until the next paycheck would come in…
I was surrounded by people of my age with master degrees in finance, doctoral studies in economics or accounting, international diplomas from great universities like Oxford… While I had a degree in human sciences from a local university… I had no chances whatsoever to free myself from that though job.
Everybody had only one dream there, to quit the phone and become a team leader. But team leaders were all in their 40’s. And they had worked there on the phone for years before they could get that job. For sure they wouldn’t quit and competition was fierce!
I had to do something to change my life. And indeed I did.
I started to look elsewhere to see if the grass would be greener. I found an interesting possibility. For the first three years, I would be paid 42,000$ per year. During those three years, I had to build a customer base and recurring sales. After three years I would have been on my own, living of my commissions! Not great, but better than earning 25,000$ per year in that zoo!
It took until 2007 before I could get the opportunity to quit my call center job to try something else. The ride has been bumpy since, but being self-employed for a while forced me to learn salesman skills. I was a very shy guy when I first started. Now I manage a team and often get to speak in public or even in front of the president of the company.
During my journey, I met a lot of people, some of them were great at getting promotions. Every time a new position was opened, they were the one chosen. One day, I decided to make friend with one of them and learn what was his “secrets” to be as successful!
I’m glad I did!
Since 2009, I work for the same company where I decided to start over new. I applied on 5 highly seek jobs since then, one per year. Tens were applying, only one had to be chosen over the whole lot. On the five occasions, I was the chosen one. I was chosen not because I was the more experienced or because I had heavily specialized diplomas, but because I follow simple rules which I shared on a previous post. Diplomas ain’t worth nothing compared to these pretty straightforward and common sense tips.
This helped me increase my salary from 42,000$ in 2008 to 77,000$ in 2013 (plus bonus and overtime I received over 89k last year) and as of next month, I will already get a 4% increase and then a 5% increase every year until I reach the maximum pay scale of that new position which is currently 88,500$ per year. This is the base salary without the bonus which can range between 6% and 12% per year normally. Also, the maximum pay-scale usually gets increased by an extra 1,5% per year every year to try to keep up with inflation.
This means that I should get a 6,5% salary increase for the next 3 years and reach my goal of 100,000$ of income per year within two or three years if I don’t get another promotion by then!
Frugality is something I experience up to some extents since I pay my mortgage fast, save a lot, make extra payments on my debt burden. Even though I make a good salary, I don’t live the great life.
I’m not someone who drives a BMW even though most of my colleagues do. I drive a very simple Toyota and I still have to turn the handle to open the windows. I don’t own a 500,000$ house and a chalet by the lake and a condo in Florida. I only own a 200,000$ house in a very simple neighborhood in a very simple suburb. Many of my colleagues don’t understand why I do that but I don’t care. I have a plan! And when I’ll retire at 45 I’ll just say “Hasta la vista… baby” and quit like the Terminator!
I don’t wear suits everyday to go to work. I wear pants and a shirt which I don’t even tuck inside my pants and which I most of the time don’t even bother to iron… I don’t mean that I look dirty. I’d describe my look as “the casual friday look”. Except that I look like that everyday… I was not like that at first. But now, people don’t care about how I look anymore. I have a reputation.
I take the bus with the crowd and many people in the bus think I have an average job with an average or below-average income. Most of them wear suits but probably make less than me…
I don’t care about being like everyone else. I feel stupid in a suit and even though all my colleagues (manager) wear suits, I decided I won’t except if I have to do a presentation or meet important customers. People were giving me weird looks at first… Now they don’t even bother… and some are even starting to do just like me! 😉
Important people in the company, those who take decisions respect me for who I am and for what I do, not for what I try to look like. Wearing a suit won’t give you a job. It can help to step over the crowd at first. But, you’ll have to deliver what you promised. I did both. Now, I don’t wear suits anymore because they know I can deliver!
Every year, most of my colleagues do nice trips, camel back riding in Morocco, 16,000$ safaris in Africa, two or three trips in Thailands or Hawaii or Bahamas in all inclusive five stars hotels. I go to the beach with my car and sleep in a tent during my vacations. I sometimes take the plane for a trip to Mexico or Cuba to enjoy all-inclusive resorts for the middle class but I try to pay under a 1000$ on such trips.
I think I could cut my expenses a lot more because I honestly don’t care about money and flashing in front of neighbors. I care about freedom. But I’m not there yet. I enjoy living in the comfort of my house and being able to go to the restaurant once and then. Plus, in Canada, the weather is cold 6 months per year so a car and a house is a comfort I’m not yet ready to quit. (I hate winter!)
In that situation, increasing my income had to be part of the equation.
Those bloggers which I respect a lot have the following equation :
Spend less + save a lot + invest wisely
I changed this equation a little to better fit my personality :
earn more + save a lot + spend a “normal” net salary + invest wisely
When I’ll reach my goal and consider retirement, I’ll have to live off 24,000$ of income. Since we are taxed on a progressive scale here in Canada, a 24,000$ income (partly taxable and partly not taxable since I’m investing in RRSP, TFSA and cash trading accounts should yield me 20,000-21,000$ net per year. That is not a lot but considering that my house will be paid off and that I won’t have no debts, I think it’s manageable. And this income should grow by 5-8% per year.
If I exclude debts payments and mortgage payments, I currently live on less than that.
Also, retirement, to my own point of view, doesn’t mean not working at all, but being able to choose where and when I’ll work. I’m a very handy guy and I’m sure I’ll find contracts here and there to either service cars, do some renovations or even build furniture. I also expect to earn some money from writing.
My new goal is to reach the highest manager position of my department within 5 years. The current salary they make is 115,000$ plus bonus, which could yield up to 130,000$ per year. I think that new promotion just put me into good position to get one of them within that time-frame. But, time will tell!
Did you get any promotion or salary increase recently?
Image courtesy of worradmu/ FreeDigitalPhotos.net