How I plan to retire at age 40
I hear that word being tossed around all over the place, especially at the start of the calendar year, during new year’s resolution and RRSP season. It’s a term we are introduced to the moment we start working, then we proceed to put several decades of life into our career, seemingly only muttering it aloud when we are frustrated with our job, manager, and coworkers. It resurfaces in our weekly vocabulary as we grow older, wiser and realize that we are closer to our own mortality. For a select few, that word does not go dormant during the 20’s, 30’s 40’s but instead is at the forefront of what they do and why they are doing it.
That word is retirement.
For me, it’s retirement in <3 years from me writing this very sentence, when I am 40 years old (my goal is to have the CHOICE to retire). For others that I have the pleasure of knowing, they made that CHOICE when they were 29, because of their focus on the Financial Independence, Retire Early (F.I.R.E) movement (more on that below). However, for the overwhelming majority, it is less of a CHOICE and more of an OBLIGATION in their sixth and seventh decade of life.
Retirement is a word with many meanings but few agreed upon definitions. Similar to beauty or fine art, it is interpreted in the eye of the beholder. For some, it means, absolutely doing nothing, sitting back, sipping mojitos on the beach while watching the world pass by. Truly relaxing. For others, it is taking a step back from a full-time career and spending more time with the family, while pursuing a hobby or an interest that was put on pause for several decades. For me, it is having the CHOICE between WANTING to work vs NEEDING to work. I love what I do, it brings a smile to my face, BUT I know I can’t physically, mentally, and spiritually do that work for the next 20 years. So in 4 short years, I’m working towards having the opportunity to make that choice when to work and when to pursue and explore other interests, when I am more physically and mentally capable. Outlined below will be a snapshot of my current passive income streams, their gross and net amounts, and the gap I need to fill in order to reach my goal of F.I.R.E.
The FIRE movement is a lifestyle and financial strategy that aims to achieve financial independence and retire at a relatively young age. The movement gained popularity in recent years, primarily through online communities and personal finance blogs (maybe even like this one)
The core principle of the FIRE movement is to save and invest a significant portion of your income, typically 50% or more (I am around 30-40%), with the goal of accumulating enough wealth to sustain your desired lifestyle without relying on traditional employment or a typical retirement age. The movement emphasizes frugality, mindful spending, and investing wisely to reach financial independence sooner rather than later.
Here are the key components of the FIRE movement:
Financial Independence: Achieving financial independence means having enough savings and investments to cover your living expenses without relying on a job. In other words, your passive income from investments (such as dividends, rental income, or interest) can sustain your lifestyle.
Retiring Early: The FIRE movement promotes the idea of retiring early, typically in your 30s, 40s, or 50s, rather than waiting until the traditional retirement age of 60 or 65. Early retirement provides the freedom to pursue other interests, hobbies, or projects that you are passionate about.
High Savings Rate: To accumulate wealth quickly, followers of the FIRE movement typically save and invest a significant portion of their income. This often means adopting a frugal lifestyle, cutting unnecessary expenses, and focusing on essential needs rather than material possessions.
Mindful Spending: FIRE advocates emphasize the importance of mindful spending. They encourage individuals to evaluate their purchases and prioritize spending on things that bring true value and happiness. The movement promotes avoiding excessive consumerism and finding fulfillment in experiences rather than material possessions.
Investing: Investing plays a crucial role in the FIRE movement. Followers typically invest their savings in various asset classes such as stocks, bonds, real estate, or index funds, aiming to grow their wealth over time. The compounding effect of investments helps accelerate the path to financial independence.
It's important to note that FIRE requires discipline, careful financial planning, and a high savings rate, which can be challenging for individuals with lower incomes or financial obligations. Additionally, unexpected life events and market fluctuations can impact financial plans, so flexibility and adaptability are essential.
While the FIRE movement has its critics and challenges, it has also inspired me to take control of my finances, prioritize my long-term goals, and find alternative paths to financial freedom and early retirement.
A few weeks ago, I published a blog on Passive Semi-Active Income, I will not regurgitate that info now, but I would recommend reviewing it prior to reading on.
As of the time of writing, the following are my current non-physiotherapy-related revenue streams. I have added the classification of Passive, Semi-Active and Active, the rough gross income and net (minus expenses, not including tax) income. Income estimates are from 2022 and not 2023.
My goal is to have $10 000/month net income through non-physiotherapy-related income, which will allow me to make that CHOICE to work. This number will also allow me to meet all my current and future lifestyle needs. This value does not include inflation rates of greater than 3%, so I will have to re-adjust if inflation remains elevated and sticky.
Dividend Stocks and ETF, Bonds and Fixed Income Instruments (PASSIVE)- I hold this as part of my traditional asset portfolio in blue chip and tech-based companies. They provide readily reliable dividends that I use either to re-invest (called a DRIP,- which I discuss more in my intermediate course, or to pay brokerage fees)
Gross: $1796. 38/year, Net: $1796.38
Long-Term Rental Properties (SEMI-ACTIVE)- Traditional long-term tenanted rental properties provide me with a certain monthly income that I use to offset the expenses of owning a home. Gross: $49 567.8/year Net: $9968.54 (had larger expenses this year)
Short Term Rental Properties (Airbnb ) (ACTIVE): Short-term rental, that provides me with irregular income (seasonally dependent), and a lot more day-to-day involvement than Long term rentals
Gross: $8454/year, Net: $4235
Affiliate Marketing (PASSIVE)- Through this platform, I have been able to receive monetary compensation for referrals to certain products/services (only companies I have a relationship with). These funds are used to offset the online costs of running this business (i.e. hosting/domain fees) with the remainder being donated to charity at year’s end.
Gross and Net: $ 250/year
Online Business (ACTIVE) Financially Fulfilled Physio. This very business. Whether it be offering recorded courses, through Embodia, or live in person courses and strategy calls, this avenue allows me an active revenue stream outside of the clinic.
Gross: $4500, Net $1430
Stock Options Trading (ACTIVE)- through ThetaTrading Co, this active revenue stream allows me to earn a modest, variable income irrespective of my location.
Gross: $1550/year, Net $1100
Private/Peer-to-Peer Lending (PASSIVE). Another concept I discuss in the intermediate course. Acting like the bank, I lend out capital and earn a monthly rate of return on that
Gross: $54 000/year, Net: $21 000
Total Gross Monthly Income: $10 009.84
Total Net Monthly Income: $3314.99
The deficit from Goal: $6694.85/month
How do I plan to reach my goal and reduce my deficit?
Pay down debt, currently, my loans range between 5-8%. In the short term, I am more comfortable paying down that debt than seeking a higher return on a less certain investment
Refinance when the conditions warrant it. If rates return to~ 3%, that will allow me to garner a higher cash flow on a few of my investments.
Purchase another rental property, more than likely a vacation property. This short term rental property will allow a higher monthly cash flow than a traditional long term rental.
Purchase a boring business. Something that is not sexy but can provide stable cashflow. Think of a car wash, a laundromat, or a storage locker. A shout out to @codiesanchez and Unconventional Acquisitions for the inspiration and framework.
Grow and Scale Financially Fulfilled Physio. I am confident that in the pursuit of educating my colleagues on this subject matter, this business will also provide a semi-consistent revenue stream.
Now I know some of you may comment “It must be nice Robin”, or “You make it sound so easy” and “That’s unrealistic”
What isn’t portrayed in those values is what I have had to put on pause or in some cases completely give up for this pursuit. I am divorced, fortunately, I found Katie, who has lifted my spirits and instilled a further purpose in my life. What is the point of having freedom of time if I don’t have anyone to spend it with? Furthermore, my circle of friends dwindles each year as my focus narrows. I come home to an empty house and often feel alone. As Alain de Botton once said, “Loneliness is a tax you have to pay for a certain uniqueness of mind." Time will tell if this unique atypical goal of early retirement will be worth the loneliness. I believe it will. And if it doesn’t, then I can rest on the self-assurance that I took a bet on myself and failed. To me, that feeling is a lot easier to stomach than the feeling of regret and not trying.
That would crush my future self.
Your savings account pays you 0.5% but the inflation rate is 5%, so your real rate of return is -4.5%, and you're wondering why you can't get ahead?