Tuesday, 22 February 2011

Freedom 52

The ad series that ran for years from ScotiaBank London Life  in Canada and introduced the concept to Canadians of retiring at the age of 55 was called "Freedom 55" (thanks to Alan for the correction). It led to a lot of people dreaming about retiring early, and a lot of jokes about not being able to retire at all ("I'm on the Freedom 85 plan...").

As of Thursday, February 24, 2011, I am officially retiring at the tender age of 52 while I can still ski 10,000 vertical meters or hike 25 km a day. It has been a lot of fun watching people develop "retirement envy" about my decision. Many have asked how I managed to achieve it, and I promised a blog post on it. First, here's what I didn't do:

I didn't do it without kids. I have a fantastic daughter who is 20 years old in her second year of university. I have paid a mittfull in child support over the years. Having kids isn't an excuse.

I didn't do it by "keeping up with the Joneses." I could care less about what other people drive, or how they live, and in what kind of house.

I didn't do it by living in squalor. We have a great house in Calgary (which we have spent over $200,000 renovatig in the last decade or more). I have a lovely little place in Canmore.

I didn't win a lottery. Lottery tickets and "get rich quick" schemes are a waste of money.

I didn't do it by being extravagant. I'm generally frugal, but I know that it's smart to splurge on the right things. My skis were a splurge and cost $1,000, because they make all the difference. My poles are bargain basement cheapies and cost $20, because they don't matter, and paying $200 for poles (as you can) is stupid. I have been vacationing in Maui annually for years, but at a place that charges $90/night, not at a place that charges $500/night. I spent 4 weeks in Europe last year and never spent more than €90 per night on accommodation for 3 people. I spare no cost in maintenance to keep my car running but buy my $23 jeans at Wal Mart.

I didn't do it by starting "rich". I was basically broke at age 38 after my divorce, and lived for a year in my house with no furniture and no drapes because I couldn't afford them.

I didn't do it by inheriting it. Yes, I had a one time infusion of inheritance money from when I lost my mom. However, that has been tied up since the day I received it in a single asset that quite frankly has performed dismally. Maybe it will turn around; in fact, I don't care that much because it doesn't matter. I keep it for the sentimental value of a connection to my mom. So an inheritance added to my net worth, but hasn't grown worth a damn, and I could retire with or without it.

I did it by working my butt off. I think if you ask my co-workers, they will attest to the fact that I always work very, very hard, constantly learning and trying to get better at my job (I don't always succeed, but I sure try). I'd also like to think I'm pretty good at what I do, too, but you would have to ask them. I'm a manager; I can tell you that people who work very hard all the time are compensated for it.

I did it by being very good at investing. Investment advisors will tell you you can't expect more than 5%-8% real return on your investments over the long haul. I think they're dumb. I have averaged 28% per year growth since I started getting serious about it the late 1990's. I've never had a negative year. I've never not beaten the performance of the S&P/TSX 300. In the last few weeks, I have been teaching quite a few people my investing strategy, and in the last decade I've probably taught 100 or so more. The people who have followed my strategy do similar numbers. I just wish I had started earlier (and been able to write a Freedom 45 post).

I did it by understanding the difference between an expenditure and an investment. You car is an expenditure. It will be worthless one day. I drive a 2002 VW Passat, and KC drives a 2004 Mini. Your house is an investment, albeit a long term one. Put money into your house the right way and it will be worth substantially more one day.

I did it by being disciplined. Being broke taught me when to say no and when to say yes to spending.

That's why I believe most people can do it too. Manage you money properly, and investing it well, and you too could do it.

If you'll excuse me, I'm going skiing now. I'm retired and can do anything I want.


Marcin said...

Well done, sir. Enjoy the next phase of your life!

Alan Ryder said...

While BMO may have pioneered Freedom 52 it was London Life Insurance that coined the term "Freedom 55" and owns many related trademarks.

Much envy over here where Freedom 62 would look like a win ....

Astrid said...

Congrats!! I think i
I want to sign up for that investing course...

Jennifer K said...

Jen said: congrats Derek (and partner Karen). We want your invest course. How about a "lunch and learn" or "dinner and learn" for your friends on this strategy!!!!! Sign us up.