A savvy millennial’s journey to early retirement

A savvy millennial’s journey to early retirement

For a few years now I’ve been inspired and motivated by early retirement.  I’ve also been inspired by other investing stories.  You can read some of those stories here.

When it comes to our financial journey in general we’re just ‘not there yet’.  We are however, I believe, on a decent path – saving, investing and killing mortgage debt at the same time.  Using this site to chronicle our financial journey I’ve been fortunate to meet a number of fine folks who continue to share their stories with me. Today’s post is one of those stories, from a savvy millennial investor no less.

Bio:

  • Name: Dan Kent
  • Age: 27
  • Family status: Living with girlfriend, no children
  • Retired since: Still working
  • Retirement plans: Freedom 45!
  • Retirement worries: Simply not having enough

Dan Kent is the owner of StockTrades.ca but he wasn’t always a financial site owner or blogger or an investor at all.  Dan “was a farm boy” who was raised about 50 km outside of Calgary, Alberta. With no aspirations of taking over the family farm he graduated from high school in 2008 with the intentions of getting into the oil and gas sector. The price of crude oil was sitting around $140 a barrel in May of 2008 and Alberta was going crazy to say the least. Tradesman in northern Alberta were making more than double the average salary in Canada, so for Dan, being a tradesman was a no-brainer.

Good times never last long so when crude plummeted in September of 2014, jobs were scarce and Dan was forced to look for other potential career paths.  Before investing for the long-haul Dan ended up playing semi-professional and professional poker for the better part of two years.   He told me it paid the bills but his enjoyment for the game faded to the point where he picked up another electrical job in northern Alberta again.

Dan, that’s quite the introduction for 27 young years.  Thanks for taking the time to be on the site.  Let’s get into it – as a millennial how did you get started in investing?  Who helped you out?

I’d have to say my grandfather played a large part in my investing ability and in general my frugalness. He taught me from a young age to save, and spend money on things that will develop and grow, instead of materialistic goods. He talked the talk and walked the walk, and is now enjoying a very prosperous retirement because of it.

My first investment was a townhouse at the age of 21 years old.  (Geez, that’s young.)

I had known I wanted to start investing at an early age, but my main goal was always to own a rental property. At the time, the first time Home Buyers’ Plan was a new thing and I knew if I maxed out my RRSPs along with my company matching a percentage of my contributions I would have the cash in no time.   (Link to my thoughts on Home Buyers’ Plan.)

Being debt free due to the fact I didn’t have to attend post secondary, I had saved up a 10 percent down payment on a property relatively quickly working in the oilfield.  I purchased a 4-bedroom townhouse in September of 2011. Within a month of owning the property I had all 3 bedrooms rented and had officially deemed myself a landlord. I moved out of that townhouse in 2014, purchasing another property. Thus, real estate has been a staple to my investment portfolio.

What was your investing journey to this point?  Did you ever own mutual funds?  ETFs?  Bonds?  Other investments? 

My journey up until a couple of years ago was rocky, with stocks at least. I can say this much, besides a compass RRSP portfolio with an Alberta Treasury Branch comprised of mutual funds, I have always managed my own investments. Did I always provide adequate returns year in and year out that I could probably achieve giving my money to an adviser? No, but I am better off now for not doing it. I look back now at all of the nonsensical things I did investing wise and know they are just lessons learned.

I was a typical 20-something investor I guess, I tried a little trading, that didn’t work.  After I moved on from trading, I was constantly trying to find huge value stocks that would skyrocket my returns, labeling me one of the very few that could beat the chumps only making 7%. That habit took a bit longer than the trading to get rid of, but I eventually moved on.

As of right now, I’ve settled in to owning Canadian dividend paying stocks. I’ve got some speculative stocks, which I allocate a certain percentage of my portfolio to and not a penny more, and some blue chip giants that I suspect (like Mark) are going to be paying shareholders for years to come.

I also invest in some ETFs, but only to expose my portfolio to the American economy. I’m young right now, so as far as bonds go they have never appealed to me. I am looking to maximize my returns at a young age when I am able to take the risk.

Seems rather though out Dan.  How would you describe your investing approach today?  Why?

I take a semi-aggressive approach to investing. The reasoning behind this is simply because I am young enough now that I can take educated risks with my capital to maximize my returns at a younger age. If I lose, or make an incorrect decision I have plenty of time to recover. I cannot say I would have the same comfort investing so aggressively at the age of 50.

I have speculative stocks in my portfolio because I feel they will be worth far more than they are now in the future. That being said, the large majority of my portfolio is made of up blue chip dividend stocks and a single ETF. My account is set up to DRIP on every dividend stock I own (which as of right now, is every single stock in my portfolio).  Like you Mark I realize reinvested dividends can create a snowball effect.

Right now my focus is to maximize my RRSP and TFSA contributions.  After that, my goal is to simply invest wisely, not looking to crush the market as so many do (and fail). When my current rental condo contains enough equity to sell and split into 2 rental properties, I will be doing that to expand my reach in the real estate sector.

Index investing using low-cost Exchange Traded Funds (ETFs) seems to be a sensible way for most investors to invest.  What’s your take on that?

I do not have many ETFs inside my portfolio myself as I like to control every single position I am investing in. That being said, ETFs are a great way to be exposed to market diversity and not individual stocks within it.

The fees when compared to mutual funds are tremendous as well, often costing less than half of a mutual fund. But I often have to explain to investors looking to get into ETFs that it is not solely about your expense ratio. A fund making 9 percent with a 2 percent ratio is still more profitable than an ETF making 5 with a 1 percent ratio.

All in all, ETFs provide a cheaper path to a diversified portfolio and generally are more flexible than a mutual fund. I am looking to add more to my portfolio in the near future, but as of right now the Russell 2000 ETF is the only one I own.

Although I’m a fan of dividend investing myself there are more risks involved. Do you agree?

For an uneducated or misinformed investor looking to get into dividends, I wholeheartedly agree.  People can get into trouble when they get tunnel vision – looking at just dividend yield. A solid dividend yield does not mean a solid company. It is important to analyze a company’s stability and growth as well as their yield. Diversification is another struggle.  You will see some of the best paying dividend stocks, at least in Canada, heavily weighted in the banking and utilities sector.

One key to reducing dividend investing risk is to simply pick companies that have a solid history of increasing and paying dividends. I also believe that there should be room for growth investing in every portfolio, and a portfolio comprised of both methods of investing is one that may pay the healthiest returns.

Our big hairy audacious goal is to have an income stream of $30,000 per year for an early retirement, outside of any workplace pension plans or RRSP withdrawals for income.  What’s your goal?

I’m fairly young, so in terms of financial numbers I haven’t really crunched them yet. I would like to be considered retired by the time I am 45, 50 at the latest.  My focus now is to maximize every single penny of contribution room I have in my TFSA and RRSP while saving money for potential rental properties.

I am a huge fan of real estate investing. Not necessarily for the capital appreciation, but for the cash flow of rental properties. Having multiple real estate properties providing consistent passive income into my late 40s and retirement is a huge goal for me. This combined with a solid combination of dividend and growth stocks will allow me to call it quits early and do things I really enjoy.

There is a lot of debate in the personal finance community on investing using the TFSA first vs. RRSP first vs. simply paying down your mortgage.  As a young investor, what’s your take?

I would tell Canadians that if they can afford to, maximize both the TFSA and the RRSP and forget about paying down your mortgage early. The TSX has provided returns of over 9 percent for the last 50 years, and banks are giving out mortgages at a ridiculously low rate right now (I have a variable rate on the home I live in that was, up until the prime rate increase, 1.8 percent).

In terms of the TFSA vs. the RRSP, I think Canadians in a higher tax bracket utilize their RRSP first for the maximum benefit possible. If you are in the lowest tax bracket, the TFSA may be more beneficial.  Stockpile your RRSP contribution room until you are paying more income taxes to gain the maximum benefit.

Another factor that probably most do not realize is the ability to withdraw the money. If you are in a position where you are just starting to save I would suggest creating a cash cushion in your TFSA before you contribute to your RRSPs.  This way the TFSA can easily become liquid (depending on what you invest in) and pulled out tax free to cover emergency expenses.

Sounds like you’ve done several great moves at a young age.  Any other thoughts?  Advice for fellow millennials maybe?

It’s never too early to start.  I believe when I look back during my early years of retirement I will be able to say my early 20s was the main reason for my success. I am 27 years old.  Other than a 2015 Jetta that should be paid off by the end of this year, I have never been in one dollar of consumer debt. This isn’t to say I have lived my life under a rock, I just always had the money before buying things instead of placing them on a credit card or line of credit.

To my fellow millennials I will say it’s fairly easy to get caught up with the spend, spend, spend society we live in now. The newest gadgets, the best televisions, the fancy wireless headphones. The truth is you probably don’t need any of this.  If you’ve already started saving and investing, that’s great. I feel it’s an endless cycle of adjusting and learning. There may come another time like the dot-com boom where I read growth stocks were exponentially more profitable than dividend stocks. There may be a time where, depending on interest rates, bonds should take up the majority of your portfolio. You need to stay on your heels and always keep learning.

Impressive stuff.  I want to thank Dan for sharing his investing journey to date and I wish him well going-forward.  Keep me posted on your progress Dan; I appreciate you being a fan of this site.  Stay tuned for more investor profiles on My Own Advisor.  It is my hope you learn from everyone to help carve out your own profitable financial path.

Got questions or comments for me or this savvy millennial?  Got a profile or story you want to share with me?  Email me. Thanks for reading and sharing as always. 

Mark Seed is the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've grown our portfolio to over $500,000 - but there's more work to do! Our next big goal is to own a $1 million investment portfolio for an early retirement. Subscribe and join the journey!

27 Responses to "A savvy millennial’s journey to early retirement"

  1. Mark
    What are your thoughts on mortgage vs TFSA vs RRSP where mortgage is structured in a way you pay more interest in first 5 years and very little towards principal.
    Does it make sense if your mortgage is fairly new then pay down your mortgage for first 5 years or so and then change your plan and start contributing for retirement.

    Reply
    1. Interesting question Harry. Having had a high mortgage amount myself a few years ago I must say I struggled with trying to invest since I was worried about the debt burden. What if I lost my job? What if I become sick? Personally, I’m conservative when it comes to money management so I listened to my gut. It told me to make some lump-sum payments on my mortgage, keep my mortgage payments high as to reduce my principal, and then invest more in my TFSA and RRSP when those nerves were calmer.

      That said, I’ve also been maxing out my TFSA ever since it came into existence.

      Depending upon what you can afford to save and invest – you might be only able to do two things or one thing (TFSA vs. RRSP vs. mortgage). Ultimately it comes down to risk and reward. If could only ever do one thing then I think while investing for your future is important, if a mortgage stresses you out, pay that down.

      Few people I know regret being debt-free, owning their own home sooner than later.

      Thoughts? What about you?

      Reply
        1. Yup, scary chart if you only pay the minimum!

          Here is one of my favourite mortgage calculators, you can really see the different lump sum payments make.
          https://www.cibc.com/ca/mortgages/calculator/mortgage-payment.html

          Depending on your risk, re: potential for job loss, other, you might want to have less debt before investing major sums of money. Pros and cons to everything Harry. I wish I had a crystal ball for you 🙂

          Good luck and thanks for reading!

          Reply
        2. That chart does make it seem like paying more on the mortgage early is a better investment than paying more on the mortgage later. But the math is the exact same. Your return is only your mortgage rate whether it’s the first year of the mortgage or the last.

          If your decision is based on math, paying extra against your mortgage is almost always the wrong choice. Emotions and fear of debt are the only things that can swing the decision to make paying the mortgage a good idea.

          Reply
          1. I think it depends what your risk profile is Tyler. Taking on a huge debt, with a risky job; and only paying the minimum might not be very smart. Then again, having a small mortgage, a fairly secure job; not investing is not ideal either. Personal finance can’t always be based on math because money is an emotional subject. You have to often make decisions with your head (good idea for sure) but also with your gut.

          2. Oh, of course I wold never suggest that a money decision is only based on math. But Harry up there seems to want to make the mathematically best decision, but is confused by that chart.

            “I am keeping emotions away of being under debt and referring to the graph it makes more sense to pay as much as you can in first 5 year term.Your thoughts?”

            In this case (assuming a somewhat stable job situation, adequate emergency fund, etc) it is absolutely better to invest money at 5% than pay a mortgage at 3%. The math will almost never favour the mortgage. And in the specific case of this chart, it makes no difference to the math (your return) whether you pay up your mortgage in the first 5 years or in the last five years.

            In fact I’d argue that the first 5 years of a mortgage are the most important to be investing, due to the effects of compounding.

            I would never suggest someone is wrong to pay down debt rather than invest, but that’s not how I interpreted what this question was asking.

          3. You and I are the same Tyler…I can’t always make math decisions over emotional ones. You seem to have a very good handle on decisions – I can tell.

            If we know what the future would hold – we could always make the right/best decision 🙂

            Depending on how much debt you have – the first 5 years of a mortgage can absolutely be the most important – you are paying the most interest. Conversely, they could be the least important to your point since you should be focused on investing; taking advantage of compounding.

            To me it all boils down to risk and reward and mitigating your risk to some degree over time – since you can never predict what may happen. Few people go wrong with being debt-free longer in life. Lots of people can go wrong with too much leverage and owing other people money for too long.

  2. Starting to save and invest in your financial future is definitely a great advice that I subscribe to. Secondly, controlling your spending is one of the keys to financial success. If you spend less of your earnings, you will have more money to invest and working hard to earn more money for you.

    Earning a decent salary is good. Having your money earn it for you is better. The earlier you save, the sooner that money can start working for you.

    Reply
    1. Agreed Leo. The younger you start, the more you get that money compounding and earning for you.

      Being in the construction industry where there aren’t many pensions and RRSP matching programs, I’ve seen a ton of guys in their late 40s and even early 50s who pretty much don’t have a dime saved. They will work the remainder of their lives. This was huge motivation for me to start early as well.

      Reply
    2. Agreed Leo and you seem to have a good handle on things. Earning more money is great and a huge enabler. Yet if you cannot control (i.e., save a bit of) what you make for investing purposes then it really doesn’t matter.

      Reply
  3. re: “…I am young enough now that I can take educated risks with my capital to maximize my returns at a younger age. If I lose, or make an incorrect decision I have plenty of time to recover.”
    Seems “logical” enough, but exactly what is your time frame for measuring if your “educated risk” was a correct or incorrect investment decision? Two years? Five? Ten? If you are investing to retire in 15 years, and have that investment fund said retirement for another possible 40 years…it would be very short sighted to ditch an investment or change strategies on the first 10% of the life of the investment.

    Take Amazon Inc., for instance. In the first 2 years its stock went from $1 to $100; the next 2 years saw it go from $100 to $10; over the next 15 years it went from $10 to $1,000. You would have deemed AMZN a ‘correct’ decision those first two years, and an ‘incorrect’ decision the next two years and would have sold a very correct long-term decision. As stated, “I have speculative stocks in my portfolio because I feel they will be worth far more than they are now in the future.” What is your evaluation for “correctness”?

    re: “People can get into trouble when they get tunnel vision – looking at just dividend yield.”
    People can also get into trouble when they get tunnel vision — looking at just the paycheque: “Tradesman in northern Alberta were making more than double the average salary in Canada, so for Dan, being a tradesman was a no-brainer.” And now, just like almost every other FIRE bug, Dan is unsatisfied and unfulfilled with his professional life. He chased cash-flow money, which left him sour, and now he’s chasing accumulation of money (‘Retirement worries: Simply not having enough’), believing it will solve a non-financial problem. Another ill of Capitalism, the unrelenting belief that money is everything.

    Dan states, just like every other FIRE chaser, retiring early will “allow me to call it quits early and do things I really enjoy.” I rebuke with his own words, again, “ I am young enough now that I can take educated risks…”. So why don’t you? Take a few educated risks and find out how to “do things I really enjoy” for money, then you won’t have to bother with all this other stuff (you were astute enough to navigate the risks of gambling “to pay the bills”, I’m betting you are astute enough to figure out how to monetize those things you “really enjoy”). When it comes to money, there’s really only two things you can control — how much you save and how/when you allocate that money. Everything else is out of your control, that’s not too assuring. At least you can develop total control over your mind, your choices, your biases, your skills, your happiness, your fulfillment, etc. Invest in yourself, right? Yet I’ve yet to see a single FIRE website print even 100 words on the matter. There is an unrelenting push to understand “money”, but close to zero regarding understanding self (something far more valuable). Guess that’s a different department.

    I completely understand, but even more so, I’m completely baffled people who spend decades suffering at jobs (and lives) they dislike, piling their energy into hoarding as much money they can, thinking it’ll make them happy once they have enough to quit said despised work/life. Spending half of your waking hours in a fantasy world (“I can’t wait until I don’t have to work at this job any more and can work at being a landlord and worry about my dividends!”) is mucho bizarre (and quite probably some form of mental illness).

    Anyway…

    Reply
  4. Hey SST. Your comment is quite long so forgive me if I miss anything.

    As for your first question, the choice to cut ties and sell a security for me is when the company is simply a “losing” company. I quoted losing as there are obviously a lot of factors that go into this that I am not going to explain it down to every statistical analysis of a companies success because for one, it would take too long and secondly, the way people fundamentally analyze stocks can be very different.

    A prime example is the near demise of Apple prior to the Microsoft bailout. You simply cannot blame those who exited their positions as Apple was a disaster of a company plain and simple.

    An investment is deemed a loss when you are no longer comfortable holding said company, with whatever analysis you use to predict the profitability or lack thereof in it. Hindsight is 20/20 and if Amazon had financial indications that it was a company on the decline I would have absolutely sold my position yes.

    As per your second point, I am in no way dissatisfied with my professional life! Actually, I quite enjoy electrical work. I am looking to convert to a high voltage electrician, where I would install substations all over North America with all expenses paid. As far as I see it, it would be a great new experience for me, great money and I’d get to see some new places.

    As far as me enjoying the things that I like to do, because I work a 10 days on 10 days off shift I have 6 months of the year to do a lot of investing in myself. My biggest passion right now is actually golf, and my shift allows me to do more than ever now, I’ve knocked a ton of strokes off my game!

    As for your conclusion, I cannot speak for everyone in this situation but I really don’t see my life being all that miserable. I enjoy it. To me and many others financial success is a huge thing, and we cannot predetermine what makes a human being happy, we are all wired differently. Some will strive for financial success like me, and some will travel the world and experience everything they can. If the end result is both of us being happy, I don’t think either of us are mentally ill.

    Thank you for the comment, I hope I’ve answered some of your questions, and feel free to ask more

    Reply
    1. @Dan — thanks for that reply! Apologies(?) for colouring you with the same brush as other FIRE enthusiasts; it’s the snapshot syndrome of the internet.

      re: “I cannot speak for everyone in this situation but I really don’t see my life being all that miserable. I enjoy it.”
      I’ve spoken of this before, how younger/ish generations, even though seemingly wanting the same result — FIRE — have a much more positive and flexible mindset than the bulk of the older (and more bitter/burned out) working generations who operate FIRE blogs. You, seemingly, have a perpetual work-life vision, whereas others have a terminal plan. People who enjoy their work tend to create better work. Would be awesome if you (and all of us) continued to develop your vision and purpose throughout the course of your life. The view of the world definitely changes between the ages of 30 and 60 (not that I’m there yet!).

      re: “…we cannot predetermine what makes a human being happy, we are all wired differently.”
      Not so. Perhaps the peripheral shadings of what makes us happy differs (e.g. cheese cake vs apple pie), but the fundamentals are definitely the same (but that’s a discussion for somewhere else). It’s what I’m getting at when I rant about FIRE bugs (sparked by job hatred) thinking money will solve their problems.

      Enjoy the golf.

      Reply
      1. No worries man! Always happy to hear both sides of the spectrum.

        Keep in mind that although I am definitely a FIRE, I wouldn’t call myself a FIRE blogger. Stocktrades was built exclusively to help new investors navigate the markets. We don’t preach financial independence or early retirement. We simply provide( to the best of our ability) answers to the questions new investors may have, whether FIRE is their objective or not.

        Thanks for the comments, and have a great week.

        Reply
      2. There is certainly a HUGE FIRE movement. It can be a more positive and flexible mindset for sure, but at the same time, very close-minded. So what if you “retire”? It’s not like most 30- or 40-somethings are going to do nothing for the rest of their lives besides travel or live off income?

        No doubt I’ll change my views dozens of times between ages 40 and 60. I damn well hope so 🙂

        Reply
        1. I guess it depends on your definition of “retire”. I know there is a literal definition but a lot of people use the term differently.

          Do I like electrical? Yes. Would I do electrical if I had the necessary funding to take a paycut and do something I enjoy? No. I’d probably be working as a Marshall at some golf course somewhere, or coaching a youth hockey team in the winter and baseball in the summer etc. There are endless amounts of things I could do.

          That’s retirement for me. I’ve never imagined retiring and just doing nothing. Something obviously would have to fill the void.

          Reply
          1. Fair. I consider “retirement” as the ability to leave full time work behind, on your own terms. There is always the chance to work, volunteer, other but I think a modern definition of retirement for me is working on my own terms, by choice, as much as I want and when I want because I don’t have any financial liabilities associated with it. Definitely a few years off for me/us.

            I like my job today, there are “days” however but overall it’s a good gig. I’m not trying to run away from it specifically. I’m working towards better and more options in life.

          2. re: “Would I do electrical if I had the necessary funding to take a paycut and do something I enjoy? No…There are endless amounts of things I could do.”

            That’s the other mindset of which I have no understanding — why does anyone think they will have to take a “paycut” to do the things they enjoy? (I’ll never change anyone’s beliefs, so I’m asking you to try to convince me of yours!)

            There are people out there right now doing the things you enjoy and making just as much, if not more, money as you do with your electrical job. Always remember, it wasn’t too long ago a man made $1,000,000 selling rocks as pets…

          3. re: Mark “I like my job today, there are “days” however but overall it’s a good gig. I’m not trying to run away from it specifically.”

            I fit nicely into this category. A few years ago I did seriously consider, and pursue, a different line of work. But then I sat back and looked at the bigger picture. I work for the government, which means I’m in the system and have access to all its cold clammy tentacles. I now use the available resources as a conduit for my passions (the day-to-day job is almost autopilot at this point). Not everyone will have the same breadth and depth of opportunity, but it’s also the government…not everyone will have to fight through the same breadth and depth of red tape.

            I didn’t wait before I had “the necessary funding” in place, I didn’t have to take a “paycut”…I just looked at things from a different perspective and started.

  5. Just another to my previous comment. I am not saying there are only 2 paths in life, striving for financial success or traveling the world. I just simply used the two as a comparison and example that everyone’s goals are different, and no one is really wrong.

    Thanks!

    Reply
  6. SST, I guess it all depends on what your hobbies are. None of my hobbies have 6 figure salaries attached to them. Except maybe blogging and web development. Maybe one day I will get there!

    I definitely do see where you are coming from though.

    Reply
  7. Hello Mark,

    I just read the above interview. I was particularly interested in the following quote from the article:

    The fees when compared to mutual funds are tremendous as well, often costing less than half of a mutual fund. But I often have to explain to investors looking to get into ETFs that it is not solely about your expense ratio. A fund making 9 percent with a 2 percent ratio is still more profitable than an ETF making 5 with a 1 percent ratio.

    The final sentence was of particular interest. I have recently redeemed some mutual funds with fees of 2.4% and have been planning to invest in ETFs through WealthBar, so that I’m not paying the high fees on the mutual fund. However, when I read about the returns from WealthBar on their balance portfolios, the returns are only about 3%, and includes the risk of investing in the stock market. With interest rates going up and 5-year term deposits available through Tangerine, isn’t it better to do that, rather than be exposed to risk on the market? I am 58 and a conservative investor.

    I think the first two sentences of the quote are a topic you could explore for readers as well.

    Reply
    1. Good of you Beth to get out of products that cost north of 2%. Those products are eating into your long-term returns. That said, fees are only part of the financial equation. You need modest to good returns on your investments.

      I’m not overly familiar with the WealthBar balance portfolios, and their historical or projected future returns. Maybe they have too much (or a great deal) of fixed income.

      You probably need to decide the best asset mix (stocks vs. bonds) and whatever the rate of return is – that’s what you get. Unfortunately the more risk you take on, the more potential return, however the more short-term risk and likely volatility you will face. That is not an easy paradigm for any conservative investor.

      Reply

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