Retirement Right This Way

One of my favourite financial books is The Investor’s Manifesto by William Bernstein, talked about the attributes of a successful investor:

  • They must possess an interest in the process,
  • They need more than a bit of math horsepower, far beyond simple arithmetic ,
  • They need a firm grasp of financial history, and
  • They need “the emotional discipline to execute their planned strategy faithfully, come hell, high water, or the apparent end of capitalism as we know it.

I love this last point.  Other books have mentioned something similar.

For example, Andrew Hallam in Millionaire Teacher said you need to “conquer the enemy in the mirror” to be a successful investor.

Jason Zweig in Your Money & Your Brain said about our neurological wiring “when rewards are near; the brain hates to wait.”

In my final example, Carl Richards wrote in The Behavior Gap “money decisions are emotional decisions – and making good money decisions requires emotional clarity.  So try to pay attention to your emotions your money.”

With this in mind, today’s post will provide some insight into three practical things I’m trying to do to retire sooner than later.

Regardless how tempting it is to spend, I pay myself first and save where I can

I’ve created a long-term investment plan based on my financial beliefs but that plan is worthless if I spend more money than I make.  I enjoy travelling and I value other things in life, but saving for my financial independence is a priority for me.  I want to retire in about 15 years.  I simply can’t retire on what I don’t save.  Furthermore, I’ve learned the best portfolio returns go to the people that have a sound investment philosophy, they create a realistic and workable savings plan, and they diligently follow their plan. While living for today I pay myself first and save where I can.

Regardless how cheap borrowing costs are now, I continue to pay down mortgage debt 

Some time ago you might recall I considered changing my tune.  I wrote while extra contributions on our mortgage seem like a great thing to do in this low-interest rate environment, these payments are competing with my investment objectives.  I could probably earn a better yield from a basket of dividend paying stocks or a better return from the appreciation gained by broad market Exchange Traded Funds (ETFs) over the “guaranteed return” my mortgage payments provide.  Well, our mortgage is by far and away our largest monthly expense so I figure I should take advantage of these low borrowing rates while they exist.  Besides, I cannot predict the future.   Who knows what might happen to my job or my ability to earn an income in the years ahead.  The sooner my mortgage liability is done, the greater financial flexibility I will have.

Regardless what the stock market does, I continue to reinvest distributions and dividends

Readers of My Own Advisor know I’m a big fan of companies that reward shareholders with dividends.  And why not love dividends?  Getting paid on a consistent basis from Canadian and U.S. stocks is a beautiful thing:  your money starts making money and you can reinvest that money to make more money commission-free.  Although my portfolio is rather small I have started to witness the power of compounding already, these reports are evidence of that.  My portfolio is a blend of 30+ individual stocks and a couple of low-cost index funds.  I suspect I will always invest in some stocks directly and keep index funds.

So, there you have it.  A routine savings plan, a game plan for killing debt and letting my existing investments do their things are my keys to retirement.   “Come hell, high water, or the apparent end of capitalism…” as William Bernstein puts it, I’m convinced I’m starting to do the right things.

What are your financial keys to open the retirement door?

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

10 Responses to "Retirement Right This Way"

  1. Good points, and I agree. We have to focus on our goals and not distracted by external factors. I think we can also apply these points in other parts of our live, and not just only in investing.

    Reply
  2. I suspect you meant to write “if” instead of “unless” in the statement “I’ve created a long-term investment plan based on my financial beliefs but that plan is worthless unless I spend more money than I make.” 🙂

    Reply
  3. All around great tips. I really abide to the philosophy of paying all your debts first. However I like to build lots of credit knowing I have it available in case of a rainy day or year. Only time I would consider using my credit for investment is after a serious market crash.

    Reply
  4. Mark,
    I’ll have to add that book to my reading list. Those are some great investing points.

    I also agree about your strategy of trying to pay down your mortgage debt while the interest rates are low. I think everyone is putting things off since the rates are low, but considering that the mortgage terms are 25 years…there is a shortcoming in understanding how their expenses will increase once the rates rise.

    I cant wait for this long weekend to get started 🙂 Have a great one.

    regards
    R2R

    Reply
    1. I think you’ll like the book, I found it very helpful and that book is largely one of the reasons why I invest in indexed products and probably always will.

      If interest rates ever rise again, I’ll have made out like a bandit by taking advantage of these low rates and killing the mortgage. Time will tell and of course I could be wrong.

      Reply

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