When people ask Ross Grant how he managed to semi-retire in his 40s, they’re usually surprised by his answer. No, he didn’t win the lottery or have a secret formula for discovering 10-baggers on the stock market. He just did a lot of little things right.
Mr. Grant paid off his mortgage as quickly as possible. He maximized his RRSP contributions. He stayed out of credit-card debt. “I paid MasterCard $10 in interest once and that was because I missed a payment when I was on my honeymoon,” he says.
When Mr. Grant needed a new car, he saved up the cash first. If he and his wife found a deal at a discount grocer like No Frills, they stocked up their freezer. They tracked their income and expenses meticulously, so they knew exactly how much money would be left over every month.
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Then they plowed the savings into a portfolio of dividend-paying stocks that has grown to the point that the income can support them and their two daughters, despite the setbacks their investments have been dealt in the recession.
Two years ago, Mr. Grant took a buyout package and quit his engineering job in Toronto, following his wife, who had left the same company a year earlier. Although they could get by without the extra money, both choose to do part-time contract work – that is, when they aren’t skiing, mountain biking or travelling.
“People ask me, ‘How did I do it?’ I’d have to give you a list with 2,000 things on it, but every one of them are just basic things, a lot of which my parents taught me,” says Mr. Grant, 46. “It’s the boring stuff that really gets you ahead.”
With pension plans hitting the wall and workers delaying retirement because they can no longer afford it, people like Mr. Grant are in the minority. But his story, and others like it, illustrates that it’s possible to achieve financial freedom by living frugally, saving diligently and investing wisely. These are the very things many Canadians are not doing, which is one reason their retirements are in jeopardy.
In a society that encourages consumers to borrow and spend, in which the pressure to upgrade homes, cars and gadgets never stops, living within one’s means and staying out of debt is a challenge. But for people who make a middle-class salary, the “boring” approach may be the surest route to building wealth and achieving financial security, say those who have done it.
The early retirees – and aspiring retirees – interviewed for this article have several things in common: Most started saving early, usually in their 20s, and were inspired by a parent or friend who taught them about money management. They had a strong aversion to debt, which motivated them to pay off student loans and mortgages and avoid carrying a credit-card balance. They also took a keen interest in managing their own money, rather than turning it over to an adviser who charges for the service. This last step is crucial, they say.
“You can invest yourself. In fact, you must learn to invest yourself,” says Tom Connolly, a retired teacher who publishes an investment newsletter in Kingston. “It’s your money. You alone are motivated to manage it best.”
Consider an extreme – but illuminating – case like Andrew Hallam, a 39-year-old teacher who parlayed a frugal lifestyle and knack for investing into a portfolio that would make most people envious.
When he was in his 20s and teaching on Vancouver Island, he would cycle 55 kilometres to work towing a trailer filled with laundry, which he would load into the school’s washing machine. He could afford a car and a washing machine of his own, but was so focused on retiring by 45 that saving money took precedence.
