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me and my money

Tim Stobbs, a resident of Regina, reached financial independence in the fall of 2017 when he was 39 years old. Now he can do what he wants with his time. Currently, that means activities such as writing a book and a blog, volunteering for good causes and spending more time with his 11- and 13-year-old sons. Tranquility and comfort at last. What a contrast to the turmoil at the start of his financial journey.

The Globe and Mail interviewed Mr. Stobbs by e-mail to find out how he saved and invested his way to (very) early retirement.

How did you get started?

In 2000, they shoved an engineering degree in my hand and I added a wedding ring on my finger. Soon after, my first engineering job came along. As the months went by, I realized I hated it. I was nearly physically ill going back to work after days off. That’s when financial independence started to look good.

My wife and I had $60,000 in student loans after university and we piled on more debt by taking on a car lease and a home mortgage. About the only smart thing we did at this time was to live on my base pay and use my bonuses to pay down debt.

What happened next?

Things took a turn for the worse [in 2005] when our first son was born 10 weeks early. He’s fine now but there were medical bills to pay that were not covered by provincial health care plans. About the same time, we discovered the main structural beam in our house was rotted out, and a substantial renovation was needed.

We got used to living on less than half our income. One frugal move was finding cheaper ways to meet needs, like making wine at $6 a bottle instead of buying it at $23, and borrowing books from the library.

I also moved to less stressful jobs and got better pay. But I was still hooked on [the idea of] financial independence and in 2006 started an early-retirement blog, Canadian Dream: Free at 45.

After you paid off your debts, how did you invest your savings?

I actually started investing before all the debt was paid off, in 2005. I set up a couch-potato portfolio of four index mutual funds in a registered retirement savings plan. Money from each paycheque was automatically funnelled into the plan.

I had a balanced portfolio, with the index funds tracking Canadian, U.S. and international stocks, and Canadian bonds. They were weighted equally and rebalanced annually.

Has your investing since changed?

A few years ago, I switched from the index mutual funds to exchange-traded funds. They give the same market return at lower fees, thus better returns over the long run.

My wife and I also now have tax-free savings accounts and taxable accounts invested in portfolios of dividend stocks. Many of the companies mirror our monthly bills: two bank stocks, two power utility companies, two telecommunication companies and so on.

Finally, I have a defined contribution pension from the company I worked at for the 10 years prior to retiring. I can access it when I turn 50.

What are some of the lessons you learned from your investment experiences?

During a market crash, your investments will make you feel like your stomach is doing backflips. During the 2008 crash, I managed to avoid selling – and even kept buying. What helped was having an investment plan written ahead of time for what I was going to do during such panics.

How did you manage to retire years before the age of 45 targeted in your blog?

A bit of luck, actually. We purchased our current four-bedroom house at pre-boom prices in 2006. It only took us until 2012 to pay off the mortgage. Now, the house is worth $200,000 more than the purchase price, and we have a $100,000 line of credit on it for emergencies.

What is your net worth now?

Our net worth is close to $1-million as of the end of October. This is made up of financial assets worth just over $590,000 and home equity of nearly $400,000. Not included is $80,000 in a registered education savings plan for our sons. Included is a reserve fund of $20,000 created for contingencies.

How are you paying for living expenses?

We receive $550 a month from my wife’s home daycare business and $340 a month from the Child Tax Credit. This covers about a third of monthly expenses. The deficit can be covered for now with withdrawals from the $20,000 reserve fund I created before retirement.

More income will become available. For one thing, the Child Tax Credit should be a lot higher in 2019 given our low income. Also, there is our dividend income of around $800 a month.

Then there is income from my hobbies of blogging and writing. Plus, I can take on casual or term work. But it will be of my choosing and involve an element of fun or exploration, like the day I spent last month working in a brewery for $100 and 16 free cans of craft beer. And if worse comes to worst, I can always go back to work as an engineer.

What final advice do you have for investors?

You can be a do-it-yourself investor. It isn’t particularly hard if you stick to index investing. It takes me about 15 minutes a year. Then write out a plan for what you’ll do in different market environments, and review it at intervals.

This interview has been edited and condensed.

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