ONWARD AND UPWARD

The great rush of relief after leaving such a stressful job in
1988 gave me the confidence to keep striving for early
retirement. Although I needed another job, I had money saved,
no debts, and a substantial increase in net worth, due mostly
to the rapid rise in condominium prices. My outstanding mortgage
of $35,000 on the new condo value of $140,000 amounted
to only 25% debt, whereas the proportion of debt on the prior
condo value of $74,000 came to 47%. The boost to my net
worth provided the motivation to eliminate the remaining
mortgage balance and gain the entire difference (less costs) as
profit. Finding the funds to discharge the mortgage by the
next anniversary date was my first priority. I had ten months.
I received a retroactive pay increase from my previous government
job, and I used the money to double my mortgage
payment each month. As well, my RRSP got a boost when I
left work since the pension amounts deducted from rny paycheques
were rolled over into my existing RRSP. I asked for a
pension booklet before I quit and used it to figure out the
exact amount I'd receive. My figures showed that I should have
received more, so I called the pension department, collect, of
course. The government clerk did the calculations again and
called back to confirm that my figures were right. At the end
of our conversation, she asked how I'd found the error. I told
her, "I just did the math."
Then, in the summer of 1988, I was offered the first fun
job I'd ever had,, A friend asked if I would like to work during
the shows at the city convention centre and live theatre hall.
She convinced rne to take the job by mentioning that I'd enjoy
the shows for free. There were also complimentary tickets to
shows for friends and family and food to take home after various
catered events. I could walk to work, and it was fun to
be both behind the scenes and in the audience. The public,
though, regarded the city staff as "lower life forms" and treated
us accordingly. While my quality of life improved by working
at a pleasurable job, it was difficult to contend with this bias,
which permeated not only consumer shopping locales and
types of acquisitions but also types of employment. When I
chose to leave that job, the city personnel office mailed the
separation certificate to me. Although I hadn't indicated why
I quit, a government clerk had fabricated the reason as "personal
betterment" and handwritten it on the document.
In the fall of 1988, however, I took another hard look at
my financial position. A recent evaluation priced my condo
at about $150,000, and the real estate market was booming. I
was happy with the assets on my balance sheet, but I still
wanted to be rid of my only liability, the mortgage. I deterONWARD
AND UPWARD
mined which assets I could use for funds and analysed my
expenses once again, keeping in mind the value I received for
the money I spent. I'd reduced all costs except housing from
33% to about 25% of total expenditures, so I didn't think I
could make any more changes there.
Next I considered housing, now at 75% compared with
the other expenses. It seemed to be too expensive and out of
balance for what I was receiving in return. After doing a little
research, I discovered that property taxes for a house in a better
area were less than what I was paying at the condo. Houses
on huge lots in a nicer area were taxed $1,200 a year, whereas
my condo taxes were just under $1,600. In comparing my
condo with a house, I listed the following. I had only one view
from my unit, and it was of another building. I didn't have a
yard to enjoy Insurance costs were about the same for either
type of dwelling. Condo maintenance fees, at $175 per month,
seemed to be exceptionally high versus monthly house expenses.
I could gladly give up the indoor pool for the freedom of retirement.
Without the government job, I didn't need to stay
downtown, and I'd enjoy breathing fresher air away from the
core of the city. As well, a new problem arose when a group
home sprang up in the neighbourhood. I'd been approached a
few times by what looked to me like "anger management" residents.
But the main factor in deciding to move was that I
could buy a house the same size as my condo in a desirable
area on a large lot, with lower taxes, and at a lower price! I
decided the condo was overvalued and ripe for selling.
Since the real estate market was so overheated, I thought
I could sell my unit myself. In January 1989, I set the price
at $149,900 and advertised the condo in the local newspaper.
The response was encouraging, and a local real estate agent
called to ask if she could bring some people to see it. We
agreed that if I accepted their offer I'd pay her a selling commission
of three percent but not the listing commission (an
additional three percent). At the time, this was considered a
normal arrangement by area realtors. After showing my home,
the agent called and said the couple loved it and wanted to
make an offer. 1 was pleased but restated our agreement about
paying only the selling commission if I accepted their offer.
She then said she wanted both commissions and, if I didn't
agree, would simply tell the couple there was something wrong
with the condo and advise them to buy elsewhere. I reminded
her that wasn't the agreement, but she didn't care. Perhaps I
should have made our arrangement in writing, but if that was
how she conducted business before I even saw an offer I didn't
want any continuing association with her. As it turned out, I
made a better profit on my own. In March, I sold my home
for $147,000, commission free.
By then, the mortgage anniversary date in April was less
than a month away and, unfortunately, four months before
the closing of the sale. I arranged for a loan of $13,000 to
bridge the months to closing, used all my savings, withdrew
part of my RRSP, and discharged my mortgage! I had just
turned 29, and I was mortgage free.
The property value had increased by just under 100% over
three years. Interestingly, the units in my previous condo complex
had risen by only about 85%. Perhaps the difference was
due to the real estate mantra of location, location, location.
ONWARD AND UPWARD 75
In calculating the return on my down payment for the second
condo, I considered renovation costs, advertising expenses,
lawyer's fees, and the difference between housing costs if I'd
remained a tenant. In total, my return on investment (original
down payment + reno costs) over the three years was just
under 325%, as illustrated below.
Proceeds from sale: $ 147,000
Less bridge financing: (13,128)
Total proceeds: $133,872
Costs: renovations $998
advertising 115
legal fees 500
(1.613)
Balance: $132,259
Less difference in housing costs
if I had rented: (5.160)
Balance: $127,099
Less original investment: (30,000)
It's important to note that the only time I saw my home
as an investment was when I thought the price had risen too
high in relation to the condo's value as housing. The primary
function of a home is to provide shelter; as an asset with
inherent value, though, a home has investment potential. A
profit (or loss) is realized only at the time of sale, and, since
I was aware of my condo's market value, I chose to capitalize
on what I thought was an overvaluation within its asset class
Tola! return: $ 97,099
and improve my standard of living from both the profit and
the intrinsic benefits of alternative housing. If I hadn't discharged
the mortgage, or sold at the peak of the real estate
boom, or bought another home for less money, I wouldn't have
made such a good profit. I still needed shelter, and I believe
it's because I treated housing as a value-rated lifestyle choice,
and not as an investment, that I did so well financially.
But now I had to decide where I wanted to live next, and
within a month I found a cute house near the city's university.
It needed work, but that didn't deter me. My ever-practical
father told me, "You can't look after a house on your own,"
but given my "Sure! Why not?" inheritance I was positive that
I could. Besides, buying a house was a necessary step in my
plan. I was getting closer to my goal all the time, acquiring
basic assets for cash and building wealth along the way. This
house, which cost less than the proceeds of the condo sale,
would greatly improve my quality of life and allow me to live
mortgage free.
My money philosophy remains as a result of my vision of
a quality lifestyle: hedonism paired with gratitude. Pleasing surroundings,
no money worries, enjoyable activities alone and
with others, these are my priorities. Even greater happiness
comes from having the time to do the things I enjoy. So I use
money as an exchange of value for goods and services only after
determining how much of my time and effort I must give up
to get the money. Put another way, the value of any desire is
determined by the amount of time and effort required to satisfy
it. For example, I bought a used lawn mower to cut the
grass at my house. I could have paid someone else to cut it,
but it was cheaper to spend my time and effort on the grass
than to hire someone else, because I would have had to work
for an employer for three hours to earn the net income required
to pay another person to do a 3O-minute job. It was work either
way: whether I cut the grass or earned the money to pay for
a lawn service. Considering that my employment income was
limited to 35 hours a week maximum, the money was better
spent elsewhere. And the lawn mower was an asset with inherent
value — that is, I could have sold it at some point.
My money philosophy also includes the necessity of delayed
gratification and tolerable employment to produce my ideal
lifestyle. Ironically, if I'd allowed instant gratification financed
by debt, and pursued a profession after years of expensive education
to achieve an acceptable standing, it's unlikely that I
would have had the quality lifestyle by the time I reached my
405 or even 505 that I was already enjoying by age 30.
When my father realized he couldn't change my mind about
buying a house, he tried to convince me to look in the most
prestigious area first for one that didn't need work and take a
small mortgage to cover the higher price. But that would have
been a step backward in my scheme and a waste of my time.
I would have needed to work many more years to pay off
another mortgage. My goal now was to retire within the next
four years, by the time I was 33. If I continued to work to build
my RRSP and nonregistered savings, and I had a home free
and clear, I would be right on schedule. I followed my money
philosophy and bought that tired little house, close to the university
campus, for $132,500. I moved into it in July, with a
plan to take care of the most urgent repairs over the next month
and rent the basement room to a student in September.
Fortunately, my father had compassion for his determined
daughter, and my mother used the excuse that I didn't have a
husband to help me, when they arrived with electrical supplies
and mop and pail. The hazardous wiring was quickly replaced,
and a shower head was added to the old three-piece bathroom.
A friend helped me pull up the smelly broadloom, revealing
oak flooring underneath. Then I tore off old wallpaper,
patched, sanded, painted, and scrubbed the whole house.
When I moved in, the decor was gloomy. But even as I
redecorated, the walls seemed to close in at night, and I couldn't
sleep in the house the first month. When I finally forced myself
to stay overnight, the dark house felt oppressive. Then, when
the eerie noises began, I got up and opened the front and
back doors, leaving only the screens locked, allowing me a
hasty escape if needed. I was afraid of the inside, not the outside,
but could recognize the absurdity of this fear only in the
morning — after the sun came up.
I was looking forward to a tenant for the income and for
the company, because it would be easier to get some sleep if
another person was in the house. My home was almost ready,
and the roof was the next priority. It had just started to leak,
and I didn't want to wait for ceiling damage. There was a
completely finished basement already, a modernized kitchen
upstairs, and scenic views of the mature treed lot from three
sides. The living room had a large bay window, and I could
lie on the sofa and gaze up at birds nesting in the old maple
tree on the front lawn. The house was on a corner lot, 40
feet wide by 140 feet deep, with a white split-rail fence and
ancient tall trees lining the perimeter. It was picturesque
country living, with the conveniences of the city.
When the roof was fixed, I took applications from prospective
students, but this time I was much more careful with my
selection. I listened to sage advice from my parents, who were
experienced with student tenants. "See if they take their shoes
off when they come in," and "Choose someone who comes
with their parents," they said. I used my mother's list of tenant
rules and discussed it with both the potential students and
their parents. Since I'd be living upstairs, we needed to have
the same idea of what a good home environment would be.
Many people thought it was odd that a young woman wanted
to rent her basement to a male student, but I'd already had a
bad experience with a female student. The one I finally chose
had come with his European father and sister. I knew that
many people of his father's generation had started out with
boarders in their homes, and I think this family was as relieved
and as comfortable as I was with the arrangement. The student
turned out to be an exceptional tenant. For a small
reduction in rent, he cut the grass, shovelled the snow, and
took out the garbage for me. I finally slept well at night knowing
that he was just downstairs.
He was so responsible that I decided to take a winter holiday
in Florida. When I came back, I asked him how he'd
managed. He hesitated, then said, "Fine, except it's a pretty
spooky house." I thought back to those episodes of evening
angst before he moved in. I waited apprehensively for him to
tell me about the "happenings" he'd experienced while I'd been
away, and I was relieved when we ended up laughing about
them. Apparently, ever since he'd been living there, we were
both attributing those strange noises in the night to each other.
By the end of 1989, I had a temporary full-time contract
in a real estate office. Housing prices had peaked in the area
and then stagnated into 1990. I was thankful I'd sold my
condo. As long as my house expenses could be covered, the
valuation didn't matter, because the house wasn't on the market
(for sale), and its purpose wasn't to provide an investment
return — only shelter.
Now I had to take the next steps in my plan to afford
retirement in three years. My cash flow with employment and
rental income was good, but I had an RRSP of less than $5,000.
I'd need much more.
Since I didn't have to concentrate on mortgage costs anymore,
I changed the way I recorded expenses to reflect my
new focus on grouping costs in order of necessity. I wanted
to channel as much income as possible into a nest egg, so I
needed an easy way to review my costs of living. I ranked the
remaining expenses according to necessity and categorized them
based on their potential for reduction. The most necessary and
unchangeable expenses represented 60% to 80% of total costs,
while 20% to 40% was spent on unnecessary but fun purchases.
The breakdown was much like my previous 67% for
housing and savings (primary importance) and 33% for other
expenses (secondary importance). I kept costs to a minimum
without feeling deprived (quality over quantity). The difference
between all earnings and all expenditures then
accumulated as savings for my approaching financial freedom.
I'd been tracking, prioritizing, and apportioning expenses
for almost 10 years, so I felt capable of projecting total yearly
expenses. Those numbers would provide an estimate of the
cash flow I'd need to live comfortably in retirement. Then I
could calculate the capital required in a nonregistered portfolio
for the early retirement period from 33 to 65 and the
amount needed in an RRSP for conventional retirement at age
65. After three years of tallying total yearly expenditures, I
could determine my average cost of living per year and use
that figure as a close estimate of the sum needed to finance
each stage. If I had a good idea of what I'd be spending (based
on what I'd been spending), then I'd have a better idea of how
much I'd need. The capital in each portfolio would be supplied
by the difference between net incoming cash and total
outgoing expenses. Maximizing the difference to create capital
was my goal. Being so close to my early retirement date provided
the motivation for finding more sources of income.
I had employment earnings from both a full-time job and
occasional evenings and weekend work at the convention centre.
I also had rental income. And since the late 19805, different
family members had been holding garage sales periodically.
While I didn't have much to sell, I could count on $75 to
$200 per sale. I sold items previous tenants and homeowners
had left behind, fixtures I'd replaced in renovations, unwanted
donations from family and friends, and kind but unsuitable
gifts I'd received. I donated a leaky dishwasher that came with
the house to a charity and used the $90 receipt against my
income taxes. Similarly, I donated unsold garage sale items to
another charity for the tax receipts. I sold a ceiling fan and
chandelier through a local "buy and sell" radio program and
an old gas stove in the area newspapers free ad section. One
time, a neighbour was throwing out a wicker bookshelf that
leaned to one side. I took it into my backyard, soaked it with
water, and bent it straight again, weighing it down with a
couple of bricks. The wicker dried in the sun, and that evening
I sprayed the bookshelf white with some leftover paint. I used
another free ad and sold it for $25. Individually, these means
of increasing cash flow were negligible, but combined they
eventually came to a sizeable sum.
By September 1990, my costs of living had amounted to
only $3,600 for the previous eight months. I was happy with
my cash flow, which had provided about $13,000 net income,
leaving $9,400 for savings, $2,300 of which I added to my
RRSP. I'd become used to my mysteriously eerie house, and I
wanted to do more extensive renovations, so I decided not to
have another tenant that fall. Unfortunately, general economic
conditions were slowing down. My work contract covering a
maternity leave was over, and I was out looking for another
full-time job. Then an opportunity came along that changed
the date of my financial freedom.
Although my father was working as an industrial systems
specialist, he kept his real estate broker's licence and followed
the local housing market. He noticed a house for sale that
was a "diamond in the rough" only a few blocks from my
home but in a more prestigious area. He made an appointment,
and after viewing it he thought it was priced very well
for a renovation project that he could work on in his spare
time. My father bought it for $131,000 — less money than
what I'd paid for my house six months earlier. My family
went to the preclosing inspection to see his project and voice
our opinions. The house did need work, but it was solid
brick and stone and had a paved driveway, central air conditioning,
an underground lawn sprinkler system, and a
fireplace. And it was larger than my house. I wanted it.
It was a serious dilemma. I wanted to retire soon, yet I
wanted to buy that house. I was practical enough to know I
couldn't do both, and I was impractical enough to try. Oh,
those unlimited wants! I also knew that, with my father as the
vendor, it would complicate matters.
When I was growing up, my parents decided what was
best for me. When I became an adult, they gradually accepted
whatever I decided was best for me. They've always had a
propensity to give, but they've respected my fiercely independent
nature and desire to "do it myself." That being the case,
I've rarely asked them for anything, but after seeing the house
my resolve was shattered.
After the inspection, I invited my family over for coffee.
They excitedly discussed my father's purchase, but I was unusually
silent. When they all left, I waited about 20 minutes for
my parents to drive home. Then I called my father and asked
him, "Will you sell your house to me?"
After many long discussions, my father and I made some
plans. He would renovate the house and sell it to me. I had
just received a small accident insurance settlement that would
partially cover the utilities, taxes, insurance, and remodelling
costs while the tradesmen and my father worked on the house.
The balance would be paid from my savings for early retirement
and from proceeds from the sale of my existing house.
Any decorating and outside upgrades would be left up to me
to finish and pay for. My retirement would have to be delayed.
In early 1991, I started working for another real estate company.
It was a small business where I ran the office while the
broker concentrated on sales. Although I wasn't an agent, I
kept up to date on the real estate market by being immersed
in listings and deals on a daily basis. Generally, the market
was not doing well.
But my personal finances were improving. Total expenses
at the end of 1990 were only $5,500, and at the end of 1991
they were $8,600. Considering my net income for that year
was $20,100, I had about $11,500 left over: $1,700 allowable
for my RRSP and $9,800 for my nonregistered savings.
I had a great deal of financial responsibility in my job. I
regularly handled banking, accounts payable and receivable,
rent collection, and bookkeeping. Although my boss knew I
was completely capable of those duties, due to the poor market
conditions at the time, he would often ask me, "How are we
doing? Are there any deals coming in? Are we going to be
okay?" My concern, naturally, was that he could meet payroll
(it was never a problem), but he wanted to know the business's
daily cash position. Since I knew the average monthly
office expenses and had records of pending sales, I devised
cash flow statements that detailed money coming in and going
out in chronological order for 90 days in advance. At any
time, he could see the company's cash flow position. The office's
bookkeeping wasn't computerized, so I manually had to make
adjustments for changes and make completely new statements
frequently. But these statements served their purpose: he didn't
want computer graphics, he wanted information. As I became
adept at creating cash flow projections for the small business,
I decided to do the same for my home finances to forecast my
personal cash flow. That way, I could invest regularly by
knowing when and how much cash was coming in, when and
how much was required for expenses, and when and how much
would be available for savings. I would be controlling my
money efficiently, like a well-run business.
In 1992, I contributed $4,000 to my RRSP, and I had
expenses of $7,800 for the year, which left $12,000 for early
retirement savings. My cash situation was good. My housing
circumstances were not. The renovations were nearly completed,
and my house was up for sale, but I hadn't received
any offers. Values were plummeting. From 1992 to 1995, I
stopped recording net worth statements because I was so discouraged
over the decline due to real estate prices. I wondered
if my house was ever going to sell. Even though I didn't consider
my home to be an investment, it was hard to watch the
value go down. Other house values were decreasing relatively,
but I would be suffering a loss simply because I had to sell,
and the sale price after costs would be less than what I'd originally
paid for the house. It was disheartening when I finally
sold my home in the spring of 1993 for $127,000.
Still, it would have been much worse if I'd had a mortgage
and watched it become a far greater proportion of debt as the
value of the property decreased. I saw many homes come
through the real estate office under forced "power of sale,"
where homeowners lost all their equity, and some properties
even had debts exceeding their new market values. As well,
considering I'd started with a $10,000 down payment and 10
years later had $122,700 cash (after costs) for housing, I had
nothing to complain about. Also, if I hadn't owned a home
during that time, it's doubtful I would have accumulated the
same amount from the savings in rent versus mortgage, maintenance,
and taxes. While I viewed housing in my plan as a
basic cost-of-living expense that had to be reduced to as little
as possible, my father always stressed that owning a home is
a forced savings plan. It is much more difficult to access equity
in a home than savings in investments, and monthly mortgage
payments are much more likely to be adhered to than
a savings plan. I'm sure that I would have made regular savings,
but it's unlikely that I would have deposited or invested
anywhere near the amount I'd paid monthly for shelter. And
I don't think I would have accumulated nearly as much after
10 years.
By the time I turned 33, I'd reached my early retirement
target date, but I was still working. I had a much nicer house,
but it put financial freedom ahead a few years. As did the car
I bought that spring.
For a couple of years after I moved into my first house, I
thought about buying some kind of vehicle. That house was
farther from public transportation and shopping than my
condo was, ancl I didn't like the taxi experience. As well, getting
all the supplies for the renovations from the store to my
home was difficult. A car or truck was becoming more of a
need than a want.
I referred to the book Save Tax in Canada and Retire at
45 for inspiration and guidance. I'd already weighed the alter
natives to owning a car and made the decision to buy one.
The book suggested shopping for a bargain and buying an
economical car. I only needed it for inconvenient trips (groceries
and building supplies for the next house), and I didn't
want to handle any mechanical problems that might arise. I
decided to buy a cheap new car.
I began my research at the public library, looking at books
that showed car reliability, repair and recall history, safety
records, and general recommendations. I made a short list of
the inexpensive models. Then I set about test-driving the list
of cars. I explained to the salespeople that I didn't like driving
and wanted to drive the cars in a familiar area. New car
sales were not doing well in January 1993, so I found the dealerships
very accommodating. Since I didn't already have a car
to drive to the sales lots, I had the sales reps bring one to my
workplace as I was finishing for the day. I asked them to take
me to my home neighbourhood, where I changed seats for
the test drive, which I finished in front of my house. Each
rep looked a little surprised when I got out and said, "Thank
you. I have a few more to try yet, so I'll let you know." But
it wasn't that I'd just arranged a free ride home. I really did
buy one of those cars.
It was a '93 Dodge Shadow hatchback with an automatic
transmission, an upgraded engine, air conditioning, and a
three-year, bumper-to-bumper warranty. It was larger than a
similar Toyota model, and it suited my needs perfectly. After
all the costs and taxes, I paid $12,000 cash for it, and the
dealer delivered it to my home.
With the hatchback trunk and back seat pushed down, I
was able to move half my household belongings to the new
house over a number of short trips, which saved on eventual
moving costs. I could now buy food staples in bulk, also saving
money that way. And I didn't take the car to work, so I saved
on insurance. But it was still an expense that prolonged my
working life.
Now I planned to retire within the next two years, by the
time I was 35. At the end of 1993, my net income was $19,500,
of which $3,900 went into my RRSP at the beginning of the
year, based on my own calculations on my earnings in 1992.
Expenses for the year were $8,000, not including the purchase
of the car, leaving a balance of $7,600 for savings.
My cost of living was low in 1991 and virtually the same
in 1992 and 1993, so I estimated expenses to continue at about
$8,000 per year. (In five years of retirement, the actual figures
have been in the $7,000 to $9,000 range.) Of a gross average
income of $20,000 per year, my retirement income needs were
about 40%, not the general "expert" financial planners' advice
of 6o%-8o%. The amount in my nonregistered portfolio
would have to supply $8,000 a year in current dollars for the
30 years until I reached 65. Since my RRSP would provide
income after that, the early retirement amount could be used
up by the time I reached conventional retirement age. Payments
before age 65 would be made up of a portion of the accumulated
capital as well as returns (gains) made on that
portfolio. In retirement, my level of consumption would be
only for daily living and not for any substantial acquisition of
consumer goods since I already owned all the major lifestyle
goods I wanted. My spending habits still reflected needs versus
wants, make it or do it myself, get it free, pay the least amount,
and pay cash, so the consumer price index would have little
effect on me. If I wasn't buying much, then increasing product
prices wouldn't matter much. Even so, I used a financial planning
and insurance industry guideline to determine the amount
needed: my annual income needs multiplied by a factor of 10,
equalling $80,000 for my nonregistered portfolio.
To calculate the amount that I'd need in my RRSP at age
35, I used a bank's financial planning worksheet that assumed
the current Canada Pension Plan (GPP) benefits would be in
place and that the return on my RRSP would outpace inflation
by four percent. By the time I reached retirement age,
GPP benefits of some sort would be likely since I'd be considered
a low-income Canadian. I allowed for a higher
retirement income of $15,000 yearly, as expressed in present
dollars, and I would not make another contribution to the
RRSP. The calculations showed that at 35 I'd require $20,000
in rny RRSP.
I knew the amount was only an estimate, since future rates
of return, inflation, and income requirements can't be known
with any degree of certainty ahead of time. But if this amount
turned out to be grossly deficient, I still had many options to
avoid any future financial constraints. I didn't need to live in
such an expensive area or even within the city. I had a range
of assets that could be converted to cash. I'd be young enough
to work full time, if needed, during the next 30 years, I also
expected to receive some part-time earnings from employment
or my own business in the future, but they'd come from a
fun job of my own choosing or from a hobby. That way, as
well, I could keep contributing to my RRSP. And, of course,
I already owned everything outright that I needed to enjoy
my present lifestyle. So retirement at 35 was not only possible
but also reasonably secure. I already had close to $20,000 in
my RRSP. The only thing I really needed to do was build up
my nonregistered portfolio.
During 1993,1 began investing in bank funds. I was looking
for a better return than the cash instruments were paying.
Although I still kept half my money in GIGS and government
bonds, I ventured into a combination of total equity, balanced,
and bond mutual funds. In my first foray into equity-type
investments, I felt safer buying bank funds because to me
banks were part of a solid, conservative institution, and I
thought that would be reflected in the makeup of their fund
families. I believed better diversification for a relatively small
investment was also a good idea.
But I got caught on a bond fund. The stated rates on all
the separate bonds within the fund were higher than what I
could have received buying bonds on my own. I thought that,
since the fund invested in interest-bearing instruments, I could
count on a return generally based on the average of these rates.
I asked the bank representative if my thinking was logical, and
she agreed, but she added there was another dimension to the
fund. If interest rates went down, the unit value of the fund
would increase, and if interest rates went up, the unit value
would decrease. I told her I thought rates were increasing, so
didn't that mean I shouldn't be buying that bond fund? She
looked down at all the paperwork we had just gone through
and didn't answer. Then I said, "But I should be able to count
on the higher rates of return within the fund to keep the value
up, right?" She nodded her head in agreement and said, "But
the funds will fluctuate." I should have done more research
until I really understood bond funds. Instead, I purchased the
fund and watched the value go down. I was right that interest
rates were going up, but that was no consolation. I cut my
losses and got out of the fund.
This loss reminded me of a time in the early 19805 when
I read some doomsday money books warning of impending
world financial chaos. Those "experts" advised buying gold to
survive the coming triple-digit inflation and monetary collapse.
I thought owning a few gold coins and bars, just in case,
couldn't hurt. I was wrong. Although I purchased the gold
well after its 1979 high of over $950 an ounce, I still paid
about $400 per ounce and held on to that security blanket
far too long, earning no return whatsoever. When I finally
smartened up and sold it all, I suffered a loss of $1,800. The
fact that 75% of the loss could be used to offset a capital gain
was no consolation either.
I was investing $1,000 a month in 1994 just before leaving
my job with the realtor. Real estate was still in a slump, and
that office was a stressful place to be, so I left the job as
summer approached.
My next job was in the accounts department of a local
hospital. Although I found the working conditions intolerable,
I stayed there to build up my freedom fund. My coworkers
said that, whenever there was a vacancy posted for their department,
it was always filled by someone from outside the
hospital. I wasn't surprised. I left after nine months, graciously
creating an opening for some other poor fool.
Although the goal of financial freedom was uppermost in
my mind, I fell into the trap of rewarding myself while I
stayed in that horrible job. But it wasn't in the form of easily
identified consumer luxury goods such as jewellery, clothes,
vacations, or entertainment. For me, it was in the form of
spending money on home improvements.
There was a massive old tree, much too close to the house,
that I paid about $1,000 to have cut down and removed. Then
I had three dozen new trees and a handful of bushes brought
in to give my backyard some creative form and privacy. I hired
students to help me tear out the grass, dig up new beds, and
plant the various flowering bushes, cedars, and willows. I
bought a new stove and a new dishwasher. Then I had a central
vacuum and a burglar alarm installed.
So I kept working. I loved the house and the upgrades,
and it was the first time I decorated for my pleasure, not for
resale. I had one bedroom turned into a library for my extensive
collection of old books, which continued to grow.
Beautifully bound volumes lined the wall-to-wall shelving, but
I'd bought most of the books for a dollar each from garage
sales, library book sales, or flea markets. I had a completely
new kitchen, a new bathroom, and new broadloom throughout
— everything looked new. Work might have been hellish, but
my home was heavenly.
It wasn't only the compensation or "I deserve it" trap that
kept me from earlier financial freedom. I think that, as I got
closer to my early retirement deadline, I became apprehensive
about taking that big step. I truly wanted to be free, but I'd
ONWARD AND UPWARD 93
never done it before. Or maybe I was just on a final spending
spree trying to buy everything I thought I wouldn't be able
to purchase after I left regular employment. I also think that
cultural conditioning made it difficult to plunge into an alternative
lifestyle. I didn't know any 35-year-old retirees to call
on to calm my anxieties.
As I reached my 35th birthday, I was still on the fence. After
a bad winter, my driveway and front porch needed major repairs,
so I hired a contractor to fix both and decided to work a little
longer. I also rented out one room in my home to another student
for the 1995—96 term to supplement my savings.
After my job at the hospital, I found work with an insurance
broker. This turned out to be a good education in the
area of consumer insurance products. I also gained an inside
perspective on the claims process when my house was robbed
and my car stolen. Those experiences along with on-the-job
knowledge led me to confidently bypass the insurance broker
and choose future policies with a discount insurer instead.
By 1996, my financial picture was looking good. I added
a canvas awning to the front of the house but couldn't think
of any other improvements to make. There would be more
yard and gardening work to do, but landscaping was a hobby
of mine and something to look forward to when I was retired.
The housing market was recovering, and I watched the value
of my home gradually increase. My net worth was $225,000,
but I continued to work. Finally, a very sad event nudged me
into retirement.
For most of my life, I've lived near my family. Part of the
reason I made an offer on my first house was that it sat across
the street from my aunt's home. It was comforting to know
that if anything went wrong I could just run across the road.
In fact, when I initially couldn't sleep in my spooky house, I
spent the nights on her sofa bed. Even though my aunt was
self-supporting all her life, there were problems with her various
jobs, and in later years she was miserable at work. When
she turned 65 and retired, the change in her personality was
remarkable. She was cheerful all the time. She happily went
on outings with friends, participated in many volunteer activities,
was quick to help our family, and enjoyed new hobbies.
She loved being retired! Sadly, her health failed, and, after only
a few years of joyful freedom, she died.
Her death made me realize that life really is too short. I
felt so sad that she spent most of her life working long and
hard for the reward of a happy retirement, which in the end
was simply too little, too late.
After 15 years of working, I quit and retired at 36.
FREEDOM FACTORS
Eliminate the mortgage and don't take on any new
debt.
Determine cash flow and income needs for both
phases of retirement: before and after age 65.
Contribute to an RRSP in January for that
calendar year.
Build a substantial and diversified net worth.
Look for income from all sources.
Research alternatives in all areas: investment
products, regular expenditures, assets for net worth,
major purchases.
Gather as many "expert" opinions as possible for
any financial plan or transaction, then do your own
research and make your own decisions.
Don't use fleeting rewards or fear of freedom to
keep you in the rat race.
Spend less time making a living and more time
making a life.

FIRST THINGS FIRST

My entrance into the world of work was not a smooth
one. I thought my best job prospects were in Toronto,
specifically at one of the handful of Bell Canada offices there.
I knew Bell had a generous stock option plan for its employees,
and I wanted to take advantage of any opportunity to increase
my wealth through an employer. While I waited for an opening
there, I stayed with an uncle and aunt, who generously
accepted a minimal rent until I became more established.
For me, the fastest route to a job was through a temporary
agency. Within a few days, I was employed by a large insurance
company in downtown Toronto. I had a clerical
accounting position that consisted mostly of adding up batches
of numbers all day. The pay was very low after the agency's
fees were deducted, but the job was just a stepping stone to
something better, and essentially it was paying for my expenses.
After a month there, I applied to a small accounting firm and
was hired as a secretary. The major partner expected that I
would further my accounting education and become a greater
asset to the company, but that wasn't my plan. The earnings
from this job were an improvement, though.
For extra income, I taught remedial reading to the bookkeeper's
young son, since I had experience from a grade 13
English course. Even so, I waited apprehensively for the call
from Bell. I was still living in my relatives' home and keeping
purchases to a minimum. I went with my aunt for groceries
and discovered discount warehouse food shopping! My focus
remained on acquiring basic assets as quickly as possible, and
every bit helped in accumulating some savings during this
time. I put any money left over into savings vehicles because
they allowed low deposit amounts, and interest rates in 1980-81
were relatively high, making the return especially good in relation
to my low cost of living and tax bracket.
Finally, I was interviewed at Bell Canada and secured a
position in the collections department. I wasn't keen on that
type of work, but the salary and benefits were substantially
better than those at the chartered accountants' office. I also
began to realize that my aunt and uncle would have preferred
a higher-paying tenant, so I needed to find another place to
live. I didn't really like living in Toronto, but I had a good
source of income (the first step of my plan). The easiest option
was to live as close to my job as possible. I didn't want to
keep renting, because the next step was to secure shelter and
minimize its cost while still building an asset base. Owning a
home, eventually free and clear, was the only way.
On my lunch hour, I would walk around the residential
area near the Bell office and take note of the properties for
sale. Then, in the evening, I'd meet with a real estate agent
to view the homes. I soon learned that, although I'd been
saving every penny and had a substantial down payment, I
couldn't obtain a mortgage for the balance. I might have been
able to manage a mortgage on a home in an outlying area;
but, to be honest, I felt scared when I went by bus to some
of those areas. A reassessment of my position was in order.
It was the spring of 1981, and I had just turned 21. I didn't
like the high cost of living in Toronto. I didn't like working
in collections. I didn't have any debts, I had savings of about
$13,000, but I couldn't buy a home in an area where I felt
safe. I was becoming frustrated and discouraged. Was nothing
ever going to work out? Was I never going to reach my goals?
The plan had seemed so simple, but it wasn't coming together.
Stymied, I decided to take an extended vacation to regain
perspective.
I quit my job at Bell and moved my belongings back to
my parents' house. I flew to a horse ranch in Missouri, then
stayed in Oklahoma, then went on to Texas. After spending
those months in the States, my disappointment vanished, and
my optimism returned. I concluded that financial achievement
required flexibility and time. Just because my plan wasn't
unfolding in the way I'd expected didn't mean it would never
happen. I only had to make some adjustments.
The first two strategic steps of generating income and then
buying the basics were sound. I was living at my parents' home
in Hamilton that fall and took a job within walking distance
at a dental lab. I assumed that making dentures wouldn't be as
stressful as collections. It was a relaxed atmosphere, somewhat
artistic, but so many hours of close work strained my eyes, and
objects at a distance became blurry. The salary was exceptionally
low as well, hindering my ability to amass savings. To
supplement my income, I sold Avon door to door in my neighbourhood.
One blustery winter evening, a young woman invited
me into her home to display my wares. I was shivering, and
my nose was running, detracting from the perfect Avon Lady
image. Her husband wandered into the living room, and I
introduced myself. He shook my frozen hand, looked out the
window at the swirling snow, and said to me, "You've got guts,
Dianne." I might have had "guts," but I didn't make a sale.
My mother likes to say that "The good are rewarded," and
a former schoolteacher was fond of reciting that "Patience is
a virtue," but I don't give credence to either. I was approaching
my zznd birthday, and I still didn't own a home. It was time
to focus harder on finding a good source of income.
Fortunately, a job became available with the provincial government.
Unfortunately, it was in collections. The starting
salary was mediocre at about $16,000 a year, but the benefits
package and job security couldn't have been better, considering
my previous job experiences. The determining factor, though,
was that I would be able to buy a home within a couple of
years. Could I stand collections again? I convinced myself I
could. This type of job, after all, was the key to my future of
financial independence. Wealth from collecting taxes. The
irony of that was still to come.
I think every employee is enthusiastic at the beginning of
a new job, and I plunged in, even happier on paydays. I joined
the payroll savings plan for Canada Savings Bonds as a painFIRST
less way to save. I moved into a tiny apartment on the 26th
floor of an upscale highrise, again within walking distance to
work. I probably should have weighed the new expense of rent
against board at home plus transportation costs. I knew I
wanted to buy a home as soon as possible, but I didn't think
it would happen that year, either way. I also felt "entitled" to
an apartment as compensation for working, and I didn't want
the responsibilities or costs involved in buying a car. From the
marketing course at college, I should have recognized the folly
of rewards and entitlements used by advertisers to establish
consumer buying patterns. Fortunately, my existing moneyhandling
habits offset the potentially damaging consumer
behaviour. I wasn't perfect; occasionally, I succumbed to subliminal
messages and other marketing ploys, but I had been
following a sound financial path for some time, and it had
become automatic and effectively blocked the lure of advertising.
I also believe that some rewards are needed to keep the
motivation and momentum going to achieve any goal — the
key factor being moderation. Occasional rewards. Quality over
quantity. Apportioning limited resources (time, effort, income)
to cover needs, goals, and a few wants. Unknowingly, I had
kept a balanced approach in handling money with respect to
my future goal, my current survival, and the all too human
desire for unlimited wants. In July 1982, my net worth was
about $20,000, which included Canada Savings Bonds, gold
bullion, silver, and antiques. By October of that year, I could
almost afford to buy a condominium!
Since my rejuvenation in the United States, I had replenished
my savings to about $11,000. I reserved this amount for
a down payment on a home and lawyers fees. Since the bonds
returned 19% interest, I decided to keep $1,000 aside for an
emergency fund. My father owned a real estate company in
1982, and he had a special interest in helping his new "purchaser"
to find the best home. I decided on a three-bedroom
condo, built in a desirable area, with a ravine view. The unit
had been owned by a busy single mother, and it needed a few
repairs and redecorating. The sale price was $42,000, and I
used $10,000 for a down payment. At that time, Canada
Mortgage and Housing Corporation had a first-time home
buyers' program in which I qualified for a $3,000 grant. I
assumed the existing mortgage of $12,000 at 9.5% interest, and
the vendor agreed to take back a second mortgage of $8,000
at 12% interest. The remaining $9,000 was a third mortgage
obtained from my parents, interest free for a term of five years,
to be paid monthly. The total mortgage debt was about 45%
of my disposable income. Before I made my offer, my father
calculated the three payments, taxes, and maintenance fees; the
total cost for housing came to 63%, and he asked me if I could
afford it. I'd been making personal balance sheets to watch my
assets grow since 1980, but I'd recorded my income and expenses
only in a notebook. Using those figures, I estimated that it
would be possible to cover basic expenses with my remaining
net earnings of $370 a month. Since my parents held the third
mortgage, I knew they wouldn't foreclose if unforeseen circumstances
forced me to miss a payment, and there was enough
in my emergency fund to cover two or three months of total
mortgage costs. Without their help, though, I wouldn't have
been able to get such an early start in the real estate market.
At 22, I was a homeowner! So far, I had been following
my plan, learning from experiences, making the necessary
changes, trying again, and muddling through. Combined with
new household, daily living, and renovation costs, the mortgages
were a sobering challenge, but achieving every small step
in my plan was exhilarating. I would go from room to room,
marvelling that the whole condo was mine! It was large, and
the big rooms diminished what little furniture I had. The living
room suite was my parents' well-kept 25-year-old sectional sofa
and chair, which my father reupholstered 17 years earlier. The
end tables and window sheers were handed down in perfect
condition from other relatives. I bought a marked-down brass
headboard from the Sears Clearance Centre for the guest room
and rescued a 19005 dresser with an oval mirror destined for
the city dump. It only needed a coat of glossy white paint.
When I mentioned to my mother that I needed to buy more
furniture and drapes, she exclaimed, "Buy? Buy? You can sew
drapes yourself! As for the furniture, we'll see what we can do."
All my mother's side of the family exude great confidence, and
they've done quite well financially. I recall that one of the few
English words they regularly spoke with emphasis was "Sure!"
as in "Sure I (you) can do it!" immediately followed by a rhetorical
"Why not?" My father's side had gentler, more practical
personalities. WTien I suggested to my mother that I didn't have
her talent for sewing drapes, Dad smiled down at the floor and
quietly took a step back as Mom began her evangelistic "Sure!
WTtiy not?" speech: "Of course you can make your own drapes!
You're from this family — you're one of us. You can do anything
you set your mind to." In jest, my father snapped to
attention behind her, while I pictured petite Brigadier-General
Mom commanding her soldiers "Onward brave troops —
charge!" Making drapes seemed to be an easy task after an oration
like that.
I had my mother's old sewing machine, and, as I began to
make the window coverings for each bedroom, I repeated
to myself that they didn't need to be perfect, they just had to
look good. I gleaned coping skills from a library book called
Diana Phipps's Affordable Splendor. It was subtitled An
Ingenious Guide to Decorating Elegantly, Inexpensively, and
Doing Most of it Yourself. This designer had her decorating
featured in Architectural Digest and House Beautiful. The book
jacket listed royalty and a well-known author as clients. If her
techniques were good enough for them, then they were good
enough for me. My mother expected perfection in her sewing,
but my home would have remained bare if I'd shared her
viewpoint.
One room became a den. My father panelled the walls in
knotty pine while I sewed cushions for comfortable seating on
a borrowed deacon's bench. For the master bedroom, I made
two fabric hanging lamps from a kit, each one coordinating
with the Dresden plate quilt my mother had sewn for the bed.
I inherited a suite of two walnut dressers and bed from my
grandparents. Round bedside tables were made from inexpensive
plywood and covered with homemade matching
tablecloths and square lace toppers cut from a piece of old
curtain and dyed to match. The ensuite bathroom had white
fixtures and walls decorated with a delicate blue-and-white
paper. I simply added a wall-to-wall piece of white fake fiir,
which cost about five dollars at a textile outlet, for the feel of
luxury beneath my feet.
The kitchen needed the most attention. It had an old
linoleum floor and dated, dark green, imitation wood cabinets.
I picked out a discounted end piece of new flooring, and
my father laid it for me. The countertops were an acceptable
off-white arborite, but all the cupboard doors were replaced
with new solid pine fronts, the wood fashionably "detailed"
and finished by my father as well. The eating area consisted
of two wooden farm chairs and a card table with a piece of
plywood cut in a circle for the top. I made a tablecloth,
matching chair cushions, and a grass-cloth hanging lamp. My
mother sewed coordinating placemats.
Since the appliances weren't included in the purchase price,
I had to find a refrigerator and a stove. We found a stainless
steel stove that was old but free, and it worked well. For $235,
I bought a used gold refrigerator advertised in a newspaper.
The only other purchases were an oak dining room set for
about $150, again from the Sears Clearance Centre, and a new
microwave from a discount appliance store for an extravagant
$600. Adding the renovation and redecorating costs into the
housing expense brought the total up to 67% of monthly net
income, or $670 a month.
The remaining $330 per month covered food, transportation,
property insurance, personal care, clothing, households,
furnishings, and gifts. There weren't any spare funds for savings,
so I considered the upgrades to my home as my investment
plan, which amounted to four percent of disposable income.
Medical and dental expenses were paid for by my employee
health plan. There was no money for entertainment, vacations,
hobbies, or recreation, but to me the sacrifice was justified. I
owned a home. Basic costs were covered. I had an emergency
fund. I was on track for my goal. Despite this logical reinforcement,
I still needed ways to ebb occasional feelings of
deprivation. Lifestyle was important: if I didn't feel poor,
I would stay motivated and pursue my financial objectives. I
needed some balance.
To alleviate the problem of having no cash for fun activities,
I used the indoor pool and tennis courts at the condo
complex for free recreation. Instead of paying for classes, I read
library books and magazines on my various hobbies. For entertainment,
I had "bring your own" parties, visited with friends
and family at their homes, and enjoyed free local events. My
father found and fixed a colour TV for me, and, while my
stereo was perfectly adequate, I did buy a cassette deck. I had
been to Florida, Jamaica, Missouri, Oklahoma, and Texas in
the past two arid a half years, so I was satisfied for a while
with the travelling I had done. Even so, there was more I could
do to improve my quality of life for free.
By keeping costs to a minimum for items that were necessary
but gave me little pleasure, and by cutting out what I
considered to be automatic and unnecessary purchases, I could
splurge on the things I really wanted and never feel deprived
financially. There were four benefits from getting accustomed
to buying very little: I avoided the expensive habit of automatic
buying, my home was uncluttered, I differentiated
between the things that would bring lasting pleasure and those
that would bring momentary pleasure, and I saved a lot of
money. I continued to save by using public transportation
instead of buying a car, which for me would have been a lowpleasure
purchase. Transportation was a necessity, but I paid
the least possible amount for it. I had money for what I determined
to be high-pleasure-generating purchases. Microwave.
Oak dinette. Cassette player. Brass headboard. Fur carpet. I
didn't buy these desired goods on credit, so I avoided potential
money problems. I had the cash to buy them by saving
money many times over through (a) cutting costs on low-pleasure-
generating items, (b) choosing cheaper alternatives, (c)
getting things free, and (d) not purchasing some items at all
My income was a precious limited resource, so I spent it
according to my specific priorities (goals, needs) and preferences
(pleasures). It was a new turn on the principle of value for
money I saw the purpose of my fridge as simply cold storage,
so I had the most value for the least money by buying it used.
Almost 20 years later, that fridge is with me, and I'm still waiting
for its demise. Most of my furnishings were handmade, used,
or free. I wasn't buying much of anything except quality. I
bought a few expensive things, paid for by not buying little
ordinary things such as kitchen gadgets, magazines, decorating
trinkets, housewares, and hundreds of other rarely used items
of minuscule value that simply waste space. Anyone who has
ever had a garage sale will know the next-to-worthless value of
ordinary clutter and gadgets. What someone else will pay for
rarely used or unwanted items is one determination of value.
The items that I did buy had inherent value — to me and to
others. Recently, I sold my dining room suite for a higher price
than I paid for it 17 years earlier. I still use the microwave and
50
cassette deck, and they have never needed repairs. Quality, not
quantity. One reward, not multiple rewards. Interior designers
advise having one focal point, one outstanding or oversized
piece as opposed to many insignificant little furnishings. I
applied that rule with one more major indulgence.
In November 1983, I bought a beautiful piece of antique
jewellery. My parents had received an invitation to a national
travelling show of antique jewellery. It was closed to the general
public, but my mother felt justified in extending the
invitation to her immediate family. It was on a Saturday
evening, and long-stemmed roses were handed to each lady
upon arrival. An abundant buffet of delicacies had been laid
out, and uniformed older men, looking like butlers, offered
champagne to the guests. The champagne was very fine, and,
when my brother asked for the name of the vintner, one butler
intoned haughtily, "It's Mum's, of course."
There were so many unusual heirlooms on display,
including an Egyptian gold ring embossed with hieroglyphics.
An enamelled gold locket, from 1870, caught my eye — and
I wanted it. When I started discussing the price with the store
manager, my mother looked worried, but I could feel that
inherited Old Country confidence. The locket was something
I really wanted, so I bought it. I was able to negotiate for a
heavier, longer chain to go with it but not for a lower price.
Since it was valued not only as jewellery but also as an antique,
the store guaranteed to buy it back at any time for what I
paid. That was another example of inherent value.
I didn't know exactly where the money for the locket would
come from, but I did know I'd be sorry if I left the store
FIRST THINGS FIRST
without it. I just had to find the money for it. My mind was
racing. Three mortgages. I wasn't spending money even for an
occasional magazine. But I wouldn't feel poor with a piece of
jewellery like that! The manager solved my problem by offering
interest-free payments over four months. I left the first cheque
and went home to figure out where the next three payments
would come from.
I would have to do a more intense cash flow analysis than
I did before I bought the condo. In that case, I estimated
many of my expenses; however, when it became apparent that
I had $370 per month to budget, allocating the money among
the different expense categories made the condo purchase feasible.
Now, with this unexpectedly large purchase, I had to
make new calculations. During 1983, my salary was raised to
$18,000 a year, increasing my disposable income by about $125
a month. Also, the renovations were finished, so that expense
was eliminated, and two months before the jewellery purchase
I decided to rent one of the condo rooms to a student. The
additional income and the reduced total expenses would cover
the price of the antique locket. Just. Perhaps I was putting
myself in a precarious financial position, but I still had the
$1,000 bond plus 19% accrued interest for an emergency. If I
was careful, I could handle the next jewellery payments.
Unfortunately, renting out the room was not a success.
Four months into the term, my student tenant left by mutual
agreement following her invitation one day to the university
football team to use the shower after a rainy game. When I
came home from work that day, I stepped in wads of mud
on the broadloom and found filthy wet towels strewn
throughout my home. The student wasn't there, and I decided
I liked it better that way.
But that made the money situation very tight for the last
two jewellery instalments. I paid the mortgages, kept the savings
bond intact, and ate wherever I was invited. With
transportation a fixed expense, the only adjustment I could
make was to the food category. I didn't need money for any
other area since I'd already learned to stockpile bargain-priced
staples, and I had enough in supplies to last a few months.
Cutting food costs was difficult but not impossible, and my
nutrition actually improved when I eliminated expensive convenience
foods. I took my lunch to work every day, and I didn't
buy snacks at the coffee cart. I bought enough groceries for
two months of breakfasts and lunches, and the money left over
paid for slightly more than a month of suppers. I ate chili on
weekdays for a month, dined out with my boyfriend on
Saturday evenings, and visited my family on Sundays for dinner.
It sounds like poverty living, but I saw it as a challenge, and
it was only for two months. My mother suggested I delay their
mortgage payment, but I decided not to. This was a test for
me. If I could survive a difficult money situation now, surely
I could handle any future problems. Then, just as I was really
getting tired of eating chili, I had some good fortune.
One night while I was reading the area's free newspaper, I
saw a cartoon game in which two drawings looked identical
but in fact had some obscure differences. The skill was in
finding as many of those differences as possible. For fun, I
started solving the puzzle and then realized it was an entry for
a contest. A new Kentucky Fried Chicken restaurant was
opening nearby, and in celebration it was holding this contest.
The winner would receive a huge barrel of chicken! I could
almost taste it. Could that contest have been heaven sent? All I
knew was that I needed to win it. I listed every discrepancy
I could find, even those likely to have been print irregularities.
In the end, I found over 25 differences and mailed in my list.
Maybe the good really are rewarded. I won the barrel of chicken.
Although the two months were financially restrictive, I was
motivated to follow through by knowing that they were a temporary
pain for a pleasurable gain. I trusted my ability to
control money and reaped the reward: I was healthy, happy,
and had a new treasure.
Meanwhile, many changes were taking place at the tax
office. A number of older employees were reclassified or offered
early retirement packages, or their positions simply became
redundant, allowing a flood of young people with university
degrees into newly created positions. It was another example
of having far less control over incoming money than outgoing
money. I had thought unionized government jobs were completely
secure. At the same time, my supervisor encouraged me
to take a degree course in credit management. He indicated
that a promotion would likely follow, along with a move to
the head office in Oshawa. I signed up for the course, seeing
the change of residence as a temporary concession that would
further my goal of building assets through a higher income.
Shortly into the course, though, I realized that the shine on
my job was quickly losing its lustre, and I wasn't enjoying
studying similar material at home. So one night I sat down
with my calculator and compared the pros and cons of the
additional education. My job was only a means to an end, not
a career. It was a necessary evil to be endured for as short a
time as possible. If I didn't pass the course, I wouldn't be compensated
for the tuition. I was able to move to Oshawa, but I
didn't want to. My income would be higher, but so would my
cost of living. Then I came up with the figures that decided
my path. After I did calculations on a tax form both before and
after the raise, I discovered that the increase in my disposable
income would be negligible. Then, when I considered the additional
costs I would incur, along with the effects on my personal
goals and enjoyment of life, I decided that the designation and
the promotion would be a hindrance, not a help.
When the first course on credit counselling was over, so
was my participation in the program. That was my first important
lesson in taxation. It was ironic that my wealth (after
increased work-related costs) would have remained almost the
same while the government would have reaped more from me
in taxes since I would have moved into a higher tax bracket.
My extra time and effort would have improved the government's
coffers better than mine. In all my financial transactions
from then on, I checked the numbers and did the math before
making any decisions.
By March 1984, I had been living in my condo for over
a year. Although the spacious interior had been upgraded and
all the windows had a treetop view of the ravine, I was finding
the long bus ride to work tedious. I still didn't want a car, so
I considered moving closer to downtown. I hadn't been able
to buy an apartment near work before, but real estate was
taking an interesting turn. My father provided me with a curFIRST
rent market evaluation of my home, and I was pleasantly surprised
at the increase. It was the beginning of an inflationary
real estate market and what proved to be my ticket to a more
convenient condo.
I was serious about moving, but as a trial I listed the condo
for $59,900. There was an immediate response, and it rapidly
sold for $58,000. I had paid the mortgages down by about
$2,000, leaving a total still owing of $27,000 to be discharged
with the proceeds. That left $31,000. My father waived his real
estate commission, saving me about $1,700, and once the other
realtors and lawyer's fees were paid I had $29,000 in cash.
The condo's value had risen by 38% in a year and a half.
However, the return on my $10,540 investment (down payment
plus renovation costs) was 155%, calculated as follows:
Proceeds from sale: $29,000
Less down payment plus costs: (10,540)
Balance: $18,460
Less difference in 15 months of
payments if I had rented: (2,115)
The increase in sales activity and resale value seemed so extreme
that I thought prices would stagnate for a while. I was almost
24 and knew I wanted to live downtown. I had three months
until the closing date, and I chose to move back to the upscale
apartment building where I was a tenant prior to buying my
condo. I would think about my next move there.
^ H I ff°n d*> °& J? &§ £ 813 Total profit: 516,345
Since I assumed real estate values couldn't possibly keep
increasing to the extent they already had, I thought the best
financial course of action was to rent and invest my proceeds
for a superior return. I also expected to save a greater portion
of my income since the monthly rent of $488 was much lower
than the mortgage payments, property taxes, and maintenance
fees of $629. As a percentage of net income, my rental housing
costs would be about 40%. Therefore, I reasoned, I could
amass an even greater down payment for the next property
and continue to indulge in a few big luxuries, ignoring any
small ones, as I did before.
My expenses for 1984 and 1985 averaged about $900 a
month. I had recorded a bank survey showing the average
persons spending habits, and the total monthly expenses came
to $1,035. The biggest difference was that my cost of living,
not including housing, was 33% of total expenses, while the
average person spent 67%. Even as a tenant, my spending
habits were opposite the average of one-third housing and twothirds
living costs. Even though my disposable income had
risen and my shelter costs had declined, I was keeping other
expenses to 33% of total expenditures, just as I did in the previous
two years. I was able, therefore, to use the extra money
for savings. According to that bank study, the average person
saved less than five percent of disposable income, whereas I
saved about 25% in 1984. Those figures reinforced belief in
my ability to build capital, but I was about to learn a good
lesson in predicting future economic conditions.
Using historical data that showed the degree of increases
in housing prices over time, I concluded that the recent rise
in real estate values had created an overvalued market and that
prices in the near future might decline. So I thought that I
should rent for a while and keep track of downtown real estate
values. By the fall of 1985, I had a net worth of about $55,000.
I was enjoying luxuries and accumulating money, but my numbers
weren't coinciding with the current market data. Although
my assets were growing as planned, real estate prices continued
to escalate. I quickly decided to look for another condo, this
time closer to my workplace. My father suggested two luxury
buildings in the downtown core. The first building had oneand
two-bedroom apartments, mostly owned by others my
age. The second building had two- and three-bedroom apartments
with a much older clientele. I preferred the first location,
and I made my best offer on a one-bedroom unit with a
storage room. The vendor didn't accept my offer, but it was
all I could afford.
My second choice was a two-bedroom unit in the other
complex. This time, my offer of $74,000 was accepted. I
decided on $30,000 for the down payment and kept $10,000
aside for an emergency fund, renovations, savings, and cash.
The mortgage payment at $424 per month was less than the
rent I was paying. I chose a smaller down payment because
there were still taxes and monthly maintenance fees to consider.
My job was also becoming more of a strain, and I
thought I might need the cash in case I quit. Even so, the
down payment was a hefty 40%, and, since I didn't have any
other consumer debt, I was able to obtain a mortgage for the
remaining $44,000 easily.
I had never applied for a bank mortgage before, but after
comparison shopping for rates I decided on a major trust company.
I made an appointment, and I was a little nervous, not
knowing what to expect. The loans officer sat behind a huge
mahogany desk, and I felt dwarfed in my chair. She was looking
over the agreement of purchase and sale, the mortgage application,
and my proof of income. Then she pulled out a list
and started asking questions about my financial position.
"Do you have any other outstanding debts?"
"XNTo ."
She eyed me and asked me more specifically, "A car loan?"
"XNTo ."
"Are you making instalment payments for anything?"
"No."
"Any other mortgages?"
"XNTo ."
"Are you carrying a balance on your credit card?"
«-\T 53 No.
"Have you ever declared bankruptcy?"
"XNTo ."
"Well, that was easy," she said.
It took less than ten minutes to approve the mortgage.
Since I was so security conscious, though, I opted for a 25-
year amortization, which had the lowest monthly payment.
The mortgage contract also allowed for monthly "double up"
payments and a 10% repayment on the anniversary date. Those
payments were applied directly to reduce the outstanding principal
on the loan. By now, after years of practice, my
money-handling skills were efficient and cost effective. I could
safely handle the monthly mortgage amount even with unex-
pected financial problems, and if everything stayed the same
I would be able to take advantage of the double-up payments
and the yearly 10% reduction, instead of depositing the money
into savings vehicles as I did before. I was covering all eventualities.
In the worst case, I wouldn't likely lose my condo or
equity. In the best circumstances, I would eliminate my debt
as if I had taken a much shorter amortization simply by making
extra payments at the beginning of the mortgage, effectively
lowering the principal faster and in turn the total interest paid.
I had my mortgage, and the process had been painless.
The complete housing cost of $693 now represented about
50% of my disposable income, which increased to $1,400 per
month in 1986. This cost for shelter was only $64 a month
more than what I was paying for my first condo four years
earlier, yet it represented 67% of total expenditures for 1986.
All other expenses remained at 33%. As a percentage of new
disposable income^ however, other costs of living amounted to
20%, and the remaining 30% became savings, which included
mortgage-reduction payments. It had become an unconscious
habit to keep my costs of living to about one-third of total
expenses, regardless of any increase in disposable income. When
I received a raise in income, it automatically became savings,
simply because I maintained my expenses at the same level as
before. I didn't budget a set percentage ahead of time, but I'd
focused on monthly expenses for years, and I'd become very
efficient at keeping the costs down without feeling deprived.
Even as a tenant, my living costs (without rent) remained at
the same level: 33% of all expenses.
While setting limits on budget categories never worked for
me, knowing my goals and spending priorities did work. After
I put savings toward paying down the mortgage, the rest was
for RRSP contributions and luxuries. Transportation costs were
almost nonexistent because I was still within walking distance
to work and shopping. An underground parking spot came
with my unit, but since I didn't have a car I was able to rent
the space for $20 a month. The other budget categories were
relatively low because I didn't need to look beyond my home
environment for recreational activities.
The condo building's indoor pool and Jacuzzi opened onto
a patio with lounge chairs and umbrella tables, all enclosed
by a high brick wall. There was an exercise room full of equipment
and a library for less strenuous pursuits. Since the
building was filled with older residents, they would be in their
units by 9:30 p.m., which meant I had the pool and other
facilities virtually to myself in the evenings. A penthouse party
room contained plush furniture, a kitchenette, and a bar for
entertaining. My own unit had central air conditioning, an
ensuite laundry area, and an enclosed balcony that I made
into a tropical sunroom. I sewed white sheers for the large
window; then I laid green outdoor carpet on top of a scrap
piece of broadloom for underpadding, and I applied white
stucco to the concrete wall. I painted my wrought iron sewing
machine cabinet white and placed it against one glass wall.
The seating area contained two rattan chairs, which I bought
at a garage sale, placed around a table constructed of a milk
can for its base, a plywood circle for its top, and a colourful
Caribbean-print sheet for a full-length tablecloth. A large white
glass ball lamp, another garage sale find, hung over the table.
FIRST THINGS FIRST &
Then I filled the room with exotic plants, most of which I
had started from cuttings.
Again I was paying the least or nothing at all for items of
low value whenever possible. I had all the same furniture as
before except for the living room suite. I bought a tweed sofa
and a leather sofa bed, both in taupe tones. Small accessories
and soft furnishings were inexpensive to change, so I followed
the interior design rule of buying the most durable and expensive
furniture in neutral colours. I also bought a floor-model
wing chair, priced to clear, and a coffee table with two end
tables on sale. I made these purchases over three years, only
after I had saved enough money first. That way I knew exactly
what they cost, and I could accurately judge their value in
exchange for my money or, stated another way, for the time
and effort given up to make the net income. If I'd charged
the furniture on my credit card and then carried a balance,
it's staggering to think what the true purchase prices would
have been. And, regardless of the additional interest costs, I
wouldn't have been controlling my money The store or finance
company would have had control over my present and future
dollars. It was far better for the asset value (cost of the item)
and other asset accumulation (savings) to simply wait for a
few months, buy exactly what I wanted for cash, and then use
the money I would have lost (interest charges) to buy the next
pleasure-generating item. That was controlling my money.
My aversion to debt was reinforced by working in a field
that brought me face to face with people in dire straits. I saw
firsthand what happened to people who couldn't meet their
financial obligations. When their income didn't cover expenses,
they borrowed money (illegally in the case of Sales Tax) month
after month and then became grossly overextended. My job
duties included instigating wage garnishments, seizing assets
and bank accounts, and registering liens. It was real life and
real people. I wanted to make sure I would never be on the
receiving end of such actions.
While it was a difficult part of my job to see the consequences
of the desperate financial moves people made, it was
interesting to see the results of the money decisions made by
those in my workplace. In the 19805, conspicuous consumption
was in high gear. I wasn't immune to it, and I bought my share
of luxury goods while I was renting. Psychologically, I took the
set mortgage payments more seriously, even though I could
expect a yearly increase in my rent, which effectively lowered
my disposable income. However, I still maintained my principles
of buying with cash, acquiring goods that had inherent
value, and only making purchases that gave me the greatest satisfaction.
My idea of indulgences, though, didn't match average
consumption trends. I didn't use credit to buy a popular car or
pay for regular winter and summer vacations. I didn't buy
everyday lifestyle products as others automatically did, even if
the products were inexpensive. But I did buy a large wardrobe,
jewellery, and a fur coat. Although no one believed me, I really
did want the fur for warmth. It was so cold walking to work
in the winter, and I refused to wear a down-filled coat and look
like a huge quilted pillow tottering down the street.
As for vacations, ever since I'd been to Jamaica, I didn't
understand the attraction my fellow employees had for going
en masse to inexpensive hot destinations such as Cuba, the
Dominican Republic, and Mexico. I still don't. To me, frequent
jaunts to popular places offer short-lived satisfaction,
whereas infrequent luxury vacations provide greater happiness.
It's simply a matter of personal choice. The most economical
holiday is the one that provides the best value in terms of
lasting pleasure. My brother and sister-in-law travel to Mexico
frequently because it's their favourite vacation spot, so it's the
best financial choice for them. Likewise, when I had the chance
to meet a friend in France during the summer of 1987, I took
it. I arranged for time off work during the first three weeks
of August. However, since I'd been to France before, I was
concerned about the long flight from Canada and my susceptibility
to travel sickness. My father jokingly said, "You
could always take the Concorde." I liked the idea, so I did.
The chance to travel throughout France with my friend, then
on to England, where I had always wanted to visit, was too
good to miss. The total cost for my trip, including the airfare
on the Concorde, was the same as three vacations to Mexico.
I wouldn't have traded that trip for six trips to Mexico.
I flew first class from Toronto to La Guardia airport and
then continued on in a waiting limousine to JFK airport. Air
France covered the cost. Once at JFK, I was cordially greeted
at the door. My suitcase was whisked away, and my hand luggage
was graciously carried for me as I was escorted to the
Concorde lounge. It was like a large, plush living room, with
subtle lighting and a long bar at the end. Glistening silver
trays of puff pastry hors d'oeuvres were set out, and the bartender
waited patiently for me to select a drink. He looked
amused when I asked for a cup of tea. I'd had a full breakfast
in first class, but it was still morning, and tea was what
I wanted. I sat down on a soft chair, noticing the expensive
glossy magazines and the latest issue of Sotheby's auction catalogue
on the coffee table in front of me. My tea was served
with a plate of fresh croissants, flown in that morning from
France. Everything was complimentary, and I was treated like
a queen. The ladies' room was elegantly decorated with touches
of gold and wall-to-wall glass shelves filled with French perfumes.
I caught the bartender smiling again when I came out
surrounded in scent.
When it was time to board the Concorde, the man who'd
escorted me to the lounge accompanied me and along the way
offered me a variety of world newspapers and magazines. On
boarding, I was introduced to my host, who was to look after
me for the duration of the flight. He had handsome French
features and was young and striking in his Air France uniform
and gloves. He would have looked great on the cover of the
magazine I was holding. Could it get any better? It did.
The take-off was a roar of engines one second and a surprisingly
inclined lift the next. It did not taxi down the runway
like other planes. Once airborne, there was no turbulence at
the altitude we were flying, and I couldn't even tell that the
plane was in motion. Menus announcing a five-course meal
were handed out to whet the appetite. Complimentary cocktails,
liqueurs, wines, and champagnes were also listed. I chose
Dom Ruinart, 1979. To start, I had the canape appetizers, followed
by a lobster-and-vegetable salad. The main course was
medallion of lamb with Madeira and chapped truffle sauce,
chanterelle mushrooms sauteed in olive oil, and potatoes gratin.
For dessert, a Grand Marnier genoese cake. As the final course,
a luscious fruit salad plate was served. When the china was
cleared, my host invited me to meet the pilots and view the
cockpit. He suggested I bring my camera, and when I entered
the tiny cabin area the pilot motioned for me to sit in the
seat behind him while my French host took my picture. When
I returned to my seat, the other flight attendants were busy
giving out Concorde portfolio cases and toiletry bags. It had
been just over three hours, and the flight was coming to an
end. My host charmingly asked if there was any final thing
he could do for me. I thought of all kinds of things but simply
thanked him for his attentions.
The final approach to Charles de Gaulle airport was like
being in an air show. The plane banked fiercely on one side
and then on the other in a nose-dive. Just before landing, the
back end flattened down first, and then the front, where I was
seated, gently rocked forward to meet the tarmac. The engines
roared in a great reverse thrust, violently shaking the insides
of the plane, and like an anticlimax it simply stopped.
French Customs was a short distance from where we disembarked,
and I was immediately led to a congenial official
who actually smiled and waved me through. I didn't remember
my last time at French Customs being like that.
I felt no ill effects from the trip over, and I was able to
spend a few days in Paris, stay with friends in the French
Alps, spend a week at the Riviera, travel back to Paris, then
fly to London for a long weekend, all without feeling tired.
For me, it's quality, not quantity, that matters. One great trip
occasionally rather than three mediocre vacations regularly. At
the same time, I'd accumulated the money not spent on the
ordinary trips to pay for the luxury trip, and I could enjoy
myself in Europe freely.
Another spending behaviour I didn't share with my
coworkers was participating in the workplace lottery pool. It
just didn't seem to be proactive to me. They all hoped for a
windfall of money by making weekly payments. My windfall
of money would come from making regular payments to a
savings plan. Over the six years I worked there, none of the
lottery crowd ever came away with a pile of money, but I did.
And what kind of fun was that, losing money, week in, week
out, for years on end? I, not chance, controlled my money,
and in the end I had a sure thing.
My spending patterns seemed to differ, in fact, in almost
every area from those of my peers. One friend had a flashy
new car complete with expensive lease payments, but it didn't
bring her the most happiness. She wanted her own apartment,
but with the hefty monthly payments on the car she
couldn't afford her own place and had to keep living with
her parents. And a new bride complained to me when the
couple bought a run-down house. On my visits to their home,
it looked like they were living in poverty, but my cousin loved
shopping, and she rarely went into a store without buying
something. It seemed to me that her recreational shopping
was an escape as she happily went from store to store. That
is, until the day I witnessed her tearful pleas while her husband
locked up her credit cards. Whenever I slipped into the
behaviour of buying low-value treats as rewards for enduring
unsatisfactory conditions (working), I quickly corrected it by
noticing the unhappy results that the habit produced in others
around me.
The principles of my plan kept me from going astray as
well. At the beginning of 1988, I was focusing on the time
and the effort of earning money and their relative value to
me, carefully examining any automatic or externally conditioned
thinking patterns. I'd been doing collections since 1982,
and I knew I couldn't do it much longer. My financial position
was good: I had about $24,000 in my RRSP and
nonregistered investments (still in gold, silver, bonds, and certificates),
about $35,000 left on rny mortgage, and no other
debts. My net worth was now at $145,000 due to a surprising
real estate evaluation that estimated my condo resale price at
$140,000. However, after almost two years, even with some
early repayments, I had lessened the mortgage liability by only
$9,000. I knew I'd have to be more aggressive in paying it
down. A retroactive pay increase in the form of a lump-sum
payment was due to me at any time. The union's settlement
would mean that I could look forward to an extra $9,000,
which I'd apply to the mortgage.
In the meantime, my luxury condo was affordable, and it
was completely furnished to my satisfaction with enough new
items to keep me happy indefinitely. I had travelled to Las Vegas
and Europe within the past six months, so I was content to
delay travel for a while. But I would still need another job to
achieve early retirement. I thought of my grandmother, who
couldn't speak English well yet managed to find work
throughout the Depression. She once told my mother, "You
can always get a job; you can always do something." So, in the
spring of 1988, just after I turned 28, I left my government job.
LAYING A SOLID FOUNDATION
Spend consciously and determine priorities.
Do the math before making any money decisions.
Employers are for net income and stock option
plans.
Take advantage of moonlighting opportunities.
Set aside an emergency fund.
Buy a home in a good area with a 25%-40% down
payment.
Use home buyers' plans and vendor take-back
mortgages.
Stay debt free, except for a mortgage.
Do it yourself or get it free.
Once basic furnishings are acquired, spend
disposable income as follows:
Housing 34%
All other expenses 33% (maximum)
Savings 33% (minimum)
When disposable income goes up, keep all other
expenses at the same level and add the whole
increase to savings.
Savings priorities are mortgage reduction and RRSP
contributions.
Shop at discount stores for all types of purchases.
Buy goods with inherent value.
Select preferred luxuries and enjoy them
occasionally.
Don't count on historical market data for
forecasting.
Jobs and spending habits must never hinder financial
goals.

THE STUDENT YEARS

While I didn't like what university had in store for me, I
was resigned to the fact that nevertheless I'd be going.
In the meantime, I still had a couple of years of high school
to come up with a secret plan of action to circumvent the
career and accomplish early retirement. That was both a need
and a want.
Since I'd already learned that needs and wants can be satisfied
with money, I thought I would simply need enough
money to live the lifestyle I had become accustomed to, with
added luxuries, of course. I would need money to cover the
most important basics first: a place to live and food. Then I'd
need additional money for "everything else." It wasn't much
of a secret plan, but it was a start, and I had time on my side
to solve the problem of getting the required funds without
having to endure years of being the dreaded chartered accountant
or actuary.
What I really needed were answers, which meant doing
research. Whenever my parents wanted to do something, they
simply found out how to do it and then tried it themselves.
Ignorance is bliss, and as a teenager I believed anything I
wanted to do was as easy as that. You just learned how, and
then you did it yourself. The trouble was, I didn't know any
self-made wealthy people to ask, and I couldn't seek help from
my parents because they thought my future plans were set. In
the 19705, there weren't nearly as many financial planning seminars
as there are now, but even if there were I couldn't have
gone to them secretly. All I could do was observe the moneyhandling
skills of my parents and read their books. Fortunately,
they enjoyed reading about personal finance, and their collection
was a bonanza! Great titles such as The Money Game, Crisis
Investing, Smart Money Shortcuts to Becoming Rich, How to Live
Rich when You're Not, Think and Grow Rich, and Anyone Can
Make a Million were available to me. But by far the most influential
book was Save Tax in Canada and Retire at 45- That one
addressed my goal precisely, and I thought that, if I followed
the advice at my young age, I had a chance of retiring at 35.
It also supplied the first good lesson on taxation. All these
books were written for an adult audience, and, while I didn't
completely understand the investment terminology, I couldn't
help but absorb the concepts. At the time, those were the only
resources I had, but they formed the foundation of my plan
and provided the means to learn and the advice to experiment
with on my quest for financial independence.
I applied many principles of sound money management
while I was still in high school and more so later in university
and college. It was excellent practice to use the concepts,
and I saw the results of handling income from student jobs,
finding ways of getting additional income, paying my own
expenses, saving money by choosing cheaper alternatives, and
then investing whatever was left over.
My first job was working behind the scenes for the regional
public library head office, from 4—6 p.m. after school. My
brother was already working there, and I had him to thank for
asking if there was an opening for me. Shortly after I was hired,
however, I had the feeling that my time and effort weren't as
valuable there as my brother's. Since I'd learned typing in school,
the head librarian asked me to type an expense report she had
written out in rough. I laboured over fitting the column headings
across the top of the page and made sure all the decimal
points lined up perfectly in each column. It took a long time
to finish, but I proudly left it on her desk. The next afternoon,
she was waiting with the report in her hands, and she didn't
appear to be as pleased as I'd expected. Looking down through
glasses pinched at the end of her nose, she said to me, "The
column in my report for Personnel Expenses isn't done correctly.
You've typed it Personal Expenses, and there is quite a
difference between those two words!"
The second part-time job I held was in a gift shop. I
greeted customers and offered them candy, created displays,
and made candy trees. At Christmas time, the owner received
a large order for turkey gift baskets to be made up for a local
manufacturer's Christmas party. She didn't have the space or
the refrigeration facilities to keep 150 frozen turkeys, so she
arranged for her mother and me to arrive well before daybreak
on the morning of the company's party. The truckload of
turkeys was already there, and the three of us frantically passed
the frozen birds around, added more food to the baskets,
quickly wrapped them, and heaved them back on the truck
for delivery The Christmas rush in retail provided good experience,
but shortly after the frozen turkey escapade the owner's
niece arrived on the scene. I showed her the job duties as
instructed and watched my work hours decrease. Then I was
welcomed into the "real world" and completely squeezed out
of my job.
That was another financial learning experience. Even
though I had provided the desired value for the employer's
money, other factors had come into play to hinder my incomegenerating
activities. Life wasn't fair. Nevertheless, I knew that
if I wanted financial freedom I needed money to pay for it.
I was also learning that I had far less control over incoming
money than I did over outgoing money. I didn't earn much
from these first two jobs, but I followed my mother's rule of
saving at least half. As long as I felt that my goal was more
important than the multitude of wants that kept springing up,
it was easy to save even more. Although the experiences from
these two jobs weren't positive, they did supply additional
motivation for my goal of not having to work.
My brother was two years ahead of me in school, and he
was able to save for a good portion of his university costs from
his after-school jobs and summer employment. One summer
he drove a diaper-service truck, but his most lucrative work
was at a canning factory. I had worked for my parents in their
real estate office for a time, and the experience was invaluable.
My typing had also improved immensely by then, but
postsecondary school costs required summer work like my
brother's that would pay more serious money. My parents asked
all their acquaintances if there were any "unadvertised" student
openings at their workplaces. As a result, one friend of
the family graciously helped me to find a job with Bell Canada.
It was excellent full-time pay with overtime, and it added to
my bank balance nicely. Then, in turn, I was able to find a
position for my brother at Bell when the canning factory
workers went on strike and he lost that lucrative summer job.
Quality family themes such as "We all help out" and "You've
got a voice" were put to good use in such situations. Both are
very important in building wealth. Help others whenever you
can, and ask, ask, ask for whatever you need. Keep on asking
until you get it.
The following summer, I wanted to return to Bell, but the
company only had placements for students to work out of town.
I tried to persuade my parents that the relatively high income
justified the extra costs of living away from home. Unbelievably,
they agreed, and I was on my own in Toronto! It was my first
experience with handling money for grown-up expenses such
as rent, food, and transportation, and I chose inexpensive alternatives
in order to save as much as possible from rny salary I
started out renting a room in a townhouse that a young couple
owned, but I moved to a cheaper room in a single woman's
house that was closer to work. The public transit system was
very convenient and economical. I didn't eat in fast-food restaurants
or order take-out. Instead, I had a full meal at lunch in
the staff cafeteria and bought groceries at a nearby supermarket
to make simple, light breakfasts and suppers.
One Saturday when I was at the plaza for groceries, I
noticed a store called Bargain Harolds. I had never been in a
discount store before. My worldly goods had come from a
high-quality department store, and I'd kept each item as long
as possible by fixing it or making alterations, and my remaining
possessions were homemade. I was curious about the low-price
store but hesitant to go inside, imagining the "kind" of people
who shopped there. Finally, after thinking I wouldn't likely see
anyone I knew, I ventured in. There was a jumble of what
my grandmother would have called "junk and garbage," mostly
poor-quality clothes and home textiles. However, there was a
perfectly fine blouse in one of the bins, and I bought it for
a ridiculously low price. And I found some grocery items on
my list that were priced lower than what I was about to pay
next door at the supermarket. I'd stumbled across a way to
greater savings by choosing alternatives. Although I didn't tell
anyone I was a discount shopper, each monetary reward helped
me to cast off the "snob shop" habit. Added together, all these
small savings meant that I could go out with my friends on
weekends and still have a hefty amount of cash by September.
But my carefully planned summer abruptly changed one
night at Ontario Place. On that perfect summer evening, the
Bell summer students got together at an open-air cafe with a
tented dance floor. The warm night and energetic disco moves
made thirsty people, so I shouldn't have been surprised at the
intoxicated state of almost everyone there. Except me, of course.
Harmless fun was about to change into my first experience
with disability insurance. The disk jockey had chosen a lively
polka, and some clod I'd never met before pulled me onto the
dance floor to show me his moves. 'Polka boy' had a vise grip
but lacked any coordination. He bandied me about, a captive
rag doll in his frenzied dance. Apparently, his inebriation
affected his hearing, and he was completely oblivious to my
yells to unhand me. I finally managed to escape back to the
table, but by then my ankle was severely injured. Later it swelled
to the point where I had to cut off my sock in pieces. The
doctor decided that a cast was best, which meant I was on my
way back home, off work, and immobilized. Fortunately, I'd
been a Bell employee long enough to qualify for disability insurance,
and I received reduced payments while I was off work.
Even though I was able to return to my job before the end of
the summer, my total earnings were quite low. But they would
have been much lower without the insurance payments.
That episode taught me the importance of planning for
emergencies and disabling circumstances. It also provided
another example of having more control over outgoing money
than incoming money. Whether income was in the form of
insurance payments or salary, though, I put my money into
Canada Savings Bonds (CSBS) and trust company guaranteed
investment certificates (GIGS). In the summers, I used 30- to
9O-day GIGS. The term depended on when I received the money
and when I'd need it. They were all short-term savings investments,
needed within a year's time. Interest rates were highest
on the CSBS and trust company GIGS, as opposed to bank products,
and there was an added bonus with the CSBS. You could
buy them a few weeks after the November ist start date of
the bond and still get the full month's interest. Meanwhile,
the money earmarked for the bond would be earning interest
at another institution. Same money but double the interest
income stream. Back then, savings accounts paid a decent
return, and the tax treatment for interest income was much
better, so it was worthwhile to take advantage of the overlap.
I remember my mother regularly calling brokerage firms,
banks, and trust companies to compare term deposit, GIG, treasury
bill, and other government bond rates. It was a good
lesson illustrating that comparison shopping was necessary for
all kinds of purchases, including investments.
I returned to my job at Bell with only two weeks remaining
until university started. It was a relief to have a full paycheque
again, but I was looking forward to living on campus and
making some progress toward my goal of early retirement. As
it turned out, life in residence was also full of financial experiences.
Even though I didn't have much money coming in, I
was responsible for my outgoing cash flow. I had earned enough
for half of all my university costs, and my parents covered the
balance. When possible, I bought used books for my courses
and chose the inexpensive residence food plan. Meals did get
a bit boring after a while, but there was a Wednesday night
all-you-can-eat spaghetti special at a local restaurant and a decadent
ice-cream shop for a rare treat around the corner. While
it would have been cheaper to buy treats and keep them in
the residence fridge, I soon discovered that food was frequently
stolen. Next lesson: if you have something in demand, someone
(or something) will want to steal it. My roommate and I tried
to keep apples fresh in the winter by hanging them in a plastic
bag just outside our window. The squirrels stole them.
But there were also positive money experiences. I took
advantage of many free opportunities offered by the university,
There were music-practice rooms in the residence and a
homey library with a fireplace. I took part in free ballet classes
and swimming at the recreation centre. Free concerts were
plentiful, as were residence parties and movie nights. There
were more than enough free fun activities to fill spare time.
As well, I had a television and a stereo in my room, which
was unusual for a student to have at the time. Although the
TV was only a black-and-white portable, it was better than no
TV, which is what everyone else had. For the stereo, I bought
a top-of-the-line turntable from a discount warehouse, and my
father built the other components. The homemade "amplifier"
box had unmatched and unlabelled switches, but it worked
well. The speakers were chosen for their custom sound, and
the cabinets were made of elm, hand-picked for a nice grain,
then stained and urethaned with love. I still use those speakers
my father made — they are forever.
It was relatively easy being careful with expenses at university.
It was a good preview of my early retirement plan in
that all the basics were paid for, and I took advantage of free
activities for entertainment. My student days were full and
didn't leave much time for other recreation, like shopping. The
residence was right in the core of downtown Toronto, near
the exclusive Yorkville shopping district. I would walk by the
shops, but the prices in the windows would keep me out on
the sidewalk. The only time I went in was when an antique
show and sale was held in an expensive store's concourse level.
When I was younger, my family used to go to auctions regularly,
and I developed an interest in collecting antiques. At
this elite sale, though, I decided I would buy something small
for myself because I had some birthday money to spend. It
turned out to be the windiest day of the year. People clutched
at mailboxes, newspaper boxes, and light standards to keep
themselves grounded as they groped along. So the exclusive
store was a refuge from the weather as well. As I toured the
aisles, I quickly realized there weren't many antiques I could
afford, but I really liked an emerald green miniature oil lamp.
I think the vendor took pity on me as I tried to fish every
last penny out of my purse for it. He accepted what I had,
perhaps being compensated with the knowledge that his lamp
would be treasured. I held on tightly to my purchase, contemplating
the staggering winds outside, when I heard yelling
behind me: "Stop! Stop!" — I turned around to see a skinny
young man running through the front doors. Two security
guards ran after him while everyone else watched. It was almost
slapstick, the thief fruitlessly running against the wind, which
reduced him to slow motion. He turned his horrified face to
us as he realized his dilemma. But the two security men were
also running in slow motion, now hatless with their hair plastered
against their foreheads. They were strong, though, and
probably eventually gained on the thief. All I saw was their
struggle against the windstorm as they turned down an alley
and out of view. It was a familiar lesson: if you have something
of value, someone will want it. It was also yet another
example of taking a financial risk, as in my childhood episode
of canvassing for "charity."
I found only one opportunity for earning money at university.
I had taken voice training for years, so I used one of
the music rooms and taught singing, which provided a little
spare cash. Very few students in my residence worked at parttime
jobs. It came as a complete surprise to me when a
number of young women openly admitted they were at university
only to meet their future husbands. The remaining
few were truly interested in their chosen fields and future
careers. I was there for neither husband nor career. My goals
were completely different from those of everyone else and, as
such, unconventional. I reasoned that, if I had a Bachelor of
Commerce degree, I could earn a substantial income that
would pay for a house and assets and then retire early to
pursue an artistic lifestyle. I really tried to do well, but I
lacked enthusiasm for the theoretical courses, and it showed
in my marks. I barely passed and knew I wouldn't be returning
to university the next year.
My parents were disappointed, and I was devastated. My
plan wasn't working, and I felt like a failure. But at least I
didn't have to be an actuary! So now what? I decided on a
new plan, slightly different from the first. My father strongly
suggested I attend college, where I could still get an accounting
degree. It would be a more practical course, and I could use
some university credits. In my eyes, it would lead to a way of
earning enough money to achieve my goal, although it would
take longer with a lower salary.
I chose to live at home and attend the local college to save
money. I did well in the Business Administration course, but
after the freedom of university classes I felt like I'd returned
to high school. My goals didn't match those of the college
crowd either, and the program emphasized corporate finance,
when I was really only interested in personal finance. At the
time, comprehensive programs in that area didn't exist. I could
have received a designation to sell stocks, mutual funds, or
insurance, but to me each one was just a small part of personal
finance. 1 didn't return to college the next year either.
My parents were disappointed again. I wasn't as devastated
this time, and I thought I'd gained some financial ground. I'd
saved money by living at home, by not buying a car, and by
not taking on any consumer debt, and I would save money by
not spending it on any more university or college courses! I
thought it was time to enter the working world and start making
money. I believed I'd finally be making some headway financially,
and I couldn't wait for those dollars to start rolling in.
Although I thought earning an income as soon as possible
was the way to financial freedom, I'd learned some valuable
lessons from university and college. The most beneficial courses
for gaining an understanding of the financial arena were economics,
accounting, and marketing. Knowledge of economic
laws and conditions made investment decisions easier.
Accounting fundamentals helped in developing and simplifying
personal money management tools to efficiently handle
income, expenses, and investments. And marketing exposed
the many psychological factors in the exchange of money,
which helped rne to recognize and avoid the inevitable roadblocks
to financial freedom.
By this time, I had also read How I Found Freedom in an
Unfree World, by Harry Browne, a book that greatly influenced
my decisions. It presented ideas on how to find freedom from
imposed cultural identities, government, and treadmill living.
I agreed with the philosophy, and perhaps that book gave me
the courage to follow an unconventional path.
I questioned how further postsecondary courses would aid
in achieving my life goals. The courses would have provided
a degree for an eventual "professional" career, but was that
how I wanted to spend my days? Years? Life? Would I be able
to stop nodding off in class? Could I drag myself out of bed
in the mornings to a job I didn't want or like until it paid
for early retirement? I was prepared to accept short-term pain
to achieve my goals, but I thought that the necessary years of
education and the years of work would be incapacitating.
Deciding to end a university or college education was very
difficult, but I made the decision with complete commitment.
Now I was a working girl!
SCHOOL LESSONS
Read personal finance books and publications.
Be prepared for a job loss.
Find ways to increase income and ask for it.
Save money with lower-cost or free alternatives.
Be prepared for disabling circumstances.
Comparison shop between similar investments.
Take any other option besides student debt.
Recognize the potential loss from theft.
Know it's easier to control expenses than income.
Analyse and question lifestyle choices.
Make money decisions and devise plans.
Commit to beneficial financial changes.