We live here now.

So we’ve been living in Dauphin for nearly a week now, and while I noticed this in Dauphin, this is not a statement about Dauphin. It is a statement about the North American obsession with mediocrity.

Sarah and I spent a week in Como, Italy where I attended XP 2007, a software conference. Part of the Italy experience was the beautiful coffee, notably espresso and cappuccino. If you’ve never had the European coffee experience, I will say that it is marked by one major philosophical difference from my everyday experience at home: quality over quantity. Specifically, an Italian cappuccino is perhaps 20% the size of what Starbucks sells, and there is almost literally no way to compare the flavor. The closest I can get is the difference between coffee from a standard drip coffeemaker and coffee from the Aeropress. You simply have to experience it to relate.

So I was walking past 7/11 here in Dauphin and saw a sign for the “SLURPuccino… where the SLURPEE meets cappuccino.” I nearly fell over. This is what’s wrong with my fellow North Americans: they’d rather have a lot of a mediocre experience than a small amount of a superior one. That’s not original; I read it somewhere on the web, but can’t remember where and am too lazy to find it. Some blog somewhere. It’s true.

I’d rather have a small amount of a superior experience, thanks. No SLURPuccino for me.

…well, almost. At 7.29 PM CDT, at least according to my watch, our plane landed at Dauphin airport, officially beginning our simpler living adventure. The 40-minute flight from Winnipeg to Dauphin was easily the smoothest of the past few days, convincing me that it’s well worth the $125 one-way ticket. Sure, the 12-seater was intimidating, including having to flip up the seat to sit in it, but once we were in the air, it was quick and painless, a phrase that applies equally well to flights and death.

So our house is not yet ready, as a combination of our lead contractor’s wedding and some bad weather got in the way of completing the work. No matter: we are put up in our friend’s house, so while it’s not exactly what we’d hoped for, it’s more than good enough. I suppose it will ease me during the transition, as I can fool myself into thinking we’re visiting, rather than having moved.

But moved, we have. We no longer have keys to our old Toronto home. Technically, we’re homeless, in spite of all the property taxes we have to pay this week. (Only $2200 for two houses. How much are your property taxes?) But before long, we’ll be in our new home.

We live here now.

Pictures are up at http://picasaweb.google.com/sarah11918

Plane ride was good - uneventful. We were seated in an exit row for both legs, and for the transatlantic trip, we were right behind the bathroom so we didn’t have people in front of us (a bit more space that way) and it was a short trip to the loo! (And, easy to know when it was empty - very convenient.) Joe slept for most of the flight, although he did spend at least a couple of hours awake, which is more than he usually does.

We arrived just before 7:00 a.m. local time and caught the train to Como. A little bit of confusion, since the line leading out of Malpensa airport is called the Malpensa express to Milan, and I knew we didn’t want to go to Milan. But, it turns out we did in fact want to take that line for a couple of stops to the next transfer point, then switch to the Como-bound line.

The train station was literally a two minute walk from the hotel, so it was a good thing Joe was wearing one of his geek shirts . . . I mean, past conference shirts, because someone standing at the bus stop outside the station just looked at him and said, “I think you want to go that way.” He informed us that there was no need to hail a cab since it was only 200-300 meters away. Good thing, or the same thing probably would have happened to us as did to another conference attendee: he hailed a cab who put all his baggage in the trunk, then refused to take him once the driver found out where he was going.

Our hotel isn’t the conference hotel, but it’s right next door. The conference hotel seems to be very modern whereas ours is more “charming” (as it says on the website). But, we’ve been pleased with the hotel so far, even if the conference organization has left something to be desired.

Since we arrived so early (9:00 a.m. local time) in the morning, our room wasn’t ready, and wouldn’t be until 1pm. So, we found no shortage of people to grab food with, and spent a couple of hours in the hotel lobby with.

Food and company on the first day was good. We checked into the room around 3pm and I relaxed in the hotel room until about 7:30 pm while Joe checked out what was going on over at the conference hotel. Dinner then back at the hotel by 11:30 pm for an early night since we’d been a good day or two without much sleep.

This morning we had the hotel breakfast buffet which was quite satisfactory: pastries, bread, cold meats, fruit salads, yogurt, cereal, juice and coffees. I went out to take more pictures while Joe went to the conference for the morning. After just uploading the morning pictures, I’m off to meet Joe for lunch next door.

Ciao!

This was Joe’s insight while we were out for coffee with the Sussmans last night. I think I’ll have to have this embroidered on a pillow for him.

People have been asking whether the move is permanent, how long we’ll stay etc. As Joe so elaborately detailed in the Why Dauphin? post yesterday, the move (we hope) promises to be a financial success, meaning that even if it sucks, we are setting ourselves up to be able to afford to travel to places that suck less.

So in a very real sense, home is where you pay your property taxes — and in Dauphin, that’s not much at all!

I think there’s this rumour going around that I’m intending to drop off the map after we move. I’ve had more than a few people ask me with a look of fear in their eyes, “You’re not changing your MSN, are you?” (All the more funny when it comes from someone who doesn’t really know how to use it, but somehow feels comforted by the fact that if she learned how to use it, I’d be there!)

If you’re reading this, then don’t worry, you already know how to find us! Rainsberger.ca is our new virtual home, and all you need to remember.

The reason that some of you may have got the impression that I’m “ditching” my contacts is that I’ve had the same MSN hotmail address for over 10 years now, and as you can imagine, there is a lot of clutter in my contact list with dozens of students over the years. More importantly, I don’t check the hotmail address for mail, so I want to change my MSN email address so that if people choose to email me that way, it will end up somewhere that I’ll actually read. That’s all! If you are at all concerned, then just drop me a line and I’ll make sure you’re “on the VIP list.”

Four more nights on this rotten sofabed. Four more nights in Toronto before we begin our adventure in Dauphin, Manitoba. We won’t be there until June 25, but there’s the small matter of a trip to Como, Italy in the interim, so that means only four more nights in Toronto. But why move?

It’s step one in a straightforward, four-step plan to retire early. Forget about Freedom 55, we’re looking at Freedom 40! We used to try for Freedom 35, but it looks like I’ll miss that by a few years. Here is the ionospheric view of our plan:

1. Lower expenses to a minimum.
2. Build enough passive income to cover expenses.
3. Learn how to develop enough passive income to cover ten times our expenses.
4. Move to wherever we might want to live, if not Dauphin, Manitoba.

Since it’s generally easier to spend less than make more, I imagined it we would reach a 1.0 wealth ratio quicker if we spent less.

Your wealth ratio is your net passive income divided by your expenses. A wealth ratio of 1.0 indicates that you no longer need to work at a conventional job to pay the bills. Be sure to include all your expenses, and not just the ones you might put into the typical optimistic budget.

We reasoned that our biggest expense would be a house, and we didn’t want to take on the liability of a house in Toronto, so we looked elsewhere. Sarah found houses under $50k (Canadian, of course) throughout the country, but Dauphin seemed to have a decent mix of what we wanted from semi-retirement, so we went there, and three years later we’re ready to move there. I digress. The point is that we could eliminate our single largest expense (rent or mortgage payments) by buying a house we could afford with cash, and that’s what we did: the house into which we are about to move cost us $38k including closing costs, compared to the $20k+/year we would pay in rent for a comparable space. Instead, we spend about $1500 on insurance and property taxes per year. In total, we estimate our annual expenses at about $20k, including lodging, communications, basic transportation, insurance and food. It’s like having everything but the lodging expense free of charge. Who wouldn’t love
that?

After we have lowered our expenses, the next step is to generate sustainable passive income streams worth more than our expenses on a month-to-month basis. Our current income streams include rental properties, interest on personal loans and interest on cash in the bank. Normally I wouldn’t include bank interest, but the amounts right now are not trivial, so they’re worth including. At the present moment, our passive income streams are worth in the neighborhood of $8k/year before taxes, which is at least $5k/year after taxes, representing a wealth ratio of approximately 0.25. This is a pretty good start, and includes only the most reliable, sustainable streams of income we currently have. Our passive income is at least $5k/year, but at most already well over $25k/year. This reflects the amount of uncertainty in some of our streams of income, either because the income is not reasonably guaranteed, the principal is at risk or the income stream is likely to disappear with a month’s notice or less. It would be possible to boast that we’re already out of the rat race, but it’s more reasonable to say that we are on our way. Once we reach a wealth ratio above 1.0, we can move on to step 3.

This is clearly the part where I start hand-waving, but the reasoning seems sound enough to move forward.

Once we have enough reliable passive income to cover our living expenses, we no longer need to work in the conventional sense. This means that we can do anything we choose with our time. While I’m sure I’ll spend some amount of time relaxing, the next step is to figure out how to “add a zero” to our passive income streams. The theory is that the time we used to dedicate to working to pay the bills can now be spent learning about more profitable forms of investing. This will include bigger deals of the types we now do (loans, real estate) and other, more sophisticated kinds of investing. Not only will we have more time to learn these things, but we can choose
to work to earn money to participate in these deals, rather than having to work to pay for living expenses. This is the phase during which we could choose to spend more, but if we instead re-invest in ourselves, we should be able to turn $20k/year in passive income into $200k/year in passive income. This would let us move on to the
final step of our plan.

Once we have, say, $200k/year in passive income, we should be able to live just about anywhere in the world we could reasonably want to live. Granted, that’s not enough to retire in places like Tokyo, the San Francisco Bay Area or London, England, but we probably don’t want to live there, anyhow. I would be surprised if we had difficulty finding a place we’d enjoy living that costs more than $200k/year. At this point, we’d be able to finance virtually anything we’d reasonably want to do. Would we live like royalty? Likely not. Still, we would never have to worry about paying our living expenses again. If $200k/year of passive income weren’t enough to retire, we would be doing something very wrong.

So that’s why we’re moving to Dauphin, Manitoba: it looks to us to be a good mix of cheap enough to fit into our plan, but not so remote or desolate as to be devoid of quality of life. It’s small, inexpensive and friendly, just like it says right on the licence plates. A good place to start our retirement and a safe place to learn how to go from semi-retired to indefinitely wealthy. With any luck, that’s only about seven years away.

Stay tuned to see how we’re doing.