We live here now.

I have just now read an article at consumerist.com that gives 15 ways to save money when shopping for groceries. We do not hold saving money as our primary concern when shopping for groceries, but the desire to save money does inform our decision-making when our other basic rules don’t do the job, so we don’t always follow all consumerist.com’s rules. Unless saving money is your top priority, I don’t think you should follow these rules blindly either. Let’s go item-by-item:

1. Make a list and stick to it. Lists focus your shopping and are the single best way to save money.
   I strongly prefer to do this, not just to save money, but because grocery shopping is not a pleasurable task for me. I don’t hate it, but I also don’t particularly like it; I do it because it needs doing. A list is a way to know when I’ve done enough shopping. Not only that, making the list at home encourages us to think about what we are going to eat, not only to buy just enough, but also to be sure we plan to eat what we buy. I strongly dislike wasting food by letting it rot. Since we travel so often, we need to be especially careful about this in the 3-4 days before we plan to leave. The fact those who make a list tend to buy fewer impulse items, which helps them spend less is a happy side-effect.
2. Compare unit pricing, not box size. As with good things, good prices sometimes come in small packages.
   Since we shop 2-3 times per week, we tend to buy smaller quantities at a time anyhow, which means I only reach for larger quantities of non-perishable items when the unit price of the larger package is considerably lower. Buying smaller quantities of items means buying them more often, which means storing less at home and more easily taking advantage of deep sales.
3. If you only need a handful of items, use a basket, not a cart. Empty space cries to be filled.
   I like to do even more: we have made the ecologically-minded choice of reusable cloth shopping bags. We take 2-4 bags with us, fill them, then stop. If I can’t carry my groceries around the store, I surely won’t find it easy to carry them home. While I don’t believe that I need to fill empty space in a cart, I do know that I eat all the food in front of me, so I can’t claim to be entirely immune to this psychological phenomenon.
4. If it’s not on your list, don’t pick it up. According to Paco Underhill in Why We Buy: “Virtually all unplanned purchases…come as a result of the shopper seeing, touching, smelling, or tasting something that promises pleasure, if not total fulfillment.”
   While I don’t follow this rule in a draconian fashion, I do strongly question everything we pick up that isn’t on the list. I know this annoys Sarah, and I understand that the question “Do we really need this?” sounds condescending, but the technique works.
5. Shop at the edge of the store. That’s where the healthier, cheaper items hide.
   For me, this is a health-minded choice, rather than a wallet-minded choice. The only items we purchase regularly from the stacks include vegetable broth, canned tuna, turbinado sugar, spices, canned tomatoes for chili, honey, peanut butter, cleaning supplies, storage bags and paper products. We just don’t buy processed snack food or pop anymore, and I don’t miss them.
6. Disavow brand loyalty and swear allegiance to the lowest price.
   This is one area where our desire for good products trumps our desire to save money. If we know the cheaper product is inferior and we care about that, we buy the better product, such as when we spend $15/pound on Kicking Horse Coffee. We also buy local products where we can, which represents a longer-term saving strategy, including Giguere Farms honey (Winnipeg isn’t local, but it’s more local than the US). That said, we are not loyal to brands, but rather loyal to products that give us something great beyond the price. If Kicking Horse Coffee started to suck, we would buy Folgers. If Giguere Farms moved to Montana, we’d buy something else. In all other cases, we tend to go with the lowest-priced product that we don’t know we can enjoy.
7. Consider generics. You usually get the same quality, without the unnecessary branding.
   Since we buy mostly produce, this doesn’t concern us as much as it used to. We do like to buy bread baked in-store.
8. Learn to love coupons. With practice, you can buy almost $150 worth of stuff for $5.
   I’m not a coupon kind of guy, because too often coupons require me to buy products I wouldn’t ordinarily buy. Rather than focusing on coupons, I like to keep my list flexible enough that I can take advantage of sale prices. If we have “berries” on the list, and blackberries are on sale, I might buy more blackberries than raspberries. Perhaps we are missing out on coupons, but given the items we tend to buy, I don’t think the potential savings are anywhere near 97%.
9. Make one big shop, rather than several small ones. You’ll save on gas while inoculating against wasteful spending.
   We save on gas the old-fashioned way: we walk. This means we buy less, get a little more exercise, and think more about what we buy.
10. Buy from bulk bins. Why pay for packaging and marketing when you can reach right in and scoop out exactly what you need?
    We don’t buy much of the stuff you find in bulk bins, but when we want nuts and seeds, we head to the bulk bins.
11. Check your receipt. Don’t let an errant scan ruin your hard work.
    We shop at Safeway, who have a “club card” program, which essentially gives lower prices to anyone willing to fill out an application form for a card. Occasionally the point-of-sale system registers the regular price, rather than the club price. I try to pay attention. Given that we shop more often and buy less stuff, I find it relatively easy to remember the low Club prices and notice when the point-of-sale system has the wrong price. It’s harder to do that when you buy $250 worth of groceries at once. We buy less, we spend less on errant prices.
12. Shop alone. Science shows that we spend more when we’re with company.
    Sarah and I go to the store together, but shop separately: I take half the list, and she takes the other half. I find we spend less time in the store that way.
13. Track your spending so you can see what’s eating your money. Committed receipt hawks can spot price cycles to help guide their shopping.
    We have tracked all our spending at points in the past, per the recommendation of the classic Your Money or Your Life. We haven’t done this recently, mostly because we have kept our spending well under control the past year. We might benefit from doing this again, especially since we travel so much and we might find it easy to spend “in vacation mode” while on the road, even though when I work, we don’t exacly find ourselves on vacation!
14. Eat a meal before shopping. Shopping on a full stomach tamps down impulse spending and keeps you focused on your list.
    I have never been concerned about this. If anything, when I’m hungry, I want to buy exactly those things I want to eat right now, then leave the store. This helps me buy less, not more.
15. Shop without a car. Nothing limits spending like knowing you’ll have to carry your goods home.
    I find it sad that they have this tip last. I would put it first. Nothing limits spending in general like not having tens cubic meters of space to put all the crap you might buy, groceries or otherwise.

I hope you have found this useful. Take care, and I wish you efficient shopping!

There was a great post on Treehugger recently that I’ve bookmarked for more serious contemplation.

Although they may be neither popular, nor well known, there are alternatives to the two major housing options of “buy” vs. “rent.”  It seems like every day I personally vacillate between wanting to live in a Parisian apartment overlooking local markets and wanting to live on a lakefront, almost cottage-y property.  In the first case, we’d walk everywhere we needed to go and in the second case we’d generate our own electricity and grow some of our own food.  I just can’t decide whether I want to live with people or get the heck away from them.

We’ll likely be where we are for some time to come, but Dauphin was always a calculated, strategic move.  So far it has pretty much worked according to plan.  We’re closing on houses #8 and #9 on August 1, and our rental income will provide more than we need to live comfortably there.  And for the total cost of all 9 houses we’ve purchased, we still would have been only able to buy the most entry-level of entry-level homes in Toronto. (And, that would be with us paying for the privilege of ownership, not being paid enough that we don’t have to work!)

As I said to Joe last night, although yes, we can consider ourselves “retired” from traditional careers, our “job” right now is to figure out where we really want to live next and how we will be able to afford it.  It’s not as easy as you might think, and you really do need to be semi-retired before you can tackle that task; you can’t know what you really want out of living when don’t yet have the freedom to just “live.”

If I were still tutoring, I would be too busy and preoccupied to really think about what I wanted out of a house, community or local environment.  How was I to know, for example, that I really don’t mind “cooking*” when my previous life was arranged in such a way that preparing food was nothing but a huge inconvenience?  When I had taken probably less than a dozen baths in my whole adult life (and had never seen Joe take a single one!), how was I to know that we would treasure our jacuzzi tub?  There is a lot you discover about yourself when you stop “working” and start doing what might be work for some, but is really just an activity for you.

That’s why I don’t think of it as a “failure” that Dauphin won’t be the place we live for the next 30 years.  Rather, moving somewhere that is decidedly not our retirement paradise was the smartest thing we ever did:

• We had no illusions or unrealistic expectations of the perfect life.  (It was a stop along the way - another phase of the plan.)
• We chose to move solely based on finances (including of course our required amenities and necessities) so there is less of an emotional attachment to where we live.  (Leaving Toronto was emotionally so much tougher than leaving Dauphin will ever be.)
• We put ourselves in the best position to figure out what we really wanted, and didn’t assume we already knew what that was. (How could “Rat Race Rainsbergers” even pretend to know what “Retired Rainsbergers” want or need out of life?)
• Although it wasn’t part of the original plan, travel is such a huge part of our lives that we can somewhat experience and compare locations.  Two weeks ago we were in Ireland and I’m writing this now from Malvern, PA. In August and September alone we’re projected to be in Dauphin, Winnipeg, Toronto, Oshawa, “the cottage,” Brampton, Niagara Falls (ON and NY), Chicago, Turkey, the Netherlands and Costa Rica. If we can’t find something we like, it sure isn’t from a lack of trying!

And, if home ownership in Dauphin means we get to travel like this, then maybe there’s even something to be said for not doing too much of your “living” where you live!

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* - I still hate “cooking” and will refuse to prepare anything that involves the actual cooking of meat. And, much fewer of our meals are actually “cooked” now since we’ve been eating a lot raw. So, I use the word cooking to mean “making meals.” But, what I have discovered is that I like the act of chopping vegetables, I don’t mind boiling things into a soup and as long as Joe’s not sick of honey-mustard, I’m quite happy to make our own salad dressing.

Free Money Finance posted the 10 most hated money-saving tips according to the comments he’s received over the years, writing over 700 tips.

These aren’t necessarily earth-shatteringly new strategies, but that’s not the point of this list. The point is, these are the common-sense tips to which people claim to be decidedly immune. Do check out the list for yourself, but noteworthy for us is that sitting in the number one hated money-saving tip:

1. Move to a lower cost-of-living city

You can’t say we didn’t invite y’all. That you refuse to take us up on it only leaves more houses for us. (Closing on #6 and #7 currently, by the way.)

Yesterday I came across the game “Mansion Impossible” (http://3form.net/mansion_impossible/) which hass a very simple premise: buy houses you can afford, sell them at a higher price, use that profit to buy and sell increasingly expensive houses for increasingly bigger profits until you can afford to buy the mansion. So what’s so great about this game?

1. In the beginning, your options are very limited, just like in real life. You’re not buying $100,000 properties right off the bat, although most of what you’ll see for sale is in the hundreds of thousands, or millions of dollars. When you start this game, Trump you ain’t. But, through patience and persistence, you work up to those million dollar homes.
2. You don’t have to go for every deal in your price range. In fact, you usually can’t. There are way more houses on the market than you could possibly buy (although, not so many that the game is confusing) so you quickly accept that you’re going to buy some houses, and do your best with those.
3. Owning more than one investment at a time means settling for a good, though not optimal return. If you only own one house, then it’s easy to watch its property value go steadily up, taper off, sit at a peak, then start to go down. Keeping an eye on the going price of two different houses at the same time means that you will notice when the price starts to go down, but you probably won’t cash out at the peak. And, that’s OK! You can try out both strategies (single or multiple ownership) and see which one works better for you.
4. When you can afford the bigger properties, don’t waste time on the smaller ones. Or in other words, invest according to your means. If you have big bucks to play with, you should be taking advantage of bigger deals. Sometimes, it only takes one or two big houses to propel your status into the next level. But, if there’s a slow market and there are no big properties for sale . . .
5. Your money does you no good just sitting in the bank. Instead of sitting there, killing time, buy a small property or two. Every little bit helps, and it’s only by actively doing that you increase your bankroll, and therefore get closer to your goal.
6. Your goal is tangible and your score is measured in time. Money isn’t the goal of this game; it’s the means to the goal. And, you’re evaluated based on how quickly you reach that goal. This teaches us what should be lesson number one of personal finance — it’s not about money, it’s about time.
7. You will win, it’s just a matter of time. In fact, if you just keep playing long enough, even with the most conservative strategy, you’ll eventually win. But, will you be alive to enjoy it? (You don’t actually die in this game. I mean that your “score” could be 100 years.) What I like about this lesson is that it shows how from meager beginnings, everyone can work his or her way up.

It’s true, you do start with $100K in the bank that is entirely available for purchasing real estate. Perhaps this isn’t reality for most. And, your properties never require maintenance. They don’t burn down. Tenants don’t trash the place and pipes don’t burst. But, it’s a simple introduction to acquiring wealth that introduces some basic principles of investing. And if you wanted to, it’s fun enough that you could just play it like a video game.

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!

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.

Let me apologize in advance. This entry could be seen as rather depressing, but it’s important that you read it. Many of us were raised to work hard, get good marks, get a solid, dependable job, raise a family, and that would make us good citizens. My mother tried to do that, and I’d like to tell you what it got her.

My mother was born in May 1947 in Lisgar, Quebec, an English-speaking village surrounded by French-speaking villages. She moved to Ontario around the age of 20, and started working factory jobs in the automotive industry. Even from a young age, my mother had a strong work ethic. After I was born in 1974, and while her marriage was crumbling, she worked even harder, until in 1986, with no viable assets beyond a small amount of equity in their house, we left my father. Within 18 months, my mother, still working factory jobs, taking every hour of overtime she could get, had moved us into our own apartment, had bought a car with 50% cash down payment and was beginning to prepare to help me pay for my university education. I went to school on a generous, but not full, scholarship, so my mother continued to work hard, taking every hour of overtime she could get, to help pay the last thousand dollars per year for me to be at school. This was all something of which she could be proud: all this accomplishment for a woman operating in very much a man’s world. By 1997, her work was done: I was out of the house, working enough to pay my own bills, and she could start to take care of herself.

Around that time, however, she began hearing rumors of layoffs as the company moved its operations south, first to the southern US, then eventually Mexico. Within a few years, she was no longer earning over $20/hour with a strong pension and 20 years of seniority. By 2001, she was scraping by on less than $10/hour, having to move out of her own apartment and back in with one of her sisters. The two of them were in a similar situation, barely getting by between the two of them, each with jobs that paid half of what they had grown accustomed to earning in the 1980s and 1990s.

In 2004, my mother suffered three heart attacks in the space of six weeks. The first hit her while on break at work, reading the newspaper. The other two hit her in rapid succession, less than a week apart. The third one was the charm, as they say: she died March 20, 2004, more than 8 years short of her supposed retirement age of 65. When she died, her net worth was less than $25,000. She owned a car worth less than $1,000, had no equity in a home, no passive income of any kind. Only cash in a bank account.

So why tell this depressing tale? It explains why I will never again work for someone else full time. It explains why I spend so much time taking charge of my own finances, why I don’t just hand everything over to a company to whom I am loyal, or to a financial adviser whom I hire to do all my financial thinking for me. It explains why I’ve read dozens of book on personal finance, business building, investing and even accounting and tax. I would never want my mother’s fate. For all the truly wonderful things she did in her life, she spent the last several years of it essentially a corporate slave. I choose not to do that, and I wouldn’t want you to do it, either.

This is why I want to help rescue people from employment, something I do both through my professional work and just through everyday conversation. It’s something I do because whenever I see someone struggling with their finances, I think about my mother, about her death at age 56, about how much of her life was wasted making some other person rich while she barely got by. It simply isn’t just.

If you are struggling with personal finance, stuck working every hour of overtime you can, then I implore you to grab a few books off the library shelf, take a few hours to read them, then give them an opportunity to improve your life. Start with Your Money or Your Life, then try Rich Dad, Poor Dad. My mother was a lot like Robert Kiyosaki’s “poor dad”, as she bought into the job security myth. I only wish I’d known at age 18 what I knew at age 28. I could have really helped her. Don’t let your children, your spouse or your friends think the same thing about you.

Start today.

Sarah and I live in Toronto, Ontario with our four cats in a rented basement apartment below Sarah’s business venture, Mostly Math. It’s a fine existence, but it’s pricy. We don’t really take advantage of living in the city anymore. Our life revolves around a 5.5-km stretch of Sheppard Avenue East, from Yonge Street to Fairview Mall. I would estimate that we spend a few hours per month away from that stretch of road. This is one of the many reasons we’re moving to Dauphin, Manitoba this summer (2007).

Yep, the corner of Nothing and Nowhere. At least, compared to Toronto.

I would say the primary motivator for leaving the city is financial: we want to own a house, but are not prepared to pay $400-500k for “something decent”. That kind of mortgage is a death sentence for us, given that our goal is financial freedom before age 40 (the year 2014). Sarah, a born researcher and information junkie, found Dauphin on the web in 2004, so we visited it, looking for houses, a business, the possibility of a new life there. We liked what we saw.

In 2005, we acquired the Dauphin location of the Academy of Learning. This has been a definite learning experience for me, as I have never had employees before. Although our business is education, something both Sarah and I already do professionally, dealing with government education bodies is something Sarah already did and doesn’t want to do again. Not only that, but we’ve had to learn how to register for business in a new province and how to manage people from a distance of thousands of kilometers. Overall, I think we’ve done well. No-one has quit on us for incompetence, at least.

In 2006, we began renting out houses in earnest. We’d trifled with it previously, but we bought a second house in October and have happy tenants there. This has brought its own challenges, like dealing with highly transient tenants, handling late rent payments and the other joys of being a landlord. We are now preparing our first house for ourselves to move into this summer.

In 2007, we plan to simply make the transition and try to survive it. I’ll be frank: I’ve computed how long we need to stay in Dauphin before moving there and back becomes less expensive than staying here and renting. Still, I like the people I’ve met, I like the idea of a slower lifestyle and I like the idea of leaving in a well-renovated house we own free and clear. It will be enough, I think, to get through the first winter and enjoy our new life.

In 2008? Well, I have no idea. I’ll revisit that in about six months.

PS: If you don’t get the reference in the title, you must not be a fan of Frasier.

I just received my quarterly statement from ING Direct, with whom we save our money. I like reading their newsletter, as it occasionally has something interesting for me, such as when I learned about high-interest US dollar savings accounts. This particular edition is geared towards tax time, since the deadline is April 30 to submit your returns. It begins, “Everyone loves a tax refund (well, maybe not the government).”

Not me, either.

A tax refund means the government, specifically the Canada Revenue Agency, had money that was rightfully yours, and they definitely don’t pay you interest for your over-contributions through source deductions! When you receive a $1,000 refund and enjoy it, you are willingly submitting to a short-term forced savings program that earns you no interest. No thanks.

The sweet spot seems to be owing the CRA just short of $2,000 per year at tax time, which I recommend paying exactly on April 30 and not a moment sooner! Owing them money means that you had their money interest-free for on average six months, and not the other way around. You can earn interest on that money, even at a measly 3%, rather than let the government do that. Anything more than $2,000, though, and they might sign you up for tax instalments, which is just another short-term forced savings program that earns you no interest. Avoid it.

If you are an employee, you can petition the CRA to reduce your deductions at source. I have never done this, so please contact someone who has done it to learn how. As I am my own employee, I can choose more flexibly when my source deductions are remitted, so I can keep my money out of the government’s hands longer than most employees can.

Stop loving tax refunds. Let them start to make you a little angry. Do what you can to avoid them.