They say personal finance is just that, personal. But with that in mind, there seems to be a consensus among the experts on certain money matters. For the past seven years on this podcast, Kornel Szejber asked top finance experts to share their best practices, tips and tactics when it comes to personal finance in Canada. He joins me this week to share those lessons with us. Kornel is the host to both the Canadian Financial Summit and the Build Wealth Canada Show. He’s been featured for paying off his mortgage in only six years while still in his 20s and becoming one of Canada’s youngest retirees at the age of 32. He now runs one of the top personal finance investing podcasts for Canadians, as well as Canada’s largest personal finance and investing conference. 

 

Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. This episode of the Maple Money Show is brought to you by Willful. Did you know that 57 percent of Canadian adults don’t have a will? Willful has made it more affordable, convenient and easy for Canadians to create a legal will and power of attorney documents online from the comfort of home. In less than 20 minutes, and for a fraction of the price of visiting a lawyer, you can gain peace of mind knowing you put a plan in place to protect your children, pets and loved ones in the event of an emergency. Get started for free at maplemoney.com/willful and use promo code Maple Money to save 15 percent. Now, let’s chat with Kornel… 

 

Tom: Hi, Kornel. Welcome to the Maple Money Show. 

 

Kornel: Hey, Tom, thanks for having me back. 

 

Tom: Thanks for being back. You’re one of the very first guests I launched with. When the advice was that you had to launch with at least three episodes, you were one of them. It was great to have you on then and I’m glad to have you back. And speaking of it being quite a while now, I think that was three years ago, you’ve been podcasting for a long time. How long has it been since you started your podcast? 

 

Kornel: It’s been around seven years now. 

 

Tom: So in podcasts years, that’s going back quite a ways. I remember when I met you, it seemed like podcasting was a new thing. Sure, there were podcasts going even further back, but within Canada, that was still a pretty new thing at the time. 

 

Kornel: For sure. I just thought it was a really good excuse to get really good advice from a diverse group of experts. At the time I just finished paying off our mortgage (which was great) but we were really behind on retirement savings so I really needed to figure out this investing thing because we can’t just kind of ignore it anymore since there was no more mortgage to pay. I remember thinking podcasting seemed like a really good way to do that because you get diverse perspectives from different experts. And even if it fails, I’m going to learn an absolute ton of great practices that I can then apply to my own investing. So it’s going to be a win regardless, even if it actually fails. But it didn’t fail. It did really well. That’s what started it all. And yeah, it was great. 

 

Tom: That’s what I wanted to have you on about, to discuss what you’ve learned over this time from different people to consolidate into the top tips. You do cover a lot of investing in your podcast. What is the preferred way to invest? Is there something common? There are all these different options out there. But on a whole, what do most people suggest? 

 

Kornel: When I first started in investing many years ago, it was kind of a blank slate for me. What is this passive index investing thing? What about these active mutual funds? What about day trading? It was just kind of open so I had to figure out who were the people I actually respected in the industry—the ones who were consistently doing well,  and their reasoning makes sense as opposed to telling me this stuff as a sales story because they’re trying to sell me some kind of investment product. So definitely, I kind of took in as much as I could. And now over the years, definitely, it’s been an overwhelming consensus, but the most common recommended thing by people that I respect and follow is basically passive, total market, index investing. To break that kind of investing down for that’s new to all of this, passive basically means you’re not trying to beat the market. For instance, buying ETFs that are there to replicate the market. And that’s a really big distinction as opposed to, “Oh, I’m going to get a home run and get 100 percent return,” that kind of thing, like the crazy Bitcoin that rises and falls. So none of that. We’re just doing passive approaches. No speculation. Total market is the other part of it, which basically means we are trying to get a representation of the whole market as opposed to some subsegment. There are lots of different indexes out there. There’s a marijuana index. Lots of places can create lots of different indexes. Just because something is saying or an index investor, that’s not really taking it far enough because what kind of indexing are you? Are you a gold index investor? That’s not the same as being a passive total market index investor. So that’s another big distinction. We’re looking abroad because we’re not trying to pick and choose the winners, we’re just trying to get broad diversification and a representation of everybody. Then index investing kind of the last part of the passive, total market, index investing. And so, again, we’re trying to replicate an index. Then what kind of index? Is it an index that is reputable, respected, representative, things like that. And so when we’re talking about the kind of investing that I do as well as an overwhelming majority of experts I’ve had on will recommend, basically, you’re trying to mimic an index. In Canada it would be like the S&P TSX. In the US it would be the US Total Market Index. We’re looking at this kind of broad level. So hopefully I explained that okay. It’s kind of a mouthful for somebody holding you to it. And what’s been really interesting, even when I interview people… For example, I interviewed Peter Hudson, who basically ran one of the biggest hedge funds in funds in Canada at one point in his life. The guy’s managing billions of dollars in assets. They’re people who are very much into active investing and trying to beat the market. Even when I interviewed Warren Buffett, it was the same thing. Even for these active investors who are very good at what they do, very respected by the peers, and are considered celebrities in their field, even they did not actually bash index investing at all. They say, “Look, that’s how I made my money—through attractive. This is what I do. This is my craft, my specialty. I’m able to beat the market,” but for most people, there’s actually nothing wrong with this passive, total market, index investing approach because it’s a lot easier to implement. It’s less costly, less risky. You’re not speculating. It lets you get that investing piece tied down in your life. It makes you feel like you’re investing in a good way and it’s going to be fine. That let’s just sort of move on with your life so you’re not in investing day-in, day-out, as a career, because most people are not on Wall Street doing this, right? They have their regular job, but know they need to invest for retirement. And so for those types of people, oftentimes the passive, total market, index investing approach is very reasonable for them. 

 

Tom: You mentioned risk and cost. Those are two of the things I really focus on with this because it really opened my eyes when I read the book, The Little Book of Common Sense Investing. It’s just the idea that if you want big gains, you’re adding risk. There’s volatility tied to risk. And the cost thing was the big thing. You mentioned big hedge funds and everything. The bigger they are, the more they are the market. They’re part of this market average. You take all these different companies together and that is the market. It’s not that you’re necessarily trying to beat them on a whole, you’re actually just trying to match them. If most of these stocks are being bought and sold by institutions, then you’re not truly even trying to beat them. You’re just trying to match them. And then on the cost side, you’re paying less to do so. Instead of paying a big MER just to try to beat them, you’re saying, “I’m just going to go along for the ride. I’m going to be average, save some costs, and that’s where I’m going to come out ahead over an average.” If you are the average as a market result but you’re paying less fees, then you’re actually coming out ahead by being average. 

 

Kornel: And the S&P did a really interesting study where they basically looked at these active funds because a lot of times if you go to sort of the traditional financial advisor, they’re going to say you should get mutual funds. And they’re going to basically show you the ones that did the best from the past two years. They’ll say, “Look, this one beat the market by X percent so why would you stick with the market when we were able to beat it last year?” That’s how they get people to go ahead and pay the higher fees thinking it’s okay because their returns are so much higher than the market. They feel the fees get offset. But what S&P did in their study—and they kind of keep updating this periodically. But if you look at all these past funds that were at the top of their game—the top quartile is what the study looked at, the overwhelming majority of them were not able to hold on to that top spot, longer term. So even though you did good for one year, maybe two years, maybe three, how many of those were at the top? Which of those were able to remain on the top for the subsequent years? When the study was published, only 15 percent were actually able to maintain in that top quartile, which is nuts. It really butchers that argument of, “Hey, look how amazing our mutual fund did. And yeah, the fees are higher, but who cares because look how much money you’re making.” But the chances of you actually continuing to perform this well for the next years? Anybody investing in the markets, don’t really care much about what’s it going to do next year or two years. This is for retirement, typically. We’re talking decades and decades. It’s really more about the longer term performance rather than just beating the market in one year. In the grand scheme of things, that’s not really what moves the needle. It’s the consistency, year-over-year, through decades of investing. 

 

Tom: Even at that point, that’s looking backwards. To look at 15 years, you can look at that backwards. Even someone that did great and stayed in that top quartile, there’s still no guarantee. The very next year might be the year they don’t make it. 

 

Kornel: Exactly. And there have been some really famous hedge funds—I can’t remember if they were hedge funds or mutual funds. But basically, these active funds trying to beat the market, actually were consistently beating it for a pretty long period of time. Not just a year or two. Eventually, they ended up failing as well because the bigger you get, the harder it is to actually maintain top performance because you’ve got all these fund flows where you might actually be able to move the market a bit. There’s just a lot there. Even with some of these top winners, it’s really hard to maintain that top ranking spot.  

 

Tom: Another thing that comes up often on my podcast, is just getting your finances right—getting that cash flow right. That seems like something that that comes down to making sure you’ve paid off your debt, controlling your spending. Maybe you have a budget, even though not everybody likes that word but what have you learned from people around this topic of money management? 

 

Kornel: I get these questions from time-to-time from listeners of the show. I almost get the impression that they’re looking for some sort of “silver bullet” some trick or hack where, if only they knew how, it would solve all their money problems. The think is, that thing doesn’t really exist. What it really comes down to is just spending less or earning more. That’s how you’re able to increase your savings for retirement. It comes down to these two things, spending less and earning more. Those are really the key components you need to focus on. From the “earning more” perspective, you’ve got your job you could really focus on. But then you get to ask yourself, “Do you enjoy it? Does it have high income potential?” If you really go all-in on your job, can you actually increase your income that way? So that’s one option. Secondly, maybe your job isn’t like that or you don’t enjoy it that much. You don’t want to put in the extra hours because you’re just kind of doing it for the paycheck. But maybe you want to do a side business. That’s kind of like what you and I started with, right? We had our regular jobs and we did a side business that eventually grows. And ideally, you get to a point where you can quit your regular job and just have your side business. The other option is that you do a full blown-entrepreneurship. You quit your job and go all-in on the entrepreneurship thing. You could get some really good gains there. Or you could lose everything potentially as well so, obviously, you’ve got to be pretty careful with that. But those are the main choices from the “earning more” side. And then the other part of the equation is, spending less. There I would say the biggest things that move the needle are your home and your car. There are people that say they don’t have enough money to invest and you look at their house and the mortgage they have and see their mortgage is basically butchering their cash flow month-to-month. Of course, they don’t have enough to max their RRSP and TFSA because they’re paying so much for their mortgage. The multiple car thing is another huge one, especially if you’re buying a new car. It’s crazy. The price variance you see between getting a used car on Kijiji or whatever versus buying brand new. There is really, really big disparity. And also, just having one car instead of two in general. We switched to one car as soon as we humanly could because you actually save so much money and time by doing that. It can really move the needle. The other big thing, I would say, is tracking your spending as well. No matter how much you’re earning, there’s ways to outspend what you’re earning. You see these examples all the time, with celebrities and athletes—and lottery winners that end up going broke. They have enough to never have to work again, but they mismanage that money and actually end up going broke. These things actually happen. So you just can’t out earn. There are lots of companies that are happy to take your money. From the spending less side, I find it really valuable to track expenses. Use software that actually synchronizes with your credit card. That’s what I do. I’ve been using Mint—I actually went back to using Mint because I tried a bunch of different ones and was having some issues with syncing. You want them to sync to your account so you don’t have to manually enter these transactions. I actually went back to using Mint. I’m not affiliated with them or anything. I only have my credit cards through them because that’s where I do all my spending. This way I’m not giving them my banking information. I’m not giving them my investment account information. Just the credit card stuff. Those transactions get automatically downloaded and categorized. I’m able to see reports to see if I’m overspending and if my spending trending are upwards or downwards in certain areas. By managing it to that level and having it automated with the automated downloads and syncing, it actually doesn’t make a huge time suck. My wife and I spend maybe 10 minutes a week going through our transactions and stuff. But it’s a huge, game-changer. 

 

Tom: I like that automation too. You can have it connected to the banks. And sometimes those connections—even with Mint, the last time I used it, can be a little shaky sometimes where you get the have to reconnect. And if you don’t, you’re going to lose the effect of your data. I do like automation, but I realize some people don’t. Some people need that hands-on system where they’re going to take their numbers, put them in—almost like balancing a chequebook in the old days. They just need that hands-on to really know their money. Some people do the automated end and just don’t pay attention. I also like that you focused on the big expenses and how you can cut that. Personally, I got way too into things like turning the thermostat down a degree. You can only go so far. I would say for almost anybody, they could get a bigger gain in their cash flow, that buffer space, by doing some kind of thing on the side. For you and me it is blogging and podcasting, but it could be as simple as just driving for Uber. Any of these side hustle things—I think anybody could make an extra $1,000 a month. That’s going to that’s going to do so much more than these little changes to your expenses. Both are good. If you can do both, great. You’re increasing that gap on both sides. But I think people really need to look at the income side—getting something beyond just your career. Even if you’re really into your career, I still think just from a security standpoint, having something else is helpful. 

 

Kornel: Yes. And then if you push it too far with the whole savings piece, then it can really start to impact your standard of living. You might be saving money on heating but you’re cold. You’re freezing while you’re trying to type on the computer, things like that. So there’s times where you’re okay paying a bit more because it really has a positive impact on your standard of living. And like you said, you might have saved a few bucks, but you’ve earned a few hundred or thousand doing this other thing. And if you enjoy doing the thing you’re using to make money, then why would you not do that? 

 

Tom: Yeah. You don’t want to go to crazy on the expense cutting. That’s another reason I like the tracking too is, you can look at it over time. I really like the idea of looking at it annually to see things as a big amount. It’s seeing how much that stereotypical coffee costs. You can’t just look at it per item. You’ve got to look at it as a full annual expense so you can really compare it to everything. This is how much I’m spending on my car. This is how much I’m spending on coffee. You can kind of make those value decisions where maybe you don’t want to be freezing. Maybe you want to have that extra coffee. But then you’ve got to make the decision about how this is all going to come together. That’s where the extra income is handy, because you can say, “I don’t want to give up the spending,” and that’s okay. But you’ve got to at least be aware of it and be able to make another offsetting decision that’ll help everything come together. 

 

Kornel: You also have to be really careful of that trap of trying to save a few pennies or a few dollars. It takes so much work to actually save that amount that if you broke your labor down on an hourly basis, it becomes below minimum wage. That’s the kind example that comes to mind. It drives me nuts to hear people say, “Oh, the gas is cheaper by three cents,” and it’s across town. Then it’s rush hour and you’re going to be stuck in traffic so did you actually save anything when you factor in your time and the gas to get there? And even if you did save some, what sort of hourly rate did you earn in a way by saving that money? Yeah, you saved some money on your gas. You may have saved $5 but it took you half an hour to do it. That’s a pretty low hourly rate, right? That’s below minimum wage. So, did you do you really want to do it? Was it really worth it? You’ve got to spend that time either starting your own business or doing these things like Uber. Just something where you’re going to basically get a higher return on your time invested. So definitely, I would say be careful with that extreme, frugality thing because you’ve got to factor in your time because that’s actually worth something. 

 

Tom: Yeah, but you mentioned the gas example. For me, it’s coupons. I’ve tried clipping the 25 cents off and so often it’s just not worthwhile. Sometimes in the mail I’ll get a thing where you sign up for free samples. You get coupons for free items. Great. I’ll use those. But some of these 25 cents off stuff—it’s just not worth the time, especially if you’re going out of your way to buy something you didn’t want to buy. This is marketing, by the way. When they send out coupons, they’re trying to get you to try something. But I will say on the grocery side, I’m a big fan of shopping based on the flyer, because you can buy these reoccurring items. They’re going to be on sale once a month anyways. But the coupon thing I just found, it’s such a waste of time. That’s exactly how I looked at. Same as the gas. I could do it. But is it worth having to track this pile of coupons, hand them over to the cashier, just to save a few bucks? 

 

Kornel: Yeah, exactly. Exactly. I agree with you. Flyer shopping is still good because groceries are also another huge expense. I mentioned, housing and vehicles but groceries are also pretty big. And like you said, if you can stockpile because you’ve got a deep freezer, you can stock up on that. Load up on those chicken breasts or whatever the case may be. I hear you. All the savings there can actually add up quite a bit. And you’re going shopping anyway so it’s not like you’re spending an extra hour shopping because you’re at a certain store getting those deals.  

 

Tom: I don’t want to go to that far down the grocery track here, but people often say they won’t get what’s in the flyer because it’s not the exact thing they want. But it’s just about timing. You still buy the exact same thing you want but being in the grocery industry for decades now, I can tell you, that same item you actually will probably be on sale about once a month so it’s just a matter of timing. Just space it out and you won’t have to pay full price for anything. 

 

Kornel: For sure, especially things that don’t expire as well, right? Maybe you don’t have a deep freezer to buy 30 packages of—oh, there’s probably a limit to how many you buy… but, I mean, even things like paper towels and bathroom things, it’s definitely a no brainer for sure. 

 

Tom: So another thing I wanted to talk to you about that I know you’ve talked to people about, and it’s something I don’t know a lot about right now is, insurance. Especially life insurance. I know enough general advice to have been able to get my own insurance, but I don’t know the common thread. Is there something people suggest for what kind of insurance to get and maybe even how much? How do you protect all your finances in case something happened? 

 

Kornel: In terms, specifically, we’ll talk about life insurance because that’s one you may accidentally buy when you really don’t need it. When it comes to life insurance, definitely the overwhelming type of life insurance to get has been term insurance. Just to basically give a broad scope, there’s term insurance, universal life and whole life. Whole life and universal are types of permanent life insurance, and term is just for a specific term. Term is a lot less expensive. We could have a whole podcast talking about the insurance thing. But basically, since we’re just kind of talking high-level on what the consensus is, the overwhelming majority of experts saying term life insurance if you actually do need life insurance. It is definitely the one to pick. The salespeople that try to sell universal life, whole life, they will talk about the investing portion of it. They’ll say you’re getting life insurance but you’re also you’re also investing in a way. The consensus or overwhelming majority of experts I’ve interviewed on this subject has been, insurance is for insurance. Investments are things like ETFS, index investing, that kind of piece. That’s what you use for the investing piece and the insurance you use just for insurance purposes not for investing purposes because there’s a lot of different rules. The fees can be much higher, different restrictions, things of that nature. When it comes investing, if you’re doing DIY index investing, you basically get more control. You get more flexibility. You get lower fees. Whereas with universal life and whole life, you very much may not get that. Now, I am kind of painting with somewhat broad brush strokes here. I’m not going to say you should never, ever get a whole life. You should never get universal life. It can be different for people in different situations. I know there are some estate planning strategies that revolve around it. Certain people with pretty high net worth individuals that are really trying to save some tax… It may be for some people in these really nuanced special circumstances. Some of those products may be worth it. I’m not sure, but they may be, depending on what’s happening. For most Canadians, term life is the way to go. In special circumstances, these other ones might be okay for you. But if you’ve got someone saying, “Hey, for your situation, definitely get universal life or definitely get a whole life,” the thing you’ve got to figure out at that point is, does the person telling you that also sell insurance? Or are they a financial planner calling themselves that and they’re actually getting some sort of commission on the back end by selling you that? If the answer is yes, they are, maybe they’re great people and they have your best interests at heart. Awesome. I hope they are. But there is the potential for conflict of interest. So in those situations, you do actually want to get an unbiased second opinion from someone that knows how to do the right analysis to figure this out for you. And that person cannot be getting paid in any way whatsoever for the selling of the product rights. You want someone where you pay them a flat fee, an hourly fee or per project—whatever the case may be. They can do that analysis for you but they have no horse in the race, right? They just want you to be a happy client. They’re not trying to refer you to their friend who sells insurance or recommend some product because the firm sells that insurance policy. Just be really, really careful with that one because, yeah, there are commissions involved like the rest of this investment industry. You might hear some very conflicting information but you’ve always got to ask yourself, does this person have a financial incentive to be telling you to get it? And if the answer is yes, then you should definitely get an unbiased view from someone that’s not selling it, essentially. 

 

Tom: Yeah. That’s my experience exactly. I knew enough that term life was the easy, proper way to go. And you’re right, anytime I’ve heard anything other than that was from people who just happen to sell insurance. Even if they weren’t trying to sell it to me directly, it’s just the fact that it’s in their mindset when they’re talking to me. You did touch on the fact that with anyone high net worth there is some benefits. I’ve heard this from a couple of people, too, and I don’t fully even understand it. Like I’ve said on the podcast, things like Bitcoin, if I don’t understand it, it’s all the more likely I’m not going to do it. In general, get term life insurance and invest the difference. What you aren’t paying in the difference in insurance prices, you can just invest that extra money. Put it in those ETFs. You generally come out ahead. If you’re higher net worth, sure, talk to someone that isn’t directly profiting from the insurance industry. You may find that something could be different for you. 

 

Kornel: Yeah, well said, Tom. Exactly. I agree. 

 

Tom: Now, a lot of people focus on retirement. We do a lot on this podcast. You mentioned a lot of savings is towards retirement. What should people be planning based on talks you’ve had? Should they go with general rules of thumb, like the 4 percent rule and such? Do they hold up? Is that the best way? Or do you look at things like your current income? I’m not a huge fan of that one where it’s, “What’s my spending look like right now while I’m right in the midst of my career and stuff.” Where is the happy spot? 

 

Kornel: Oh, you mean the ones where they say to take 70 percent of your income, that’s what you need for retirement? Those kinds of things?

 

Tom: It’s helpful. Any of these general rules of thumb are helpful in that you need some idea of how much you should be saving and what you want that to look like by retirement. You need something just to get started in the right direction. But when it comes to fine tuning it, I don’t know if any of those match everybody’s unique situation. 

 

Kornel: The one that I don’t like and heard a lot of criticisms about is the one where they say you need X percent of your current income. That’s how much you need in retirement per year. So if you’re making $70,000 now, you need X percent of that in retirement. That’s so general and inaccurate in so many cases that I wouldn’t even entertain that one at all just because there’s so many different variables and different things you can change. Different levers you can pull in retirement to make that number not work. Yeah, that’s way too general a rule. The really common one that’s gotten a lot of publicity and people listening to your show have probably heard about is the 4 percent rule for retirement. Let’s say you have a million dollar portfolio. You can take out reliably 4 percent per year of that, inflation adjusted. That would be $40,000 a year on a million dollar portfolio. There is a whole thing on that because there are a lot of different assumptions built into that. But just on a broad level, my view of the 4 percent rule is it’s a really awesome beacon you can use, where your retirement is far off in the distance. You’re building your portfolio and you just kind of want something to aim for. It’s kind of motivating to see. You’ve got a goal and it’s more concrete. It is good from that perspective. However, once your portfolio has actually growing quite a bit, there are different levers you can pull to be able to potentially even retire or semi-retire a lot quicker. My point here is, you don’t want to use the 4 percent rule as a GPS where you’re going to follow it exactly and it’s going to take you exactly where you need to go because it doesn’t quite work like that. Treat it as a beacon off in the distance trying to guide you in the general direction. You can’t just use it blindly because there are certain limitations and there are some negatives. But it is very helpful at a high level. The approach I like is a common one. Let’s say you have a million dollars saved and you get $40,000 a year, inflation adjusted. Practically speaking, what I would do is try to get to half a million. Try to get to $500,000 in terms of your investment portfolio. That’s a pretty solid number. Once you get to $500,000, get a fee for service financial planner to actually crunch the numbers. Take into consideration, your situation. Do a custom plan to see how much more than the $500,00 you actually need to have the lifestyle you want in retirement,  semi-retirement or early retirement. Then you can play with things quite a bit. A thing that can make a huge difference is if you actually have a little bit of side income like Tome was mentioning. That can have really just an absolutely enormous difference. Let’s say you and your spouse say you’re going to semi-retire. You’re both going to make $10,000 a year though, in retirement. That’s a pretty small amount compared to what you’re making now, but you can basically multiply that by 25 (which is a variation of the 4 percent rule). If you’re bringing in an extra $10,000 a year, that’s like $250,000 extra you’d have in your portfolio. That’s basically quarter of a million dollars that you no longer need to have saved in your portfolio in order to get that extra money. That’s a pretty big deal. Now, it’s not going to be exactly that. It’s going to be a bit less because there’s taxes we have to factor in too. Like I said, once you get to $500,000, you want to sit down with an actual fee for service, financial planner to get those details nailed down. But at a high level, my point is, let’s say you’re bringing in $10,000 which is basically $192.31 a week. You’re making over $1,000 a week right now, I’m sure. So, if you and your partner are both pulling in $10,000 a year, that’s $20,000. According to the 4 percent rule, that would be like an extra half a million dollars in your investment portfolio. If you already have $500,000 saved and you’re going to work part-time, you may already be able to quit your regular full-time job that you might not like because you may already be at that million-ish level if we factor in the fact that you’re also going to be working a little bit in retirement and so is your partner. It gets more complicated because now we get into taxes and things of that nature. I would encourage you to understand (at a high-level) that even though someone says, “There’s no way! It’s going to take me until I’m 90 to save $1 million,” that sounds totally unreasonable, right? Well, actually, you don’t really need to save $1 million for the 4 percent rule. It can actually be a lot less than that if you are willing to pull certain levers. There geo arbitrages, that’s another one. Certain savings that get massively reduced when you’re not working full-time. There’s a whole bunch of these levers you can pull. But the biggest one, I would say, is semi-retirement, where you actually are still earning a little bit. The big thing here, too, is that you could go and work at a nonprofit, for example, part-time. And yeah, you’re not making as much money as you did at your corporate job, but you’re working for a cause you believe in. You’re still getting paid. You’re having fun. And you’re able to basically quit that stressful job you hate decades earlier because you’re willing to do that. So, yeah, I definitely really encourage people to not just think of the 4 percent rule where they’ve got to retire and never work again because realistically, you are going to work because you need that extra fulfillment you get because it actually provides you with a lot of other things which we can talk about later. It’s just something to really keep in mind. 

 

Tom: Yeah, I like that because this does go back to that $1,000 side hustle. The same thing that bought you that cash flow cash flow buffer on top of your career, totally helps in retirement too. It gives you that breathing room. So if your 4 percent calculation or whatever isn’t perfect enough, at least there’s something that covers it. You’re not just relying on one thing. Just like don’t have to rely on your career, you don’t have to rely on just your retirement savings in retirement. How does this change your retirement then? I’m a big fan of not really using the “R” word. People don’t need to truly retire. They may leave their career but I think more and more people are seeing that they can do something else and they may want to do something else. Retirement might go 30 years, so it’s not the same as decades ago where you retire for five years and then you die. This is a longer journey than that. I assume it’s got to look a little different now. 

 

Kornel: Yeah, it’s very different. And retirement is a dangerous word to use. I would say work is another kind of dangerous word to use because a lot of people, when they think of work they think of being stuck in traffic, sitting in a cubicle doing something they really don’t. That’s kind of their definition of work. That sound productive. You can’t just say anything that’s productive is automatically work, because what if you love doing something and you’re getting paid for it? Maybe not as much as you did during your corporate gig or whatever that may be, but you could definitely find things you enjoy doing that you would actually do for free, just for fun or because you enjoy it, because you’re passionate about the subject, you enjoy learning about the subject and you’re getting paid some money. And that can be enough to help you retire much, much earlier. I think this is very relevant for people that are both part of the FIRE community but also for traditional retirees. Just from interviewing different experts—like at the Canadian Financial Summit we’ve got Ellen Roseman, Jonathan Chevreau who are both “retired” in a way but they’re actually semi-retired, really because they are at that age where they could be traditionally retired but they’ve learned that if you’re doing the kind of work you enjoy, it’s actually fun. It gives you creative stimulation, intellectual stimulation and challenges which are very important just for personal development. You actually feel good about it. It can provide you a really big social piece as well, because you’re if working on a job in an industry you like, want to be part of and enjoy, interacting with others who are in that same boat, it gives you energy, fun, etc. So work is a dangerous word to use because an onlooker could consider that work but I would probably be doing it for free. I’d enjoy this much more than that watching TV because I’m getting, the mental stimulation, intellectual, social—all these components. You get a sense of fulfillment if you’re working for a non-profit, something beyond yourself. So it kind of to get back to your question with Jonathan Chevreau he’s still doing writing. He clearly enjoys doing that. It’s the same with Ellen Roseman who is still teaching. Even people that are older and can actually retire fully, choose not to because they have certain passion projects that are so fun that they can actually still get paid for doing. And it’s funny, too, because if you like something, you’re probably going to be good at it. You’re going to enjoy learning about it. That’s going to make you even better at it, which is then going to have people even more willing to pay you money to do it. And you don’t mind that because you actually enjoy it, right? So it kind of becomes this self-reinforcing thing. I’m really big on the whole semi-retirement instead of the full stop retirement. I kind of went through that myself. When my wife and I hit our financial independence number, we were 32. We both quit our full-time, corporate jobs. My wife went full on but I wasn’t ready to do that yet because I had a really great opportunity I always wanted to do so I actually did semi-retirement. I would basically just work part-time. I did that for two years and I loved it. And eventually I thought I’d like to actually do the full retirement thing. That sounds awesome because I was earning money that I was never going to spend anyway because we were already financially independent. What’s the point of working for someone, making you’re not even going to use? So I decided to do the full retirement. It lasted 6 months. I got all the things I wanted to get done on my “to-do” list. After that, you just start craving those things I mentioned earlier like the intellectual stimulation, the challenges, the socializing, all these really positive things that work can provide. You start to miss that. You start looking for fulfillment. I ended up taking on the Canadian Financial Summit. I still have the podcast, but that’s only one episode a month so I decided to bring this extra thing on. That’s how I got it out of my system and got that fulfillment. That was a really long answer to your question, but I think it’s a really big warning sign because myself and other FIRE people I’ve talked to who have actually pulled it off, every single one of them has gone back to what could be considered to work to some people, but it’s not considered work to them because they’re just doing what they love anyway. They just found a way to monetize it. I hope that answers it—in a very long-winded way. 

 

Tom: No, no, that’s great. That’s exactly what I think. No one should actually retire with this idea of saying, “This will be my last day of working because the next day I’m going to sit on the couch and watch TV.” You just won’t last long if you don’t have something you’re passionate about. You need to do something. Like you said, maybe you’re not making a lot of money. Maybe you make an even no money. But specific to this podcast, it would be good if you’re making a little extra income that that gives you that extra breathing room. You mentioned the Summit, which is on this month. Can you let people know all about it and where they can get tickets? 

 

Kornel: Sure. It’s September 22, 2021. Everyone that listens to the Maple Money Show, you guys can get free tickets to it. We have a special link that we set up where you can get the free tickets. It’s maplemoney.com/summit. If you go there it’s going to take you to the front page. Enter your email and as soon as the free tickets are available and we have the talks up and ready to go, you can start watching all of them for free. It’s 100 percent, online conference, so there’s no travel required. It is specifically for Canadians. What we do there is bring on Canada’s top personal finance experts (such as Tom, who’s going to be on there as well) to share their best practices. So whether your goal is to retire early or optimize your investments… Maybe you want to figure how to lower your fees a bit more, pay less in taxes, we bring these experts on from different sub-fields within personal finance and investing to share their best practices so you can essentially (and ultimately) hit your financial independence years earlier. That’s really what we’re going for. Enjoy the free tickets. Enjoy the event. You can watch all of them for free. And again, it’s maplemoney.com/summit to get it as a listener of Tom’s show.  

 

Tom: Great. Thanks for walking us through all this and thanks for being on the show. 

 

Kornel: Awesome. Thanks so much, Tom. 

Tom: Thank you, Kornel, for the straightforward advice on a wide range of money management topics. I know listeners will benefit even more from attending your upcoming financial summit. You can find the show notes for this episode at maplemoney.com/164. Also, don’t forget to grab your free tickets to the Canadian Financial Summit, which is hosted by Kornel and happens later this month on September 22nd. To get your free tickets, head over to maplemoney.com/summit. I hope you’ll join me there. Thanks as always for listening. I really appreciate the community we’re building both on the Facebook group and the personal messages and reviews I’ve received. I look forward to see you back here next week when I’ll have Kyle Prevost on the show to tell us about his new life as an expat. See you next week.