043: From 60K in Debt to Pursuing FIRE | F.I.R.E. We Go

When Gean and Kristine met, she was $60,000 in debt. Having worked and saved hard to immigrate from Brazil to Canada, Gean already had a good handle on his finances. Together, they managed to pay off the debt and get on the path to FIRE—in just one year!

Listen in to hear how this remarkable couple turned their financial situation around with intentionality, dedication, and teamwork. We also discuss their investing strategy, the Smith Manoeuvre and Norbert’s Gambit.

Special thanks to listener Ashley M. who generously volunteered his time to edit the transcript for our show notes. Ashley, we’re so grateful for your help!

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Money Mechanic
Hello, listeners. Welcome to Explore FI Canada, where we sit at the roundtable with Canadians, and share their thoughts, ideas and personal journeys to financial independence.

Chrissy
Thanks to Matt McKeever for sponsoring Explore FI Canada. Matt is a Canadian investor, CPA, entrepreneur, and real estate expert who achieved FIRE at age 31. Do us a favour and check out his YouTube channel by searching Matt McKeever or using the link in our show notes.

Money Mechanic
Welcome back. Hello again. Explore FI Canada. Chrissy, how are you today?

Chrissy Kay
I’m doing great. It’s another sunny day here in Vancouver.

Money Mechanic
You know, it just so happens we only record on sunny days because people think it’s sunny all the time here

Chrissy Kay
This is unusual.

Money Mechanic
It is, it is. Anything new and exciting over in the continent that I’m missing out on and my little island here?

Chrissy Kay
No, it’s just lovely here. Nothing new to report. Everything’s good here.

Money Mechanic
All right, right on. So we made a little bit of a shout out to the community for guests, because we want to share the Canadian story. For Canadians by Canadians, right? That’s what we’re all here trying to do on Explore FI Canada. And we have two lovely guests on the show tonight that are relatively new to their FIRE journey. So we really want to learn from them and what they’ve done and what the start look like and things like that. So without any further ado, welcome to the show, Gean and Kristine.

Kristine
Hello. Thank you for having us.

Gean
Hello, guys. Thanks for having us. Yeah, excited to be with you today.

Chrissy Kay
Oh, we’re so happy to have you and everyone may notice a lovely accent from Gean and can you tell us where you’re from originally?

Gean
I am originally from Brazil. Sunny Brazil!

Chrissy Kay
Sunny and warm, right?

Gean
Yes.

Money Mechanic
No kidding. I looked… I’ve read your blog now… Just to keep… We’ll let you do your own introduction. But you do have a blog that is called F.I.R.E We Go! Anyway, sorry to jump right into this, but I was reading through it and I had to look up where it is you actually are from and I may be not pronouncing this right: “Fortaleza“?

Gean
Fortaleza. Yes.

Money Mechanic
I gotta roll the “R”: “Fo-R-taleza”. But it looks absolutely gorgeous. The beaches are stunning. There’s like 20 kilometers of beaches, and I watched this YouTube video of this drone footage flying around there. It looks like a very big but gorgeous city.

Gean
It is. it’s quite big. It’s a lovely city. It’s on the north part of Brazil. So yeah, and my family they are not far away from the beach. Maybe 20–25 minutes? And I kind of feel bad. Sometimes I call them and I asked where they are. And guess what? They’re by the beach, you know, having a nice beer and enjoying life.

Chrissy Kay
Awwww… And barbecue, I bet? Brazilians love their barbecue, don’t they?

Gean
Yes, we do.

Chrissy Kay
Yes.

Money Mechanic
All right. Well, let’s… let’s start off with just getting to know you both a little bit. Tell us a little bit about who you are, and a little bit about what your FIRE journey looks like.

Kristine
Well, who we are, I guess we met three years ago online. And since that time, we’ve kind of discovered FIRE. We moved in together about a year ago. And since then, we’ve really kind of started to align our finances together. And now we’re getting married. We want to retire explore the world and FIRE is the way that we’re going to achieve that.

Chrissy Kay
That’s amazing! You moved in together a year ago. And sounds like you dove right into FIRE. Is that right?

Kristine
We did. We had the difficult conversations like every couple has, right? And unfortunately I had to sit down with Gean and open up my past financial history, which wasn’t all that pretty. I was coming into the relationship with probably close to $60,000 in debt. I did own my home but had a lot of consumer debt to go along with that. So Gean was much savvier with his money. And together, we managed to pay off the debt. And now we’re well on our way to our FIRE journey. Hopefully within the next 8 years.

Chrissy Kay
Wow. So 60,000 gone in a year. Is that…

Kristine
Yeah.

Chrissy Kay
Oh my goodness. How did you do that? That’s incredible!

Kristine
A lot of it was… it was on a line of credit for the most part. So Gean’s line of credit was almost empty and he had a much lower interest rate. So it’s really about playing with interest rates, paying off all the credit cards that we had, switching the debt that then was on the higher rate of interest line of credit over to the lower rate of interest, and just pounding everything we had we put on to the debt.

Chrissy Kay
Amazing!

Kristine
Every cent.

Chrissy Kay
So Gean, tell us more about your personal journey. How did you come to Canada and how were you so good with your money right from the start?

Gean
Yeah, thanks Chrissy. Oh, well, I immigrated to Canada back in 2003. So by the time that I got here in Canada, I started to immigrate to Toronto. So I’ve been living in Toronto ever since. And I basically had to get, you know, all the finances that I have back getting Brazil, bringing here the money back to Canada. So that’s how I started looking for information online. I did not know anything about Canadian finances, and I have been here since 2003. So 17 years, so I have to learn and of course, so many mistakes along the way. A little bit that I know today was since I decided to move to Canada. So that’s how I kind of got started and move into Canada and being in a new place that I have never been before in my life. So I had to be careful how I spend my money. So that’s, that’s how, you know, we all started.

Chrissy Kay
Well, and I know moving from Brazil to Canada… We host Brazilian students and I know the currency exchange—the difference between the Brazilian real and the Canadian dollar—is quite humongous. So you have to save a lot more in Brazil to come to Canada and make it.

Gean
Yeah, exactly. Right now, I guess is 3.95-to-1. So for every dollar that I had is 3.9 reals.

Chrissy Kay
Oh boy.

Gean
It was not bad. You know, the difference at that time, it was actually nice to remember is 3.33. I mean, 3 reals and 33 cents. So, yeah.

Chrissy Kay
Well, good for you.

Money Mechanic
So you came across the FIRE concept in early 2019. Can you just sort of run us through some of the bigger changes that you made in maybe sort of lifestyle or spending? Consumer choices? Just some broader things for listeners. Sort of like: “okay, you found out about FIRE. You were inspired. You want to travel the world while you’re young. And you can see all the things you want to see that’s on the bucket list.” How did you implement this overwhelming amount of information?

Kristine
Well, I think the important thing that we started out doing was literally—and to this day, we still do it once a month—we sit down and we track every single cent. We put everything we have—like we buy—on a credit card, so we travel hack as well. So we put everything on credit cards, and then we sit down after the end of the month with a glass of wine, or two. And literally Gean’s built this entire spreadsheet empire. So we go through every single line on our credit card statement and account for every cent that we spent. And so from that we were able to see, you know, we were spending way too much on things like our cell phones, car insurance. He was renting his own place. So that was a big one. When he moved in, we were able to put all of the money that we were spending on two households towards one. And just… it was those conscious decisions, right? Do you need to go and spend $300 on a really great dinner out? No. No, we didn’t anymore, right, because now we had a different goal. And that $300 dinner out—though it was delicious and we had a great time when we did it—at the end of the month, it was probably more beneficial for us to put that $300 into the RRSP, or put it against the mortgage or things like that. So I think just sitting down and accounting for all of our money really made us look at what we were spending and just become far more conscious about every cent that went out.

Chrissy Kay
And that’s something I always like to stress on the FIRE journey. It’s not about deprivation, it’s about, like you said, getting more conscious, and then really pouring your money towards things that you value. And for you it was investments because that will lead to more freedom in your life.

Kristine
It’s become almost a little bit of a… I don’t know, that’s our entertainment, almost, to a certain extent. Like the dividends come in, and we’re like: “oh, let’s go update the spreadsheet!” Or you know, we DRIP something or like: “Oh, we got to update the number of stocks and stuff that we have.” Or… Just it’s nice to see that everything is slowly growing. And I think that what we’re doing is working. But like we said it’s only been six, seven months now. So it’s still early stages, but we feel like we’re on the right track.

Money Mechanic
So I imagine you had that amazing feeling. When you paid off your debt. I remember that in my own life of that point where you go: “oh my goodness! This is the first time I’ve been debt free in 10 or 15 years.” It blows your mind! And just adding on to what you’re just saying there, once you feel that you’re actually building something positive with your investing, you can kind of start to gamify it a little bit because you kind of get really excited like you said about seeing some of that money come back and it’s like: “oh! there’s actually return on investment.” It’s pretty empowering.

Kristine
It’s amazing. Yeah, it’s been great.

Chrissy Kay
So can you tell me how, how it was that you… Who discovered FIRE first and did one of you need more convincing than the other one? You both seem very much on board now. And how did you get to that point?

Kristine
Oh, it’s totally Gean. He started talking, he’s like: “Oh, Amor (that’s what he calls me), Amor, that’s not FIRE.” Like, what the heck are you talking about? FIRE? What are you talking about? And so that he would explain it. So you can explain how you came across FIRE, Gean..

Gean
Yeah, sure. So when I moved to Canada, and I didn’t know where to invest my money. I didn’t know what it was an RRSP. TFSA—at that time—it didn’t exist, but it was basically the RRSP. So I started saving money, because I knew it was important for retirement. So after that, and as you go through internet, and then we start reading blogs at that time, Million Dollar Journey, which is one of the blogs that we’ve been reading since 2007–2008, I guess? He was going through his journey of FIRE, even though it was not called FIRE at that time. I always learn to what he has to say and finding ways to save money. So that’s how it all started. And then later on, it’s going through, you know, like reading: “okay, what do I need to do to retire early? What what are some of the things that I need to do?” And we ended up finding the group on Facebook: the ChooseFI Canada. So that’s how we… I found the group and then I thought: “you know what, this is actually what I was looking for.” And going through the group and finding, of course, the podcasts on Explore FI Canada, and also the FI Garage. And then I thought: “you know what this is actually what we’re looking for.” And at the same time it was when I introduced the concept to Kristine. And we got excited. And then we decided to go through our finances. And then that’s how it started.

Chrissy Kay
I love it. What a nice story.

Money Mechanic
So you’ve got a goal for 2028—which is awesome to have a target—and you basically say you’re ready, that the goal is about travel. Can you speak to that a little bit? I was just curious. We’re going to go into a little bit into your numbers and what you share on your blog in a second here, but does that goal look like you leaving? You’re currently in a high cost of living city. Does that look like you selling your primary residence and becoming somewhat nomadic? What does that look like for you guys?

Kristine
Maybe to a certain extent. So the way we have it… our house here in Toronto is a bungalow. We’re a semi detached, but it’s fairly large. It’s like a full size 1960s bungalow. So we have a one bedroom apartment that we were renting in the basement, and part of our FIRE journey is we’re in the process of moving ourselves downstairs. It’s a big apartment, and it’s a walkout. It’s beautiful. So it’s not like we’re sacrificing anything more than two bedrooms that we don’t use at this point anyway. So part of the goal is we’re renting upstairs to gain more income to invest. And I think at the end of the day, we’ll just keep that one bedroom apartment in the basement for coming back to Canada in the summer months to see family, friends, reset our health care, things like that, right? But for the most part, I think what we want to do is incorporate more of the slow travel and spend a month, month and a half, two months in different countries around the world for the first eight to 10 years. And then who knows, right? After that either: in Brazil—we have a condo down there as well—and then, or here in Canada. Split our time.

Chrissy Kay
So your condo in Brazil, is that a rental or is that going to be your vacation home?

Kristine
So Gean, do you want to talk about that?

Gean
You’re the one who decided to keep it!

Chrissy Kay
Is that right!?

Kristine
Oh yeah, totally! We went down to visit his family and his best friend lives in a city, not too far away from Fortaleza if you’re flying. It’s a place called João Pessoa. It is absolutely, breathtakingly, beautiful. And we were out with his best friend one night, drinking, and Alfredo was like: “you guys should buy a place here!” Next day we go, we look at—it is under construction—but the presentation center, I guess. And I’m like: “yeah, let’s do it!” We should totally FIRE, right? Yeah, whatever. Like we totally need a place in Brazil. So we did and now we’re currently… it’s still under construction, but it should be finished this year. And the idea is to rent that out, as well, for the first five to six years, until we’re ready to use it ourselves.

Chrissy Kay
So can you hit the 1% rule in Brazil? Is that possible?

Kristine
Gean, you know, the, the finances down there better, but I would think: “probably.”

Gean
Yep.

Kristine
Yeah, if we are taking Canadian dollars down, I think it’s going to go far further than it would ever go here, right? So..

Chrissy Kay
OK

Gean
And that’s the beauty of buying the property back in Brazil. If you were to buy the same property here in Canada, I would maybe spend more than 1 million, I guess. Kristine, please correct me if I am wrong. And on the other side, you know, the place we bought in Brazil with a good conversion rate, stay ahead right now, it kind of it works on our advantage. So that’s why we thought it will be a good property.

Chrissy Kay
That’s fantastic.

Money Mechanic
So my question is—you share in your on your blog here, so I’m not giving anything away —the condo is worth around 140,000 Canadian. Is that a very luxurious condo for that particular town that you’re in?

Kristine
The finishes and everything… it’s a one bedroom… Well, it’s better two bedroom, two bath condo… but it’s literally like you… there’s like a beautiful pool complex that’s part of the development, but you walk out of the pool onto this beach that goes for miles. Like it’s literally on the ocean, and spectacularly beautiful. So the view and the location… are rather than the size. It is a nice, very nice condo, but it’s smaller. But the location is pricey.

Gean
Yeah, it should that is actually the location. It’s not like on a big city in Brazil. So if you normally hear about Rio or Sao Paolo, we wouldn’t be able to buy this thing condo in San Paolo, because the price it might be three or four times more than what we pay in João Pessoa.

Kristine
He says it’s not a big city, but there’s like 2 million people. And there’s just nothing.

Chrissy Kay
Yeah, well, sounds lovely. I would love to visit one day.

Gean
You’re more than welcome anytime. As soon as it’s all finished. But yeah.

Chrissy Kay
Yeah.

Money Mechanic
All right, let’s pivot a little bit here and tell us about your blog and why you started it.

Kristine
This one’s all you Gean.

Gean
So I guess it was more… we got excited when we were listening, you know, to videos on YouTube, and also the content on Facebook, on ChooseFI Canada group. And then we saw so many blogs, including both of you. So thanks for sharing your journey as well. And then: “oh, you know what? I guess it might be, you know, maybe it might be the time for us to do the same.” Most of the content that we’ve read there was actually in the US. And I kind of felt there’s so many, you know, good things going on with the possibilities that we have in Canada. And since we are new to the journey, and then we thought maybe we can try sharing our our journey with everyone else. And we can see that mistakes that are making then as we go through and share, you know, the net worth updates, or share the dividend incomes, it kind of, uh, reiterate, as in doing, what we’re doing. It’s just having another option. It might not be for everyone, based on the things that we do. We are far away from being experts on the content. We are just like a regular family trying to do the same with this retire. So that’s how we saw, if we share our journey with everyone else so people can read, they can see if it makes sense or not. And questions are asked. So that’s why I think that it’s also important, because having a second opinion also helps and you know, help us make sure we are on the right track. No: we have to do this, we have to do that… and blogging: it’s helping us to achieve that.

Chrissy Kay
Yeah, I find that too. I learned a lot from my readers and listeners of this podcast. Just as much as they might take from us. It’s just sharing information like that… everyone gains from it.

Money Mechanic
Yeah. I feel it’s like having an accountability partner. You know, you produce any content. It’s… it’s really cathartic in a way because you get some feedback, and you learn more and it empowers you to go and learn even more than you knew already. So it’s great to see more Canadian content. So we’ll be following along with that. Now, I’m going to ask a few more particular questions from your blog here because you are sharing some monthly dividend income and you’re sharing some net worth updates. So that’s pretty awesome cuz a lot of people don’t want to share those numbers—and I’m not going to go into super details here—but I do have a few questions that I’m really curious about because a lot of the community maybe knows about the strategies but doesn’t necessarily implement them. So first question for you, drum roll, is: you are using the Smith Manoeuvre, which is really cool. Can you just run us through? I read here that you refinanced? Sorry, I think was 2018, and you got the re-advanceable. Just kind of walk us through the basic, the baby steps of how you did that, why you did that and what your expectations are.

Kristine
So we actually… we just did the refinance this year as part of our… like, we paid off all the debt that we had, and when now we’re looking at our numbers, and we’re like: “how are we going to make this happen?” Like, we obviously don’t have a ton of money to just throw into the market, right? So Gean came across the Smith Manoeuvre, and we bought the book, and we’re both reading the book, and we’re doing all the research that you can, and we’re thinking: “Okay, we can do this, why not?” Our house is… it’s not opulent by any stretch of the imagination, but it is located in Toronto. So we have that perk, I guess, if you want to say, because when we did the refinance on the mortgage, we found out that, what we bought it for what I bought it for, four years ago, we now had $300,000 more in equity built into the house. So when we refinanced we did the readvanceable. And now we had, on the line of credit, we had available to us cash that we could put into our investments straightaway. And just kind of, I guess there’s a term for that. And I can’t even think of it…

Chrissy Kay
Prime the pump?

Kristine
Prime the pump! Something like that. So that’s what we did.

Money Mechanic
This isn’t a test.

Kristine
I need the book, there’s a tab, I swear. But yeah, so that’s what we did. Gean came across the Smith Manoeuvre, and we thought: “you know what? We’re sitting on this asset that if we sell the house, we can gain the money and go ahead and do what we want to do.” But we need to live somewhere at the same point, right? So why not use that money now and then down the road, if we need to sell it, then we still have all of the assets that we’ve taken out and invested, and we can just walk away and do what we need to do wherever else in the world we want to go.

Money Mechanic
So you use “prime the pump” to start it off with, and are you following through with just, I guess—Robinson likes to call it the “Plain Jane Smith Manoeuvre”—by using each month’s principal payment to be reborrowed and invested. Are you continuing like that?

Kristine
The way we’re doing it is a little bit different than having our entire mortgage on like a fixed mortgage portion and then an available line of credit. What we did was we put a chunk of the mortgage on the line of credit and then we have a portion of the mortgage that’s locked in. So that way we’re able to… because, Gean, our finances are set up a little bit different than most. I’m like a salaried employee for the city, and Gean has his own corp—like his own business. So he works on contracts. So we’re able to put larger lump sums of money on to the line of credit, to be able to utilize that money again for investment purposes. So it was more advantageous for us to have a larger line of credit available to us, even though a portion of it was set up with the mortgage or the debt from the house that needed to be paid down as well. Does that make sense?

Money Mechanic
Yeah, I think some of our listeners will get lost on that one. But I understand what you’re saying.

Kristine
We basically split what was left of the mortgage into two pieces. One was a fixed mortgage with the bank and the x, the second half sits on the HELOC—on the on the line of credit portion—as just part of the line of credit that we’re paying interest on. The same as we would, right? So we just have two different interest rates really right now on our mortgage.

Money Mechanic
So you’re not regularly borrowing to invest them?

Kristine
We are, but we literally throw every extra cent we have onto the line of credit. So we reinvest, reinvest the dividends, along with extra cash from the corporation and all this kind of stuff that comes from Gean’s side. So we’re putting lump sums down on the line of credit to then turn around and reinvest back into…

Money Mechanic
That’s got a name, doesn’t it? That’s just slipped my brain now but that there’s a name for that where you essentially put all of your money into this line of credit that you’re gradually paying down and then you only withdraw from it for your necessary expenses. Is that sort of… is that what you’re doing?

Kristine
Sort of. We live off of my income right now. So we’ve got it down, we’ve managed our expenses to the point where we’re able to live solely off of the income that I generate from my my job so everything that Gean earns now we’re able to use as investment. So whether we’re keeping that inside of his business, or withdrawing to put down onto the Smith Manoeuvre line of credit to then reinvest through that account, as well.

Money Mechanic
Right on. Okay, well, let’s not get too far off into the weeds here. I know Chrissy wants to say something. So go ahead.

Chrissy Kay
Well, I just wanted to say it’s quite a contrast that you paid down $60,000 in debt, and now you are taking on debt with the Smith Manoeuvre. How did you get comfortable with that from going debt free to now using leverage in order to invest?

Kristine
I think that was more Gean, right? You had to get more comfortable with that. I’ve lived in debt forever! For me, it wasn’t so big. But Gean, how did you get comfortable with that?

Gean
I guess it’s known that it works, right? It was not the case that we thought: “okay, let’s… we’ve read about this Smith Manoeuvre, lets tomorrow, go and do that.” No, we did some some research before going through, you know, the book… which is really helpful and trying to understand how it works. And speaking to people when learning, when reading what other bloggers were talking about. And then we thought: “oh, maybe this does work! Hopefully…” I mean, we will really know once this year ends, and then we have to fill up our taxes and everything. But so far, I guess it’s good. And as Kristine mentioned before, the fact that we are able to live with her income, and you know taking care of all the expenses. Everything else that I make goes towards, you know, the line of credit, and then we feel confident that we were able to, to do that.

Chrissy Kay
That’s impressive. Living on one income, it’s it’s not an easy feat. So it takes a lot of planning and a lot of intentionality to make that happen.

Kristine
That’s where the budgeting and the sitting down… We don’t necessarily budget to be honest with you. But we do sit down every single month. And we have like our little declining balance for our groceries on the fridge and stuff like that. Like we’re… it’s just being more intentional with everything we buy now, rather than just like… I work shift work. So I take my lunch every day, whereas, like the guys at work are going out and grabbing Chinese for dinner or whatever. Right? So there’s, by the end of the seven day shift, you know, that’s $80-$90 that other people are just basically throwing away, and we can turn around and then reinvest. Right? And Gean’s a really good cook. So I’m going to take his food to work for sure, rather than, you know, spend $13 on something that’s just convenient. Right?

Chrissy Kay
Yeah, it’s shocking how that adds up over time.

Kristine
Yeah.

Gean
And I guess it also helps us, the visual representation that wants to go through the finances every month, and then we say: “oh, here how much we spent.” And then we when we look at what we spent last year compared to this year, let’s just be more mindful on where we are spending money, right? We are not depriving ourselves, we are just more conscious on where we are going to spend and why we’re spending that money. So…

Chrissy Kay
Exactly. And I just want to highlight for the people who hate budgeting, how you said you don’t budget and I don’t either. I actually, I think what you and I do is more just tracking our money. Like you know where every cent is going. You’re not necessarily limiting yourself, but you’re really watching it and you’re careful about how you spend it. So you know that it’s going towards things that you really want it to go towards.

Kristine
Yeah, exactly. I mean, we, I mean, our Costco bills can be exorbitant. Right? We don’t… you know, we’re not eating ground beef and chicken every day, right? We eat the ribs and the steak and we enjoy our lives. But we’re very much aware of everything that we’re spending our money on, because now it has a purpose, right? We have eight years until our deadline. And if we can do it before then trust me I am going to be handing in my papers and walking out the door. Yeah.


Chrissy
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Chrissy
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Chrissy
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Chrissy
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Money Mechanic

So you mentioned that you have your monthly meetings which is a great idea. I totally support that. Sometimes my wife’s a little reticent when I… but I talk about money way too often, but… so did you join finances? And I’m asking this from like a day to day perspective. Do you have one account that… I know, I know that you say you live off your income, obviously all that money goes in there, but do you use one chequing account for both you? Do you share credit cards? What does that part of your sort of money situation look like?

Gean
Yes and no. We are, I guess, we are really a open about everything, about the finances that we have in place. Right now, we don’t have a joint account. That’s something that we have been discussing for quite some time, which is having one account, which at the end of the day is gonna remove, like the monthly fee that a bank says taken out from us. Right now? No, we don’t. But my money is Kristine’s money; and her money is my money. So we don’t have any problems with that. We are not depriving ourselves. So if she wants to buy something, she’s going to do it. And the same way with me. But being, I guess, on this journey together, which I think is a huge advantage for us, right? So no, we don’t, but we are, we always try to find ways to, you know, to improve our finances. Like credit cards, you know, she has a credit card, and then when we need to buy something we say: “okay, which one is gonna give us more points? Is it going to be credit card A, or is it going to be credit card B? Where an improvement that we both have, she says: “Okay, here’s your… I mean… you have the same PIN number. So I know that I have to swipe the card. So I know it’s gonna be okay. And going through at the end of the month, you know, on our monthly, meeting I should say monthly, “why” meeting. It helps. So it’s not something new.

Money Mechanic
For sure. It sounds like you’ve got a plan that works for you guys. And I think that’s what everybody finds, is you find what works for you as a couple. And to tack on to the part B of my question was going to be—and you kind of answered it—I think in there was: do you give each other or (I shouldn’t say “give each other”—that’s not quite the right verbiage, but…) do you have a no questions asked spending amounts? Like, I know the accountant on FIGarage, he likes to have a number him and his wife have for the month, that’s their guilt free spending. And I don’t have that with my wife: I believe in the same as you. If I want something, I’m gonna get it. And if she wants something, she’s gonna get it. And I trust that we’re both value minded enough that it’s because we really, it’s something that’s really important to us. So how do you guys deal with that?

Kristine
I think it’s very similar. Um, we don’t question like, if Gean wants to buy a gadget or something for, you know, the computer and things like that, it doesn’t matter to me, right? I go out and rarely, these days after I added up the amount that it costs, but get a manicure? He doesn’t care, right? Like that’s, it doesn’t matter. Because at the end of the day, I think sitting down and going through all of our finances, and now having aligned our goals, neither one of us wants to just spend money on things that don’t bring any value back to us. Right? So those manicures, they don’t mean anything anymore to me, really. You know what I mean? That’s just the value of the money that we’re earning and how we could be spending it versus just throwing it out the door on something that’s gonna, tomorrow not mean anything, right? So we don’t find ourselves actually spending a lot of extra cash other than maybe extra coffee at work for me. That’s about it.

Chrissy Kay
Yeah, I find that discovering FIRE really helps to focus your intention with your money. I used to love shopping at Winners. I don’t know if you have Winners in Ontario, but it’s so tempting because everything’s a good deal. So it’s, it was easy, especially when my kids were little you go into the toy section and you find board books and all these nice little sleepers and things like that. It was so easy to buy, buy, buy, but once I discovered FIRE, the thrill of that just went away. And now I have a list, I go and get what I want, and I leave. And I’m happy with that. So I… that’s what I think FIRE really brings to the spending, is that it gives you that purpose and that intentionality and helps to prevent that, you know, that FOMO, or that impulsiveness to buy all the time.

Kristine
Now my spending is transferring $50 to my TFSA. So like buying another ETF. And for me it felt.. it’s weird but it’s true. That fulfills that same little desire that I want to go out and buy a new shirt. You know what I mean? Like that has more meaning now for me than a T shirt that’s just gonna sit in my closet for weeks until I put it on.

Chrissy Kay
Yeah, I love that.

Money Mechanic
And you know that comes back to the, you know, the saying—one of the ones I love the most is—you know: “buy assets, and then have those assets buy your liabilities.” And I like Mark Seed‘s latte factor that he’s got, his metric is that: “how much does he get paid every hour of every day even while he sleeps from his assets?” And that’s… it’s a mindset shift of looking at that and getting excited about that. Right? Not that you have to focus on that, that that’s not your only happiness. But it’s something that, like you say it can replace that short term joy that you get from the purchase of something by seeing that 50 go in and make a difference down the road.

Kristine
Exactly. Yeah.

Money Mechanic
Right on. I have a question about your investment choices. Did you guys, like, go off script on purpose here? I mean, you’ve got, so on your blog “F.I.R.E We Go!”, you’ve got your dividend income for September posted up there. And quite a few of us actually commented on there. And I was reading through that. And I’m just curious. And there’s there’s no right or wrong answer here, of course, we know that—this is personal finance —but I’m curious, you’ve got a lot of dividend stocks and not a lot of index funds. What’s the decision process there?

Gean
Kristine, go ahead. <<laughing>>

Kristine
The majority of the dividend income right now is coming from the Smith Manoeuvre. So from what we’ve learned and heard and read and what not, Canadian dividend, it’s all Canadian dividend paying stocks that we have in that particular account that we use through the Smith Manoeuvre. So that’s where the vast majority of the dividend income is coming from. And we’re gonna continue that. I mean, what we’re invested in are really strong Canadian companies, they’re not going anywhere, they haven’t gone anywhere for decades. So we’re quite confident in those. We have invested in seven US dividend paying stocks. But we’re also now transitioning over to more ETF-based within the US and international markets, slowly. But the vast majority of our holdings are still Canadian dollars through the Smith Manoeuvre. So the majority of our income right now is dividends. Only because of the Smith Manoeuvre,

Money Mechanic
Okay. So it’s not like you have a specific strategy for eight years from now that you know, a lot of your FIRE, your income and financial independence is going to be dividend income. It just happens to be a factor of how you’ve got it allocated at the moment.

Kristine
Yeah, I think at the end of the day, and correct me if I’m wrong, Gean, but we’re going to keep the dividend paying stocks that we have now. And those dividends are going to keep paying us out as we, as they are now. We’re going to start transitioning new money that we’re putting into our RRPS, TFSAs, and the other margin account that we have that’s not the Smith Manoeuvre. those are going to start purchasing more ETFs. But right now, we’re not selling any of our dividend paying stocks, we’re actually quite happy with the dividends that we’re receiving from them. And then we’re able to take those out, cycle them through our line of credit and put them back in to the Smith Manoeuvre account that we have going right now.

Chrissy Kay
Can you tell us more about which ETFs you’re investing in? Are these index ETFs or something else?

Gean
Yes. Just to compliment what Kristine has said before. What we are trying to do is to diversify our investments. To the fact that we are with the Smith Manoeuvre, yes, we are basically buying Canadian stocks, that pays dividends. So that’s the majority of the money that we have. And we know based on what we have read before is the money that we have on RRSP, we still have, you know, a lot of room for the RRSP and our TFSA, so what we are trying to do is use the RRSPis for more US exposure and the TFSA we’re gonna have more global exposure. And those accounts, what we plan to do is actually to buy the ETFs and it kind of depends on if you want to buy for example for the US stocks, we actually today we bought ITOT which basically gives you exposure to all the US market, right? So that’s what we are trying to do. For global exposure, it’s going to be the ETFs, and honestly, crazy, I don’t remember they codes yet—the tickers yet—but we have that written somewhere. Oh, I guess it’s VIU and UAE. So it’s not the account and how, you know, what is the room that I have available, and then based on that we will, you know, try to buy those ETFs.

Chrissy Kay
OK. So it sounds like similar to Mark Seed and Bob Lai, two other bloggers: you are a hybrid investor. So some dividends and some index ETFs.

Kristine
Yes.

Gean
That is correct. Yeah.

Money Mechanic
Okay, I’ve got the harder question than that, though, because I did see your tweet today. And I do want to ask you specifically about these two ETFs. And this is gonna get a little into the weeds—and maybe we should not do this on the show, but I’m doing it anyway, it’s my show! So first of all, I thought it was interesting that you are… these two ETFs—and let me run through this and I can kind of get the listeners up to speed of what we’re talking about—but first of all, used Norbert’s Gambit to invest in them, which is cool, because we haven’t really talked a lot about that on the show. Maybe just before we get into the specific ETFs that you bought, what do you do with Norbert’s Gambit for yourself? Like which ETF do you start with? And then just quickly, what does that process look like? Because I think a lot of people are unfamiliar with that.

Chrissy Kay
Maybe first let’s explain what Norbert’s Gambit is?

Money Mechanic
I guess I should Yeah, I guess I should. So well, well, I mean, okay, basically, Norbert’s Gambit is buying a Canadian listed ETF, and then journaling it over to the US side of the same account so that you avoid the transactional fees of exchanging Canadian to US dollars within your trading account so that then you can purchase a US listed ETF for presumably the saving lower fees, basically, and having the knowledge and saving yourselves the withholding tax.

Chrissy Kay
And also the currency exchange fee that the brokerage would normally charge.

Money Mechanic
Yeah. So what do you use to do Norbert’s Gambit?

Kristine
This is all you, Gean. He looks after it. I haven’t done it yet. But he does it for us.

Gean
So that’s exactly what you have described it. We have the puts baby. So let’s say we have our RRSP, And then we have Canadian funds in our RRSP. So what we could have done, we could have bought, you know, like a Canadian ETF who tracks, you know, the US—the total US—stock market. So that’s one option. And I guess most people in our community, essentially do it. But what we think is actually the US dollar is going to be stronger than the Canadian dollar in the future. So what we have done, we actually bought the ETF, I guess is DLR.U, and then once we bought this specific stock—I’m sorry, ETF—we go and we journal, which is basically converting Canadian dollars to US dollars. So once I do this, I am not going to pay a lot of taxes in doing that. In our example, that you mentioned today, saved up $150, the amount that we transfer over was quite significant. And it makes more sense to do the Norbert’s Gambit. So once we go through this process, just like transferring money from Canada to the US, based on a conversion and removing the fees that you have to pay.

Money Mechanic
Exactly. And I think that’s super important because I see a lot of conversation about people wanting to buy US listed ETFs. And if you want to get that optimized, and there’s nothing wrong with it, there’s the conversation back and forth about you could just hold VUN which basically holds the same thing as the ITOT which you hold, but you are sacrificing a small bit. But you do need to understand and implement Norbert’s Gambit. So just wanted to bring that up, because I thought it’s great that you’re using it and you’ve learned all the applicable skills that you need and the right ETF to do that with, so I thought that was pretty neat. And the next part of my question is: you’re using two US listed ETFs. One of them is ITOT which is the US total market, which is totally fine. Nothing wrong with that. And then you use one that’s QYLD for those playing along at home. And this is a covered call NASDAQ ETF. My question is because I didn’t… I’m not that familiar with these two ETFs. So being the nerd I am, I spent some time digging through the numbers on these. And looking at them from a decision making point of view of why I would hold either one of them. I was just curious. And it doesn’t have to be a great huge, long, detailed, data driven rational reminder explanation, but these two look very, very similar to me. Just curious why you chose them together or one or the other. Just kind of fill me in on I’m curious.

Gean
Kristine go ahead.

Kristine
So ITOT, it’s basically it’s the total US market, right? So you’re you’re covered everywhere. And to be honest, it’s the… I think it’s.. what’s it? iShares? or BlackRock?

Money Mechanic
Yeah, it’s iShares. It’s the same. Yeah.

Kristine
Yeah. And we looked at the Vanguard one as well. But it was, to be honest, this one’s just cheaper. It has a bit less invested in the actual ETF, but they cover more or less the same companies. And they’ve got more or less the same history over the past few years. So they’re on par with each other. So we just went with the cheaper one, because, frankly, we could buy more shares of it for that. QYLD—through our avid YouTube watching—we came across that one. And this one, rather than a quarterly payout, this one pays monthly. And so for us, we get a monthly income from QYLD that down the road, if we want to diversify from ITOT we can start generating more monthly income within the RRSP, or Gean’s RRSP, or whatever, to put that money, rather than having to send money all the time down, or transfer it through Norbert’s Gambit, it’s generating its own monthly income, that we can start investing into different ETFs for dividend paying stocks, or whatever we choose to do within those RRSPs.

Money Mechanic
Yeah, that’s, that’s a great answer. And I was pretty sure that’s what you’re gonna say. And just for the people playing along at home, for the numbers on it, the ITOT, it pays a small dividend of 1.75% has a very low expense management expense ratio. And the big, big difference with QYLD is it pays right currently, it has an 11% yield with a higher expense ratio of point six. But I did a little bit of digging back on this just out of curiosity. And they do hold basically, their top 10 holdings are very, very similar. It’s big tech companies in the US. And if you look at I kind of did this the back of the napkin five year return on it, you would have had the exact same amount of money—well not exact same, I’m paraphrasing—but you would have had a very similar amount of money with either investment over a five year time period, which is… it’s interesting because I’ve been a victim of this too where I’ve got different ETFs that I think are doing different things. But at the end of the day, they’re almost identical. If you really crunch some of the, you know, like the year to date return on your ITOT is 8%. But your year to date return is just basically essentially zero and QYLD, but they paid out all your return in the dividend. So it’s really, it’s just kind of interesting. And the more I’m learning because I’m on that journey of trying to learn about how to look at all these things, it’s I’ve definitely looked at yield, and if that’s what your intention is, is to generate income from it, then that’s the good, that’s the right choice. But it’s important that people see that. Even though these look different, they’re very, very similar at the end of the day. And

Kristine
And at the end of the day, we’re still looking, we plan on living and using the dividends or distributions from our investments to supplement our other income streams that we’re going to have down the road. So we wanted to try and maximize monthly income as well. So QYLD gives us that right, it’s going to be every month, we’re going to be generating some income from QYLD. So down the road, that’s going to be a constant monthly income generator for us. Right now, we can either let that money build up and buy a different stock with it or keep reinvesting it into ITOT right now, until we find something else that we want to invest in with that money.

Gean
If I can add something else, the reason that we bought, you know, QYLD and ITOT, is basically as with that account, we are not transferring every month, you know, like Canadian to US dollars, we thought: “how can we keep—how can we have some US money and then keep buying ITOT?” so that’s why we thought using QYLD, because based on the amount of income that we’re going to have from QYLD, we will be able at the end of the month to have let’s say one or two stocks to have the money and then use that money to buy another ITOT stock. So that’s basically why. So we basically will QYLD to give us you know, some dividends every month and those dividends are not DRIP’ed in. What we are gonna do with those dividendsis buy ITOT. So that’s why we finally doing this. We don’t need to do the Norbert’s Gambit every month. So we transfer this chunk of money today. Next month you’re gonna have dividends from QYLD. The dividends that you are receiving from QYLD, we will actually buy ITOT.

Money Mechanic
Yeah, I completely understand your thought process there. And I guess the point that I was making is that if you look at the actual returns of the two different ones, you’re taking a QYLD, which has no actual return to its value, it just returns all of its value in its dividend. And you’re putting it into a very similarly structured ETF that is all about the value and not about the dividend. It’s just a just a point that I noticed looking at these ones out of interest. So that’s your plan. And that’s great. As long as you’ve got, you’ve got that plan moving forward, for sure.

Gean
Yes, it’s… that’s on that account. So the reason is we have another account with more QYLD so that’s why like the other ones, we keep growing, but for this specific one, which is a spousal RRSP, we wanted to invest more in the US market. So that’s why with that specific account, we are enjoying, you know, that we are doing that, you know.

Money Mechanic
For sure, well, we better get out of the weeds there because Chrissy is sitting on the side lines twiddling her thumbs, and going: “stop talking about ETFs.”

Chrissy Kay
I wanted to point out that, in case our listeners didn’t catch this, that you are keeping these US dividend paying ETFs inside your RRSPs. And in case listeners aren’t aware of this RRSPs are the only account in Canada where the US recognizes it, and has a tax treaty where they will not charge you the foreign withholding tax on the dividends. So if you are going to hold any ETFs that hold—that are in US dollars, US listed and pay out us dividends—to be careful. If you put it in your TFSA you will not be shielded from that tax. RRSPs are the only account that has that.

Gean
Yeah, that’s correct.

Chrissy Kay
Okay, so I think this has been a great interview. Do you have any other questions, Money Mechanic?

Money Mechanic
No, I checked off my, my tough question list. I’m gonna save the one I had about tech questions for another time. Next time we chat with Gean and Kristine. Gotta save something…

Kristine
… A tech question—that’s not me at all.

Chrissy Kay
I just have to comment. Throughout this interview, the two of you have just passed the questions back and forth. And I’m just so impressed that you’re equally knowledgeable about the investments. I can’t say the same about my husband and I. I handle…

Kristine
Well, it wasn’t the case. Gean was always way more into the whole finance thing. But I think that he because of his interest in it, it just drove my interest in that. I mean, we spent an entire five day road trip through Northern Ontario listening to all your podcasts everywhere. Wow. Any podcast we could find, right? And it’s just kind of his enthusiasm for it is really driven my enthusiasm. And it’s quite interesting once you really start learning about it. And you want to pass it on to everybody you meet.

Chrissy Kay
Yeah. And I think that’s a huge strength between the two of you that you have that teamwork going.

Kristine
Yeah, for sure.

Money Mechanic
Fantastic. Well, it was such a pleasure to meet both of you and chat with you. And I completely agree with Chrissy, you have a great plan going on. And the strength of a good team makes all the difference in the journey to FIRE.

Kristine
Yeah, it’s a… it’s the beginning of our journey. But I hope we’re on the right track. And then we get there by 2028 Because I’m retiring!

Money Mechanic
Well, the beauty is that there’s no one path, you know? I mean, you can always change directions a little bit—there can always be fine tuning—so you don’t have to make every decision in the beginning and then just think that’s the only course. Life changes for all of us.

Chrissy Kay
Yes.

Kristine
For sure.

Gean
Yeah. If I may just add one more thing is just to encourage people to pursue that, right? We know it’s not easy. And then you might think: “oh, you know, their situation is better” whatever the case is, but it always starts with you know, your partner and then being open and understandable about the situation that we are all in. We know it’s not easy. In our case, it’s not flowers all the time, right? So her and I, we decided to do this. It was a difficult conversation because we were kind of blaming ourselves for being in a lot of debt. But at the end of the day is: what do you want? You know? What is your journey and what to want to acquire from that journey? What are you know, your cause, and you’re working as a team, what can you do it together? Don’t be discouraged by any means and you know, keep doing, and spend less than what you make. So it might be not in eight years, but it could be nine years or ten years. So it’s your journey—it’s personal to you with what it matters to you. Right?

Money Mechanic
Well said

Chrissy Kay
Yes. Thank you for sharing such an inspiring story. I think a lot of our listeners will relate to it. There a lot of great gems in there for how they can get their journey started and how you… it’s possible to overcome even a lot of debt and get started with FIRE.

Money Mechanic
So where can our listeners find you out on the web-o-sphere?

Gean
We usually are on… we have our blog, so it’s firewego.com it’s, you know, we don’t blog as much as we could, so… but you can go to firewego.com, we have our Instagram and also our Twitter account, it’s @firewego and then if you have any questions, you know, we are around we are more than happy to you know, to help you guys out and thanks to Chrissy and Money Mechanic for your help, your guidance. As Kristine was saying before, on our trip, you know, that’s all that we have done: and no music, no country music. You know, podcasts over podcasts and Kristy—you know, the the Millennial Revolution—we listen to their audio book on our trip. So it was amazing. It was an open eye for us. And yeah, so that’s how you guys can find us and thanks again for your help.

Money Mechanic
Beautiful.

Chrissy Kay
Well thank you for listening and thank you for coming on to talk to us.

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6 Replies to “043: From 60K in Debt to Pursuing FIRE | F.I.R.E. We Go”

  1. We are happy to help the FI Community, and excited with this opportunity. It is a journey to financial independence, and our goal to retire in 2028 made us realize there’s not a lot of time. However, finding support in this community means a lot to us, and we keep learning and improving our plan. I am sure there will be changes ahead, and we are ok.

    Thanks Chrissy and Money Mechanic, and Kristine, for believing we can. One step at a time we’re paving our journey to financial independence. Thanks for letting us be part of your journey and feel free to connect and ask questions. 🙂

    Stay safe!

    1. Hi Gean—you and Kristine have good heads on your shoulders and all your finances lined up for success. With the way you work together so nicely as a team, I have no doubt that you’ll reach your goals!

      I can already picture the two you on the beach in Brazil in 2028, enjoying all the hard work you put into reaching FIRE. We’re happy and honoured to be part of your journey. 🙂

  2. Just listened to this episode today.

    As for the Smith manoeuvre, can you elaborate on why you’d want to put a portion of your mortgage balance on the HELOC side? Money mechanic seemed to understand why but you guys didn’t really explain.

    Is it to allow you more prepayment flexibility or is there some other reason? Thanks!

    1. Hi Barney, I think I know what you’re referring to, see my comment at the bottom. Here is a copy and paste from the transcript:

      Kristine
      The way we’re doing it is a little bit different than having our entire mortgage on like a fixed mortgage portion and then an available line of credit. What we did was we put a chunk of the mortgage on the line of credit and then we have a portion of the mortgage that’s locked in. So that way we’re able to… because, Gean, our finances are set up a little bit different than most. I’m like a salaried employee for the city, and Gean has his own corp—like his own business. So he works on contracts. So we’re able to put larger lump sums of money on to the line of credit, to be able to utilize that money again for investment purposes. So it was more advantageous for us to have a larger line of credit available to us, even though a portion of it was set up with the mortgage or the debt from the house that needed to be paid down as well. Does that make sense?

      Money Mechanic
      Yeah, I think some of our listeners will get lost on that one. But I understand what you’re saying.

      Kristine
      We basically split what was left of the mortgage into two pieces. One was a fixed mortgage with the bank and the x, the second half sits on the HELOC—on the on the line of credit portion—as just part of the line of credit that we’re paying interest on. The same as we would, right? So we just have two different interest rates really right now on our mortgage.

      Money Mechanic
      So you’re not regularly borrowing to invest them?

      Kristine
      We are, but we literally throw every extra cent we have onto the line of credit. So we reinvest, reinvest the dividends, along with extra cash from the corporation and all this kind of stuff that comes from Gean’s side. So we’re putting lump sums down on the line of credit to then turn around and reinvest back into…

      Money Mechanic
      That’s got a name, doesn’t it? That’s just slipped my brain now but that there’s a name for that where you essentially put all of your money into this line of credit that you’re gradually paying down and then you only withdraw from it for your necessary expenses. Is that sort of… is that what you’re doing?

      Kristine
      Sort of. We live off of my income right now. So we’ve got it down, we’ve managed our expenses to the point where we’re able to live solely off of the income that I generate from my my job so everything that Gean earns now we’re able to use as investment. So whether we’re keeping that inside of his business, or withdrawing to put down onto the Smith Manoeuvre line of credit to then reinvest through that account, as well.

      What they have done (I think) is refinance their mortgage into 2 parts. A fixed portion and a HELOC portion. But they only created the re-advanceable part on the HELOC side. At the beginning, the HELOC side starts with an existing balance. They basically put all their money against this balance and then borrow back a portion to invest as it re-advances. I’d have to see their exact numbers on this to determine if it makes sense or not. Sounds too complicated for me. I’ll have them read your comment and maybe they can elaborate.

      Cheers,
      MM

      1. Thanks. I’m actually working with an SMCP advisor who is licensed to sell mortgages as well. There is still a lot I need to learn and want to get going ASAP. I believe he is looking to set mine up in a similar fashion and I’m trying to wrap my head around it.

        I found this post on reddit and I THINK it’s something along the lines of what Gean and Kristine are doing. Seems smart but as you said, complicated.

        https://www.reddit.com/r/PersonalFinanceCanada/comments/cxaaqy/heloc_vs_traditional_mortgage/?utm_medium=android_app&utm_source=share

      2. Hey Barney, Hopefully your SMCP advisor will know the best strategy for you. Using a larger HELOC portion may allow you to have larger pay down privileges, but this is only useful if you are going to capitalize on that. Otherwise you’re just paying higher interest on that loan. We have a re-advanceable HELOC with a variable rate mortgage. We can put 20% down on it and that is plenty for us. It’s pretty aggressive to be putting $40,000 extra on a $200,000 mortgage, plus the principal pay down and re-borrowing all of it, not to mention maxing TFSA and RRSPs. But if that’s the plan, right on. I don’t see how a more expensive and complicated mortgage gets you much more than that. You would be better off taking existing investments and selling them in order to pay down a lump of the mortgage, and then re borrow them for investment. Do this before you commit to the next mortgage. Anyway, as you can see there are lots of interesting options. I trust your SMCP is working towards the best strategy for you. Cheers, MM

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