053: A Canadian Guide to Early Retirement | Réjean Venne

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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
Good afternoon, my friend Chrissy.

Chrissy
Hello, Money Mechanic. How’s it going?

Money Mechanic
It’s going good. Here. We are back recording again, which is always exciting. Explore FI Canada. And today, we’ve got another guest. We’ve had quite the parade of guests so far this season, haven’t we?

Chrissy
Yeah, 2021 has been a good year.

Money Mechanic
It’s and we’re not slowing down anytime soon. And I am holding this, the listeners can’t see what I’m holding. But you can. I’m holding a book that has a big red X through the three and 35. And you know why that is because this book is a Canadian guide to early retirement and it’s 5 Years to Freedom instead of the traditional 35 years to freedom. And we have the author with us today. It’s Réjean, how do you pronounce your last name Réjean, Venne, Venne?

Réjean
Yeah, Venne.

Money Mechanic
So this book just came out last year, I believe, because you do reference some talking about the pandemic in

Réjean
it. Yeah, just released the second week of January. So it’s just just over a month now.

Money Mechanic
Yeah, we really appreciate you sending us a copy to read and review and of course having you on the show joining us today. And we also have a copy of this to give away to you the listener today. So at the end of the episode, we’ll let you know how you can qualify for that and get your hands on a brand new book for the Canadian specifically Canadian This is the important part Chrissy Isn’t this the important part, but specifically Canadian guide.

Chrissy
Well, that’s what we’re here for. Right?

Money Mechanic
We’re here for the Canadian… exactly Explore FI Canada. So without further ado, welcome to the show. Réjean, thank you for joining us. And it’s great to have you here.

Réjean
Thanks, guys, and great introduction. I loved how you presented the visualization of the three crossed out it’s not 35 years of freedom. It’s just five years to freedom. Good, good visual description.

Chrissy
So we have both read your book. And we both know your whole FIRE story now. But can you tell our audience a little bit about yourself and introduce your story?

Money Mechanic
Sure, but don’t spoil the book. We don’t want any spoilers here.

Chrissy
Yes. Yeah, cuz we want to dig in once you’re done introducing yourself.

Réjean
Yeah, sure. The Long story short, I retired at 29. My wife and I were in we’re living in Ottawa, Canada, and we, we had successful careers, we were ambitious and sort of climbing corporate ladders. And we sort of didn’t really think twice about sort of our, the trajectory of our lives, you know, we were just going to keep going that route. And then we started having kids like seven years ago. And while when we had our first child things sort of, no, we sort of really reflected on what we valued in life. And right around the same time we discovered Mr. Money Mustache. So I’m a true original Mr. Money Mustache follower and followed up so many other blogs and podcasts such as this one since then, but really got into Mr. Money Mustache right off the bat and read a story of his in the Globe and Mail and was really inspired by the idea and just really thought it was kind of unbelievable at first, but read everything that he had to say and then convinced my wife to do the same. And we sort of got onto the same wavelength on that and started designing a plan to retire early. And it really after that point it once we got started, it really only took us three years, three and a half years. But I summarized the book as five years because I say that, you know, before that we had started getting a lot more financially, I guess, savvy, we’ve always been pretty good financially. But obviously, you know, when you start thinking about having kids and you put your life together, you you start making more or different decisions. So that’s why I say it’s five years, but three and a half years after that we quit our jobs, and have been sort of retired ever since. And we just call ourselves full time parents now. And we I mean, don’t want to give too many details in the book but we essentially took an approach of reducing our expenses to essentially $30,000 a year and we live off of the income of a single rental property at this point, which generates easily 30,000 in cash loads, it’s a four flex and what allowed us to do this is a lot of factors. You know we did some geoarbitrage we benefited from Some very good real estate decisions over the last few years. But I guess these are all topics we’ll discuss today.

Chrissy
Yeah, an amazing part of the story that you maybe didn’t mention was how young you were when you retired. This is three years ago, and I believe in your book, you said you were 28 and 29. Is that correct?

Réjean
Yes, I was 29 and my wife was 28.

Chrissy
Yeah, that’s, that’s impressive.

Money Mechanic
That’s impressive. I left Canada at 29. And I was happy, really happy to be at zero net worth not even close to thinking about retirement at that point. So congrats on that. And yeah, I like the way you add in there that you, you’re FIRE, but you are now full time parents, which I don’t have children. But I know that it’s a full time job. Let’s just have a look at that. It was not a big part of your why is that something that was really meaningful for you, when you started when you made the decision? We started having kids? Did that really kick it into high gear for you?

Réjean
Yeah, absolutely. That’s sort of, that’s probably the why for a lot of people, because you know, you, you see yourself in a different light when I guess when, for me, I just saw myself as a career person I was going to be, you know, the CEO, or president or, you know, obviously, probably that never those things. But you know, that’s what you dream of, you know, becoming those things in the corporate world. And then I guess, when we had our first child, and it was just like, well, now I’m a parent, that seems more important than being a CEO, or being a president. So, so then it’s like, yeah, how can we shift our attention and 95% of our attention, which was in work, and try to shift that towards being a parent? And the best way to do that would be to just stop working, right? Because otherwise, you know, if you’re ambitious, and you’re in a career, it’s hard to, to tone that down. You know, it’s, it takes up a lot of your time, a lot of your emotions and stuff. So definitely, yeah, that was the wise, the children, you know, we liked being a parent, like, you know, we like being a parent being with our kids. And then like the idea of sending them to daycare. And so that’s definitely the dewine equation. And we they got the desire got stronger, as you know, we had our second child, and now we have three. So but you’re right, the when I say full time, parent, I often joke about, I’ll get, I’ll get people ask me sometimes, you know, what do I do with my time? Or what do I do for a living, and I talk a lot about that book.

Money Mechanic
So one of the things that you mentioned to us was an article that you read, and I went and read it today, too. And it was called The Tail End. And it comes from a blog named Wait But Why. And the cool part about this is that it kind of gives you a really sort of graphic visualization of how much time you have left to explain to us how that captured you and why it kind of added and made a difference to your why, Réjean.

Réjean
Sure, first, that that blog, is one of my favorite blogs. So Tim Urban’s Wait But Why blog, always been one of my favorites. And just a very famous, he’s never checked it out just does very important, quote, quirky articles about with a lot of visualizations to really put things in perspective. But this particular one was about The Tail End. And you just put things in how many times he’s done something and how many times he has left to do them. So the the examples of like how many Super Bowls he’s got to watch in his life and how many days you have left, and how many pizzas he’s probably in his life and how many pizzas he’ll probably eat. And then if you visualize those numbers, they sound trivial, but then they really do put things in perspective. But the part of this, of this article that I really liked, and I referenced it in the book, which inspired me to retire was the section where he referenced how much time he spent with his parents throughout his life and how much time he would have left to spend with them. And the visualization was very striking, because he sort of analyzed that, you know, you and your child up until say, rating birthday, when you go off to college or university, you spend almost all your days with your parents, well, maybe not your entire day, but you see your parents every day. So maybe 95 to 99% of the days. So he summed up how many days that would add up. And then he figured once he left for college or university, until his parents died, gave him a generous life expectancy till 90. And based on that, he any any figure, you know, he had moved away for college, university, and so did I and blog, after college, university and for careers. And based on that, and it’s a it’s a scenario that a lot lot of people are in, you don’t see your parents as much as you probably see them maybe 10 times a year, maybe less. So he did that analysis based on let’s say 10 days per year, from your 18th birthday to your 60th birthday versus you know, 300 and some days per year from your first birthday to your 80th birthday. And he calculated that you had used you probably have used up or 95% of your days with your parents by the time you leave for college or university, which is very scary to think that you’ve only had 5% left and in my in the book, I sort Take that analogy and I reflect on it from, you know, he taught he called an in person parent time. And I like to talk about in person child time, or so essentially reverse the equation with our children. My young, my oldest son is seven, you know, I’ve already used up and maybe, you know, if we were to follow that same trajectory, I may have already used 40% of my, in person child time with him. And so I better make better make the the rest of it very, very good, you know, moments to spend with him. Because when he turns 18, who knows, you know, he may move away or something. So yeah, I hope that’s a that’s a good summary of that concept.

Chrissy
Yeah, I read this post a few years ago, and I was just as affected as you were, especially when you see the graphics, and I’ll link to this in the show notes. But when you see what he created, the graphic you created for the in-person parent time, you have to scroll and scroll to the bottom of because there’s so many, like, he puts out these little icons that represent his in-person, parent time in this little chart. And it’s crazy when you see how that tiny little bit which he calls the tail end? Because it’s just that last little bit where is that the remaining years he has left with his parents and it almost brings a tear to your eye when you see that and you think about it.

Réjean
Yeah, for sure. And and you could apply it to you know, your children, but also to your close friends and your siblings and your close friends. You spend so much time with them growing up. But then when you get into career life, you you know, you only see them five times a year, if that sometimes once every five years. So, yeah.

Money Mechanic
Definitely striking. In the past year or two, a lot of us haven’t seen our close friends and distance family for a long time. And you know, that really hits home when you’re like, geez, if there’s only X amount of times left, I want to maximize them and enjoy it while I can. Right. So now, what do you think, was the number one thing that helped you and your wife retire early?

Réjean
Um, well, for us it was, when we did our, we were always big on doing tracking our expenses. And we’ve always tracked our expenses, probably not as closely as we did after we learned about Mr. Money Mustache and trying to put together a plan to retirement. But when we tracked our expenses, and then sort of projected what a retirement lifestyle would look like, that was the biggest tool for us, because I was what made it possible we, we couldn’t really conceive, you know how much money we would have, we would need to actually retire. We knew how much we spent back then, which in my book I recorded was around $85,000. But we didn’t know, you know, that’s not reflective of what we would need to actually fit our jobs. So once we actually projected based on our current expenses, and what you know, retirement lifestyle could look like without a mortgage without a car payment. And without daycare, we were able to just with those three expenses, we were able to bring down our expenses by over $15,000. And right there, we were already in close $30,000 range. So yeah, it was essentially I guess that was our biggest tool. Our biggest eye opener was just, you know, our expenses, just just exploring our expenses.

Chrissy
Yeah. And that’s what I really focus on in the FIRE journey, especially in the beginning. Is that, that tracking… like you don’t, like, you say in your book that you don’t budget and neither do I. But it’s the tracking part that really makes a huge difference.

Money Mechanic
Don’t let Tanya here that just loves You Need a Budget!

Chrissy
I do. It’s called You Need a Budget, but I use it just for tracking. I don’t, I don’t actually budget with it.

Money Mechanic
I’ve never used it, I probably should just be more familiar with it. But I was thinking about the angle. You mentioned how you cut down your expenses from 85k to 30k. A big part of that, as we all know, the most expensive part for all of us probably is housing. And what did you do in that area that really made a big difference? The you know, we’ve heard about geo arbitrage before, but we haven’t talked to a lot of people that have actually successfully executed it. And I think that’s a real key part here to your story.

Réjean
Yeah, so we, my wife and I are both from Northern Ontario. We’re both from small towns about five hours’ drive from where we were living, which was in Ottawa, which we had moved there after university to pursue careers. And in Ottawa, we had a nice house in the suburbs, four-bedroom, double garage and pretty big yard for this for that, you know, for the city, essentially max what we could get on a mortgage, which is probably not always the smartest thing to do. But I mean, in our case, it It ended up working out because we in the process, when we did get get to the point where we wanted to retire early and and wanted to downsize our life and reduce our expenses. We had a pretty good financial investment in the equity in our home. So this house, which we had put 20% down payment on because we didn’t want to pay CMHC fees. And so we had a lot of equity there. And you know, the housing market was doing really well which is we No one has been doing well for the last, you know, five to 10 years. So we were able to, when it came time to execute our plan to retire, we were able to sell this property and realize a very big profit, which allowed us to move to Northern Ontario, where we were from, and buy a property essentially mortgage free. So, you know, our house was worth $550,000, in Ottawa, which at the time, I think was, was a lot, this was 2017, when we ended up selling the property. I thought that was a lot. Now, now, it’s probably even more and you guys are Vancouver, that’s probably just nothing. But the that allowed us to have a profit of almost $200,000 on that property. And in a lot of communities in Canada, and I talked about that in the book, and especially in Northern Ontario, you can get a property, a house with with a decent property for around that price, you know, without even taking the mortgage is $200,000 for that property. So that’s what we did. And we found a community that has a Francophone population, because our children are we come from Francophone families, and we wanted our children to go to a French schools. And we found a community that had that properties we can invest in from real estate standpoint, and communities where we had relatives already. So we, yeah, so we found the option. And we’ve, we’ve liked it ever since we haven’t, the part of our move was like, oh, we’re gonna miss a lot of things in Ottawa in the bigger cities. But we haven’t really missed that. Since then we get access to libraries, same amount of books, we get access to hockey arenas in the local swimming pool, and everything is within biking distance. So yes, that’s our story of geo arbitrage.

Chrissy
Can you tell me the timeline? Did you stop working? And then you sold and moved over to Sturgeon Falls, which is where you moved to from Ottawa?

Réjean
Yeah. So we, our plan was to retire in 2018. But we essentially put our house for sale in 2017. Because we were we, we did the conservative thing, same thing, and we’re going to give ourselves plenty of time in case it takes us a while. And you know, we didn’t realize that houses don’t take a long time to sell in big markets. And we sold right away. So then we ended up moving into we rented a condo in the city and live lived out our final years sort of just renting so that we ready to because we didn’t know exactly when you know when we will be ready. Like we were sort of putting our the final pieces together and making sure we have enough financial cushion. And then we were putting pieces together in the hopes of how we wanted to, to purchase in the small town. So we we did the rental route. And then we had the flexibility to sort of make a call two months in advance and say, Okay, now, you know, we’re and call our bosses and say, you know, we’re leaving in two months and then give our landlord notice. And so yeah, that’s that’s what we did. I that’s a I didn’t talk about too much about that in the book. But that’s a great recommendation for anybody’s approaching financial independence is through in the rental route, you get a lot of flexibility on when you actually want to sort of pull the trigger on the plan.

Chrissy
Yeah. And so so then you moved, you reach FI and then you gave your notice, I guess and then you moved after that. Tell us what you gained in the geo arbitrage of moving from a bigger city and Ottawa to a smaller town.

Réjean
Financially?

Chrissy
Yeah, like what exactly did how exactly did the geo arbitrage benefit you and your path to FIRE?

Réjean
Well, it just in the sense that we can instead of having a property with 20% equity now we have a property with 100% equity, so we don’t have a mortgage payment and then also our property taxes went down. We were paying $5,000 a year for property taxes and now we pay I think it was $1,600 last year for property taxes. So you know those property taxes essentially give us the same level of services and sweeping in the bigger city we actually have more land now than we did before we get garbage pickup once a week we get a library services we get recycling so it’s Yeah, that’s that’s the that’s a big one too is property taxes.

Chrissy
And what about things like groceries, car insurance or things like that?

Réjean
Also cheaper car insurance is didn’t really change the way Ontario car insurance work. I mean, it could change from one town to the next but a lot of times it doesn’t. Groceries we have two of the major chains in this in our small community which and they both within biking distance so we still get to shop around. We we still use Amazon once in a while. We have access to the big centers like we’re surrounded by Sudbury which is a pretty big Metropolitan it’s about an hour from from us and then we have North Bay, which is a half hour from from from us on the other side. And both these towns have all the big box stores and some has a Costco and stuff. We don’t typically shop at Those places anymore, mostly just because we just don’t see, we really don’t like using the car. So it takes a it would take a lot for us to have to take the car out for 60 minute drive.

Chrissy
You’re a true Mustachian.

Réjean
Yeah, I do the I now analyze the kilometers. And you know, I did my own spreadsheet where my kilometers cost me 40 cents per kilometer when I encounter, you know, wear and tear gas and appreciation. So, every time we have to, you know, we need something in the big town, which is, like I said, 60 minutes away, approximately 100 kilometers, 200 kilometers round trip. And then I do the backwards math at 40 cents. And I say is, are we saving $40? Here? If not, then it’s not worth it.

Money Mechanic
Makes sense. But it takes Chrissy an hour just to get across Vancouver. Two hours of frustration not 200 kilometers, but it’s worth it. It’s there’s money value to that time. I find it really interesting with this geo arbitrage because it’s super powerful. But I think you’ve got to spend some time thinking about it beforehand, right? Like if this is something that you’re entertaining as one of the finish parts of your FIRE journey. Like I know, for a long time my wife was absolutely, there was no way we were moving back to a small town that she had worked so hard to leave when she was 18. But it’s super powerful right to be able to geo arbitrage and take some money out of the big city. But it really comes down to the Chrissy, you’ve been very staunch that you are not leaving Vancouver because you love it and you love having your family around you. So I’m just trying to get out like for people that are listening and people that are on their FI journey. This may be a super powerful strategy, or maybe something is totally off the table. But it’s worth thinking about. Definitely.

Réjean
Yeah, and I mean, it’s different if, you know, like, like Chrissy she lives in Vancouver, but her family’s in Vancouver. For us, our family was in the small town, we moved away and said, there’s no way we’re coming back to this small town where we’re one of the big city, we’re gonna live our lives. Yeah, Mom and Dad we’re gone. But then again, a lot of your listeners will reflect you know, once you grow a little older than you do want to get closer to your parents. And especially if you start having children, and then you want to have babysitters around. So you you definitely want you know, and that’s been a huge help for us is being closer to our parents is, you know, the help that we get from from the three children even though we’re retired now. And we have been we don’t really need childcare in the traditional sense. I mean, having a night out or weekend away is huge when your parents nearby.

Chrissy
Yeah, you still need breaks.

Money Mechanic
Yeah, for sure. So with all that money that you saved on your housing, and you bought your own house, was it part of your plan all along to have rental real estate?

Réjean
Yeah, that was we had always planned to buy real estate like in our investment journey. And we but we didn’t know where we’re going to invest in real estate, it was sort of the next thing to do when we before we had discovered the concept of, you know, extremely early retirement. But then we, we wanted to put together a plan that will get us through retirement fast enough. So we started buying properties in a small town, this small town that we ended up settling in, because we were able to find real estate deals for very cheap, like our first property, we only paid $200,000, and it was a fourplex. So we were able to, we only needed $40,000 down payment to buy four rental units. And that’s what really accelerated our plans. And when we did that with another property afterwards and eventually with just two properties and seven units and being able to create efficiencies and we ended up doing a lot of renovations to increase the value, increase the rents and enable them to cash flow got to $30,000 very quickly and even surpass $30,000. And that was mostly because the mortgage payments were so cheap, being able to buy properties for that price. You know, you might end with the low interest rates. You’re getting mortgage, a mortgage, monthly payment of $600 a month. Yeah,

Chrissy
We Vancouverites are salivating here… the numbers. And I mean nothing even close to that here.

Réjean
I didn’t get lucky. Like, we did get lucky in the sense that this town that we’re in, has seen real estate prices go up as well. So we and we bought we started buying rental properties maybe about five years ago now, or well over four years ago. And we we bought at a pretty low price. And today the prices are that that low but still much, much lower than you would see in big cities and we were able to get margins a lot. Yeah.

Chrissy
And the other thing that you have going for you is that the rents are high and high enough to give you a good percentage back whereas you cannot find that very Easily anywhere, really, you really have to look hard to find those kinds of deals where you’re getting enough rent to cover all the expenses.

Réjean
Yeah, for sure. That’s, that’s the thing that surprised me as well is that when I started looking at it, it’s not just this town that I’m in, but a lot of smaller communities, the rents are not the same as Toronto or Vancouver or Ottawa. But they’re not like drastically lower like, you would think that your houses a property in Toronto is a million, and the rent is $10,000. This is not an accurate example. But you will take the property that’s $100,000, you rent it for only $1,000. But that’s not the case. Like it’s, it’s, it’s not the same ratios. So you get the only, you know, you may not get as many renters But for us, that hasn’t been a problem, there’s still been a very high demand for rental properties, and we’ve never faced a vacancy, even in a small town. The benefit is that in a small town, you know, you it’s easier to, to know your tenants to, you know, you don’t have to, you don’t have to get on the lookout for, you know, professional tenant of some sort of like in where you have to, if you’re renting a property, like as a landlord in a big city, you would typically go the, you know, criminal background check, credit check, three references, stuff like that in a small town, you know, you don’t really have to do those things. I mean, you could, but it’s you most the time you start talking to you tend to know somebody in common. So.

Chrissy
Yeah. And I found something charming, in your book, how you mentioned, the second property that you purchased was kind of run down. And it was known in the town being a certain…

Money Mechanic
THAT house.

Chrissy
Yeah, exactly. Like you don’t get that in big cities as much. You know, there’s this one building that’s really recognized.

Réjean
Yeah. And that’s (inaduible).

Money Mechanic
I want to dissect your cash flow just a little bit. I don’t want to go into a big deep dive on real estate here. Because I want to explore some more of your story, but I just want to dissect this, because I know some people are listening and probably going, how does he get 30 grand in cash flow from a rental? So without going deep, deep into the numbers, in my mind, you must let Okay, let’s just start with saying that there’s three, maybe four ways to make money in real estate, right? It’s your cash flow, which mortgage pay down its appreciation. And if you force appreciation by doing renovations, right, so you did a lot of renovations and upgrades to improve the properties. But it sounds to me like you are not carrying a large mortgage on that property. And by not carrying a large mortgage on it, you extract a lot more cash flow from it. Am I correct? In that assumption?

Réjean
Yeah, exactly. I mean, for the way we first set up our retirement, cash flow, we had two rental properties, both of them had a mortgage. If I give the example of the fourplex that that one had had a mortgage payment of $750 a month, maybe was $760, just around there. And the rents after we were done… so the renovations at the beginning, when we purchased it, the rents were about $3,000 a month, after the renovations, we had brought that up at $4,000 a month. So just right there, you know, you look at $4,000, rent, the rent payment, the mortgage is only $750, you’re left with $3,250. So then we do get utility expenses and the property taxes and a bit of maintenance. But the maintenance cost goes down drastically if you if you’ve done like us, and we’ve essentially renovated every part of the building in the last few years. So now the maintenance costs are pretty low. So, you know, we were already at $24,000 to essentially $2,000 a month cash flow just on that one property. So that would bring us we’re at almost $24,000, just with one property. And then we ended up buying another property and doing similar thing. And since we retired, we actually saw our numbers for the first couple of years and realize that we really only needed the cash flow of one property if we just took the equity of one property and applied it to the other property. And that’s what we did this last year, especially because the housing prices were going up and we got the benefit from a nice profit on one of these properties. We did that and took the equity paid off the other mortgage, and now we only have one property, but now it’s mortgage free. So the cash flow goes up even higher. Yeah. And that doesn’t include the appreciation on the property and stuff.

Money Mechanic
Yeah, I think it’s just interesting to note there for listeners is that you can generate a lot more cash. Like Chrissy we’ve talked about it before, right? It’s like the 1% rule. Well, you can’t get any cash flowing real estate, you know, but apparently you can if you go outside the big centers, which we know in Canada, but that’s difficult for everybody. And also to note that if you crush that rental mortgage, then you extract all the cash flow from it. So it’s I’m just interested as that you’ve chosen that path because a lot of real estate investors choose to keep a high mortgage on their rentals for tax deductions and pay it down. But this is an interesting part about the FIRE story is that You don’t want you don’t have a huge income to deduct all the taxes from so it’s like we just want this to cash flow and that’s pretty cool how Réjean set that up and structure it.

Réjean
That’s a good point, I just, a final note because on the interest that that was one of the things that we debated we had this extra cash from selling the property and right do we do we pay off the mortgage because we’re getting some interest payments which are tax deductible. But you’re right, we don’t really have a significant income so really, we’re not paying that much taxes either. So I prefer the risk adverse side of the prefers the let’s just wipe out the mortgage and here’s what the interest payments and the tax advantage there because it’s very little. Yeah, so

Money Mechanic
Chrissy, let’s take a quick break and hear from this episode sponsor.

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Chrissy
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Money Mechanic
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Chrissy
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Chrissy
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Money Mechanic
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Chrissy
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Money Mechanic
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Chrissy
Okay, we are back. And we’re going to continue our conversation with Réjean. And we’re going to shift gears a little here. And we’re going to leave the real estate now because I think we covered that quite thoroughly and and if people want more info, they can read your book and get all the details

Money Mechanic
Well, and we also forgot that they can reach out because Réjean does also have a blog in Canada. It’s mindfulfamily.ca. So if you’ve got more questions about the real estate, and all that side of things, I’m sure raise your hand, we’ll be happy to respond to our listeners. So what’s next?

Chrissy
So next we want to talk about the kids stuff. Because it’s a it’s a huge myth that people with kids can’t reach FIRE or can’t reach it as easily or have to delay it till they’re much older. But you’re living proof that that’s not true. And you have actually have two different tactics that you share in your book that I think are really useful to share with our audience for people who are parents or maybe know parents and can share this info with them. So the first one we’ll start with is the CCB, the Canada Child Benefit. Can you go into detail with that, and how it’s actually quite a great source of income for families who have reached FIRE?

Réjean
Oh, sure. So the CCB was a program developed to, to give money to the parents to help offset the cost of raising children. And the beauty of that is it’s a tax-free payment. And you know, anybody can calculate what they are entitled to by going to the federal government’s website, and if you just Google CCB calculator, and then you’ve input your details, how old your children, your level of income, you can actually figure out what you’re entitled to now or based on, you know, scenarios in the future if you went down to one income or part time or eventually stopped working. But one thing I do stress in the book is not to ever rely on these programs as a tool to reach retirement, it should, in my opinion, it’s a great tool to offset the potential cost of that children will increase in your retirement, but at the same time, like they could change, they could be they could become less generous tomorrow, they could be eliminated entirely by by new government. So the way I see it is sort of like a bonus. But it’s definitely something to take into account when you’re you’re sort of projecting what you need to retire and how much money it’s going to cost you to with your kids and the kids develop. You know, one thing we thought of is, you know, when we get into retirement, we have a certain expense. But then when our child wants to go in like a competitive sport that cost a lot of money. Well, these the CCB can be very helpful in that regard. And you know, I talked, I talked a lot about it in the book. But some of the numbers like if you just brought your family income down to under $50,000, and you had two children, you’d be eligible for over $10,000 in benefits through these programs. And these would be tax-free payments, so it could increase your income by up to 20%. And it gets even more generous if you go down to $40,000 or $30,000, where you can start benefiting from six six to $7,000 per child per year in tax repayments. So Yeah, I just I encourage anybody who’s thinking about, you know, retiring early or with kids or think of retiring early, but kids may play a part in it in the future, we’ll use these tools to sort to see what, you know what, how things will change from, from a revenue standpoint, because I, although a few, I say this a lot kids, kids are cheap. But they they don’t really, in my opinion, substantially, you know, increase your burden financially, if you’re able to already, like, if you’re already able to live a pretty frugal lifestyle, mustache and lifestyle, then the CCB can essentially offset the cost of the children. If you’re already in that mindset.

Chrissy
Yeah, and you say in your book, that parenting is a job, that it’s a nice way to get compensated for it.

Réjean
Yeah, for sure. And especially, you know, we are it is it his job, and it’s not one we expect to get paid for, but it’s going to produce, you know, hopefully, and I really hope, pretty encouraged by what I’m seeing so far, but I’ll be producing some, some outstanding contributing members to society. One is so though, you know, that that’s what we do his parents,

Chrissy
I agree. Now, I do have to bring up a point that someone may comment and say this, it comes up when we talk about things like this, where we are wealthy people in the FIRE community, we are actually quite wealthy on paper. And just because we don’t have a lot of income, we qualify for some of the low income programs, which the CCB is kind of based on, you know, the lower your income, the more you get, and I know this doesn’t seem right. And to some people it’s not ethical, but at the same time, it’s what the system is, and it’s it’s there and that we’re not doing anything illegal by doing this, it just, that’s the way it’s set up.

Réjean
I just wanted to add that it’s also, it’s not something you like the CCB isn’t even something you really apply for it’s essentially, it is technically part of like your tax return, you file your taxes and, and you know, you don’t really get the choice to opt out of it. And not saying that I would, because I do I do appreciate it. But it’s Yeah, in a sense, it’s sort of an automatic payment that that’s paid. And it’s not something that I I’m not advocating saying I need more CCB. And, and fine. I think it’s still programs there. So you right, you know, it’s like, it’s like, it’s like trying to save money on your taxes. You know, we all do it. And then, and we do, you know, make donations, and we do, you know, volunteer times. And when you have, you’re still you can still be on these paths and still be generous people.

Money Mechanic
Chrissy, I thought you brought up a great point there because there’s other programs that are income tested, not means-tested. And I might be misspeaking here, but is GIS and OAS?

Chrissy
Not only OAS. Well, OAS is kind of. GIS is one where it’s meant for low income seniors, but people in the FIRE community, I don’t want to say we can game the system. But with with good tax planning, you can get the GIS even if you’re a multimillionaire, you know?

Money Mechanic
Yeah. Well, and I think it’s just interesting, like these are, they’re not means-tested. And that may change in the future, right. But the FIRE community is still small enough and fringe enough that, you know, they’re not expecting the people that are earning 40 grand a year, to not have a net worth of over a million dollars. Right. So I totally agree with both of you there. And it’s, it’s not like we’re here advocating to try and game the system. It’s just the way the system is at the moment. Those are some fringe benefits of, and you know what, and I think maybe that’s okay to have a little bit of a fringe benefit, because by living on less than 40 grand a year, you’re less of a consumer, you’re less of a drag on our environment, you’re providing a lot of benefits, as well. Right. So yeah, you know, and like Réjean said, you’re you’re volunteering your time, you’re improving your communities. You know, there’s there’s lots of offsets, but it’s an interesting one to point bring up. The next strategy, we’ll call it, that Réjean has used his to do with the RESP piece, give us a little overview of what you’ve got going on there.

Réjean
Sure. I didn’t contribute to our RESP, from the beginning when I first had children because I, I was sort of took the Mustachian mindset where I paid for all my own university, myself and sort of my wife and I thought it taught me a lot to be responsible for my own post secondary education and actually where it’s actually where I learned a lot of my own financial discipline and a lot of tools. So I just didn’t really see it as a priority in my life. I was I want to help my children, but I think I’d want them to be responsible for their education as well. But then I just read more and more into the RESP program and the grants that the federal government provide to encourage us to save for our children’s education. So then that sort of tipped the needle for me, I guess that’s like, Okay, well, if I’m really being encouraged to, to save for them, and the government’s going to be providing money as well, well, then maybe I should contribute to take advantage of this essentially, again, free money to pay for the children’s post secondary education. But I took a sort of a while I’m looking at it sort of from a different perspective where I’m taking the government. So in a nutshell, the government will match 20% of your contributions up to $2,500 per year. So essentially, if you put $2,500 into an RESP, the federal government will match it with rule match $500. So then you totally got $3,000 a year, they’ll do this up to $7,200. So $500 per year for essentially 14 years, if you make those max contributions of $2,500. So my strategy has been now for all three of my children have been maxing out these contributions every year, so that I can get these $500 payments every year from the federal government. And my calculations have told me that, based on this strategy, by the time my children turn 17, or $18,000, just pulling in my numbers here, this account, if if it’s invested, you know, just with a pretty realistic 5% growth, it’ll grow to approximately $80,000, by the time they’re 17. And now just be by making these contributions for 14 years in order to maximize the government portion. So I look at this $80,000, that’s going to be available to them under 17. And then I think, well, what did I contribute in all this and the number that I contribute? It is only $36,000. So then, even if I take out that $36,000, and pay myself back, my children, each one of my children will still have $43,000 to pay for their education, and $43,000, taken back to 20 years with a discount value. So essentially, the whole $43,000 in 17 years be worth today, it’s still a pretty large sum of $31,000. So you’re essentially by taking advantage of this of this government matching program, you’re essentially left with a profit of $31,000, which is I described a lot of this in my book, but you know, in Ontario, that would still pay for a four-year university degree based on average tuition of an average University. So in a nutshell, you can pay for a four year university degree, just with the grant portion of the government plus the growth that will also grow in that account, without accounting for the $36,000, that you’ve contributed, essentially, this this, you know, you could leave the entire $80,000 in this account for your children to use for other expenses, such as residences and stuff, but the government does allow you to take that money back, because those are, you know, after tax dollars you put in, you know, there’s no, there’s no restriction on that money to take out in 20 years from now. So the strategy essentially entails getting your children’s essentially an interest-free loan for 17 years, so that you can get those maximum contributions. And then and then give your children a pretty large gift in a full education. At the same time, this can act as a forced savings for your own retirement if you’re not in early retirement journey.

Yeah, we discussed a lot of these intricacies of RESP withdrawals in the two episodes we did with Kari and Court, but it just underscores how important it is understand these government benefits and programs that are available to us. Because when you really understand the details, you can really maximize what you get out of them completely legally and completely within your own rights. But it makes such a huge difference when you can really see it in that kind of detail and take advantage.

Money Mechanic
Yeah, I think we see a lot that people are always asking how to calculate their FI number. Well, understanding all of these types of programs makes a big difference when you start making those calculations. Because if you can take your children’s post secondary education off the off the spreadsheet, then this is game changer, right.

Réjean
And then like I said, it’s if you if you take this strategy, you know, you could build it into your savings plan as well, you know, thinking that if you took each project out that in 18 years, you know, you’re you can even tell your children know this an account I started for you, but I do plan to take out a substantial portion out one day that I invested in, but I will help you substantially with your education and, and, you know, the, you know, they could act as if you have two children or three children, you know, we could be in a situation. My wife and I in 20 years where all three of our children are done University graduated, we paid their entire tuition. And we’re left with, you know, six figures in savings that now we’re contributing back to our own accounts. So yeah, and all we can, you know, if we’re doing very well financially at that point, way better, it had been thought and children want to go to medical school or something. And then we just decided, you know what we’re gonna, we weren’t planning to do this, we, we wanted you to be to be responsible for, you know, postgraduate studies, but then the Graduate Studies and then we decide, whatever we’re going to pay it because we will offer them so it gives you some flexibility in the future.

Chrissy
Yeah, well, that wraps it up nicely. It really typifies your story, or it puts your story into perspective how, just being a lot more mindful with lots of little things. And big things can really get you a lot of the way to FIRE. If you’re really paying attention and optimizing and not just mindlessly spending your money without realizing where it’s all going. It makes a huge difference, especially over a number of years. And I think that’s what your book, what really stood out to me in your book is that you’re just an ordinary family. You weren’t. You’re making good incomes, but they were not crazy incomes that that no one can achieve. They’re pretty regular people. And yet you got to FIRE at an extraordinarily young age with three kids. So congratulations. I think you’ve done well. And I’m glad you’ve been able to share your story.

Réjean
Thanks. Yeah. Thanks. That’s a great description. And I’m glad that that’s the perception you got it because it’s that’s how I see it as well. Yeah, it’s not. And that’s how I end my book as well. Is that I don’t think I don’t think I did anything special and like just like I tell people I don’t even think Mr. Money Mustache is special, I think. I think he’s just an average guy. And he he’ll say the same thing. I think of his you know, I don’t think he has any superpowers, everything and just did some pretty common sense things. And that’s what we tried to mimic. And that’s a lot of what you guys preach you listen to your podcast, it’s it’s just about little things to average people can do.

Chrissy
But it’s also not to minimize what you have done because you and your wife worked really hard. Really, really hard to get to where you are. I know in your book, you mentioned how, for many weekends, I don’t know how many years it was, you went from Ottawa over to your rental properties, which were what, four or five hours away to work on them every weekend for a while. And that’s not easy, especially when you’ve got young kids in tow.

Réjean
Yeah, that was a lot of work. And yeah, looking back, it’s I don’t know how we did it. Because now it’s no, I find it. Because we have so much free time now and not as much structure in our lives. So when I get one weekend that’s extremely busy. I just get overwhelmed. And I used to get these weekends all the time. Yeah.

Chrissy
Yeah, especially during COVID I’m the same I’m I just think that like how crazy things used to be before COVID. Like we were booked up almost every weekend, we have parties or we go to someone’s house or whatever it was, we were just busy all the time. And now we’re not. And I just think how did we do that?

Money Mechanic
I’m like super stressed out Chrissy when I’ve got like four things on my calendar for one day. I’m like, I really got to budget my time today. I’ve got like four different things I’ve got to do. Fantastic. Well, it’s been it’s been lovely to chat with you, Réjean. And as Chrissy said, you do have a story. That’s, it’s extraordinary. But at the same time, it’s achievable. And I think that’s that’s the interesting part. And that’s why people should go out and get your book. Now before we let you go. I’m gonna bring up one thing because the Internet Retirement Police will be all over us, Chrissy, because he didn’t retire he wrote a book! Is that what we’re gonna do, when we’ve retired? Is write books? Yeah, so I’m, you know, we’re gonna let that slide because here we we don’t mind that because we’d like more Canadian content. And if you the listener would like to get your hands on this brand new 2021 Canadian content. You can leave us a comment on the show notes about the show. Your thoughts, question for Réjean. And we will be doing a random draw from there. Does that sound like a plan Chrissy?

Chrissy
Yep, perfect. When should we do the draw?

Money Mechanic
Well, that depends. We’ll do it one month after the show airs. How’s that?

Chrissy
Okay.

Money Mechanic
Give them 30 days. Unless it’s a month for 31. Right on anyway, signing off. Thanks again for joining us, Réjean. And before we let you go, can you please just let our listeners know where they can find you. You do have a blog. I know the best part about this community is people like to reach out and all the content creators love to engage with everybody else. So just let us know before you go.

Réjean
Yeah, for sure. Yeah. So we have a blog. It’s called mindfulfamily.ca. So mindfulfamily.ca. Yeah, just you can reach out there. There’s a contact page with my address, my email address. There’s also a form to send a message but I’ll respond to any message and questions anybody has Always, I received some questions last week and some pretty detailed questions. And really, I actually really enjoy answering questions. So send them along. I really don’t mind answering them. And I’ll try to check out if there’s any questions on the comments to this episode as well to answer any there.

Money Mechanic
Yeah, yep, we’ll definitely let you know about that. I’ve got one last question before we let you go. I saw there’s some riverfront property in Sturgeon Falls for $100,000. Think should be invest in that?

Réjean
I just I’m not I don’t like buying any property right now. Just I find everything’s overvalued. That’s just my…

Money Mechanic
It’s bare land. Yeah, it’s bare land. I’ll buy the bare land. Yeah, it’s gonna help me develop.

Réjean
That’s great. I want to start my own FIRE community here in Sturgeon so yes, I’ll absolutely…

Chrissy
A FIRE commune.

Money Mechanic
Chrissy and I would absolutely move there but you have a little too much winter for us.

Réjean
Absolutely. We’re actually planning to come to the West Coast this summer if everything opens up because we’ve been planning a trip down there for three years and we’re hoping to finally do it and a lot of people tell us once we get there we never want to come back because right we the winters are insane here and I would love to live on Victoria Island and not have to shovel snow at any point.

Money Mechanic
Yeah, well hopefully we are allowed to travel and when you do do that and this is a note to the listeners too is if you want, again, fingers crossed everybody’s allowed to do it safely… is reach out to the place you’re going because I run a group on Vancouver Island we’d love to do a meet up Chrissy, you’ve done meetups over in Vancouver. You know if you’re traveling and you want to meet other like-minded people, just shout out there’s either like a ChooseFI local for that or or hit us up on the podcast. We’ll put you in touch with people and when we’re allowed. It’s It’s fantastic to meet up with like-minded folks. Right on. What a show.

Chrissy
Thank you, Réjean.

Money Mechanic
All right. We’ll catch you next time. Explore FI Canada.

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