I love this article from the Globe and Mail (sorry kids! Sub only!But please sub to at least one Canadian paper and one magazine a year to support homegrown content /soapbox) but here is what I think the most important takeaway is:
The bursting of the internet bubble provided a real-time test of Mr. Bergen’s “4 per cent rule,” which brings me to the hypothetical Canadian investor who started their retirement at the end of August, 2000. They began with a $1,000,000 portfolio. Half was invested for growth in the S&P/TSX Composite Index while the other half was invested for income in the S&P Canada Aggregate Bond Index.
The investor took $3,333.33 out of the portfolio to live on at the end of each month (a 4-per-cent initial annual withdrawal rate) with the payments being stepped up each month to adjust for inflation. (The figures herein are based on monthly data with reinvested distributions, but they do not include fund fees, taxes or other trading costs. The portfolios were rebalanced monthly.)
(Yeah, the 5% seems to be missing)
This is absolutely great news — unless you were that 6% guy. Ouch!
I subsequently read Sean Cooper’s book about his experience …and discovered nothing of note. Basically his plan was simple: be young, single, child free, able-bodied, know how to live frugally, have a high paying career, be able to give up what makes life worth living and have enough energy to work multiple jobs. It’s hardly rocket surgery. Obviously, not everyone is able to tick off all of these boxes on the “pay off house quickly” list. Few of us – if we’re honest – are able to do more than a couple of things that he did, let alone all of them. But outliers make for great copy so he soon found himself clenching onto his 15 minutes of fame in his paid-off house.
An (ex) friend of mine wrote a particularly scathing commentary about the article denouncing him. In fact, many people did including this particularly vitriolic piece in Slate. When I asked my friend why he cared what other people did, his response was that if everyone did this than capitalism would expect us all to do this! I didn’t think that was true but I let it go. What I find hilarious is that in retrospect, when all this was going down we were in one of the largest Bull Markets in history. For most people, life had never been better: interest rates were low, equities high and compared to today real estate was way more affordable. In fact, reading that Slate article as we claw our way out of a global pandemic feels almost quaint.
Here is the rub though: I think that Slate article is bang on. Individual actions not structural inequalities drive our morality when it comes to money and it shouldn’t. Yes, absolutely I would love to see some real change, some real support for people who are struggling. But let’s also be realistic: only people who are like Sean Cooper in every way have the ability to do what Sean Cooper did. But only them. Being angry at Sean Cooper for his accomplishments is like being angry at David Beckham for being better than you at football.
The real issue is that we are extrapolating his very constricted set of circumstances and trying to apply them widely. Clearly, a single parent of two children in an expensive city with a minimum wage job is not going to be able to pull this off and no one is saying that this is what they should aspire to. Similarly, I – as a middle-aged disabled woman – will never be a famous footballer. That’s why it got any press at all: he accomplished something only available to a select few people. Cooper was featured because he deviated from the norm and deviation from the norm gets eyeballs on your news pieces which in turn generates advert dollars. That’s all. But even if we can’t apply every single idea into our lives there is still a lot of value to see people doing things differently. We can extrapolate a few ideas instead. Maybe someone reading that article will realize that they rarely use their car and that they can give it up and instead buy themselves the model railroad they’ve always wanted. Who knows?
A couple of weeks ago, I watched Marie Kondo get raked against the coals for daring to say that she isn’t as tidy anymore now that she has three kids. No duh. Of course, the internet jumped all over this. The same thing happened when her book (and subsequent Netflix show) came out. My facebook lit up like a Christmas tree at the fact that she only had fifteen books. “JUST FIFTEEN!” people lamented, “That’s bullshit! I could never live like that!” But she never claimed that everyone needed to have a maximum of fifteen books. She stated that fifteen books was the right amount of books FOR HER. If rooms full of books “spark joy” for you, then her perspective was: you do you. The catch was that you needed to actually watch the shows and/or read the book to know that she wasn’t insistent on just 15 books. Instead people succumbed to internet outrage and social media soundbites. But her recent decision that tidying was a lower priority for her now that she had three children set the trolls ablaze. “AHA! was the collective response to the news, “clearly it was all bullshit!”. Really though, her choice not to prioritize tidying over time with her small children in no way means her system doesn’t work. It just means that right now spending time with her kids “sparks joy” more than a tidy house does.
Finally, this week I was unsurprised to watch the trolls come out in full force when I read the comments about this Vancouver couple. While some of the comments are cruel, some of them are just nonsense. “Well she isn’t retired now, is she?” Well maybe she doesn’t want to retire yet. “There is no way they can retire on 800k.” Had they used the BTSX strategy, a quick back-of-the-envelope calculation pegs the dividends at over $40000/pa. “They won’t be able to travel on that kind of income.” Geographic Arbitrage is cheaper than living in Vancouver full time, for sure.
Unfortunately, a lot of online interaction leads itself to Crab Bucket mentality: because I can’t have it, I’m going to drag you down. Like the metaphorical crab who sees another crab escaping & stops them, people in similar circumstances who won’t do the work end up in comment sections dragging the people in the article down. Their goal is to shame people who do things differently and hope that other people agree with them. Groupthink is incredibly powerful and the message is, “if I can’t have it, you shouldn’t either!” We love watching successful people get dragged in what the Australians/New Zealanders call Tall Poppy Syndrome.
People are completely missing the point of all three of these examples. They’re just ideas, tools and goals that these individuals used to give themselves options. Maybe their lifestyle isn’t for everyone but SURELY they have to have some insight that we can potentially apply to our own lives? Also, we make the assumption that we are the audience for every article when clearly we are not. These articles have value because there are people out there who don’t know that they can pay off the mortgage early, or that there are better ways of folding t-shirts or that a high savings rate is achievable for mid-income folks with a few short cuts. But smart people realize that there are nuggets of wisdom everywhere so they take what they can from a resource and leave the rest. I see this a lot in popular personal books (PF) that are written for an audience outside of the author’s country. Inevitably there is always a review that says, “ONE STAR: this doesn’t apply to me because I don’t live in that country. You need to write one about my country.” But I’ve read personal finance books from all over the world and inevitably I take some gems out of all them. Most PF books are US-based but I just swap the terms for Canadian versions, IRA to RRSP for example. I don’t need to be spoon fed every single detail about my particular situation, I can just apply the larger idea to my own life by adjusting it.
The reality is that no matter how often you get angry that your house isn’t tidy enough, or it’s not getting paid off as quickly as you’d like, or you feel stuck in your life with your finances awry, no number of negative comments you post will change that. Sure, you may get a little shot of dopamine when someone agrees with you or you can get jacked up on the arguments with the people who don’t agree with you but it adds zero value to your life. You would be better off taking notes or figuring out who else is achieving the goals you’d like to achieve and reading their books or blogs.
I didn’t pay off my house in 3 years, it’s an absolute tidiness disaster with two kids and two dogs and I certainly don’t have close to $700000 in investments. I am still grateful for these people who’ve given us a window into their lives. The value in reading these stories is not making a carbon copy and applying it to your life, its value comes from seeing that maybe you could try and do things differently and that it could be life-changing. When you have applied some of these tips and tricks the value becomes one of seeing that you aren’t alone – other people are doing it to!
So I encourage everyone to get out of the metaphorical crab bucket. Glean the wisdom that may be helpful to your life and focus on how you can make your situation better. It’s much better time spent.