How I Retired Before I Turned 40

It was August, 2022, and I was heading into work on a Saturday.

Working on a Saturday wasn't uncommon. I had a demanding position for a company that's still known for pushing its people hard. I knew this before I signed up but I did so anyway, enticed by the challenge of the work, the overall quality of my co-workers, and my respect for the organization, which, even today, continues to redefine its industry. That resulted in me working a lot of Saturdays, and the odd Sunday, too.

So I did what I needed to do. A normal week saw me working 50+ hours, and that's not even including the commute. I'd regularly work 55 or 60 hours a week, and occasionally I'd get bumped up to 65 or even 70 hours a week.

This Saturday was different, however. I was going in because I knew I'd get some semi-private time with my boss, and I was finally going to bite the bullet. After 20+ years of working, saving, and sacrificing, I was going to make it official. I not only planned to leave my job; I planned to leave traditional work completely, to hang up the proverbial skates for a life of leisure, travel, and burying my nose in annual reports. Yes, I was going to live off my investments and maybe dabble a little in writing on the side.

I finished my work and began the walk to his office with a massive knot in my stomach. I hate disappointing people to begin with, and the feeling is twice as bad when I have to disappoint someone I like and respect.

I don't remember much about the conversation, only that my boss couldn't have been nicer. He understood and supported me, even though I'm pretty sure he thought I was insane.

I had just turned 39. Who retires before their 40th birthday? Who can afford it? How could I, someone who had worked (barely) middle class jobs for just 20 years, be able to pull this off? I'm pretty sure I have former coworkers who think I secretly took another job, because there's no way a person my age could pull such a feat off.

It's now been nearly two years since I retired, and if anything I have less desire than ever to return to traditional work. I spent 2023 traveling, golfing, socializing, reading, writing, and thinking, and it was great. So far 2024 has been much of the same. I'm living the life millions of Canadians can only dream of.

Inevitably, this leads to one question -- how did you do it?

The internet is filled with 'how to retire early' articles. Just type the phrase into the Google machine and take your pick of the thousands of results. But very few of those were written by people who actually did it, nor will they have the detail this one does. I'll go over everything -- from the big picture concepts most everyone understands to the tiniest of details, small changes that ended up having a big impact. But most importantly, I'll tell you exactly how I did it, including how I turned a massive savings rate into smart investments.

Let's get right to it.

How I got started

My very first job was making ice cream cones and blizzards at my local Dairy Queen. I was 14 years old and didn't particularly want to work, but my sister had just gotten her first job and my parents decided it was time for me to get off my lazy ass as well.

I was pretty useless that first summer, and apparently they were close to firing me. But I stuck it out and eventually I became one of the few people around there who could do pretty much everything. I also became known as the guy who would pick up shifts, meaning I'd supplement my part-time hours with an additional 10-15 hours per week covering for people. I was working 30-35 hours per week and still going to school.

Suddenly, for the first time in my life, I had a pretty decent amount of money coming in. So I started to spend. I indulged in all sorts of different things: buying food, Slurpees, video games, CDs, and new clothes. I probably would've gotten a car if I was old enough to drive.

Then, one day, as I was getting snacks at a nearby convenience store, my new debit card declined. I thought there was something wrong with the retailer's system, so I tried a nearby bank machine. It declined me too. The reason? Lack of funds.

This was a real wake-up call for me. I had worked all summer and didn't have anything to show for it. I vowed right then to never run out of money again, and I never have.

Emboldened by my new attitude, I transformed the way I thought about money. I only ate out at work where I'd get 50% off. Slurpees were only an occasional treat. And I waited until my birthday or Christmas to ask for the latest video game. My savings balance quickly marched higher; within a year I had a few thousand dollars to my name.

The rest of high school was mostly the same. I worked as much as I could and saved aggressively. I started reading about the concepts of personal finance and investing until, one day, someone else's unfortunate event changed everything.

How I learned to invest

One night, in the middle of a closing shift, I got a phone call at work. This hardly ever happened, since work had a very strict no phone calls policy, so it was a big deal.

My mom was on the other end. Don't freak out, she said, but your dad is injured. He hurt his leg and we're off to the hospital.

It turns out he did more than hurt his leg. It was a compound fracture and he'd need major reconstructive surgery. They put a titanium rod in there and everything, and we were told it would be up to six months before he'd be able to move around with any sort of normalcy again.

This is when I started to get concerned. My dad was the breadwinner in the family. How could we afford to live without him working?

Once he was back at home and recovering, I started asking questions. Did my parents need my Dairy Queen earnings to survive? Would we be okay? Keep in mind I was pretty addicted to saving by this point, and really didn't want the balance to start going down.

Relax, I was told. We're fine. Remember all those rental properties that we bought? They're more than enough to get us through this rough patch.

This was revelatory to me. Sure, I knew these rental properties existed, but in my mind they were annoying places I was forced to help clean when tenants would move out. They were all downside to me. I never realized there was upside too.

So I started asking questions. How do rental properties work? How does one decide which place to buy? How do you protect yourself if a tenant doesn't pay rent?

Since he had the time, my dad happily answered all those questions, plus the million more I had. By the end of the summer I knew the basics, plus I had the confidence of knowing someone who was an expert.

That fall, school started talking to us about our futures. We needed to pick a college major now, they said, because without a college education we'd end up poor working at some dead-end job. I'm exaggerating here, but only slightly. School really laid on the whole you'd-better-go-to-college routine thick.

Going off to post-secondary didn't appeal to me. I hated school and would much rather be out working. I'd do the bare minimum to get a decent mark and that was it. I wanted desperately to find a good job and get a career so I could get ahead. I was still addicted to watching my bank account go up every time I got a paycheque, and I didn't want that to stop when I was an adult.

So I did some thinking and decided to reverse engineer it. Back then, the average college grad made about $10,000 per year more than the average person with only a high school education. What could I do to bridge that gap and ensure I'd make as much as a college graduate, without losing four years of potential earning power to studying?

The answer was simple. I'd create a world where I generated $10,000 per year in passive income by owning property. And because I didn't want to fall behind my peers, I needed to accomplish this by my 22nd birthday, four years after graduating. That way we'd both be in the same position.

Nelson's landlord adventures

I was almost 18 and high school was a couple months away from ending. I had traded my Dairy Queen job for one at the local grocery store, which promised a career path if I stuck around. Dairy Queen was fun but unless I bought the place -- an idea that was thrown around, although not seriously -- it didn't offer much potential for anything more.

Then, an opportunity came up. A house was on the market and my dad was interested. He pulled me aside and said either you buy this house or I will. That was all I needed to hear, so I bought the place. I was still 17, and I remember there being some questions whether a 17-year-old could own a house or not, but that's why you pay a lawyer.

To pay for it, I used a combination of money my parents had set aside for my college education and my own savings. There was no mortgage on that property because we lived in a small town with incredibly affordable real estate. It was surprisingly easy, and soon I was telling my friends at school that I owned a house.

I don’t think anybody believed me.

Then the fun began. My newly-inherited tenant's rent was too cheap. My dad told me to deliver her a letter which would give legal notice I was increasing the rent.

The conversation went a little like this:

DING-DONG!

"Yes?"

"Hi. I'm Nelson, and I just bought this place."

"Oh, you're the new owner? (Old landlord) told me he sold the place but there would be no changes."

"He did? Ummm... I'm not sure why he did that because I'm here to tell you your rent is going up."

"What? Are you sure you're the new owner?"

"Yeah."

"Well, this is fucking bullshit."

The best part? She moved out three months later.

Welcome to being a landlord, Nelly.

She was temporarily replaced by two summer students who shared the place while they worked at a local tourist attraction over the summer. One day they called in a panic. The basement had flooded! There was a big problem!

So we went over. There was a clog in the sewer line. There's only one solution to that, so we got out the drain snake and went to work. After a while the snake broke through the clog and the line was cleared. Naturally, we're curious about what caused the issue.

As we reset the snake and were able to look at the end of it, the answer was staring us in the face. The evidence was unmistakable. It was tampons. These ladies didn't know any better and were flushing their tampons.

I went upstairs and had my second awkward tenant conversation. Ladies, please don't flush your tampons. Naturally, they had no idea what I was talking about. It must have been the previous tenant.

Sure....

Surprisingly, even after these adventures, I was thirsty for more. I soon found another property with a unique setup. It was a house on a double lot with the potential to subdivide and sell the excess land. My Realtor (and former math teacher, in a fun twist) helped me though the math, which went something like this:

• Purchase price: $42,000

• Value of the other lot: $17,500

• Net purchase price: $24,500

• Annual rent: $7,200

• Expenses: $1,800

• Profit before tax: $5,400

• Cap rate: 22%

That was an absolute no brainer, so I bought the place. Plus, the older lady who lived there didn't bother moving her stuff out, so I got a couple thousand dollars in furniture I later resold.

I didn't have enough capital to pay cash for this one, so I had to get a mortgage. I then dedicated myself to paying down the loan as quickly as possible, which I accomplished in about 18 months. By the time I was 20 I owned two properties outright.

I then put down an offer on a third place for $28,000, losing out to someone who bid $1,000 more. It was a bad move in hindsight; I should've paid up for what would've been a good asset. Paying an extra $2,000 would've reduced my cap rate from 16% down to about 14%, which would've been just fine.

It took a little while longer, but I did finally buy a third place. It was $24,000 and I was able to rent it for $450 per month. And, most importantly, with the purchase of the third property I had succeeded in my quest for $10,000 per year in passive income. I quickly paid off that mortgage -- pretty easy when I could throw three rent cheques in the bank each month, plus work earnings -- and officially hit the goal of five figures of passive income without any mortgages when I was 22.

I don’t buy physical houses anymore, but I do use the concepts I learned there to buy REITs. Here’s how I do it, including how I value real estate like an owner.

Pivoting to mortgages

I would've been content to keep buying up houses but, unfortunately, the market didn't cooperate.

Rural Alberta experienced a massive oil boom, driving up the value of real estate. The houses I wanted to buy pretty much doubled overnight, with rents barely budging. Suddenly the real estate I was looking to buy went from offering 15%+ returns to about half of that. 7% wasn't very exciting, especially in a world where I could get 5-6% in GICs. Canada was also in the middle of the income trust boom, which offered dozens of stocks with 10%+ yields. So there were various other opportunities that were more attractive than real estate.

Sticking with what we knew, we still identified a real estate-esque opportunity. The alternative financing space was in its infancy, with only a few lenders willing to give money to people that were turned down by the banks. It was even worse in small towns, where these lenders wouldn't even operate. This created an opportunity.

So me, my dad, and a couple other partners stepped in and filled the void. All we did was tell one mortgage broker we were in business and he brought us a steady stream of business. He soon left for greener pastures but by then the word had gotten out. There was a steady demand for these mortgages, and we had the local monopoly.

This required some discipline. Alberta has non-recourse mortgages, meaning if a borrower defaults you can only sell the house to get paid back. You can't sue the borrower personally. We were also concerned about house values after the market had moved up so quickly. We responded to these issues in a simple way -- we tightened underwriting standards and insisted anyone we dealt with have large amounts of equity in their home.

We started off charging interest well into double digits, although that went down over time. We were supported by a real estate market that remained strong and our strong underwriting standards protected us from loss. This business quietly grew for years, and we survived the financial crisis of 2008-09 with nary an issue.

At this point I deviated a bit away from my partners, who were looking for slightly different deals. I was happy to take an 8-10% return on higher quality mortgages that were more long-term in nature, while they wanted higher yields and a high likelihood of a cash out in 2-3 years. So I started doing deals without them, and I still hold a couple today, 10+ years later.

There was a solid five years there where nearly 100% of my investible capital went into mortgages. I even borrowed to fund particularly interesting deals, taking the spread between my financing source and my borrower, with both loans locked to prime so I wouldn't get my ass kicked if rates went up.

My first 10 years towards FIRE

I invested in primarily real estate and mortgages for the first ten years of my FIRE journey. They worked out great, and I was able to grow my money at a nice clip each year in a world where the stock market struggled. Remember, I was buying real estate in the early 2000s as the 1990s tech bubble popped. It turned out really well.

But my investments were just one part of the journey. Without making a decent wage and keeping my expenses low (which created a huge savings rate), I wouldn't have been able to get ahead as quickly as I did.

So what else did I do?

Let's start on the earnings side. Besides consistently striving to maximize my passive income, I also took steps to maximize my active income. It started with me finding the highest paying job I could as a non-college grad, and then working as hard as I could to maximize my long-term earnings power. After I stalled out at that job I pivoted to another, and then another after that. I was the proverbial job hopper, and it worked out for me. Plus I got to try some other things -- I was a Realtor/Mortgage Broker for a couple of years -- and discovered what kinds of jobs I liked and didn't like.

I also had various side hustles. My evenings and weekends were full of entrepreneurial pursuits and various casual part-time jobs. I also took on as many extra hours at work as possible, knowing overtime was a great way make extra cash.

Still, even when you combined these income sources, I was only making a comfortable middle class living. And I had to work harder than many of my peers to make an equivalent amount of money. It turns out the lack of college education was coming back to bite me a little bit.

The spending side was much more important. I did everything I could to save money. I lived at home until I was 25. I avoided getting a car because of the associated expense. I ate ramen and cereal and plenty of cheap, cheap pasta. I intentionally gave up golf because it cost too much. I took only two weeks of vacation total from 2003 to 2010, and one of those weeks I didn't even go anywhere. I was willing to do whatever it took to get ahead, to work towards my goal.

The funny part is I hadn't even identified what my goal was. I knew I wanted to be wealthy but, other than that, I couldn't define it. I didn't even know early retirement existed back then. I continued to work towards my undefined goal, knowing that eventually I'd have a more concrete answer to what I was looking for.

I recently did an interview with Bob over at Tawcan which has some further details on my early retirement journey. Check it out!

Nelson discovers the stock market

After dabbling a little bit in the stock market -- including some mixed results during the 2008-09 financial crisis -- I started getting serious about the stock market in the early-2010s.

Partly it had to do with mortgage deals starting to run out but, to be completely honest, I was bored with mortgages. I had been studying the stock market for much of my adult life and felt ready to invest in stocks in a big way.

So I started moving money into the market and very quickly made some pretty bad mistakes. I chased yield. I concentrated in some pretty poor investments. I even embraced a deep value approach without proper appreciation for the downside.

I'm the first to admit my first couple years I stunk. I made too many unforced errors and didn't really make much -- if any -- money.

But I learned and really found my groove when I discovered a more dividend oriented approach. I started out buying too much trash, but at least that trash paid dividends. I slowly pivoted to a more dividend growth strategy, which had the benefit of solid total returns combined with an ever increasing collection of dividends.

I almost immediately fell in love with dividend investing. It was just like real estate; these stocks spun off gobs of predictable cash flow and I could do what I pleased with the money. It became addictive; I did whatever I could to ensure I kept on saving, putting ever more cash to work. Combine that with my real estate income and the mortgages still on my books and things were really looking up. I was at the point where could see the finish line, where I'd have enough passive income to be able to afford a bare-bones lifestyle.

It was also around then FIRE started making its rounds on the internet. Initially I was skeptical. I enjoyed work and couldn’t imagine life without it. What would I do all day? It would take years before I really took FIRE seriously.

And then, around the same time, something unexpected happened. I met a girl. And she actually liked me!

Married life

In Atlas Shrugged -- a book I loved in my youth but now realize has pretty significant weaknesses -- there's a quote about marriage I really liked. I've since lost the exact quote (and it's not easy to look up, since it's a looooong book), but it goes something like this.

"Seek a spouse that is going independently in the same direction as you are."

I was fortunate to find someone who fit that definition, someone who had her financial poop in a group. She had the same financial goals as I did, someone who not only believed in achieving financial independence with me but also helped immensely in other areas where I was noticeably weak. She taught me emotional intelligence, how to better deal with people, how life was about more than just making money, and so, so much more.

Together we took off on a journey that ever so slightly delayed financial independence. We lived in South Korea for a year, spending somewhat aggressively to make sure we maximized that experience. Although, in hindsight, I should’ve spent more. Once that was finished we settled back in Canada and pursued various entrepreneurial ventures, some which worked out handsomely and others which were less successful.

Once we combined our finances it was obvious there wasn't enough for two people to become financially independent, so it was back to the grind. I worked to maximize my income as a freelance investment writer, while my wife pursued teaching. We settled in the same small town I grew up in, attracted to the cheap cost of living, my already established friend group, and the various other advantages I'd built up over the years.

Financially it was a successful plan, and soon our collective savings rate soared. We were saving well over 50% of our income while living a rich life -- filled with travel, an active social life, and regular family visits. But life in a small town was also limiting in a lot of ways. You end up seeing the same people over and over again. Many folks in small towns have a somewhat limited attitude, always seeing the world from a glass half empty perspective. And there simply aren't that many opportunities in small towns.

So after a few years of struggling with some of these downfalls we made the decision to move to a larger center. We pulled up roots, settled in Edmonton, and embarked on the next adventure

The home stretch

The move to Edmonton happened during the beginning of the pandemic and, in hindsight, it was a fantastic move.

Our cost of living went up a bit, but our incomes went up substantially as we were both able to secure good jobs fairly quickly. This quickly translated into another 50%+ savings rate which, combined with all our other sources of income -- including dividends, a few mortgages, and rent from my real estate -- meant the money was pouring in. It was a challenge to invest it all, especially when I was so busy working.

Edmonton was also a pretty great place when we weren't working. It's a big city, so there are always things going on. There were dozens of restaurants within a 10-15 minute drive. The city has numerous professional and not-so-professional sports teams. We made new friends and settled into our new lives.

Financially, we kept up the pace for a few years until it was more and more obvious the goal had been reached. I never had a eureka moment; rather I just slowly warmed up to the idea that I was financially independent.

This lead to a lot of thinking and a lot of self reflection. I was working as hard as I'd ever worked in a job that was both stressful and fulfilling. I liked being part of a team again after so many years working on my own, and the job was interesting. There was no lack of work, either. I was constantly barraged with problems, and I liked being busy.

But, at the same time, it was a lot. As I mentioned way back at the beginning, I was working a big chunk of hours in an attempt to keep up with everything. It was hard knowing I constantly was keeping people waiting as my backlog expanded. I also found I was spending too much time on problems that were urgent, rather than focusing on the big picture stuff that really got me excited.

When you need to have a job, there are three options when dealing with work issues. You can:

• Suck it up

• Work with your boss to improve things, or

• Get a new job

When you're financially independent, a fourth option opens up. You can:

• Throw up your hands and never work again

The longer I was financially independent the more the fourth option appealed to me.

I also did a lot of thinking about my journey and the payoff. After 20+ years of consistent sacrifice and financial responsibility, you start to ask yourself some tough questions.

What exactly did I sacrifice all these years for?

What was the point of this journey if I don't ever get anything out of it?

Why should I, someone who made the right decisions for decades, live the same life as someone who needs to work and who didn't make those same sacrifices?

What I discovered is financial independence undoubtedly fucks with your head. It puts you in a funny mindset because it gives you options. Suddenly, a move like quitting your job forever is feasible, and having that option is pretty enticing. You have the option of going down the road less traveled and leaving all your stresses behind.

I read all the articles and thought about every conceivable issue. I made sure I planned with the average day would look like post retirement, which would include lots of reading, some writing, travel, golf, socializing with friends, and, of course, investing. I thought a lot about the financial risks too, doing things like:

• Embracing an overly conservative withdrawal strategy where I'd withdraw 75% of my passive income and reinvest 25%

• Taking steps to ensure I'd make a little active income to help pay for my travel

• Keep 6-12 months of expenses in cash to guard against sequence of return risks

• Embrace a less aggressive spending plan during years where dividends might be down (like in 2020)

• Spend only the dividends and allow the capital to slowly get bigger over time

Basically, I knew I'd only get one shot at this early retirement thing, so I intentionally set things up to be conservative. The last thing I wanted was to have to go back to work in 5-10 years with my tail between my legs, hoping for a job in a market where my skills are rusty and I'm a middle-aged applicant with a massive gap in my resume.

The most important parts

I made the decision and retired in 2022, making it official a few weeks after the pivotal meeting with my boss. I stuck around for three months to help train my replacement, which in hindsight was about six weeks too long. But that's okay, I'd rather my last memory of work be how I gave a little extra and not how I abandoned my team.

I'm now almost two years into early retirement and I love it. Each day is a routine of reading, writing, and various other hobbies. The best part is how I can randomly decide to have an extra long lunch, go visit a friend, or start playing video games at 11am. My time is my own and I love that freedom.

I can't envision a future where I ever return to full-time work.

Financially things are going great as well. Despite making consistent withdrawals from my portfolio, both my portfolio value and passive income are both flirting with all-time highs. I've been able to analyze hundreds of stocks, discovering all sorts of interesting names that weren't even on my radar before. I've dumped a few duds and replaced them with more growthier stocks, which bodes well for future income growth.

As I look back at my financial independence journey, I realize it really came down to three things:

• Make enough money that I could create a huge savings rate

• Invest that capital intelligently and consistently for 20 years

• Don't get burned out and fall off the bandwagon

It's more complicated that that, of course. And even though it's as easy as just putting a few words in bullet points, execution is anything but. Take it from me; it's fucking hard to maintain a sense of scarcity over 20+ years. Saving 50% of your income is no picnic either, even if you're an exceptionally high earner or if you live in a low cost of living area like we did.

The result made it all worth it, but there were definitely times when I was ready to abandon the plan and live a more conventional life.

In fact, I almost feel a responsibility to my former self to get this early retirement thing right. I owe it to younger Nelson to make sure I don't screw this up. That keeps me motivated.

The bottom line

There you have it, kids. 5,000+ words on my financial independence journey. The highs, the lows, and, most importantly, the key factors that allowed me to embrace this lifestyle 20+ years sooner than average.

Whenever I share my story, I inevitably attract a few naysayers. The accuse me of throwing away my youth, time that I can never get back.

I have a lot of time to reflect and think about my past and let me tell you guys once and for all. I wouldn’t change a thing. 20 years of sacrifice for 50 years of freedom is a trade I’d make again in a heartbeat. I don’t feel deprived at all.

I can have those experiences I missed as a youth today. I’m young enough to enjoy them, plus I can afford to add a bit of luxury to them. No youth hostels or skipped meals for me.

Now my days are truly my own, and it’s wonderful. I get to write about what I want to, read, play golf, or travel. I get to analyze the stocks I want to in my premium newsletter. I don’t need to talk about stocks I don’t believe in to try and boost subscriber numbers.

Freedom was always the goal. And now that I’ve hit it, I wouldn’t change a thing. The sacrifice was 100% worth it.