Today we continue the ESI Scale Interview series where people answer questions about their success at working the ESI Scale.
In short, the series focuses on what the interviewee is doing in the areas of earning, saving, and investing. They also get an opportunity to ask ESI Money readers for suggestions if they choose to do so.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
With that said, let’s get started.
My questions are in bold italics and his responses follow in black.
OVERVIEW
Please tell us a bit about yourself.
My name is Dan and I am 27 years old.
I am single, no dependents except a cactus that I think I overwatered and is dying.
I live in Toronto, Ontario, where I recently moved to from Calgary, Alberta. MASSIVE cost of living difference, starting with a 7% sales tax difference, and double the hydro and rent rates.
I luckily don’t have expensive taste (except for scotch and craft beer) and most of my hobbies are cheap outdoor activities like kayaking, running, mountain biking and rock climbing. I have a couple that cost something like skiing and hockey but I have never felt bad about spending on an outdoor activity.
What is your current net worth?
Net worth is about 185K and breaks down as follows:
- 85k DC Pension Plan – Work place tax deferred savings plan – similar to an American 401k
- 33k RRSP – Personal tax deferred savings plan – Similar to an IRA
- 57k TFSA – Tax free savings – similar to a Roth IRA but more flexible and better in my opinion
- 10k in cash in in saving and checking accounts for liquidity
I also own a paid for 2015 VW Golf but I do not consider it as part of my net worth as it depreciates forces me to spend more money on insurance, gas and air fresheners (because of hockey equipment).
How did you accumulate your net worth?
I accumulated my net worth by working the ESI scale. Nothing fancy.
I went to university for a degree that was highly employable (agriculture), I graduated with no debt through hard work, hustle and cheapness while in university.
I started saving as soon as I got my first paycheck.
One thing that I did differently was took a year between high school and university to work so I could pay for school. It was also a fun year, with lots of mountain biking, skiing and rock climbing trips.
I would say I got here primarily by saving, then earning and least by investing.
EARN
Tell us a bit about your career.
My current role is a Brand Manager for a large German Crop Science company (one of the big 6/4). I have been with them for exactly 5 years, which is when I graduated from my undergraduate degree.
I got into agriculture because I grew up on a farm and have always loved both the business and science of agriculture. I decided that there was a lot of opportunity because no one was going into it. There were a lot of boomers retiring and graduating class sizes for Agricultural programs were at record lows.
I completed a Bachelor’s degree in Agriculture with a major in Crop Science. I had lots of opportunity for summer internships which I took advantage of and helped me land my first job.
The company I am with liked that I had the hustle to move to the other side of the country for a summer job with one of their competitors because I wanted to learn. My first job was a development program for new grads, so I think my summer experience really helped land me the job.
Side note: I would highly recommend any prospective student with an interest in plant biology and/business consider agriculture. The prospects are good, and the industry is a lot of fun, plus, plants a neat.
2013-2014 I worked as in marketing in the professional development program. It was designed to help make me a useful future employee and open up opportunities a little earlier. I started at 62K/ year and a 10% bonus target.
2014-2016 They moved me across the country and I worked as a retail account manager. I negotiated a few raises from time to time and learned a lot about customers and how to sell.
One thing I did to increase my earnings, that was a little risky but worth it was asking for a raise during a restructure where I had to re-apply for my job. A few of us were being cut and I had a pretty good feeling that they wanted me so I used it as leverage. It worked and I got an 8% raise outside of the regular annual raise schedule.
I finished this time off at 80k/yr and my bonuses were sales target based and ranges from 10k-28k. I broke 6 figures in 2016.
During this time I also completed my MBA in Agribusiness and negotiated a deal where my employer would pick up the tab in exchange for years of service.
2017 I got promoted back in to the marketing team as a Brand Manager on a small portfolio, I managed to skip the associate level in the marketing group because of my previous experience in the development program and a bit of persistence. I was at 93k plus a 15% bonus target.
2018 I was asked to take a lateral move to the biggest portfolio as a brand manager. The fact that I was asked to take it over made me know that I was wanted, so I was pretty adamant on what I wanted for compensation. This is where I am now at with 104k and 15% bonus target. I went back and forth to get this but I felt that I was a little underpaid before and knew I had some leverage.
In addition to my base and bonus, I contribute to the max of my DC pension which is 5% for a 2x match for a total of 15%. They also deduct 5% and do the 2x match on bonuses which is pretty rad.
A couple things that have really helped my career not in any order are:
- Mobility
- Willingness to take on any project/position
- Sales results
- Moderate likability
- Being vocal about wanting opportunities to the right people (networking)
- Trying to be visible to leadership (if they need someone to go represent your function in front of the senior leadership team at some customer thing – volunteer, even if it is a pain)
- The right degrees (this is more to get in and less important once you start your career)
- Good summer experience to get a good starting job
Do you have a side hustle?
No side hustles for me. I figure I am better off putting in more effort at work or developing my skills. I also have to enjoy life and stay healthy (I love exercise and outdoor activities).
If you were rating these results on a scale of 1 to 10 (with 10 being best), what rating would you give yourself and why?
I would say an 8 out of 10.
Taking into account my base and bonus, it works out of a CAGR of 12% which is pretty good. If I can keep that up for another 85 years I’ll be close to a billion/yr, just have to avoid dying and keep my productivity up!
I also had a decent starting point for a new grad and have made career moves where it made sense.
I would consider my free 50k MBA a form of compensation/skill development as well. They have also paid for all my moving costs over the years and currently pay half my rent (grossed up for taxes) for the next year and a half to compensate me for moving to an expensive city.
What are your future plans regarding growing your income?
I plan to keep working.
I hope to go international (Asia or Europe would be fun, a tax haven like Singapore would be great) and keep moving up.
One thing I need to do is get some people management experience soon.
One thing that I would like to get as far as another income stream would be either a rental property or some farmland (as a farm kid this is something I have always wanted). Trouble is that neither cashflow that well in Canada right now.
SAVE
What percent of your gross income do you save?
This year I will be in the range of 35-40% of my gross. If I could buckle down my spending a bit I could get to 40. We will see.
How did you get to this level?
I started out after graduation by contributing the max to my DC pension plan which got me to 15% right away (5% from me).
I also contributed to my TFSA out of my first or second paycheck and started automated contributions. It was originally just going into savings but I eventually realized this should be invested and switched.
Other things I have done to increase my savings rate is save 100% of my bonuses and more than doubled my automatic contributions to my TFSA. Last year I landed at about 33% savings rate.
One area that I am saving a ton right now is on my rent. My 1 bedroom apartment rent doubled from 1k to 2k per month when I moved from Calgary to Toronto and I negotiated my work to pay for it for 2 years. This allows be to invest even more than I was in Calgary despite the ridiculous cost of living here.
One area I saved a lot over the past few years was on vehicles. I had a company vehicle for 3 years so spent only about 2k per year in taxable benefits on transportation which is dirt cheap. This also helped me save more of my income. I no longer have this so my monthly spend is up quite a bit for gas and insurance (both of which are horrifyingly expensive in Canada).
If you were rating these results on a scale of 1 to 10 (with 10 being best), what rating would you give yourself and why?
I would give myself a 7-8 out of 10.
I think that I really could save an extra 5k per year with some minor sacrifices, no expensive scotch or craft beer (also disgustingly expensive in Canada), less eating out and less skiing and mountain biking.
I also have a pretty sick moustache and on a per oz basis moustache wax is twice as expensive as silver.
Those are all things that I enjoy so I figure as long as I am saving 35+% of my income I don’t need to sweat the small stuff, that would all go to zero spend if I was laid off or my income dropped.
What are your future plans regarding saving your money?
More of the same. Try to keep lifestyle inflation to the minimum (a bit is fine but less than half of my salary increases is the max) and save a minimum of 35% of my gross income.
If I ever find a girl make sure that we are on roughly the same page about money cause I think that can derail a well laid savings/early financial freedom plan.
INVEST
What are your main investments?
I’m 50% long bitcoin and 50% short Etherium. JOKING!!!!!
I exclusively invest in boring old vanilla index funds. My asset allocation is 15% CAD Bonds, 10% emerging markets, 25% US, 25% Developed International, 25% Canadian. My MER is under 0.25% across all accounts.
I have my accounts set up to be as tax efficient as is simple so bonds and international primarily in tax deferred and Canada and the US in my TFSA. When I run out of TFSA room I will put strictly Canadian stocks in my taxable account.
My performance has been ~7% over the past 5 years. It is lower than it could be because I had 10-30k sitting in cash for 2+ years while I figured out what to invest in. I got analysis paralysis while I binged on books like The Intelligent Investor, Millionaire Teacher, and The Millionaire Next Door.
Luckily my DC plan was auto investing otherwise my returns would be a little lower. It is also a little lower than an index strategy would be for an American as my 25% Canada has been an absolute dog of a stock market through this oil crash. I sometimes wonder if I have too much Canada in my portfolio but the efficient frontier from what I have read is anywhere from 6-35% of your stock allocation for Canada. I guess being diversified means you hate part of your portfolio all the time.
Almost all of my investments are automatic. I do manually invest my bonuses or any excess cash I have around.
Any time I get much over 10k in liquid cash I invest the overage, whenever there is decent market correction like we had in Feb this year I dump an extra 5k in, but that is as active as I get.
Fun fact: I have never sold a security in my life. I also have 500 bucks in a P2P small business lending platform to try something different, but I really don’t think that you are compensated for the liquidity penalty or the extra risk you take on. I’ll probably keep doing that as it is fun and keeps me from buying individual stocks.
If you were rating these results on a scale of 1 to 10 (with 10 being best), what rating would you give yourself and why?
I would give myself a 6 out of 10.
I have behaved well with my investments, not selling when we have had 2 near corrections of 15-20%. Why I am giving myself the lower rating is because I didn’t invest from the start.
What are your future plans regarding investing?
I would love to buy some real estate, either farmland or a home but I live in Toronto where my 1-bedroom condo is worth over 550k and I rent it for 2k. The view is sick, but it still seems expensive. I plan on being mobile in my career so buying Toronto property seems like the wrong decision.
WRAP-UP
What money mistakes have you made that others can learn from?
- I didn’t invest right away in my personal accounts – I thought I would buy a house but was just scared to invest. When in doubt invest. I lost out on a few grand by not investing right away. Overall a small mistake.
- I prioritized my RRSP over my TFSA. I should have saved my RRSP room for when I was in a higher tax bracket. This probably cost me over 2k in tax deductions. I was like, “oh sweet I get a tax deduction”, when I should have realized I would be in a 40% tax bracket right now and get a much bigger tax deduction if I waited.
- I spend too much on eating out, but food is so delicious. I like cooking but cooking for one is lame.
Are there any questions you have for ESI Money readers regarding any parts of your finances?
I have one (four parts) around home ownership.
I think it makes sense to buy a home at some point as a general rule, I disagree with the stereotypical boomer mentality that if you don’t own a home you are pathetic lazy millennial who sucks with money and eats too many avocados.
I also think it makes more sense as you run out of tax advantaged investment room and have to pay taxes on dividends in your taxable account. I know that I want to live in Calgary at some point and the market isn’t insane there but I don’t think housing cashflows well for rentals and I don’t currently live there. I also plan on letting my career take me around the world for a bit 5+ years.
My questions are:
- When or do you buy in a house in a hot market where you don’t plan to live long term? (Toronto for me)
- Would you buy in a market where you don’t currently live and be an absentee landlord until you end up there (Calgary)?
- Is being a landlord worth the hassle (assuming decent returns)?
- When you are saving for a hypothetical house and you might not actually buy for years do you just invest?
The Physician Philosopher says
You are well on your way! Stick to the plan, and you’ll be a happy camper soon enough. As long as you don’t spend too much on moustache wax and scotch!
As for buying a house…. Every place is different in terms of the estimated time it takes to break even on buying. If renting would make you equally happy, this may be the better route. Everyone I’ve heard from that decided to landlord from a remote location felt like punching themselves in the face six months to a year into it. It’s a lot to handle from far away. There are management companies to help with this, but I’ve heard of some horror stories (house used as a meth lab, and no one knew until cops arrested tenants….).
Not sure I would want the headache of remote landlording.
Dan P says
Thanks for the comment about being a remote landlord! My current investing is so easy thats at least worth a percent or two in return for no headaches.
m says
First, I really enjoy how your sense of humor comes through in this post! Excellent storytelling.
I think you’re doing great–keep doing what you’re doing, and keep getting out on the slopes, the trails, the rinks, etc. Money is a tool to enhance your life and you don’t want to look back with regrets.
As for a house, there is no shame in renting. Buy when you need to, or feel you are settled into a location. Until then, it will just be an anchor if not financially, then at least mentally.
Dan P says
Thank you for the comments M!
Sean @ Frugal Money Man says
Congratulations on your early career success!
You hit the jackpot with your employer paying for your MBA, so it seems like you definitely are in a great position with a company who truly values you.
I did like your one line “when in doubt invest.” I couldn’t have said it better myself! A lot of friends/colleagues around my age (26) keep telling me that they are waiting for the market to sell off to invest. It has cost them money in appreciation and dividends, and they have all expressed regret in that decision. You will never go wrong by simply dumping money into index funds, then never touching/looking at them.
In terms of real estate, I probably can’t answer any of your exact questions. My wife and I live in a high cost living area (Washington D.C. area), and we recently moved out of our 2 bedroom apartment (rent $1,800) and back into my parents so we could speed up our savings process for our 1st home. We are planning to save up at least a 40% down payment for a home further south, where we will eventually relocate in the near future.
It’s always funny to hear some folks destroy millennial’s for the home ownership subject, yet they don’t really equate the debt/absurd home costs in major cities into that equation. Isn’t that easy when newly built town homes in my area are starting at 650k, and newly built single family homes are going for over 900k. Those prices will put the majority into a vicious cycle of house payments that would make it difficult to build wealth outside of your home.
Great interview!
Dan P says
Yeah its frustrating when all any adult tells you as a reasonable career stable millennial is that you should buy a house cause your just paying your landlords mortgage. Its not exactly that simple of a decision and realistically anyone who bought a home in the early 90s got in at the best point in a real estate cycle ever. Not exactly the best predictor of future returns.
I don’t think i could move in with my parents again though – that would drive me up the wall! good on you and your wife!
Fred says
Congrats on your success so far. It’s quite impressive.
I really like your aggressive approach to negotiating compensation (salary, raises, bonuses). And getting them to pay for your MBA and rent are huge wins. That skill will serve you well wherever you are. Not to mentions your ability to meet sales and productivity goals. Well done.
I’d be cautious on the rental property. That can be a great investment. They are also a lot of work. The upside of Toronto real estate is the potential for greater price appreciation due to demand. You should also be able to get higher rent. That’s also where the risk is. Hot markets can also come crashing down. Be sure you understand the market.
I would also not recommend being a long distance landlord. As the Physician Philosopher said in his comment, that can be a nightmare. If you want to end up in Calgary, I’d put additional money away for a downpayment. When you move, you’ll have more options with your cash. Easier to be a landlord locally.
Great job getting where you are at such a young age. Good luck!
Dan P says
Thanks for the comments – that is where my gut is at as well its just that everyone says i need to get some real estate. Not a great way to make a decision i know, and its good to have some input from the personal finance community.
Any thoughts on weather to hoard cash for a down payment when i don’t even know when I would be buying or investing since i’m flexible?
Dan
Lily | The Frugal Gene says
How did you find ESI and the personal finance community?! It sounds like you’re shooting through like a rocket!! Breaking 6 figs at your age (same as mine except I don’t make 6 figs) is impressive!! Almost as much as that consciousness.
Dan P says
Can’t remember exactly where i found ESI but i started reading a lot of books (wealthy barber , millionaire teacher ect) when i was about 23, then started reading some blogs like Financial Samurai and such. Im a big fan of Ben Carlson as well.
I actually have always enjoyed finance and business but never thought to hard about personal finances before that – likely on account of not have any.
Dan
Jesse says
I am Impressed. For a number of reasons:
* you’re very well written
* you grasp that the best investment is in yourself
* that deferred gratification benefits you exponentially as you age
* that you’re trying to understand who you are as an investor
* you’re negotiation skills prove successful for you (and I’m
Betting your company is impressed also)
* you have a mustache that requires wax (really?!)
We had rental property that was four hours away. That didn’t last long. The hassle factor was high and I hated it. The main benefit to real estate is diversification. But that’s quickly diminished when it comes at the cost of your performance on the job or your sleep factor. Focus on your job. You’ve proven solid thus far-don’t risk it with real estate until you’re more settled. Life comes in chapters. Real estate isn’t in this chapter. But it will present itself.
You’re on a great trajectory. Keep it up and life will be your oyster.
Dan P says
Thanks for the feedback and kind words! I appreciate the thoughts on real estate as well. I do have a mustache that requires wax, its about two inches long on the ends and i either salvador dali it, curl it or stick it straight out to the sides. I feel like i should post a link to my insta as proof. As an aside – it is a fantastic networking tool as everyone remembers me for it haha.
Dan
Mike H says
Hi Dan,
You are doing great and have a very bright future with all kinds of good options in front of you.
Are you ultimately looking for partner in life? Because if and when you get to that point it will be very important that you have reasonably consistent goals and values towards saving and growing your net worth. I wish you luck and success in the next chapters of your journey- you are already coming out of the gate very strongly.
-Mike
alana says
As the author pointed out, finding a partner on the same page about money is important. The fact that this is reiterated in the comments makes it seem like this is such a daunting task, is that really the case? I’m so glad to have read this interview today, reminded me that there are like-minded people out there. As a single, ambitious lady in her mid-30’s who is focused on achieving financial independence in the next 10 years, I just want to encourage Dan to keep looking, that special someone is out there!
I also live and work in Toronto and have a friend who works in Agriculture. She’s always encouraging me to look at opportunities in the industry and after reading your interview, I definitely will have to give Ag more thought. You have some seriously sweet benefits, kudos to you for working hard and negotiating your way to 6 figures at age 27.
To address your questions, why do you want to buy property? Is it for personal use, investment or are you looking for something to live in now and turn into a rental later? I could be wrong but sounds like the live now, rent later option. I’m not sure you can find a deal that cash flows well in today’s market (in Toronto). Also, if you’re going to move in the short to medium term, you’d have to set a really good team to help manage the property. If you’re confident you can find good help and the numbers make sense on paper, property investing could be a good option. If not, since it doesn’t seem like you’re bursting at the seams to get on the property ladder, I’d say keep on investing. I used to want to buy property as well but after learning more about financial independence, it’s lost its appeal to me. I no longer enjoy the idea of being tied to such an illiquid asset and I like being completely mobile for work. Plus I’m now addicted to watching my investing accounts grow ?. If average market returns are good enough for you, I say stick with indexing until your thoughts around real estate become a bit clearer.
Dan P says
Hi Alana,
Thanks for the comments, i don’t know that it is necessarily hard, it is just important. I was sure that I was the only person in Toronto who works in Agriculture – it is a great industry but not many are in it. If you ever had any specific questions about the industry i would be happy to chat and can get you my contact info somehow.
I like your comments around real estate as well and really appreciate your perspective as well as it seems you are in a similar situation. I totally know what you mean about starting to love watching my investment accounts grow. Compounding is pretty powerful. I would never want buying a house to prevent me from making out all my tax advantaged accounts and saving a little extra beyond that. Being mobile for work is such an huge thing these days, it is worth a lot really.
What industry do you currently work in if you don’t mind me asking?
alana says
Funny enough, I work in Commercial Real Estate!
Dan says
Hi Mike,
Yeah it is absolutely crucial – cant be on different pages there for sure.
Doug N says
Hi. I am also 52 and grew up in Iowa – DES Moines suburb. I look forward to reading more of your works.
JeffB MI20 says
Getting older means you can afford better scotch and beer, but the metabolism slows down. If those are your most expensive hobbies, go for it.
SMS says
Hi Dan
Enjoyed reading about what is going on in your ESI Journey. One thing I like about this blog is the individual stories and how there are common themes but also differences between people.
As someone living in New Zealand its good to get different perspectives from others. There are of course differences between all our countries but still a lot of common themes. As someone who has traveled quite a bit over last 20 years to Australia,Canada and USA two common things seem to come in conversations no matter where you are
1. Cost of housing – no matter if your are renting or owning
2. The price of gas – everyone bitches about the cost
Often viewpoints are a matter of perspective and I have found its interesting to check my own against others. If I use gas prices as an example
CAD pl USD per g NZ$pl
Toronto $1.28 $3.70 $1.47
Los Angeles $1.21 $3.50 $1.38
New Zealand $2.00 $5.83 $2.31
We all manage to survive no matter the price of gas (and bitch about the price) yet there is quite a difference. It also taught me one of life’s other lessons. I can do nothing about the price of gas so just have to adapt and suck it up and spend my time and energy in areas I can influence
In answer to you question about buying a property in another town from where you live here is my perspective
About 15 years ago my wife and I bought a property in a town several hundred kilometres from where we were living. It was bought with the idea that when we eventually retire we might like to move there. We rented it out and then a couple of years later bought another one in same town as an investment. The challenges with remote management are you reliant on a property manager as in my opinion its too difficult to manage yourself. No matter where you own an investment property then bad tenants are always a possibility. After a couple of years because of tenant issues we sold the 2nd investment property. Eventually we decided on a lifestyle change and moved to the new town and into our rental property. We kept our old house for 10 years and rented out before selling last year once we knew we would never move back. Overall owning investment properties was a wealth creation tool for us but it does come with risk
Good luck with whatever you decide
Dan P says
thanks for your perspectives SMS.
ThinkingAhead says
Since you read financial blogs and are in Canada, have you read Garth Turner’s blog? He has some good stories and numbers, especially relevant to Canada, since he lives there, and the entertainment value of his blog is great. I frequently laugh when I read it.
My thoughts to your questions:
1) When or do you buy in a house in a hot market where you don’t plan to live long term? (Toronto for me)
Buying a house to live in is different than buying a house for investment purposes.
If you’re looking for an investment house, then run reasonable comparisons and see if the numbers work. In Toronto, I’m pretty sure they wouldn’t. Most landlords seem to subsidize their renters and have a huge financial burden (mortgage), as well as risk, and loss to show for it. Don’t do it unless there is a good return, and don’t factor in appreciation into your calculations. There’s no guarantee of appreciation.
If you’re looking for a house for yourself, it gets tricky. First, compare the financial outlay you would need for the house you want (downpayment, taxes, fees, closing costs) as well as the monthly mortgage amount, and then compare what you would be paying for a similar house in rent (without your employer subsidizing it). With a single asset (house) taking up all your money, you have a big risk to factors outside your control, like the economy, job market and your employer wanting to move you. IF you can save money by buying, then decide whether the risk is worth it to you. If you’re going to be spending more to buy than to rent, then obviously, don’t do it.
2) Would you buy in a market where you don’t currently live and be an absentee landlord until you end up there (Calgary)?
No. Who manages the property? A property manager? Who manages the property manager? Too many things can go wrong for me, but you may feel differently. Again, as stated above, if you’re OK with the additional risk, then run the numbers and see if there is a good return, and if you want to tie up your money in a single asset with many factors outside your control.
3) Is being a landlord worth the hassle (assuming decent returns)?
Depends on a lot of factors. In the long run, housing appreciation tracks inflation, so not a great return. Where you can get a better return is your ability to manage the rental, to find a good buy, and to manage the renters, do renovations that make you money, and so on. I’ve got a rental property and it’s cash flowing well, plus the ability to depreciate expenses helps shield my income from taxes. I’m in the US, so I don’t know if Canada tax laws allow you the same. I was fortunate to be able to buy at a low price, but I’m not buying anything now, given the market where I live.
4) When you are saving for a hypothetical house and you might not actually buy for years do you just invest?
Yes, and nothing fancy. I started off by putting my downpayment money into an after-tax brokerage account and invested in an S&P 500 fund. Once I had enough saved up, I started looking for a rental property that made sense and nothing was meeting my requirements. I’m in a high cost of living area as well. Eventually, housing crashed but so did my planned downpayment money. I ended up changing plans and got a 10% downpayment conventional loan and funded it with some money from the brokerage account and some money I had in savings. I had a stable job, so I wasn’t worried about lowering my emergency account and wanted to save some of the money in my brokerage account. Also, selling at a loss allowed me to carry forward some capital gains for a few years. When the market recovered, I sold the rest and used the carry-forward losses to equal out capital gains and then put that money towards a refinance which lowered my rate and got my equity up.
Dan P says
Thank you for your incredibly detail response. I really appreciate it. I will also check out Garth’s blog i have not heard of him.
Thanks for sharing your experience with downpayments and investing. I really appreciate the real world insight