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鈥檇 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 their responses follow in black.
OVERVIEW
Please tell us a bit about yourself.
We are Mr. and Mrs. Xyz from Our Financial Path. We are still in our late twenties, just got married last year, and are expecting a newborn in a few months. We are so happy to welcome a little one on our journey and cannot wait to share this amazing world with our little girl.
We are currently DINKs (Dual Income No Kids) but all this is about to change really soon and we could not be happier about it.
We live in a nice middle-class suburb in Canada but actually live way below our means compared to most of our neighbors.
Before we bought our house, we used to live in a small condo in the downtown core and would bike to work every day. This was a great way to stay active and live car-free but we still choose a house for a few reasons; we wanted to live close to nature, enjoy the lifestyle that a large house can bring you, and the costs ended up lower than in the city.
We are currently saving over half our income to build our wealth and retire early in less than ten years.
What is your current net worth?
We currently have around a quarter of a million in assets, which represents about a third of the net worth we plan on needing to support us in retirement.
This is broken down to roughly 30% real estate and 70% investments.
Over the past three years, we have accumulated our wealth through hard work and diligent savings. We started at 23 when we started investing a large part of our incomes simply because we wanted to buy certain stocks. We saw the appeal of owning companies we liked such as Apple, Tesla, and Facebook but did not have any long-term plan or vision.
It took us a while before finally thinking about buying a house. Back then, we were not even thinking about retirement yet. Once we had a goal in mind, we started minimizing our spending and increasing our savings. With a concise plan in mind, we bought a house the following year and then started saving with a longer wealth-building horizon.
EARN
Tell us a bit about your career.
I work in finance in a mid-level position for one of the biggest banks in Canada. I started as a stockbroker in the direct investing division of another of the biggest banks in Canada.
From there, I always learned more and more skills and got promoted to a global trading desk then moved down to a position in credit to work closer from home. I changed banks but kept my previous salary rank and now work 10 minutes away from home in a much less stressful environment.
Changing jobs for this local opportunity was one of the best things that happened to me. I can now bike to work during the hot summer months; it takes me under 20 minutes. When I drive to work, there is no more traffic, no more detours, no more stress.
My previous transportation costs added up to $9 per day but with this new commute, my costs are four times less and these savings add up to $1,700 per year, not to mention the six hours per week I have gained back in my life! Even when we were living downtown, the hustle and bustle were stressful.
Do you have a side hustle?
I made a few apps about two years ago and they are still bringing in a few hundred dollars every month.
We also generate a small revenue from our blog and host Airbnb guests in our spare bedrooms sometimes.
We are planning a 9 month leave this year, as soon as our little girl is born, and I plan to focus a bit more on our side hustles during this period.
How happy are you with these results and what future plans do you have for growing your income?
All in all, it is enough to put a smile on our face but not enough to quit our day-jobs. We wish to, hopefully, one day live off our side hustles and quit our day-jobs but we are far from there.
SAVE
What percent of your gross income do you save?
Our net savings rate is slightly above the 50% mark but this represents about 40% of our gross income.
We have found that the more we save, the fewer taxes we end up owing.
How did you get to this level?
We started looking into our budget when we wanted to save for a down payment for our home. Back then, we started using Mint to track all of our expenses and see exactly where our money was going. From then on, we have been slowly optimizing our spending to the level it is now.
It started with cable cutting. We switched to Netflix and saved over $50 per month with this alternative. Then we took a deep look at our spending to find everything that could be replaced, negotiated, or cut.
Our biggest win so far has to be credit card rewards. A year ago, we were spending over $9,000 on travel and we were able to cut this down to $1,500 with the help or travel hacking. We are still traveling the world as much, but we stopped paying for flights and get most of our hotels for free.
How happy are you with these results and what future plans do you have for saving more?
We are super happy to finally keep a stable spending level and think we have found the right balance for us.
At these levels, our wealth is building up quite rapidly and we can still enjoy the things we love like traveling or eating out.
INVEST
What are your main investments?
We share all of our investments in our Open Book series. Simply put, we are mainly invested in broadly-diversified index funds and mainly using tax-advantaged accounts.
We currently hold 40% of our investments in the US Market, 34% in the Canadian Market, 21% in the International Market, and 5% in Bonds. All of our asset allocation is composed of Vanguard funds.
In terms of returns, we have been very happy with the results so far. We do not track it often, mostly just automatically invest more every paycheck, but our portfolio is currently up 14% year-to-date.
How happy are you with these results and what future plans do you have for investing?
We are super happy with the results. For the future, we recently started playing around with a few cryptocurrencies and are hoping these will grow exponentially. We only invested a very small portion of our cash holdings into it given the risks involved. Only 3% of our total portfolio is invested in different cryptocurrencies and tokens such as Litecoins and Etherium.
No one can guess the next Bitcoin or even know if Bitcoin will be up another 70% in a month from now but we cannot win if we are not playing. This is a long-term play that could be very profitable if cryptos become broadly accepted over time. If it skyrockets, we will be happy, if it tanks, we will not lose much.
WRAP-UP
What money mistakes have you made that others can learn from?
We started investing in individual stocks before knowing anything about them. We were buying stocks we liked such as Microsoft, Google, and Tesla, but also bought stocks blindly without even knowing the product they were selling.
Do your research, invest only in what you understand, and invest with a plan. Once you have a long-term goal, everything seems to fall into place.
Are there any questions you have for ESI Money readers regarding any parts of your finances?
What are your thoughts on cryptocurrencies?
Do you think it is a frenzy heading into bubble territory or it is just the beginning of something much much bigger?
Lily | The Frugal Gene says
I started investing in individual stocks as well, big names like Pepsi and AT&T etc. Back then I didn’t know much about investing, which was good because I didn’t have a lot of money either! We all have to start somewhere so mistakes like that are welcome and more than relatable. Great interview!
Xyz from Our Financial Path says
Thanks Lily, we all need to start somewhere and I guess starting off with the big names is better than starting off with penny stocks.
Accidental FIRE says
I think many of us tried buying individual stocks when we were starting out, and most quickly realized it’s just not the easiest way to go. You’ll find some personal finance bloggers out there who make it work, and those folks are obviously smarter than me 馃檪
You guys are off to an amazing start at such a young age. Congrats on the impending baby and good luck!
Xyz from Our Financial Path says
Thanks you so much!
The Physician Philosopher says
Completely agree. This was what I was going to say. Reading A Random Walk Down Wall Street has made me appreciate this philosophy a lot more. Fundamental analysis (“doing your research”) sounds all well and good, but if everyone else does a different kind of research another company may do better (or yours worse) despite being a better company.
I love his example of this kind of thinking using the beauty pageant analogy. You have to pick the winner. You think initially this is easy. Do your research, find the prettiest gal of the bunch, and then pick on her to win. The problem is that there are 9 other people involved and the total count is what awards the winner. What if everyone loves the red head and you picked the blonde? Well, you’ve lost your bet. Not because the blonde wasn’t gorgeous, but because of the other voters opinions. You quickly realize your job wasn’t to “pick the winner,” it was to pick who everyone else thought the winner was going to be. That’s a lot harder, and is exactly what picking individual stocks is like.
Fundamental analysis, no matter how fancy and sophisticated it sounds, does a pretty poor job of “picking winners.” It’s a lot more boring (and a lot less sexy) to go with broad based index investing, but over the long hall this is the surest way to get to Dublin.
The Physician Philosopher says
P.S. Congrats on the baby! It’ll change everything, but in a good way. Wouldn’t trade our three kids for anything 馃檪
Xyz from Our Financial Path says
Thank you, love the beauty pageant analogy by the way.
Amy @ LifeZemplified says
It was great learning a little about you Xyz’s. I didn’t realize you were so young, great job on accumulating all that you have.
I can see some of the appeal for cryptocurrency but I’m not personally invested in it.
Best wishes on the baby and all your goals!
Xyz from Our Financial Path says
It is definitively not for everyone and most definitively not what I would call “an investment”. Crypto is purely speculative and a huge longshot and that is why we invested only a tiny portion of our portfolio into it.
If they shoot up, great. If it danks, we won’t starve…
Jason@WinningPersonalFinance says
Great Post XYZ. Congrats on your success so far and the upcoming new addition.
I see you really want to generate comments with that Crypto question. My two cents is that bockchain has utility. When something is useful it has value. That said, I have no clue if these existing currencies end up worth millions each or worth nothing. I鈥檓 certain don鈥檛 understand the market well enough to invest myself so I鈥檓 on the sidelines for now.
Xyz from Our Financial Path says
We’ve looked a lot into the product and love it, the blockchain can do amazing things, but you are right when saying we cannot predict which crypto will grow and prosper in the future. Cryptocurrency will certainly live on, bitcoin might not. We are just gambling on the next Microsoft 馃檪 That is why we only invested a tiny portion of our portfolio.
The Grounded Engineer says
I think crypto currency will be a long-term form of currency. However, I believe it is still in its infancy because money is something so sacred to people that it will take a long time for crypto to establish credibility with people.
I work in technical sales and I have two customers that are buying property and building these huge bit mining server farms. The investment they are making is insane!!
Xyz from Our Financial Path says
It will be a huge part of our future, which coins will survive though… that is still to see.
Dave says
Yes, thanks for sharing Xyz. I am a big fan of your blog. You are doing great. Congratulations and good luck with the new baby on the way.
Xyz from Our Financial Path says
Thank you so much Dave
Chris @ Duke of Dollars says
Congrats on the new baby!
Our thoughts on cryptocurrency align with Charlie Mungers….avoid it like the plague!
Two reasons:
1. It is so violatile that it is hard to know whether or not it is a fair value purchase, so your buying it with the speculation it will rise and someone buy it at a higher price from you. It has no inherent value since it is not an asset that produces any of it’s own money, like Microsoft does.
2. Although some businesses started accepting Bitcoin, it is really challenging for them to because of the violatile prices. How can a business reasonably priced their goods and also plan for the longer term plays when a currency changes so often in value? Very challenging thing to do in our humble opinion.
Thanks for sharing !
Xyz from Our Financial Path says
I agree with both of those points and that’s why we only played with a small fraction of our portfolio. Blockchain technology is going to be huge, we could not just stay on the sidelines.
It is a gamble, but a fun one 馃檪
JZed says
Agree with the comments here on crypto currencies. It is gambling at this point, not investing. If you don’t have much at risk, and you are having fun playing around with buying it and watching it, then enjoy… but don’t consider it an investment, consider it entertainment.
Blockchain in general is interesting, and has some potential in business, but the hype is massive at this point with little to show for it. Blockchain itself can’t work without the associated mining (to continuously validate the transactions on the blockchain)…and there is no reason to mine without the associated currencies… so there is a potential for sustainable value there. But it is dependent upon blockchain solving real business problems. That is where the value will be generated.
Sean @ Frugal Money Man says
I started off with individual stocks as well around 22 years old. I had no idea what I was doing, and looking back on it, I think it was more for the rush. 3 years later, I am now an Index Fund advocate. Makes the game a lot simpler, and you barely have to check your investments.
Congratulations on all your early success, and I wish your expanding family nothing but the best moving forward!
Xyz from Our Financial Path says
Thank you Sean!
Erik @ The Mastermind Within says
Hey Mr. and Mrs. XYZ’s!
Thanks for sharing your story. You’re doing very well and I’m glad I’ve been introduced to you!
I wrote an article about what I thought about cryptocurrencies. Really, my main point is, why are people in general so close-minded about where their money is stored? We are open about so many things, but when it comes to banks and payments, it’s like, OMG BUBBLE.
Erik
Xyz from Our Financial Path says
I think there is huge potential but the investment part of it is still a gamble. We approached it like any startup and only invested what we are ready to lose.
Nick @ HalfAsWell says
Mr. and Mrs. Xyz, it was neat hearing a little bit about your story.
I never really got into buying individual stocks, as I couldn’t be convinced of the long term returns having a higher rate of success of being better than say VTSAX. I ended up buying some stock in the company I work for (no ESPP yet) that has seen a steady rate of growth, and I wanted to have some skin in the game. It’s not a large amount enough to completely foil my plans if it tanked (I have bigger problems than my investment if it tanks, lol)
I kinda do want to get some skin in the cryptocurrency game, but I don’t currently feel comfortable diverting any more money than detailed above away from potential index fund investing. Not knowing anymore than the same cryptocurrency stuff that everyone has been reading in the last 6 months, Ethereum seems like a well regarded play at current time.
Congrats on the pending arrival! Kind of far off, but what is your approach to college funding and is that going to impact reaching your financial goals? Does Canada have something akin to 529s?
Xyz from Our Financial Path says
We do have something like 529s in Canada called RESP (Registered Education Savings Plan) and the government matches 20% of our contributions, up to 500$. We do plan on starting this plan in her first year and contribute 2,500$ per year into it to maximize that sweet match!
Gene says
Great start XYZ’s!
I am curious how you arrived to your desired net worth. I believe you are aiming for $750k? What will you do when you hit your “number?” Retire?
This may or may not pertain to you, but I worry for some people who plan to retire early and live off their savings of x. For example, $750k savings with a 4% withdrawal will give you $30k/year and has a high likelihood of lasting 30 years. BUT, many in the FIRE community are retiring in their 30’s and 40’s. They may have quite a bit longer than 30 years to live. $30k today will buy you a lot less down the road.
Just my thoughts. I’m relatively new to the idea of FIRE. I, for the most part, enjoy my job, so I don’t think I’ll retire super young. But I do like the “FI” part! Trying to figure out my “number.” 馃檪
Congrats and best of luck to you and your growing family!
Xyz from Our Financial Path says
Our idea if FIRE still includes some sort of income. We always have projects going on an will, inevitably, generate income from them in retirement.
Our number is more of a Financial Freedom number, simply not tied to the 8 to 5 anymore 馃檪
SavvyFinancialLatina says
I remember being so nervous when I started our financial journey. Are we making the right decision? I still have the same thoughts when it comes to big decision (i.e. career, house, family), but I can attest just pummeling cash into index accounts has proven fruitful. I really can’t wait for it to start snowballing.
Xyz from Our Financial Path says
The snowball comes pretty fast.
Michael CPO, From the Far Side of the Planet says
Individual stocks can be good …. if you have the time to properly research and think about your investments … index funds and rental real estate are less risky … I like the new BAT stocks and so on … the least time consuming option is of course Index funds … though again I have found real estate has been my most successful choice and helped me become a multi-millionaire on a international teacher’s salary – wishing you great success – It looks like you made a great start 馃檪 Michael CPO, From the Far Side of the Planet
Xyz from Our Financial Path says
Stocks can work for some but there is a lot of time tied to it. It just wasn’t for us.
Kevin says
I invest in individual stocks – 55% of my wealth (brokerage acct which is 5%-15% cash and rest stocks). I also have additional cash in 20% (high I know) and 25% in my 401k in funds. Total about $4M. My stocks are currently 22 and out of that I have a couple stocks I am overweighted in. Most start out at 50k-100k investment and will add on as I feel comfortable.
So with that said, you have to spend a lot of time, it is a job — one with a lot of flexibility. 2017 this part of the portfolio (which included some cash – i.e. my brokerage account) was up 28% (stocks only were up over 30%). Since end of Jan ’16 I have moved wealth from $2.8M to $4.OM overall despite having a significant portion in cash. But if I did not have the time to research, track stocks daily inclusive of releases, news other investor comments, look for opportunities then yes I believe index funds are absolutely the way to go.
Cryptos – just never felt comfortable. I commend you on taking a speculative chance. May be a higher risk than most speculative investments, but the returns could be higher. As I have really immersed myself into investing over the last few years, I wish I would have put a tiny bit in way back then (2013), but never really crossed my thoughts as viable. On one of the forums I have read upon, they recommend up to 5% speculative and crypto could be 3%-5% of your speculative portfolio or .15% to .25% of your portfolio. Thus, I would say you are a bit overweighted, but being as young as you are I don’t think that it is an issue, especially if you don’t have a lot of other speculative investments. If you were in 50’s, I would likely recommend to back off a bit. Since I am in my 50’s now I am not investing in it. If I did, it might be at $10k to $20k, but I doubt I ever touch it.
But above all else, congrats. There is no one way to invest and lots of paths to become FI. Lots of lessons to learn when young that will provide opportunities to outperform as you get older and more experienced. A loss is not a loss when knowledge is gained to make improved decisions going forward. FI is a process which in which patience and eliminating emotions (as much as possible) is key. Wish you continued success.
Xyz from Our Financial Path says
Thank you, Kevin. I have traded stocks in the past and did very well too (about 30% yearly) but I am just not willing to dedicate that much time and effort to it. If I was not working, it might be different.
For now, I am happy with index funds.