FIRE Community Interview #3 – Dividend Investor Reached FI By Living An Intentional Life

Welcome back FImily to the next installment of the FIRE Community Interview Series! For anyone new here, this interview series will cover people within the FIRE community who are on their way to becoming financial independent, have already reached financial independence, or who have retired early. If you are reading this and you are financially independent, retired early, or close to reaching these major financial milestones, please reach out to the Modern Fimily! I am so excited to have “Martina” (not her real name, she prefers to remain anonymous) on to tackle our interview questions this week. We connected with Martina through our Instagram account and I truly wish we were neighbors. The list of things in which we both prioritize and value is just insane.  I feel like I could have written some of her responses below and you’d have no idea if it was me or Martina writing. Just like Ali & Alison from last month’s interview, it is very rare to find fellow lesbian FIRE members so we immediately hit it off and the friendship has grown ever since.  Martina and her wife live near Toronto (yay fellow Canadians!) and have already reached FI, yet they are still working to continue to grow their portfolio, take advantage of their employer related benefits, and help out their family members.  Again, I hope you appreciate these responses as much as I do and I hope you gain some knowledge along the way!  Martina prefers to remain anonymous so if you have any follow up questions or would like to get in touch with her, please leave a comment below and she will reach out. Martina, take it away!

1. Can you give us a little background of who you are, what you do, and how you became interested in personal finance? How did you discover the idea of financial independence?

I am a 42 year old female, married and live just outside of Toronto, Ontario. I currently work in the public sector (last 11 years) but also worked in the private sector (IT industry) for 9 years. I immigrated to Canada with my family when I was 10 years old and all we had to our names were a few suitcases. My parents struggled to learn English and adjust to a new country, and as a result had low income paying jobs until they retired at 65. Now that I think back, we would probably be considered borderline poor by today’s standards but at the time I was clueless to this fact and had a happy childhood as an active kid playing sports. My interest in finance started in my late teens but it was geared towards owning real estate. Although I didn’t have any guidance from my parents, I was a very inquisitive teenager and sought out information on my own.

I learned about the value of money early on in my life when I got my first job at age 12 delivering flyers so that I could pay for a week long tennis camp. Unfortunately, the concept of financial independence didn’t enter my mind until my mid-30s. This is about the time that the FIRE movement hit mainstream media and I stumbled upon the Mr. Money Mustache blog. The FI spark ignited in my brain when I read The Shockingly Simple Math Behind Early Retirement blog post. After binge reading all of his blog articles over a few days, I started thinking differently about money. I shifted my thinking from viewing money as a survival tool to viewing it as a freedom attaining tool.

2. When in your journey did you realize financial independence was actually possible?  Was that the original goal at the beginning? 

I realized that FI was actually possible when I learned about the 4% rule and ran my numbers in my early 30s. Although I don’t plan to implement this particular strategy in my early retirement, I think it’s a great starting point to get an idea of how much one has to save and have. Because I am a very frugal person, I was very surprised at how little I needed to have. Once I gained more knowledge about FI, I focused my efforts on getting my expenses down as opposed to increasing my salary. Because of my frugal lifestyle, I predict my yearly expenses in retirement to be anywhere between $21,000-$23,000 (to keep things simple, I won’t include my wife’s numbers as we keep our finances separate for the most part but our FIRE life will be mainly funded my stash of various investments).

3. To help put things into context; if you are comfortable sharing some numbers, what is your savings rate, FIRE number, net worth, salary, how many hours a week do you work, etc?

Love sharing my numbers as long as I stay anonymous 😉 and again these numbers do not include my wife’s savings/investments.

My savings rate is not a simple answer because I support my retired parents by paying the mortgage on the house that they live in (and have done so for the last 11 years) as well as a few other expenses that they cannot cover. I also bought them cars in the past and cover any major expenses that come with home ownership. So considering that, I am still able to save 44% of my net income (salary only, excludes dividend income).

Based on my vaguely predicted expenses in retirement of $23,000/year, my FIRE number is $575,000. Although I surpassed this amount several years ago, I still plan on working at my full time job for the next 6 years because I have too many unknowns in my future when it comes to the cost of supporting my parents and I like my job. My net worth is approximately $1.24 million. This includes two real estate properties (approximately 42% of my net worth) which will be sold when I quit my job, my work pension (approximately 23% of my net worth) which I plan on cashing out, stock investments (approximately 29% of my net worth) and cash (approximately 6% of my net worth). As shown, most of my net worth was attained through real estate. I love renovating homes to increase their value and have sold 4 homes in the past. I was also very lucky to have owned several homes in Toronto over the last 18 years and as you know, that real estate market went sky high; I greatly benefited from that. But over the last 5 years, I shifted some of my real estate money into the stock market. It’s become impossible to get any good deals in the GTA, and my renovation expert side-kick (my dad) is in his 80’s and retired from swinging the hammer.

Yearly salary (gross) is $115,000

Yearly dividend income is approximately $16,050

I currently have a challenging but very fulfilling job that provides great health benefits, a defined benefit pension plan, a 7am-3pm, Monday-Friday schedule and lots of vacation time. I work 35hrs/week and have the option to work overtime (which I mostly turn down these days because living a balanced life is more important to me then a bigger paycheck).

4. Do you feel deprived?  Do you feel like you are sacrificing and missing out on life?  How would you say your mindset has shifted throughout your FI journey?

I definitely don’t feel deprived, in fact most times I feel spoiled. I’m in good health because I have the time to be very active, and eat healthy. I prepare/cook 95% our meals at home and participate in activities that relieve stress. Luckily for me, a lot of the activities that bring me joy are either free or cost very little such as hiking, biking, back country camping, canoeing, tennis, X-Country/downhill skiing, gardening, building stuff/renovations and traveling. Most of our travel is done by utilizing our SUV as sleeping quarters or camping instead of renting expensive hotel rooms as most of our time is spent exploring the outdoors. We are both nature lovers and prefer to spend majority of our time playing in sun or snow (we’re not picky).

Since 2014, my mindset became primarily focused on accumulating and investing as much money as I could to reach FIRE as soon as possible (I didn’t have my dream job back then). I still have this mindset today but not to reach FIRE (because I already have) but more to challenge myself to achieve personal/financial goals. I like to set goals because I enjoy chasing the carrot and catching it; I get a sense of accomplishment and can move onto the next challenge in life.

5. What do you spend your money on and what don’t you spend your money on? Do you use a budget?  Do you track your expenses?

There are so many things that I don’t spend my money on that the list would be too long to mention but I guess some of the “normal” things that most people spend their money on that I/we don’t are: makeup/beauty products, jewellery, cable TV/landline phone, eating out, meat (we are both vegetarians), brand new fancy cars, professional sporting events, all-inclusive vacations and essentially any trendy/brand name items (we stick to the generic/no name brands).

Most of my materialistic and foolish spending was done in my 20’s and over the years I accumulated all of the sporting and camping equipment that a sporty/nature loving girl like myself can dream off. I also have enough clothes/shoes to last me the next two decades (no I am not kidding) and aside from spending extra money on our 2 dogs, most of our expenses are for day-to-day living costs.

I don’t use a budget and never have, I also don’t track expenses because it’s too tedious for me and since my expenses are mainly fixed, there is no need to track them. I am a natural saver and generally dislike shopping so over spending is never an issue for me. I always pay myself first by putting away $1200/month into my investment portfolios and any extra cash that is left over for the month, I put aside in hopes that the market will crash at some point and I will be able to pounce on the deals.

6. What is your investment strategy? Do you invest in mutual funds, index funds, dividend growth stocks, real estate, other businesses, etc.?  Has your investment strategy changed over the years?

Aside from my real estate investments, my stock investment strategy changed over the years. This is due to losing a lot of money after I started to day trade hoping to make a quick buck or $10,000. Back in my mid-20s when I was a naïve and an inexperienced investor, I jumped two feet into day trading because I made some money on a few risky trades. But the market wasted no time in chewing me up and spitting me out when I started investing in mining companies, oil, and trending, one product companies like GoPro and Digital Ally. Needless to say, I lost money, a lot of money (over $100k in just a few years, no I did not accidentally type an extra zero, I wish). But despite my big losses, I never gave up on the stock market; instead I hit the books, watched a lot of YouTube videos and read a lot of finance blogs to educate myself on how to successfully invest for the long run.

Today, the bulk of my stock market investments are in dividend paying stocks both US and Canadian companies with a sprinkle of 2 US ETFs. I hold no bonds, mutual funds or GICs currently. 

My strategy for generating money when I’m retired is purely from dividend payouts. I love this strategy for 5 main reasons.

1. I get to increase my portfolio size without putting in a single penny of my active income (which I do anyways) by reinvesting 100% of my dividends, 58% is done through DRIP. For those aren’t familiar with the Dividend Reinvestment Program/Plan (DRIP), a DRIP is a program that gives shareholders the option to reinvest their cash dividends into additional shares of the underlying stock on the dividend payment date automatically. The benefits of using a DRIP are that the purchase of additional shares is usually commission-free AND some companies even offer a discount to the current share price. Also, after the initial onetime cost to buy a stock, there are no ongoing costs/fees to maintain the portfolio for the rest of its existence.
2. Although not always the case, most of the companies that I invest in increase their dividend payments over time. So essentially, I get a raise every year or few years which should keep up with inflation. Below is a screenshot of my dividend stocks and how many times each stock either raised (green) or lowered (red) their dividend payout over the last 4-5 years (which is approximately how long I’ve held these stocks for). The picture also shows my current dividend yield based on my initial cost. And lastly, stocks highlighted in blue are DRIP’d.
3. Although generally speaking, dividend paying companies don’t have a large capital growth potential, I make sure that my portfolios have a mix of both “dividend growth stocks” and “dividend income stocks”. By combining both types of dividend stocks, I get the benefit of getting a higher dividend yield then any ETF/index AND I get some capital growth to add to my overall investment return. Click here for a video that explains this strategy better than I can.
4. NO TAXES! Because I will have no traditional income or pension when I’m retired, I will pay zero in taxes on my received eligible Canadian dividends (in most provinces this amount is around $50,000). This Business Insider article has a longer explanation on how this is possible.
5. Last but not least, I love the idea that I NEVER have to touch my initial capital once I’m retired because I plan to cancel the DRIP and use the dividend payments as my income to fund all of my living expenses. This eliminates my anxiety of running out of money, especially since the life expectancy of a female in Canada is 84. And yes, I do realize that there is a chance that a company may lower or cancel the dividend payment completely (this has happened to me several times already); majority of the companies that I now own seem to take pride in maintaining their dividend payments to shareholders and have a long history of doing so. By the time I’m retired, the dividend yield will be more than the 4% that is calculated with the 4% withdrawal rule which means that I will be able to live off approximately 6+% of my portfolio value without ever touching my capital (this blows my mind). This is the main reason why I chose to invest in individual dividend paying stocks vs. ETFs, index funds, bonds or mutual funds. Below are my dividend yield projections in my retirement year of 2026 and when I turn 60. The calculations are based on a conservative 2% yearly dividend increase and the assumption that I will never cost-average down when opportunities present themselves (which I will) and essentially leave the portfolios as they are (which I won’t because I will continue to purchase/rebalance my portfolios regularly).

6. If you could go back in time and change things, what would you have done differently?

Oh boy where do I start? How about staying away from day trading when I knew nothing about the complexities of the stock market. I also should have held onto my AAPL, FB and MSFT shares when I bought those about 6 years ago and sold them way too early for a tiny profit. Unfortunately I’m not a very patient person and struggle with just sitting on the side lines and waiting for growth. As I get older though and hopefully wiser, I’m learning that some things require time to grow and I see that in my dividend stock investing strategy. I still consider myself an active investor though and love to research and carefully pick undervalued individual stocks for my portfolios on a regular basis. I check the markets daily and always look for buying and selling opportunities.

If I could change only ONE thing, I would start investing in the stock market at a much younger age because the greatest wealth creating strategy is compounding and the main factor in that strategy is time.

7. Has discovering financial independence changed how you view your job and life overall? 

Discovering FI has not changed how I view my job or life overall but REACHING FI has definitely allowed me to be more relaxed at work and in life because I no longer have the stress of being stuck somewhere that I may not want to be at and I know that I can easily take care of my loved ones. My ultimate goal in life is to have freedom because that is what truly brings me happiness and peace. Being FI gives me that freedom and there is no better feeling then having choices and opportunities just because I have “money in the bank”.

8. Do you take advantage of tax advantaged accounts offered to you?  If so, which ones and how so?  Do you have a game plan to be able to withdraw from these funds without getting hit with a penalty?

Living in Canada, I definitely use ALL of the tax advantage accounts that the country has to offer. Here is a breakdown of what I keep in each account (and why):

• Non-Registered Account Holdings:
  • majority of my Canadian dividend stocks (they are eligible for the Canadian dividend tax credit and when I no longer have active income, all dividend payouts will be completely tax free)
• TFSA Holdings: 
  • Canadian REITs (to shelter them from taxes as their payouts get taxed higher then dividends from eligible Canadian dividend paying companies)
  • US stocks (to swing trade and avoid paying capital gains tax)
  • Canadian dividend stocks (to shelter the dividend payments from taxes as my current high income incurs some tax on them)
• RRSP Holdings:
  • Canadian and US REITS (to shelter them from taxes)
  • Most of my US dividend stocks (to avoid the 10% US withholding tax)
  • Non-dividend paying US stocks (to swing trade and avoid paying capital gains tax)

My game plan is to live off my dividends from my non-registered and TFSA accounts indefinitely. As for RRSP, I will slowly withdraw the funds starting at 65 but take out small amounts each year to minimize my taxes. Due to having a pension plan, my RRSP contribution limits are much lower than the $26,500 limit for 2019. I will only have about $130K in my RRSP account at age of 65 so withdrawing that amount over 20+ years shouldn’t affect my tax rate too much.

9. As a Canadian pursuing FIRE, what are your post-FIRE thoughts/plans regarding health coverage?  As a reference, what do you currently pay annually or monthly for health related costs? What do you estimate your post-FIRE health costs to be per year?

Luckily for us, the Canadian health care system was built around the principle that ALL citizens are guaranteed access to hospital and physician services “free” of charge because our health care system is publicly financed through taxes. Because the health care system does not cover “supplementary” benefits, like dental care, most vision care and drug coverage, these are the future expenses I only have to worry about (note at as a Senior citizen, some of the supplementary benefits and drugs are covered).

My approach regarding health coverage for these supplementary benefits is a non-conventional one. First, I pro-actively want to minimize the chance of future health issues by exercising, eating healthy and living a healthy lifestyle. Second, I plan to put aside a small amount of money now while I have a company sponsored health plan for the next 6 years, then use that stash of money to either cover a supplementary benefit expense (if need be) OR use that money to purchase a private health plan when I hit 55. Currently my work covers all health related expenses including all of the supplementary benefits. This is another reason why I want to work for another 6 years. I haven’t looked into the costs of a private plan yet as the numbers will definitely change in the next 10-15 years.

10. Where do you see yourself in the next year, 5 years,10 years?

I don’t see much changing in the next 5 years as I truly enjoy where I/we are in our lives right now. In 10 years though, we hope to be living in British Columbia somewhere in the mountains that will allow us to have a big piece of land with a small custom designed house (perhaps a house build out of shipping containers that uses solar power). It’s important to us to be surrounded by nature where we can easily enjoy all of our outdoor activities with our dogs. I would love to volunteer at an animal shelter or better yet be a foster home to abandoned dogs/cats.

11. Have you come out of the FIRE closet yet? Meaning, do your friends, family, co-workers etc. know about your financial independence goals?  If so, how did you bring it up and what were their reactions?  If not, why not?  Why do you struggle with this conversation and why do you feel that money such a taboo topic?  

I have not, partly because I am a very private person but mainly because when I do start talking about what FIRE is and that I’m trying to reach it (I don’t tell that I already have and that I’m a closet millionaire), I get looks like I’m going to miss out on life and get the argument that it’s impossible to save money in today’s world. Just to put things in perspective, I’m surrounded by co-workers that go out for lunch every single day and often have takeout for dinner and when I told them that I ride my bike to the local library on a regular basis they looked at me like I was from another planet. As for my friends, which I love dearly, some spend their money because of FOMO (fear of missing out on life), others spend their money to keep up with the neighbours and some like to spend their money on the new shiny things. Although, there is absolutely nothing wrong with any of these spending habits, they are all opposite of what I believe in and value. Surprisingly, this completely different way of thinking has not created any friction between my co-workers or friends and I; perhaps because I/we live in our own little FIRE bubble and don’t care how others chose to spend their hard earned money.

12. What pieces of advice would you suggest to someone who is just starting out or someone who is working toward reaching financial independence? 

I can’t say this often enough but start saving and investing as early as possible, even if it’s just $20 a month, compounding will take care of you in the long run. Secondly, knowledge is power! With all the free content that is available on the internet and libraries, there is NO excuse for not educating yourself about finance and other things. Lastly, the path to FI may seem long, daunting and unreachable initially but once the ball gets rolling, things pickup quickly due to the snowball effect. Don’t get brainwashed by societal norms/expectations or what others around you are doing; instead figure out what is important to you and your family and focus on that.

13. What has been your greatest accomplishment to date?

My greatest accomplishment thus far is that I attained a financial position that allows me to support my parents monetarily. My parents (especially my mom, the rock of the family) sacrificed a lot to give me a better life. Not once did she complain about her life (which wasn’t easy) and if it wasn’t for their hard work and perseverance, I wouldn’t be where I am today. I’m also blessed to have a lot of free time to spend with them because time is something that no money in the world can buy.

Another amazing interview in the books!  How’s that for our first Canadian interview?  For those new here, Martina is essentially my sister from another mister.  We are pretty much on the exact same wavelength (and oddly enough we have a lot of the same furniture/decor in our homes), except she and her wife have 2 dogs and we have a little human monster.  We constantly chat about properties in BC, tiny house companies we’re digging, and a grand master idyllic Walden-esque plan to start a tiny house community someday in a forested area in BC where like minded individuals could call home (one can dream!). We are very excited to finally meet Martina and her wife when they head out west to Calgary in March 🙂 Let’s go over some highlights:

• Like D from our first interview, Martina is also an immigrant which seems to have played a role in her view of personal finance.  I feel like many first generation immigrants truly understand what life outside a first world country is like and can appreciate that a simple life is a happy life.
• Martina and her wife are frugal and the idea of our family living off $24,000 CAD/year seems “normal” to Martina and her wife too.  There are SO many unnecessary material items that fill up our life that we have figured out how to eliminate without making us unhappy – in fact I’d argue that eliminating things has made us happier overall. Seems like Martina agrees as well!
• Martina is a freaking rockstar and not only supporting herself and her wife but ALSO her parents.  Giving back to those we love is one of the greatest gifts we can give.
• Martina is proof that real estate can increase your overall portfolio as she has made out very well with her real estate gains.  Luckily for her, the Toronto market (where she lives) has skyrocketed and she was on the right side of the market. (Is it luck? Or is that her frugal ways and thirst for knowledge allowed her to invest in real estate early on and rewarded her nicely over time? Hmmm…)  She also has invested in other markets outside of the Toronto area too and has done her research to find some gems.
• I love this quote, “I definitely don’t feel deprived, in fact most times I feel spoiled”. Martina has clearly figured out the mindset shift that we are trying to teach over here on the Modern FImily.  There are so many free or low cost actives out there that can bring you joy.
• Martina could have given up after some investment blunders in her 20s but did she?  Hell no!  She educated herself and now she’s an millionaire in her 40s.  BOOM!
• Martina is a fan of dividend investing.  I really wanted her on here to show our readers a glimpse into the world of dividend investing since we are on team index investing.  Thanks Martina for all the back and forth behind the scenes convos to get all this information regarding your dividend portfolio into the post. As someone who is both a dividend investor and ETF investor, she has a clear strategy as to which accounts to invest particular funds to be the most tax efficient.
• Another great line, “…REACHING FI has definitely allowed me to be more relaxed at work and in life because I no longer have the stress of being stuck somewhere that I may not want to be at and I know that I can easily take care of loved ones”. Her whole response to question 7 is awesome really.
• Ah, the good ole Canadian health system.  I am curious to see how all the future Canadians respond to this question.  I’m guessing it will be very similar.  We are VERY fortunate to not have the same post-FIRE health insurance related concerns that our pals down in the US have to factor into their calculations.
• For anyone new/just starting out on your FIRE journey, I truly hope Martina’s pieces of advice resonate with you!  This question is intended for those newer on their journey to apply these tidbits of advice to empower you along the way.

• FIRE Community Guest Interview # 1 – Empowerment Through FIRE
• FIRE Community Guest Interview # 2 – We Quit Our Jobs To Retire Early & Travel The World

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