My_Brain_Gets_Itchy's Journal

Where are you and where are you going?
My_Brain_Gets_Itchy
Posts: 267
Joined: Fri Mar 02, 2012 5:29 pm

Post by My_Brain_Gets_Itchy »

@mfi:
Yes, good find.
I have an RRSP mortgage now (and have had another one in the past).
But I think the key difference for me (ie. in the future) and what the article only briefly touches upon, is that when you have an RRSP mortgage for the sake of your own property, you are paying yourself the interest. This is what I did in the past and what I am doing now.
However, in an investment property, someone else is paying the interest (tenant). You claim the interest as a rental expense like you usually do, even though the interest payment goes back into your RRSP.
You get the deduction on the accounting side that decreasing your net income, but the actual interest goes into your retirement account.
As an investor who already has property as a major part of passive income, this makes rental income much more tax efficient. I want to refinance to the highest amount possible (ie your rrsp balance) and take the highest posted interest rate possible (10 yr @6.75%), to make the interest deduction bring net income as close to zero as possible.
It comes down to whether one would rather invest in the stock market or if one would rather invest in your own property which acts as a fixed income product.
The property investment fixed income rate also happens to beat any fixed income rate in the market.
Besides the whole 'you need to balance' or 'you need to diversify' voices (which I think are good enough reasons on their own), its just that in my case, the market idiot, I can't see any reason why this wouldn't be the way to go for someone already in real estate. By concentrating the assets in this manner, you create greater efficiencies and bottom lines.
Unless of course, I may be missing something.
I totally concede a well planned or timed dividend portfolio can far exceed the returns of my plan. i.e. building a dividend portfolio starting in 2009 for example, or being a good stock picker who value invests like a Warren Buffet (ie researching fundamentals, valuations,etc) rather than someone who picks a horse at a race track (um, me).
I'm perfectly comfortable giving up any type of outperforming gains in the stock market, for some more predictable/manageable returns, especially when it comes to ERE.


My_Brain_Gets_Itchy
Posts: 267
Joined: Fri Mar 02, 2012 5:29 pm

Post by My_Brain_Gets_Itchy »

@George the Original one:
6.5% is a great return!
If I could do that in the market with confidence, I'd re-evaluate!


mfi
Posts: 93
Joined: Sun Jul 29, 2012 10:27 pm

Post by mfi »

I like your strategy a lot assuming you can structure/execute it properly to avoid tax problems. It sounds like you’ve done it before and may be admin fees are the only drawback.
I live in the US and I am not very familiar with the details of RRSP. Based on your previous posts and my Google search, RRSPs appear similar to IRA and 401(k) in the US, both of which have amount and repayment term restrictions on borrowing and potential early tax/penalties when IRS rules are not followed. For example, one can only borrow up to $50K from a 401(k) and the money has to be repaid within 5 years (or within 60 days of employment termination). Do RRSPs not have limits on how much you can borrow and how/when you have to repay the loan? May be mortgage RRSPs are a separate class with fewer restrictions?
The main reason I like the idea behind your strategy is probably because I also keep most of my assets in IRAs with some twists. I am allergic to real estate, dividend investing, or individual stock picking, but I am very comfortable with financial and commodity derivatives after 10 years of daily practice. I use my IRAs as trading vehicles and I am able to structure trades so that some gains accrue in a taxable account enough to cover living expenses (while avoiding penalties on early IRA withdrawal) and the majority of gains accrue in a Roth IRA (which will allow for a tax-free withdrawal in a couple of decades). Overall, my strategy is quite similar to yours, but I have a preference for different sources of risk exposure. The key is to find that one strategy that works well and also lets you sleep at night and then stick to it. Simple, but not easy...


spoonman
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Joined: Thu Mar 28, 2013 4:15 am

Post by spoonman »

I have been reading your journal for a while now. I absolutely love your style and resolve. If you don't mind, I think I will adopt your journaling style =).


My_Brain_Gets_Itchy
Posts: 267
Joined: Fri Mar 02, 2012 5:29 pm

Post by My_Brain_Gets_Itchy »

@mfi: Wow, derivatives for 10 years. I've taken a derivatives certification, and messed on HNU (2X Nat Gas), and I'm allergic to derivatives to say the least! If that is your expertise, you definitely are a rare one. You should post more of your derivative related strategies.
@spoonman: Thank you very much, I am flattered. Absolutely I would encourage it! I for one will be following your journal, as I am looking forward to hearing your travel and project endeavours.


My_Brain_Gets_Itchy
Posts: 267
Joined: Fri Mar 02, 2012 5:29 pm

Post by My_Brain_Gets_Itchy »

#021 31/03/2013 The Snow Fort,the Cardboard Box, and the Dining Room Table
A very early memory of happiness in my childhood was building small snow forts by shoveling tunnel caves in the snow curbs made by the clearing trucks on the side of the road.
If you aren't from the north-east or a winter climate, a more relatable visual may be when our family received a large appliance or some type of furniture that would come in a big box, that after some poking and cutting of holes, eventually became yet another fort.
These memories were triggered when I was watching my nephew and niece play.
They proceeded to crawl underneath the dining room table, close the 'door' (ie. dining room chairs), and they both sat there with a look of total contentment. Big smiles on their faces, and lots of giggling. They wouldn't come out.
Their very own little fort, their own home.
At what point did these little forts no longer provide contentment? At what point did I see this type of thing as silly?
Yes, I am no longer a child.
No, I'm not pining over the 'good old days'.
==Small spaces==
With the enlightenment of minimalism and ERE, the joy and contentment I feel in my new place, after only about a week, feels something like that fort. And yes, I don't want to come out.
I'm sure quite a few of you have already seen this Youtube channel about living in small places (http://www.youtube.com/user/kirstendirk ... ture=watch).
If you watch closely, you may see a lot of that inner child contentment in each of those residences. I see the same type of creativity and ingenuity in those videos as my nephew using the dining room chair as the door. They are fort builders.
I've lived in small places before, but never this small and never like this.
What I mean by never like this, was it wasn't by choice.
It was a suffering sacrifice that I had to endure. There was no smile, there was no giggling.
I never owned or empowered the space. I mean both literally and figuratively. I didn't build the fort.
==What I learned so far==
As things are rapidly beginning to settle down I have so far learned:
-Indoor small spaces provide a crazy coziness if you 'own' it like a child 'owns' that box or snow fort, especially if you are single or like to spend time in solitude. The 'mental acoustics' of the small space is optimized for my thoughts and self. I feel found.
-Indoor larger spaces, when single or in solitude, make me feel empty. it make my thoughts echo with distortion. I feel lost.
-Small spaces forces you to get creative. 'Space Hacks' that multitask, create illusions , practicality, ingenuity
-Small spaces make your life feel full.
-Less is More


spoonman
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Joined: Thu Mar 28, 2013 4:15 am

Post by spoonman »

Indeed, less is more. One of the great features of living in a small place is that it forces you to own less stuff, and owning less stuff means less time wasted maintaining those things.
I often daydream of the day we get rid of all of our shit and move into a nice little studio. My wife and I are well acquainted with studios because we had to live in them when we were in college. As a single man in those days I definitely liked the simplicity of the setup.


My_Brain_Gets_Itchy
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Post by My_Brain_Gets_Itchy »

#022 01/04/2013 The 20/50/50 Trade Off
My manager where I work has full disclosure of my plans to retire at the end of 2015. We have a good relationship and I fully trust disclosing to her that I am planning to retire.
She doesn't want me to leave.
A while back she proposed working part time in 2015 instead of retiring, ie. working for 4 days a week instead of 5.
She mentioned that someone else on our floor is doing it, and she still maintains her health benefits and her full vacation days, which for us is 21 vacation days on top of paid statuatory holidays, which are 11.
That got me manically thinking what if I do that now or for the next two years, before I plan to retire?
==THE INCREDIBLY REVEALING NUMBERS- 20/50/50==
The numbers don't lie and they work like this.
Currently out of 365 days of the year:
-I worked 229 days (63%)

-do not work 136 days (37%). I get 21 vacation days plus 11 statuatory holidays.
If one takes one day off a week in this scenario, there would be a reduction of 20% of your work and salary.
HOWEVER, the amount of actual time you spend NOT working will INCREASE 50%. That is, 50% of 2 days (ie. Saturday and Sunday) is +1 day.
The most dramatic effect though and most importantly..
The total break down of days not working for the entire calendar year?
183 days working

182 days not working
Throw in one paid sick day..
And 50% of your days in a year are spent not working.
==A shift in thinking==
When I first started with my ERE plans, the original plan was to retire at 45 in 2016.
Before moving to a smaller place, and after reading about Parkinson's Law, I shifted to age 44 and 2015.
But now that I am in the small place with decreased costs and pared down living expenses, I can't escape the idea that I can still plan for ERE in 2015, but that I can also plan on working only 4 days a week, or half the year, in this 20/50/50 model.
This is a fairly new revelation to me, and I'm still vetting it, and I'm going to spend the rest of 2013 figuring the numbers out based on this scenario in combination with the other numbers that have been vascilating.
I realize that any ERE plan should be fluid.
That, the first plan was largely built on theory and concept.
As I live more real life data and get more accurate life feedback and information, my plan should change with it.
==Half the year not working==
I imagine how it would feel like to have long weekends, every weekend for the next two years, 2014 and 2015, before I actually retire.
The more I think about it, the more I feel compelled that I MUST make this happen.
The more I see it, the more I see the return as being much greater than the 20% hit in FT salary, and something I should plan to work around.
Like many on this board, I've been a 9-5 cubicle drone for as long as I can remember.
Just this slight shift, I think will change my life patterns quite dramatically.
It will give me more time NOW to test out a lot of ERE life things that I wanted to do in the future.
It will also smoothen the eventual transition so much more.
This is the new plan. The new theory that will be tested.


J_
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Location: Netherlands/Austria

Post by J_ »

It is a joy to see your brain working!

The parameters shift as do the views.

Good luck with the new plan.


spoonman
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Joined: Thu Mar 28, 2013 4:15 am

Post by spoonman »

Wow, that sounds like an awesome new development. You are very lucky to have an agreeable boss.
You are absolutely right that real data beats theory. I say go for it!
plus: all of us here would benefit from any new insights you get from the extra time off =).


My_Brain_Gets_Itchy
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Post by My_Brain_Gets_Itchy »

@J_: Thank you J. Your encouragement from the start, as someone who's already been through it, has been a source of strength for me.
@spoonman: Most most definitely, I am very lucky and greatful to have the manager I have. We have a great relationship, and not having to 'hide' my ERE intentions is a relief. It is one of the things I will miss when I leave FT work.


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C40
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Post by C40 »

I'm enjoying reading your story immensely.
4 days per week of working sounds very nice, and it's something I will most likely try as I get closer to retiring.


My_Brain_Gets_Itchy
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Post by My_Brain_Gets_Itchy »

@c40:
Thank you very much.
I've read a lot of your posts in the past, and I always thought we had a lot in common in that you are a single guy living alone with a strong sense of empowerment, ie being single by choice and making the most of it.
A lot of the single guys around me choose to feel sorry for themselves in this situation.
As per the 4 days a week, I didn't realize that one day makes such a huge difference to the total proportion!


My_Brain_Gets_Itchy
Posts: 267
Joined: Fri Mar 02, 2012 5:29 pm

Post by My_Brain_Gets_Itchy »

#023 03/04/2013 Square Pegs and Round Holes
There is the peg, me..
Then there is the hole, my environment..
Most of my life is spent jamming myself into a hole that doesn't fit.
Then I wonder why I hurt and there is pain. I wonder why my life is full of discomfort.
I live this way.
I die this way.
A life unfulfilled.
I never realized there are other holes out there.
I never realized that my life was meant for a different hole, because I never sought to find it.
I choose now, via ERE to find my hole.
I don't know exactly what it is as of yet, but I am certain of what it is not.
If I never totally find it, that's okay.
Because I realize the search for the hole is as good as the hole itself.


spoonman
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Post by spoonman »

Dude, you and I are on the same wavelength today =). My thoughts exactly.


My_Brain_Gets_Itchy
Posts: 267
Joined: Fri Mar 02, 2012 5:29 pm

Post by My_Brain_Gets_Itchy »

** fist bump **
Right on, bro..
;)


My_Brain_Gets_Itchy
Posts: 267
Joined: Fri Mar 02, 2012 5:29 pm

Post by My_Brain_Gets_Itchy »

#024 08/04/2013 Left Brain-Right Brain ERE 2 Step
Recently, I came to the revelation that what I am doing in ERE is using my left brain to free my long repressed right brain.
This post expands on these thoughts.
==The 'How of ERE' as a pure formula and chess==
In my view, the 'How of ERE', i.e. the financial process, is almost an entirely left brain activity.
The left brain is often characterized as logical, rule driven, reasoning, numbers and math centric, and critical/analytical.
It's the engineering mind.
ERE is a complex, yet very simple formula.
ERE is complex in that on the micro level, there are many dynamic variables to your calculations, and all these variables interact in various ways effecting each other.
ERE is simple in that on the macro level, all variables belong to two simple categories, income or expense.
The more static these variables are, the more measurable they become and hence the more simple your ERE planning becomes.
It is a game of financial chess against yourself. I use chess as an analogy as it is often sighted as a predominate left brain skill. Your income Vs your expenses.
Your Queen is your savings.
Your King may be your home or your absence of one.
Your various life factors, ie. side jobs, vegetable garden, bike, etc, are pieces on your board, based on their strengths and weaknesses.
For example for me, a pawn on my board, is renting out a storage locker for $50/month income. A walking commute was another pawn until recently.
The more you let your left brain take control of this process, ie the more you strictly follow the rules, logic and the formula, the faster you will win the personal game of financial chess in ERE.
==My Left Hand - A trip down memory lane==
I am left handed. I was born that way. And because of that, I've always felt inside that my brain worked/thought slightly different. Not drastically different, just different.
With that, my competencies were also 'different'.
In grade school what came easiest to me were the arts. Art was my favourite subject and my best subject. Art assignments would totally engage me and I'd get good marks quite easily, whereas my math and science classes bored me silly, and it was a struggle just to get a marginal mark.
I took calculus in high school six times before I finally passed. No joke. (I would always drop out after derivatives because although not failing I was only marginally passing, which was not good enough since calculus was the only math prerequisite to any 'left-brain' major for university.)
The importance and dominance of left brain thinking in terms of parental pressure and society(i.e. job prospects and security), diverted me away from what perhaps was my natural disposition.
Since then until now, life has been more or less dominated by left brain thinking.
Somehow, despite no real natural abilities in the area, I did ended up in a left brain field.
==I ain't no Picasso==
Don't get me wrong, I ain't no Picasso. I do not have a constant desire/passion or compulsive drive to do art like things. I sometimes but rarely do.
I wouldn't even consider myself artistically 'gifted' in any respect.
All I am saying, is that my natural disposition is toward right brain thinking.
==Freeing the right mind==
As the process/transition of ERE moves more from the HOW (ie the financial) to the WHAT (ie. how I spend my time) I find that more and more of my time is focused on right brain things.
I've begun to see now ERE for me as also a process of using my left brain to free my right.
==ERE as a Life Painting==
When you remove yourself from the logical, rule driven and measurable aspects of conventional society (ie. status, income, title,etc) using a strong left brain approach to ERE, at some point, you will be left with a blank canvas to fill.
There are no rules or logic for your retirement canvas.
Zero.
There is nothing to measure.
It's entirely subjective, a piece of art.
All of it.
Do whatever the hell you want.
All those things you wanted to do that had no 'measurable' or 'monetary' return? Go right ahead.
Live your life as you were meant to.
For me, this is where I think I let go of my left brain.
Retirement now I see as my canvas to paint with my 'right' side of my brain, my right side of my life.
Bye Bye left brain, nice knowing you...


spoonman
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Post by spoonman »

That's a very interesting way of looking at it. It's a liberation of not only right brained thinking, but other wonderful things that are part of our human totality.
Indeed, the "how" of ERE is very much a left brain thing. Once the mechanics of the how are figured out, it's all about just sticking to a plan and turning the crank. That's why these days I often find myself thinking more about the philosophical aspects of the ERE journey and the awesome things I'll discover once I pass that threshold.


J_
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Location: Netherlands/Austria

Post by J_ »

I said once, when you reach fi, the difficult part begins, half joking.

That is finding a way through the infinite field of possibillities how to live your life, free of the pressure's to earn. A wonderful position, or when you find it too open, perhaps frightening.
For me, discussing this position with my wife, and then choose (and later again and again) is a wonderful position. No chess anymore, you don't have to win.
MBGI what a nice way to develop your thoughts and end with a white canvas.


My_Brain_Gets_Itchy
Posts: 267
Joined: Fri Mar 02, 2012 5:29 pm

Post by My_Brain_Gets_Itchy »

@spoonman, @J_:
Thanks for the replies.
Yes it's a little dangerous because aspiring to be ERE, with its SWR, savings rate, number crunching just totally amps up your left brain ( i mean really its very very stimulating in the same way chess can be), quantifying and measuring everything in our lives.
Its easy to then carry over that type of thinking into retirement, measuring and quantifying our life.
I was somewhat guilty of that in a previous post where I was itemizing/breaking down the hours of what I plan to do in my days when I retire.
Momments of vividness, awareness, serendipity and connection are all things I value more.
I do think these are things we can nuture by creating/fostering an appropriate specialized environment for ourselves.


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