As a child, when Bob Lai, 37, finished his school year, he remembers his parents packing up the family vehicle and heading on vacation. It wasn’t so they could rush through a local hot spot in a few days. Instead, living in Vancouver, they would drive through Alaska or tour the Eastern part of the U.S. The trips would sometimes last for a month or more.
It’s not because Lai’s parents worked at an organization with a remarkable vacation policy. Instead, they had retired in their early 40s. After they immigrated to Canada from Taiwan when Bob was in his early teens, his dad looked for a job. “Nothing sort of fit his requirements,” said Lai. “After doing some calculations, he figured he could stop working.”
Lai’s parents essentially reached early retirement long before financial independence, retire early (FIRE) notions first surfaced. They had built up enough savings, saw enough success and lived frugally, freeing them from the day job. Instead of pursuing more work, they spent their time raising their children and traveling.
For many who consider the idea of retiring early, there’s a fear that they will send the wrong message to their kids. After all, what’s a child to learn in high school if all they see their parents do is lounge on the couch and leisurely twiddle their days away? That fear didn’t play out for Lai. Instead, he learned the benefits of analyzing his finances and remaining out of debt, ensuring that one-day he could step away from the career by the time he reached middle age.
While he doesn’t know if or when he might retire – he’s currently a product manager at a large organization – he has already reached his low-end target for financial independence. Despite having two young children, he’ll reach his high-end retirement target number within five years at the age of 42, a year younger than Lai’s father stepped away from the job.
Early Retirement Is A Family Affair
Even though Lai’s father was the first person in the family to retire before turning 50, he’s had other influences as well. His cousin, who lives in Taiwan, retired at 40. The cousin now spends much of his time biking and playing badminton. Lai has another cousin, a doctor, who has reached financial independence, but she continues to work out of the dedication to the practice she built and an enjoyment of the job.
It’s his father though, where he first started to see the possibilities of working towards a specific goal (as opposed to an age).
“I think we have always lived quite frugally,” said Lai. “I didn’t get a computer or like a gaming console until I was well into my teens.”
It’s just one example of their frugality. As a child, he often wore hand-me down clothes, the family had one car and they almost always ate at home. The effort to save became “naturally engrained,” Lai added.
When his father stopped working as a manager of an import-export company, it meant he had time to take Lai and his brother to school. They were always at functions, as well. As a teenager, Lai didn’t quite understand why his father had so much free time. “Now that I’m older, [I have a] great appreciation of him being around,” said Lai, who details his FIRE journey on his blog.
But he never thought of his father as lazy. His parents taught him the basics of personal finance, even as a young teen, so he knew not to go into credit card debt and only to buy what you can afford. It gave him an understanding that his father worked for what he earned.
Now, as an adult, Lai gets home on work nights and has two to three hours with his kids, 3 and 6, and believes it’s not enough.
It’s a good lesson to pass down.
His Own Journey
While Lai’s parents taught him much about frugality, that’s only one side of the modern-FIRE coin. The other side deals with investing. Lai didn’t know much about what to do from an investing standpoint until a few years ago.
Ever since Lai began working, he maxed out his retirement accounts that he earned via his job, which work similarly to 401(k)s.
It wasn’t until 2011, when he learned about dividend investing. That’s, in his tax-advantaged and taxable accounts, beyond placing funds in index ETFs, Lai also seeks to invest in stocks that provide a significant amount of income via dividends. As of now, he earns $23,000 Canadian dollars a year in dividends alone. By the time he walks away from his job, he would like that number to essentially double to $50,000 Canadian, which matches the typical level of yearly spending by the family.
Since he still works and earns a living, he reinvests the dividends. When he decides to quit the day job, though, it’s these funds he plans to use to afford his retirement years.
Where They Splurge
Lai’s grandparents were farmers and they often stressed saving “when you have money,” said Lai, and “never spend more than you earn.”
Shortly after he married his wife, Ayoe, the couple began to look for ways to cut back. They eat out about once a month and they choose to buy organic, otherwise, their costs for food remain fairly low. Ayoe primarily stays at home, caring for the kids before they reach school age, so they didn’t have to pay for childcare either.
But Lai doesn’t view his journey as one of extreme frugality. Instead, he believes the path to FIRE is about “ finding a balance between saving for the future and spending for today,” he said. While you might cut back on things you don’t necessarily need or enjoy, you then spend on the things you love to do.
For Lai’s family, that’s travel. His wife is from Denmark, so they travel back to her home country, as well as Taiwan as often as they can. Plus, they build in trips for themselves. While they try to use travel hacking techniques for much of this, it’s not always possible. And they’re also taking up skiing with their two children. It’s a cost he’s willing to find space in the budget to cover.
Now that he’s reached his low-end target for FI, though, Lai feels he’s “more in power.” He can decide to continue working or to take a year off and travel. It’s the freedom he sought since he was a young man.
It’s also a lesson he learned as a child.
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