Budgeting Debt-Free Living Financial Independence

BMW is Your Secret to Early Retirement

Everyone has to start somewhere. No one is born a financial genius, nor does everyone have an interest in their personal finances. We all have dreams, goals, bills, and expenses. Reaching early retirement might sound impossible but it isn’t. Anyone can retire early if they take the proper steps towards their freedom.

From a young age, children see their parents swipe those magic plastic cards that let you take anything from stores. They then learn how the bank of mom and dad can pay for the movie nights and new shoes.


Financial literacy is an ongoing learning experience. Kids should start learning basics at a young age so they understand that the “Bank of Mom and Dad” has limits. – Justin Thouin


Once kids grow, they quickly learn (usually the hard way) that those magic plastic cards need to be paid back and that bills don’t pay themselves.

Unfortunately, our school system does not teach basic finances and most parents are as lost themselves so young adults start in life with little guidance.

There are so many free resources available online there should not be any excuse to know basic personal finance. We should all know how to set up (and follow) a budget, manage daily finances, invest and make our money work for us, and live under our means. Starting on the right path from a young age will get you far.


You might get 85 years on this planet—don’t spend 65 paying off a lifestyle you can’t afford. – Cait Flanders


This year, since my sister is now in her twenties and will start her career soon, I wrote her guide to start off on the right foot and maybe, one day, retire early if she wishes to.

I thought this would be a great guide for anyone who needs a small introduction to the subject. This was written for my little sister but it is for all of you to learn, enjoy, and prosper.


Since you are a big girl now, and you will soon make a ton of money, it is time to talk finance. Here is my easy guide to freedom and financial bliss.


Step 1: Aggregate and create a budget

You cannot start saving until you track your money so let’s break the fear of looking at your monthly statements and get rolling!

  • Create a free account on Mint or Personal Capital and add all of your accounts (Banks, Loans, Credit Cards, Assets, and Investments). This will give you a snapshot of your current net worth and track all your transactions for you. Net worth is like your current financial health. Any credit and debt will pull it down and any assets will pull it up. Once you see where all your money is going, you can start optimizing your finances.
  • If you have too many accounts, try to consolidate them and close extra accounts to simplify your cash management. It can be practical to have one savings account per goal (Vacation Fund, Car Fund, Education Fund…) but it can also get complicated to optimize your finances that way. Open a high-interest savings account (we use Alterna Bank at 1.90%) and start saving!
  • Use credit cards for their good side, not their dark side. Always pay the full balance every month and use cash-back or travel reward cards to enjoy the best perks. That minimum payment they print on your bill is NOT the amount you need to pay. You will not pay a dime in interest if you pay the balance in full but you will definitively pay a ton if you only pay the minimum.
  • Once you are ready to write up a budget (or type it up), you can start with your fixed and variable expenses. In one section, write down all your recurring costs such as rent, internet, phone, electricity, and other bills. You can always cut these down but it will be harder than cutting down your variable expenses. Then write down all the other stuff; shopping, food, entertainment, gas… The best tip I can give you about budgeting is to include savings in there somewhere. Set aside money first and live on the rest.


Step 2: Lower expenses

Marketing is everywhere and companies are constantly coming up with new schemes to get you to spend your hard-earned dollars. It is important to revise and be very strict about your monthly reoccurring expenses. Now that you will see them all on your budget, you can revise each item one by one and see if 1; you really need that and 2; is there a way to lower that expense. Here are some tips arranged by budget category:


Bills & Utilities

  • Drop your cable plan and just have the internet. We cut the cable long time ago and now only use Netflix. It has better content, no ads, and is about 8 times cheaper than cable.
  • The single best thing a person can do to keep costs down is to reduce how much they spend on housing. Your home will be a huge expense throughout your life so only buy what you need. If you take the biggest mortgage the bank is ready to give you, you will end up spending half your pay on your house and you will be stuck to live paycheck to paycheck like everyone else.
  • You will find that many people in expensive neighborhoods are strapped in debt to the neck and stuck trying to keep up with the Joneses. Living in a low cost of living area not only costs less but also has much less competition and incentives to get all those fancy things. You will see once you start working that most people give in to lifestyle inflation; once they get a new raise or a bonus, their spending goes up. Instead, try living on what you need and saving the raises.


Auto & Transport

  • I have one word for this: BMW. Yeah, that’s right, Bike, Metro, and Walk everywhere you can. The less car-dependent your life is, the easiest it will be for you to control this expense. Cars are a huge expense for average Americans ($720 per month on average) but you do not need to spend nearly as much to get from point A to B.
  • If you do get a car, get one that suits you need and nothing more. Having a car bigger than you need or new than you need is just a hole in your pockets. Buying 5-years-old cars will literally save you thousands. Let the others take the depreciation loss and keep your dollars for something else more interesting.


Food & Groceries

  • Limit eating out to social activities and do not eat out just out of laziness. Meal planning and a good cookbook can easily cut down your restaurant outing to once per week and save you thousands per year.
  • Find the right mix of online stores, grocery stores, and bulk stores. We found that most household items are cheaper on Amazon and ethnic supermarkets offer the best produce at the lowest prices. Due to the home-cooking customs of the non-westernized world, their customers buy a lot more fresh produce so stores waste less of it and can buy in bulk. Those savings are going right in your pockets and you will eat a much healthier diet including more fresh produce in your meals. Their meats are also very cheap and they offer more variety than most chain supermarkets.



  • There are so many fun things to do outdoors if you let yourself wander.
  • Find local festivals and tastings in town.
  • Have house/dinner parties instead of going out with friends.
  • Go out with only a 20$ bill and leave the cards at home.
  • Eat at home. The more you get cooking, the better it gets.
  • Stop those impulse buys, always shop around and wait a few days before making any purchases.
  • Always compare on Amazon and craigslist before buying larger items. You can also apply the previous point by leaving items in your Amazon cart a day or two before checkout.
  • Do not think about the great sales stores are always advertising. Everything is 100% off when you are not buying it.


Step 3: One month of expenses + $1,000 buffer

It is important to have some breathing room and not live paycheck to paycheck. The first step is to have enough in your checking account (or savings) for 1 month of expenses + a 1,000$ buffer for unexpected emergency expenses. You will have a budget now so you know exactly how much you spend per month.

Once you are comfortable with this, you can even upgrade to a 3-month emergency fund.


Step 4: Eliminate debt

Your credit score is a number the credit bureaus (Equifax, TransUnion…) come up with to help lenders judge risk. Having a good score will make you save thousands over time. Not only do some lenders use your score to determine your interest rate but even some non-lenders also use your credit score to determine prices like insurance companies, landlords, utilities, etc… We have lower insurance premiums because of our score, get access to super cheap credit easily, and gained access to premium travel cards.

Scores are calculated based mainly on payment history, available credit limits, and age of accounts.

Basically, keep high limits but do not use them (try to use less than 20% of your credit card limits month-by-month), pay back your balances in full each month, and keep older credit products open. To eliminate debt as quickly as possible, start paying off the highest interest rates first (Credit Cards, Personal Loans, Lines of Credit).


Step 5: Get your money working for you

After you saved enough for emergencies (roughly 3 months of expenses) you can start investing to get your money working for you. Throughout the last century, stocks have outperformed other investment types and our tax system also encourages investors to partake in the equity market.

You could always try to pick stocks and hope to pick the winners but just think about it; out of all actively managed mutual funds, a whopping 82% of them did not constantly beat the index over the last decade. If even professionals cannot guess the next winners, I do not recommend you try to.

Since good stock picking is so hard and actively-managed funds the banks promote have large fees. An easy solution is index investing. This refers to simply buying all publically traded companies to benefits from the winners and average out the losers. You can start indexing through mutual funds or exchange-traded funds that track the index for very little fees.

Over the last 20 years, $10,000 invested in an S&P 500 index fund would have grown to $65,225 after a 0.05% annual expense ratio.

One quick tip; control your emotions! When your portfolio value goes down, you can keep investing and buy things at a discount. The market will go up and down and eventually, you will collect high returns on the upswing from the cheap shares you obtained when everyone else ran away.

On average you will hopefully get more than 5-6% per year from your investments and if you are saving enough, this will grow to a small fortune. All you need is a balance of a US Market Fund, International Markets Fund, and a Bond Fund.

  • TD Canadian Bond Index Mutual Fund (TDB909)

        or Vanguard Total Bond Market ETF (BND)

  • TD U.S. Index Mutual Fund (TDB902)

        or Vanguard Total Market ETF (VTI)

  • TD International Index Mutual Fund (TDB911)

        or Vanguard Total International Stock ETF (VXUS)


If all of this sounds too complicated, we suggest Wealthsimple.

Start your automatic investment account today!


Long-Term Retirement

Pre-Tax accounts like RRSPs (401k) are great to save on taxes once you make good money. There are also great advantages to use a TFSA (Roth IRA) to minimize your future tax bill.

Using this strategy early should set you up pretty well to retire. You can always access those funds if you wish to retire early as long as your income drops once you take it out, you will not be taxed much.

This may sound crazy but saving at least 50% of your monthly income is not impossible. It would be a huge step towards reaching early retirement. You do not need to work until you are 65 years old and simple, small tweaks in your spending habits could make a huge difference over your lifetime. Keep at it and you will get there while increasing income and decreasing expenses.

If you have been in the same job for a while, consider looking for new opportunities while you are employed. Yearly raises in your current job are usually very small compared to the salary bumps you can get from changing companies.

Once you have accumulated roughly 25 times your yearly spending, your investments can now sustain your monthly expenses. Congrats, you can now retire! You can then have the freedom of doing whatever you want with your own time. If you still enjoy your job by then great, if not, you can stop.


Step 6: Enjoy the journey

It may get rough at some point, especially if you have a lot of debt to pay back, but your finances can be kept simple. Have fun talking about money and reward yourselves when you reach certain milestones. The first big one is net worth zero and from then on, freedom is in your hands.

Live a life of abundance and luxuries but know that there is always a frugal way to do so. Approaching the big 3; Housing, Transport, and Food with frugality will drastically cut your expenses and make the difference between working until 65 or 45. You do not need to be cheap, just be conscious about your purchases.

As the American Dream thought us, we always need the bigger, newer, shinier thing. However, this is just a path down Forever Debt Road. Be mindful of your purchases and buy the things that make you happier but you do not need to keep up with anyone. Enjoy the present and enjoy life, most of the best things in life are free.

This is my road map to freedom and I wish you the best of luck in your wonderful career little sister.