This is a pretty awesome Millionaire profile of a high earner living in an extremely HCOL city trying to FatFIRE.
I’m a big fan of reading about other people’s financial paths so that you can learn from their mistakes and implement their wins sooner in life.
Finance Stoic is turning 40 this year and has a current Net Worth of $2M with a household income of $500k. FS and his wife live in Vancouver.
It’s interesting to read about his rental properties in one of the most expensive real estate markets in the world (ahem, thanks China) as well as his salary progression. No one should settle for yearly raises that just barely match inflation.
He fully details his net worth, asset breakdown, expense spending by category, and household salary progression for the last decade in this blog post below. You can learn a ton from him!
I. Profile and personal history
Thanks for having me on your blog Olivia, I appreciate it. It has been great getting to know you and many of the other people in our FIRE community on Twitter over the past 45 days.
For those who don’t know me, I write about financial independence with a focus on how it integrates with Stoicism, a topic I recently became quite passionate about. My blog is financestoic.com. I am going to give you a long answer on my profile and personal history, because I believe it tells a story of how I got to where I am today. Also, I hope people reading it will realize – if he did this, so can I.
The School years
My wife and I will both turn 40 this year. We started dating in 1995 at the start of grade 12, when we were 17. After high school, we both went to college, but took different paths. While we didn’t go to College for free, we did graduate with very little debt.
My wife was one of the top students in our high school and went straight to the top university in our Province on scholarship to the business program with an intention to be an accountant. While in University, she lived in a home that her parents owned close to campus to save money and worked evenings and weekends to pay her cost of living.
I was not a top student. Heck, I was lucky to graduate, as my focus was on sports, not academia. When I went to college, I studied psychology and English with an intention to do a PhD in English. Unfortunately, given my high school performance I don’t think my girlfriend at the time had faith I would get a PhD and she strongly advocated for me to change majors to pursue something that would get me a job.
I should clarify at this point. I am Caucasian and my wife is Chinese. My general perception from the many Chinese people we know is that Chinese, and most Asians, focus on school as a path to a career versus learning. Specifically, an Arts degree is not something an Asian mother or father are generally supportive of.
[Olivia: Yes, my mom asks me every few months when I’m going to get my MBA.]
At her urging, I dropped out of College and started taking night school for accounting, while working full time as a bank teller. After one year, I had a conversation with our auditor that I still recall today. Over a break we talked accounting and I mentioned I was doing my CMA at night and asked him why a CA. His response was If you look in the newspaper, you will see some jobs that say CMA, CGA, CA and you will see some that say CA only. Those are the ones that pay the most.
What will come out throughout most of my answers is that I am a competitive person who gets ahead in life versus sheer effort, versus brain power. When I heard there was a pecking order and I was not doing the designation that was at the top of the pecking order, I immediately pivoted. The caveat was that I needed a University Degree to get a CA.
I immediately applied to one of our top Universities in the Province and was accepted into the business program. I took classes year round [trimester], while continuing to work part-time at the bank. Additionally, I was a resident assistant to get free housing.
After my third year, I was hired by a Big 4 Accounting Firm, coincidentally ahead of my wife [I have to rub it in periodically because she was, and is, so much better than me] and did a summer internship in 2000, before starting full-time the week after September 11 , 2001. Our total debt from university was 100% me and it was between $15,000 and $20,000.
The working world
Fast forward to our second years at the Firm [yes, we ended up at the same one], and we bought our first home together in an area that was being gentrified. Our parents gifted us $30,000, which was the sole financial assistance we have received on our journey.
The home we purchased was a pre-sale and it completed construction early in 2004, the year we were married.
Poor choices and a needed diagnosis
Unfortunately, I made a poor life decision, which resulted in us moving abroad for four years. To afford the move, we sold our home, a big regret. Had we kept that home, it would have been worth twice as much when we returned four years later.
Fortunately, while living abroad, I was diagnosed with depression and ADHD. Because of it, I was wreaking havoc on our life, relationship and my career. This was why I made the decision to leave Vancouver and I often looked back on it as a great personal failure, which I never shared with my wife, because of the negative impact it had on our net worth. Fortunately, I made up for it later.
My wife stood by me, as I sought counselling and appropriate medication for the depression and I was able to get back on track and started to build positive career momentum again. We made the decision to return to Vancouver and start a family and, as fate would have it, found out we were pregnant the day I told my boss we were going home.
Back on track and moving on up
We came back to Vancouver and our first son was born while I went back to my Big 4 accounting firm for three years. My wife, after her maternity leave, started working in a government accounting role, which had great stability [more on that later].
In 2010, I left the accounting firm for good and moved into industry as a Corporate Controller. At that stage, I had to effectively hire myself. I interviewed for a Director of Finance position, but the Company decided to scale back to a Controller. I told the VP Finance that I was willing to take a step back if we could re-evaluate in twelve months and that’s what we did. In 2011, I was promoted to Director of Finance and our second son was born.
In 2013, I pursued a new opportunity at my current employer as a VP Finance. Over the past four years, I had increasing responsibility and was promoted to CFO two years ago. My wife had also grown in her role to a manager position.
II. Financial information
Net worth breakdown and discussion
Note 1 – Primary residence
In 2010, there was a downturn in a specific area of Vancouver, which was the Athlete’s Village. At that time, a presale campaign was launching for a concrete project with townhomes at the base. Because of the developer’s market fears, he blew out his units and we purchased a 1,700 sq ft townhouse [3 bedrooms and a den] for $700,000, which was the greatest investment we ever made.
You should understand, when we made this purchase, we were going against the common view. People were calling the Athlete’s Village a ghost town and my friends told me they were worried I would lose all the money we had made to that date.
In 2013 we took possession and moved into the townhouse. After significant price appreciation, we sold the townhouse in 2016 for $1.6 million when our mortgage was down to $560,000.
We purchased a single family home [our worst investment ever] at that time and our dream home is currently under construction. Unfortunately, it is behind schedule and over budget, significantly in both categories.
The current value is the costs that have bene incurred to date for the purchase and build.
Note 2 – Investment property 1
We purchased this investment property in 2014 as another presale project and took possession in 2016. Over that time, the property more than doubled in value.
One of my biggest regrets was calling my wife when she was on the way to purchase two of these units to say, I think we are quite leveraged. Let’s be sensible and only purchase one unit…D’oh…
Note 3 – Investment Property 2
We purchased this property in the fall of 2017.
Since acquisition, I believe the unit has increased in value by approximately $50,000; which is a 100% ROI; however, I will not accrue a return until it is appraised.
Note 4 – Corporate cash
This cash is the development profits from a real estate project that are within my personal holding company. We are keeping them aside to fund the construction of our home, as needed.
The development project returned a 60% IRR over a 2-1/2 year period, which was much more than anticipated when underwritten.
Note 5 – RESPs
RESPs are a Canadian method for saving for your child’s future tuition. The Government matches your contributions up to a certain amount and the investments grow tax free until the funds are removed for school. At that time, the funds removed are taxed in the hands of your children, which is at a low tax rate.
Note 6 – Cash
While we have our house under construction, we will be sitting on large cash balances to fund the construction.
We believe the total cost of construction will be $3 million and we will have to fund a significant portion of the remaining construction costs.
Vancouver real estate market
The Vancouver real estate market has been quite crazy since 2001.
We have been on an extended bull run that only had two short downturns in 2008 and 2012, which did not last very long.
An unfortunate side-effect, similar to San Francisco is that house prices are unaffordable for local buyers and the Government has stated they have a desire to cool the market.
This is a big fear for me. Given 124% of our net worth is invested in our primary residence and two investment properties, I fear what the Government interventions will do.
To date, they have implemented:
- Speculation taxes
- Foreign buyer taxes targeting Mainland Chinese investors
- Increased property taxes and property transfer taxes for high value homes
- Empty home taxes for homes that are neither owner occupied nor tenanted
Portfolio allocation decisions
The decision to invest in the way we have is driven by my knowledge base.
My career over the past eight years has been in the real estate industry in this City. It is what I am comfortable with and I believe I have advantages over the average person in the market. Specifically, I have:
- A better idea of what to purchase, and where to purchase it
- Access to acquire units before they are widely marketed to the public
Given this, despite my biggest fear being a negative impact from government intervention, I intend to purchase one to two investment properties per year.
Between cash and RRSPs, we now have $1 million outside of real estate and we will continue to grow our RRSPs by ~ $60,000 per year.
We have pretty substantial debt at $1.7 million; however, some key considerations:
- The vehicle debt is < 3%
- The investment property debt is 2.5%
- The construction loan is currently 4.4%
- We have not carried a credit card balance since I was a student in 2000
While some people don’t like debt, I have historically been a fan of leverage.
Why do we have so much cash if we have such high debt? There are a couple reasons.
The debt in my personal corporation cannot be readily accessed without negative tax implications and will be used for future developments.
The cash in our bank accounts is meant to fund construction until we can draw on our construction loans.
Best and worst investments
I say above that our best investment was our townhouse, because it generated a return of $900,000 over six years on an investment of $140,000.
That’s not true though. My greatest investment to date has been my investments in myself. I am a firm believer in the Growth Mindset, and I have invested a lot of time in personal development. Whether it’s school, online learning, reading, or executive coaching. Every day, I seek to be better than the day I was before.
Incremental improvements + consistency + time = exponential returns
My worst performing investment is the purchase and construction of our single family home for a few reasons.
If we had not purchased it, we would have a mortgage under $500,000 and be very close to financial independence given our current earnings.
Also, because it’s behind schedule, and over budget, we have had $600,000 sitting idle for one year not earning any return, whether in the stock market or in a development project.
Very early in our relationship, my wife said that she wanted to play a supporting role. She did not want to focus on her career. Instead, she wanted to focus on our children and supporting my ambitions.
On the other hand, I have never, and may never, be happy with where I am on the Corporate Ladder, always seeking to be more.
Why did my wife and I decide that early on? Childhood, perhaps.
My mother and father in law immigrated to Canada with their two sons and had my wife in Vancouver. They moved to a small city and purchased a restaurant with siblings.
Through her entire childhood, her parents worked at the restaurant and weren’t a part of her life. She woke herself up, made herself lunch and got herself to school. It’s hard for her to recall her mother ever hugging her or saying I Love You.
[Oliva: Side note, I think it’s just that Asian people who grew up in Asia are not good at expressing their emotions. My mom was a SAHM and I did see my dad too, but culturally Asians say “I Love You” by providing for their family. In college I was in a Asian class and the professor asked whose parents had ever said “I Love You” and there were no hands… Don’t worry, I know my parents loved me very much even though they never said it and I’m sure they loved your wife very much too:).]
That is not what she wanted for her children.
I grew up lower middle class for most of my life and my parents sacrificed financially to allow us to play sports and lead a decent life, but materially, I always felt an outsider to my peer group. It drove me to be super competitive in sports to prove myself and it’s driven me to continue to do so in my career.
Jobs over time
As mentioned earlier, I am a CFO in real estate in Vancouver, BC.
I do like my job quite a lot. I have managed to build an amazing team over the last four years of intelligent, hardworking, and capable colleagues who make going to work every day awesome.
Prior to starting in accounting out of University, I would say I have had a lot of other jobs, but no careers:
- Baling hay in high school
- McDonalds cook
- Laborer in a factory in Summers
- Server at night during university
- Teller at a Bank
- University resident assistant
Since I started working, I don’t think I have not had a job, which has been a long time.
Over the past eight years, our combined compensation has been:
We have averaged an increase in our total compensation of 16% per annum over the last eight years. Given my wife’s salary has remained quite consistent over the past four six years, post her second maternity leave, most of the growth has been from my salary.
I have increased my salary 216% in the last eight years, or 27% per year.
How did I do this and how can you do it?
Unless my wife was willing to support our family the way she does, it would be hard to achieve what I’ve
For example, in my post five steps to a 1%ers salary, I highlight a time that I had to work 12+ hours per day, seven days per week for six weeks or more.
After about four weeks, my wife rolled over in bed and laid her head on my chest with tears in her eyes. When I asked what was wrong, she replied I miss you.
As a husband, it’s been one of the hardest things I have ever heard; however, she understood when I lifted hear head off my chest, said I miss you too, but there are only a couple weeks to go, and headed into the office.
If you intend to be a high earner, there will be sacrifices that you have to make and you have to be ready to recognize that.
That brings us to sacrifice.
Do you notice that a lot of readers of frugal FIRE blogs doubt that the authors can be as frugal as they say they are?
Why do you think that is?
I believe that many people are not willing to recognize that someone else is willing to do what they are not willing to do, which is sacrifice.
I personally believe these authors and I know that I am not willing to do it. That is self-awareness, but I fear not enough people have it.
Likewise, if you want to be a high earner, then you have to be willing to sacrifice.
- Long hours
- Constant stress
- Consistent surprises
- Career ahead of family
While these sacrifices aren’t made every day, they’re made consistently.
Sink or Swim situations
When you are trying to move up the corporate ladder, you need to hustle, hustle, hustle.
You need to consistently seek out sink or swim situations and then you need to swim. Like the duck who looks graceful above the water, but has flippers working frantically below the water to propel itself.
As Richard Branson said:
If somebody offers you an amazing opportunity but you are not sure you can do it,
say yes – then learn how to do it later!
For example, regardless of what section I was handed at the Firm, there were always people who said that section is so hard. My reply, regardless, was how hard can it be, someone did it last year. I was not ever saying this out of hubris because I felt as smart as anyone. Rather, I knew with the right effort and application, I could learn anything. Further, I believe that anyone can do that. Unfortunately, people don’t believe in themselves enough.
Learn, learn, learn
As I said above, the greatest investment I have ever made is in myself and it will continue to be.
Learning has a compound effect that cannot be underestimated.
[Olivia: We both love Farnam Street! They’re awesome. Also John Nash.]
IV. Finance Stoic, why haven’t you FIRED yet?
I knew this question would come and there are three key reasons:
- Our earnings have been climbing over time, they have not always been high
- I convinced my wife to purchase a lot and build a single family home in Canada’s HCOL city
- We, mostly me, spend too much money
With earnings in Canada, it is important to note how high our tax rate is. The highest marginal tax, on earnings over $205,000 is 49.8%. With fully maximized RRSPs last year, we still paid $137,000 in tax for an after-tax income of $302,000.
As I said above, I convinced my wife to purchase a single family lot and build a house in a very HCOL city, which will delay our ability to FIRE.
Oh boy, now I am worried with this section, given we had after-tax earnings of $302,000 and I am about to post my actual 2017 expenses, will I get eviscerated like that poor couple the Financial Samurai posted about last week? Perhaps, the difference is I know I am not living a middle class life?
[Olivia: I’m curious to see how this turns out. He recognizes that he’s in the 1%, people should be understanding. FS has worked so hard.]
While we are building our house, we have a high interest construction loan at 4.4%. Post construction, I would expect it to be at least 100 bps lower.
[Olivia: 1 bp is .01%]
Additionally, once complete, we will be renting out our basement suite, plus Investment Property 1, which we are living in, for ~ $4,000 per month, which will offset this expense.
In 2017, I lost 35 lbs from a reasonably serious exercise program and spent a lot of money along the way. Perhaps I should have bet on myself so I could make a 20% return losing weight.
As a result, I was spending significant amounts on running gear, gym costs, physiotherapy and new clothes.
I do not expect to continue to lose that much weight this year, have cancelled the gym membership, and reduced my physiotherapy visits by 75%. As a result, I expect this category will reduce $10k – $15k this year.
Auto and transport
During the year, I purchased a new car with low financing rates. That said, I put down a significant amount to lower my monthly payments. Instead of capitalizing and amortizing, my wife expensed it all in the first year.
This category will be significantly lower next year.
How did you get into FIRE?
When I was working insane hours at my current job, see discussion above, I started to have health issues. Weight gain, insomnia, adrenal gland failure, etc.
The types of issues that lead one to ask: when is enough, enough?
At that time, I found MMM’s website and I really became interested in the concept of frugality.
It was only a couple years later though that I realized that I wasn’t frugal, and any claim to it was not fair. Fast forward a couple years, and I am back at it; however, this time I know what my goal is and it isn’t lean FIRE. Instead, I am seeking FatFIRE.
I believe we will be able to get our expenses down to $125,000 over the next seven years and that we can save sufficient net worth to retire and live off of $125,000 with the 4% rule.
When do you plan to FIRE?
Interestingly, I don’t know if I do plan to FIRE.
I plan on reassessing with my wife and our family when I turn 45, which is 5-1/2 years from now.
At that point in our life, I will consider a few options:
- FI and Pivot
- FIRE in a few years
At 45, I expect to have achieved FI; however, I don’t know if we will be ready to RE. If any move is made at that point, it’s likely a pivot that still allows me to earn income, but differently. However, and whenever, I choose. It is ultimately above flexibility.
Conversely, we could look at our financial situation and realize that we have only a few years until we can reach full FIRE. If that is the case, I would gut it out for a few more years.
If I had to guess, I am leaning towards FI and Pivot.
We are going to build a substantial rental portfolio over the next five to ten years. Unfortunately, none of them are cash flowing yet, because they’re either under construction or I am living in them.
In the past, I have taught at a local college [I neglected to mention above, I also have a Masters degree in accounting] and may consider this when retired.
My most passionate side hustle to date is a Fantasy Series I am writing with my sister. Currently, we have written about 70,000 words. Until published, the income from it is zero. For this project, it isn’t about the money. It’s about achieving success artistically, which is important for all the times you hear you’re just an accountant…you can’t be creative…
If it ever gets published, I will let you know 🙂
Visit Finance Stoic over at his blog! **FYI, he inserted all the links and I felt like he was extremely generous with linking to some of my posts and another blogger’s as well!
My favorite post(s) of his:
Will you remember this fight? – I love Marcus Aurelius’s Meditations. Isn’t it amazing a book written millennium ago is still incredibly relevant? Does your anger over an event matter in a few months?
Life is Good – The more I read FS’s blog, the more I appreciate his love of stoicism (ie grittiness).
SMART Goal – How FS sets goals in a specific way to ensure his [and your] success.
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