Retirement Planning: How To Achieve Financial Independence By 40

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What's your retirement plan? You might be thinking, "I'm only in my 20s or 30s. That's a long way away. Why would I be thinking about retirement now?"

Retirement is something that everyone should be talking about, regardless of age. Personally, I believe the earlier you start planning for retirement, the better off you will be.

My husband and I started talking about our retirement in our early 20s. We knew we both didn't want to be working 9 to 5 jobs in our 50s. Our goal was to both be financially independent by 40.

Basically we wanted to be able to cover our living expenses and have the choice to choose if and when we worked. It was also important to us to maintain a similar lifestyle where we are able to take a couple trips a year, go out for dinners a couple times a week and purchase items we want without feeling guilty. No instant noodles or macaroni & cheese dinners every night; that is not the retirement lifestyle we envisioned.

Investing In The Real Estate Market

The goal for us was not to retire as fast as we could, but to have a good quality of life and enjoy retirement. We started brainstorming passive income ideas and eventually settled on real estate. This is obviously not the only route of passive income, but it worked for us based on the market and our skill sets at the time. Since then, the market in the city we live in has drastically changed, with property prices increasing at an exponential rate. If we were to start today, I'm not sure we would have gone the real estate route.

When I would tell people my goal was to be financially independent / semi-retired by 40, I would get smirks, eye rolls, and backhanded comments like “good luck with that”, “that's a nice dream”, or “oh, you are so cute”. Fast forward to today, and we are well on our way to making this goal a reality.

My husband left the Navy three years ago and is now semi-retired. He does manage our rental properties, but that typically does not take up very much of his time. He recently discovered pickleball and spends most of his time down at the courts. I'm currently 34 and am planning out my last few years of work as a Vice-Principal. 

You might be thinking, "well, how did they do it?" I would like to tell you that we were lucky and got into the market at the right time, but luck had nothing to do with it. We searched for multi-unit properties or properties that had the potential for multi-units that needed a lot of work. Properties that would scare off other potential buyers.

Our first property was a foreclosure that was owned by a chain smoker. The walls, carpets, and ceilings were all stained brown, and the smell was terrible! The unit was also full of dust and dirt. Needless to say, it was a total gut job, and we ripped everything out. Ironically the previous owner owned a cleaning company.

Our second property had a basement so scary that I could have sworn a murder had taken place and bodies were buried down there.  We spent our evenings and weekends renovating these properties. I'm talking about working our day jobs, then going to the property where we worked until 10 pm, go home, shower, eat dinner, sleep, and wake up, rinse and repeat. Typically, it took us two years to finish a project, then we would rent the units out and look for our next project. Our social lives really took a hit during each project. 

You might be thinking, "how did these 20-year-olds afford to buy these properties? Did they have family money? OnlyFans?" I wish! 

We saved for years to purchase our first property. I worked almost full-time while going to university and my husband had his university paid for by the military. Not having student loans really helped. We were mindful with our purchases; buying items when they were on sale and going out to restaurants with great happy hour deals. We have always purchased used vehicles and shopped around for deals on our cellphone and internet plans.

The largest cost saving measure we were able to take was living in my parents basement for two years while we were building our second property. To purchase the next few properties we used the equity from the first property to finance the second property and so on.

Planning For Retirement

I am hoping that hearing my story has inspired you to start talking about your retirement. Sit down tonight and write down your hopes and goals for retirement. 

Some questions you can ask yourself are:

• When do I want or hope to retire?
• What lifestyle do I want to live in retirement?
• How much money can I start saving now?
• Are there any expenses I can cut out of my life?
• What are some passive income options I can start exploring?

Simple Actionable Next Steps

Talk to others about their retirement plans to get some ideas. You can also make an appointment to talk to a financial adviser at your bank.

Open An Investment Savings Account: Start putting some money, even $10 or $50 a month, into a TFSA (Tax Free Savings Account), RRSP (Registered Retirement Savings Plan), or any other account of that nature. If you save $50 a month for 20 years, with an estimate of a 10% annual return on your investment you will have around $40,000.

Turn Your Hobby Into A Small Business: I have a friend who sells extra plants from her garden, and another who sells bejewelled items like travel mugs and hats. You possess unique gifts and talents, so start brainstorming about simple products and services that you can offer either in person or online.

Reduce Your Expenses: Think of ways you can cut down your expenses every month and act on at least one of your ideas. I wouldn't recommend drastically changing your life overnight, as they say, Rome wasn't built in a day and neither is your retirement. Your quality of life is important too.

Some things I do to save money are use coupons, price match at the grocery store, and purchase used items instead of new ones through websites like Facebook Marketplace. Don’t worry too much about one time purchases unless you are thinking about buying an $80,000 car; you don’t need it!

Focus your attention on recurring payments like your cellphone, car, or internet. We shopped around and were able to get a Black Friday deal on our cellphone plans and we both pay under $40 a month.

Retirement planning should be fun. It does involve some hard work, creativity, and dedication but there is no reason you can't dream big.  Roll up your sleeves, put in the work, and make your retirement dreams a reality.