IPFC 01: The Debt-Free Lifestyle

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The Debt-Free Lifestyle is our story

Christine: Hello, everyone and welcome to Its Personal Finance, Canada. This is a podcast that we myself and my husband have put together to share with you a little bit about what we’ve learned on our personal finance journey in a very Canadian way. My name is Christine Conway, I’m also designated and have been in the financial services industry for the last sixteen years being everything from a receptionist at a managing general agency to the President of a company that has been in existence for forty-four years. Ask me about that later. It’s pretty interesting story, so we’re here today to help you learn and to give you some ideas that might be of benefit to you in your life and as we evolve, I’m sure this podcast will change, but for the time being we’re trying to keep it light, trying to keep it personal, because everybody needs a little bit of story and a little bit of interest in personal finance.

Cameron: Well that sounds fun! Well, I’m  Cameron. Conway, surprise, surprise, a little bit about my background. Lately, over the past five years, I quit my job at the post office gotten a bachelor’s degree. I got a master’s degree. I’ve published two books, I’ve written for Motley Fool Canada and Seeking Alpha so I’ve got a bit of an interest in investing, and we feel that we have the right mix of understanding of insurance, personal finance, budgeting, investing and everything else to help you tame your finances and achieve the goals you’ve been trying to do, but it just seems right outside your grasp. So that’s why we’re here for Its Personal, emphasize the space Finance Canada.

Christine: But the bottom line is we’re just regular people, pretty middle class. We own a town house here in Surrey. We have a one year old son that we spend most of our time chasing around the house and a dog who’s affectionately named Winnie the Poovier, after our home town of Winnipeg Manitoba, and it’s unofficial mascot Winnie the Pooh. We’re trying to take our personal interest and my career and translate into something that’s usable for you today. So not to be outdone by my husband. I also wrote a book that chronicled our personal journey, just as regular folks trying to make debt repayment and mortgage repayment a priority in our own lives and the things that we got right and the things that we got wrong were talking along the way.

Cameron: We’re talking about the wrong stuff?

Christine: We’re talking about all this stuff, uh oh so Debt-Free Lifestyle is a book that I put out. I wrote it in 2016  it came out in 2017 and it’s going to be rereleased shortly, just because in the last five years

Cameron: The housing market has gone insane and no one can afford a house anymore.

Christine: The world has changed. The pandemic completely changed the way we look at the use of space, work from home transformed where people want to be living and everything’s value has shifted in a fundamental way that just wasn’t the case five years ago. Interest rates are still at a record low and that has been driving prices up for years now, along with their supply shortages that we’re seeing and when people are interested in larger spaces and there’s only so many to go around that naturally changes the value of these properties.

Cameron: So there’s a lot of issues that are both political in nature and financial in nature that that are driving the housing crisis and the affordability crisis that we see today so is that why we’re here to figure out how to make every dollar and cent well, nickel? I guess now go a little bit further because of how crazy and seeing all these other things have gone.

Christine: Well, everything’s gotten more expensive, so I think there’s never been a better time to look at our own lives and figure out just how to survive. I mean really that’s at the end of the day. What we’re all trying to do we go to our jobs, we clock in we clock out we’re trying to pay the pills, feed our family and fight the ever-inflating grocery bill at the end of the week. Just so that we can eat our food and keep a roof over our house, But the Debt-Free Lifestyle is a core concept that has driven us in our own personal finance journey, and I call it the Debt-Free Lifestyle, because our quest was to become debt free and mortgage free and to do that as quickly as possible. Because I fundamentally believe that if you could live a life without a mortgage payment or rent or other debt payments that opens up so much cash flow to be able to do other things. Now. I understand that that’s not a reality for a lot of people today, because the pricing structure has changed so dramatically, but what we called the Debt-Free Lifestyle is really all about: building a lifestyle that will gives you enough free cash flow to reach your goals in a reasonable amount of time, whatever they may be. So what is the debt Free Life Style for me? Could be the take a vacation once a year, lifestyle for you or it could be the put away enough money to retire one day, lifestyle.

Cameron: Wait. We can retire now?

Christine: We’re hoping so you know we might have to grind for another thirty years.

Cameron: But, but CPP’s there right?

Christine: For the time being well, we’ll see how they shore that up in the years to come, but I know they just increased the amount that employers are having to pay for that. So lots of changes down the road and sustainability for programs like that are always a bit of a challenge. When you have a large percentage of the population that need the benefits and a smaller percentage of the population, that’s paying for them.

Cameron: It sounds like a system, that’s guaranteed, to work, Ah, nothing like putting a retirement in the hands of the government.

Christine: Well, that’s something you don’t want to do so when you’re, creating your own Debt-Free Lifestyle, whatever that might be you’re going to be looking at ways and the big picture to make sure that there’s enough money coming in at the end of the month, so that you can working towards your goal becomes easy and it’s not an onerous process and it’s not trying to skimp and save a dollar here and a dollar there. Because not only is that exhausting, emotionally and physically, it’s very, very, very hard to sustain unless you’ve got Herculean self discipline.

Cameron: It kind of sounds like those fad dies where you do it for a week or two, then you kind of go insane because you just want to carve or a piece of steak but you’re stuck eating kale or whatever the flavor of the month food is. Is quinoa still a thing?

From Starving To Thriving

Christine: Well, that’s exactly it you’re starving and when you’re starving, all common sense goes out the window and you will just splurge and spend on whatever. Has that shiny appeal to you at that moment in time?

Cameron: But what if I like the shiny things. It’s a serious question. We gravitate towards the things we want now. Why should I skimp and save and deprive myself of a coffee every day when the temptation is there for me, just a hop an elevator and go down stairs to Starbucks is giving you into those types of temptations once a while really going to ruin my future and my retirement or what’s the reason that actually to be disciplined?

Christine: Well, he whole point of the exercise for us has been to get to the place where something like that isn’t substantial enough that it makes or breaks your budget. I mean think about it. If a five dollar a day cup of coffee is going to absolutely ruin your retirement plans you’re doing something wrong.

Cameron: But what about a six dollar one?

Christine: Well I mean, I think, with inflation, that’s basically the same cup of coffee. The point is that a lot of people don’t want to sacrifice on these little things that give us enjoyment in our lives really at the end of the day. That’s all we have. We have these little bright moments, these little spots of time that we enjoy. So if there’s something that costs five or six dollars, that gives you a little bit of pleasure during the day. Why not? Why not find other ways to drive your financial success forward so that you’ve built in the allowance to do these things? So there’s a couple different ways that we’ve looked at, that I mean the first is if you’re a fan of budgeting- and not many people are like you, we can always just a lot a certain amount of money, that’s discretionary spending each month to use for whatever you want. In our case, we call it fun money, and maybe it’s an adult allowance- I don’t know, but it’s no questions asked money that you can use towards. Whatever makes you happy at that period in time,

Cameron: It’s actually not that bad. For years, I try to keep it to like twenty or forty dollars a week, and I’ve managed to amass a few nerdy things, some Lego, guitars and other fun things that you wouldn’t expect to be able to pull together, like that, and I managed to do all of this without racking up the credit cards. Essentially, what you’re trying to do is do the opposite, what you do with a credit car instead of paying the twenty thirty bucks a week, plus soul, crushing interest you just save up the twenty thirty forty dollars a week before you go on your big spending spree and you don’t have to worry, with the consequences until my wife finds out about what I did.

Christine: Well, but that’s the point you’re not deprived, and if the money’s there, your wife, doesn’t really care what you’ve spent the money on and that’s why, in our Little Town House here, we’ve got an entire floor, dedicated to Cameron’s knickknacks and toys.

Cameron: Which is becoming more and more interesting for our one year.

Christine: Yeah who’d have ever thought that Star Wars, collectibles would be fun for a small baby.

Cameron: I shed a small tear the first time he turned on one of those light sabres.

Christine: So, in addition to the fun money, the second thing that we focused on when we were building our own debt free life style was making sure that we had the big ticket items in place in a way that was sustainable for the long term. And what I mean by that is. We wanted to have some decisions made ahead of time so that you’re not fighting with yourself every week, you’re not struggling to make these decisions about where your money would go. The cash flow is there automatically and the only way to drive that amount of free cash flow that will materially move you forward towards your goal is to get some of these big ticket items right and what is right will be different for absolutely every person. But what was right for us at the time was to buy a town house in Surrey which cost substantially less at the time than a single-family home, which we couldn’t afford any ways.

Cameron: Full disclosure, we managed to buy during the two thousand and eight housing crash. So we did pretty good.

Christine: That was, that was not a bad timing thing, but you could argue were on the reverse side of that now and still in a town house in Surrey, which is fine, but it is a a debt free mortgage, Free Town House. So there’s some appeal there as well, so the system does work.

Cameron: It’s almost like you wrote the book because you knew what you were doing and not because you told me to say that.

Christine: Or I wrote the book because it detailed what we went through and what we had to do to get there, and I think part of the learning experience for anyone is to make the mistakes or have some one else make the mistakes for you. So part of our experience can teach you and can help you see what we did wrong. What we did right and hopefully you’ll be able to move forward with a much smoother ride than what we had.

Cameron: I think once a wise person said, those who don’t learn from history are doomed to repeat it, and those who do learn from history are still doomed to watch. others repeat it.

Dealing with Big-Ticket Items

Christine: But getting back to the core concept. So when I talk about the big ticket items, I’m talking about the areas that take up the largest percentage of your budget, so that would be things like housing, transportation, child care, even entertainment, and what should choose to eat every week. All of those things are choices that will move the needle and once the choices are made, people often take the approach that they’re set in stone. Oh my housing costs me this amount. Every month it’s not going to change. Hopefully it’s not going to get higher, who knows with rising interest rates, but we’ve got that mentality that this is a fixed expense. When really you have more control than that, you can decide where you want to live. What your proximity to work is going to look like the size, the space, the type of accommodation, the location all of those things have an impact on your budget and when you’ve assessed what your goals cost, you can decide how much money you need to have each year to move closer to words, those goals in an amount of time that you deem reasonable. So it’s essentially goal setting backwards, you’re, costing out your goals and you’re figuring out how long it’ll take you to achieve them. If you have a certain amount of money available each month, then you’re making the decisions that you need to make ahead of time so that you know e, the money will be there every month and then you can go downstairs hop on the elevator and have your cup of coffee.

Cameron: So I guess some ways: It’s just getting the habit of not living a reactionary type of life. Where you’re trying to take some control instead of just jumping for one fire and one problem to the next. You’re, trying to decide exactly how you want to do something and where you want to go like even the entire location thing you were talking about. We ended up in Surrey of all places because it was a decent price. You worked in New Westminster, I worked in Langley and we chose it because we can either live comfortably here or we could be pulling out our hair in some other neighborhood.

Christine: Also, we had very little understanding of what the neighborhoods were like at the time having come from Winnipeg just a year before, and we spent the first year here renting in Abbotsford, so didn’t really have the best feel of the lay of the land. But we also did choose this location because of its proximity to a main road and the sky train station, so that we could easily take transit and save costs on our vehicles. That way, if we chose to do so really, this is all about figuring out which items for you will move the needle and move you effortlessly closer to your goals every month. If you can jump on the sky train like I could and save some money on car insurance or on gas, as you travel tune from work on a regular basis, then that’s money that can automatically be redirected to a goal. Whatever you decide, that goal might be

Cameron: So, after you’re hearing all its what something that we can do to implement all this. We spent a lot of time talking about why this is important. Why we should think about this, but what can we actually do to make a lot of this a reality that we can just actually commit to, rather than just have this be a nice idea here?

Christine: Well, I think one of the major things and major changes that I’m making to the book when it’s going to be re released in January 2022, is that exactly that I wanted to take it out of the realm of theory and into the realm of practical application, because apparently not everyone enjoys math as much as I do.

Cameron: Well. No, but you also have six or seven designations in the finance industry, me not so much.

Christine: Well, you’re working towards it. You’ll get there to one day, but for people that are wanting to take a step closer. I always urged them to start by writing out their major goals in life and then prioritizing those goals kind of by giving themselves a bit of a gut check. So once you’ve put in on put on the page, all of the things that you want to accomplish take some time stare at the list for a while and put them in order of importance to you and if you have a spouse or a partner or someone that you share financial responsibilities with then it’s a good idea to have them go through the exercise at the same time as well. I’ve seen situations where couples can have the exact same top three goals, but completely different priorities. So, even though they think they’re working towards the same thing and could even have conversations about these three things that are so meaningful for them. One of the person thinks they’re going on a vacation next year and the other person thinks no no we’re going to save our money and get that down payment ready for our house,

Cameron: Ooooo. No, don’t don’t insert the Sitcom ooo’s and aaaa’s to the couples fighting in your office.

Christine: No, it’s not fighting it’s! It’s realizing that sometimes, even when you think you’re on the same page, conversations might have left out certain steps that were necessary to come to a full understanding of what is actually important for both of you. So it’s not necessarily just Oh. Yes, I want to buy a house one day and oh yeah. We should also go to Hawaii, but it’s what do we want to do now? What do we want to focus the majority of our resources towards now

Cameron: So they’re on the same page they’re, just in a different paragraph?

Christine: That’s exactly it and part of the challenge. When you start prioritizing your goals. Is that if you really want to accelerate your progress towards a goal and get there faster, you have to be a little bit more single minded in your effort. So I’m I like to take the approach of rather than scattering money here and there at two or three or four or five or ten different objectives at once. We come up with a Master Plan that your priority lists turns into a top three and then your top three comes into the one big thing that you’re going to be working towards right now, and I always put a caveat on that for every person that I talk to. If retirement planning is not on the list, I’m putting it on the list for you, because life goes by far too fast to get to the end of your working career and realize you’re, just not prepared and you’re stuck with CPP

Cameron: And you can’t even resort to eating calf food because that’s getting more expensive to.

Getting Practical with the Debt-Free Lifestyle

Christine: Well, you know the lines of the food banker getting longer and that’s not meant to be a joke. It’s actually a sad reality, but once as a couple, you’ve set your financial goal and gotten your priorities in order. The next most important step that I think a couple can do or a person can do if you’re working on this on your own is to cost out the goal that you’re working towards, and this part can actually be quite a bit of fun because you get to go online.

Cameron: Is this real fun or is this finance person fun?

Christine: This is finance person fun. This is anyone who likes detail fun. No, it’s actually an exercise in what, if which can be quite a bit of fun, because you get to daydream a little bit.

Cameron: Kind of like that “What If” Marvel series?

Christine: No. It’s more of a, what will my vacation look like? What resort will I stay at? How much will my flights cost things like that? So, if I was at the place where this goal was being accomplished to day, what would it cost me all in to have the experience that I want to have or if it’s a debt repayment once I’ve factored in the interest costs? What are my costs all in to repay this debt in the period of time? That, I think, is reasonable and the other part of that is, if you don’t know what amount of time is reasonable, you can actually do a check where you start by looking at the amount of free cash flow, that you’ve generated by your big decisions and also your budget decisions. So if you know ahead of time how much money you have free each month, not counting discretionary purchases, but how much money you’ll have available to apply to your goal, you can actually divide out the total cost of the goal that you’re trying to achieve with the amount of money that you have each month. And you’ll come up with a number of months that it will take you to get to the achievement of that goal. So once you have that number you’ll be able to look at it more objectively and say: Oh, my goodness, this goal is going to take me two years and all I want to do is get to Hawaii. That’s not reasonable. For me, I better increase my savings. If I want to go next year- or you might say well, I’m saving for that down payment. It’s going to take me five years, I’m okay with that. You know what let’s give the housing market a bit of a time to maybe settle down and let’s hope that people get back into normal or whatever the new normal might be post pandemic or in this kind of continuance.

Cameron: Is that normal with a question mark or an exclamation point?

Christine: There’s a bit of a question mark there, but I think normal is, as you define it. I think normal is a little bit different for every single person. So as we find our new normal in society, you’ll have something to look forward to, because you’ll have a goal that you now know when you’d be able to achieve it with the amount of money that you have so far. So the other part of the equation is what, if you look at your spending, you look at all the different areas that are taking up cash flow and the free money that you have available is just not enough to achieve your goals in any reasonable amount of time. What do you do, then.

Cameron: Buy Bitcoins!

Christine: I suppose you could buy Bitcoins, but beyond Bitcoin you can.

Cameron: I can train the dog to o Tricks on Reddit.

Christine: Or YouTube is that is that too old?

Cameron: Depends on the day. Isn’t Tick Tock, the new hip young thing.

Christine: I don’t even know I never been on tick Tock. So there you go. That’s my extent of social media. I’d also like to say that the Debt-Free Lifestyle or the work towards whatever your goal may be lifestyle as you define it. It’s substantially different for different people, but it’s also completely not tied to the amount of income that you make, even though, of course, having more income is always a good thing, and what I mean by that is, I you can have a Debt-Free Lifestyle earning thirty thousand dollars a year, living out of a rented room and still making progress towards your goal or on the opposite of that, I’ve actually seen first hand, people that live in the dream mansion in one of the most prestigious neighborhoods around making over three hundred thousand dollars a year in a house, that’s rented and if their income ever stopped, the dream would stop in an instant. The Debt-Free Lifestyle has absolutely nothing to do with the way things look on the outside or with how much money you’re bringing in it’s all about creating that margin that free cash flow and making sure that the amount that you have fits with the goals that you have there’s nothing else. Everything else is smoke and mirrors. I mean we’re all familiar with. Keeping up with the Joneses and I think more than ever, there’s such an illusion between social media and kind of what you see and what you hear. You really don’t know or have that experience of what someone’s reality is you don’t know how far behind they could be on their bill payments?

The Instagram Filter for your Life

Cameron: It’s kind of like those Instagram filters. You don’t actually know what the person looks like, except is with their finances or how many times, even in our neighborhood, we see some of these lesser houses with Jaguars and Mercedes parked out front.

Christine: Right and that’s a certain way of prioritizing, what’s important right. So people thinking I you’ll, never come by my home, but let me impress you with my very expensive car and then all of a sudden you’re, the guy that has the nicest car in the crappies apartment in town, But going back to social media. It can be like a different person every day right where you don’t really know what the person looks like or what their finances are behind the curtain. The appearance of success has absolutely nothing to do with the reality of success or stability for a lot of people. Anyone can buy the appearance of success, any one can buy status, symbols or put them on your credit card and just pay for them later with interest. It doesn’t mean that you are successful and I mean there’s a whole millionaire next door movement. That’s completely based on the idea that the people that are maybe a little bit more focused on their goals are a little bit less focused on the appearance right now. It’s that same idea of either you work hard now or you work hard later, so for a lot of people you put in the time now and then maybe life becomes a little bit easier further down the line. But, unfortunately we live in a society that doesn’t really value that mentality. Everyone wants to look good and be successful today, but unfortunately I think it was Edison that said, a lot of people miss opportunities because they’re dressed in overalls and they look like hard work.

Cameron: Oh Edison, the bane of Tesla. But it is just putting out the appearance and to make all the stuff actually work in the real world. It does take intention and it does take work and we can’t just click the ruby slippers together and everything is Oki-doki all over and we have to be realistic with what we want and we have to make a commitment to try and bring these things in it. Isn’t just wishing and hoping that all my financial problem, so go away, is actually taking some responsibility, which is something not many people really want to hear. It’s just have this idea that everything should just be showered upon us and given to us and life. Should you just be as easy as I can, but the real fulfillment comes through the work with through the disciplined ashy have an accomplishment that you were able to do these things that you wanted to do through being intentional and through this kind of work in this discipline, and then you find out that that’s where the real success happens, because it was crafted and it wasn’t just the show piece. It’s like those old towns from the Western movies in the 40’s and 50’s where it was just this wall that was supposed to represent an entire building, but behind it it was hollow. So a lot of times where we want to do the easy things where you just want to be reactionary. We build these entire towns in our life, whereas just these fake facades, and there’s nothing behind it. So taking these responsibilities actually implementing this kind of stuff and a lot of the other stuff we’re going to be talking about over the weeks and the months is how to take control and put in the right kind of work and do it in a smart way. So it doesn’t ruin or consume your life, but it helps set you free in enough areas where you can actually have some fulfilment, some satisfaction and something to show for at the end of the day. That is real

Christine: And I think you nailed it it’s all about the journey and not always about the destination. Unfortunately, when you’re living life, this way I mean the journey is not going to be impressive, so people are going to have to decide between having the appearance of financial success to day or having actual success financially down the road, and it’s kind of like a great secret when it’s when you’re doing it right. No one knows no one sees it, but it’s something. You can kind look  at your partner and just giggle a little between the two of you and say you know what we’re making it happen and we’re working towards something that is important to us. And if you value that more than looking good to day, then this is the kind of podcast for you, and this is the kind of lifestyle thinking that will help you move forward. So I hope you enjoyed our ramblings. As we said at the beginning. This is a great experiment for us. We’ve never done anything like this before. So I’m sure this conversation that we’re having and that you’re listening to will evolve as we go through it and I’m sure that we’ll get a little bit more polished as time goes on. But for the time being, if you’re interested in following our journey and learning a little bit more along the way feel free to stay tuned, we’ll be here. We hope you join us and until then take care of you guys.