Male, late-twenties, residing in Metro Vancouver, Canada. Planning to become a millionaire one day through smart investing. In the last six years that I’ve lived on my own I’ve managed to pay off $15,000 of student loans, quadruple my home equity, build up a stock portfolio worth almost $200,000, and acquire over $300,000 worth of additional investments like farmland, mortgages, and precious metals, all using my own savings, plus some bank loans. I’ve shared my income tax statements from previous years to demonstrate that even an average salary can be used to create great wealth with the proper strategy and leverage My investments are growing at double digit rates every year because I’ve learned how to make my money work hard for me. I’m Liquid Independence, and welcome to my freedom 35 blog (^_^)
I don’t have a dramatic rags to riches story. I grew up in a typical middle class household. My parents never had a lot of money, but they’ve never lived in poverty either. When I was going through college they were generous enough to contribute $10,000 towards my tuition I’ve received no other financial aid from them since then.
My financial journey really began in 2008, when I graduated and began my humble career at a medium sized design firm with a $35,000 starting salary. Still living with my folks at the time I was easily able to save $13,000 by early 2009, which I used to buy a $230,000 apartment, and moved in right away. Most of my friends thought I was crazy for buying a home when I still had student loan debt. I continued to invest heavily into 2010 and 2011 mostly in the rising stock markets. In 2012, I was 25 years old, and I ventured into more exotic investments like farmland. By 2013 I was investing in silver coins, bonds, gold bullion, and global stock markets. By May of 2014 my salary had grown to the mid five figure range and I had over $250,000 in net worth, thanks mainly to my outperforming investments like Google and Amazon shares, and agricultural land.
The secret to my success so far is to think outside of the box. Some readers ask how it’s possible that I only take home about $40,000 a year from working 2 jobs, but somehow still increase my net worth by more than $60,000 a year. Well since I have over $800,000 of financial assets, it’s not hard to imagine that even a conservative 6% annual return on those assets will already mean a decent $48,000 increase to my overall wealth. The rest can come from my personal savings. This is the power of having a strong asset column. But in order to build an asset column one must be willing to seize opportunities when other are reluctant to do so. Below are some examples of this.
Most people would rather pay down their student debt before they buy a home. But that’s the opposite of what I did. I believe you don’t get rich by paying down debt. You get rich by buying appreciating assets So I invested heavily into real estate first and then worried about my debt later. My primary residence is now worth $50,000 more than my purchase price from 6 years ago. That’s the power of passive wealth accumulation. I don’t do any physical work but I receive all the capital gains simply by being a home owner If I had paid off my student loans first, I would have saved maybe $2000 of student loan interest, but would have also missed my opportunity to make $50,000 of tax free gains in the growing real estate market.
Most people in 2012 invested in stocks. But I did something different. I saved $10,000 during that year, which others could have done as well, and I even sold $10,000 of my existing stocks, in order to buy a farm in Western Canada because I believed farmland was undervalued compared to the stock market. By the time mainstream investors had also become interested in farmland in 2014 my land had already appreciated by $50,000 over those 2 years, which is more than 100% annual return on my initial $20,000 investment. This is the power of leverage
In 2013 many investors sat on the sidelines because they were worried about a correction in the financial markets. But I did the opposite. Not only did I invest all the money I saved that year (about $12,000) but I also borrowed tens of thousands of dollars more from the bank to invest even more into the markets. Both Canadian and U.S. stock markets increased double digits in 2013. It was one of the best years in recent history. My stock portfolio outperformed the index due to my leveraged holdings. This is the power of staying in the game
The best part about investing is it’s completely passive. If I went on vacation for an entire year my farmland, fixed income funds, and stocks would all continue to pay me rent, interest, and dividends. Instead of paying down debt I choose to invest. Instead of playing it safe I choose higher returns. Instead of just using my own money I leverage the power of the banking system to multiply my profits. This strategy of using other people’s money combined with recognizing undervalued investments has been working well for me so far. It’s possible for others who earn an average income as well to reach early retirement as long as they have the right mindset, use all the tools available in the financial system, diversify their risk, and invest wisely.
Whenever I make new investments I often explain on this blog my decision process, and often demonstrate exactly how I did it with documentation. This keeps me accountable as I can’t make up random numbers, and it gives other people a chance to try out my strategies, if they so choose, at their own risk and discretion of course There are many other generation Y bloggers like myself who also have a relatively high net worth for their age. But most of them earn a really high income, which many readers may not be able to relate to. I suppose what’s unique about my particular situation is that I’m more like the average person. I had average grades in school. I had a summer job working at Safeway, and had to go into debt to complete my education. I don’t even consider myself very frugal because I currently spend over $3,000 a month.
The salary from my full time job in 2014 on an hourly bases is still below the average Canadian wage for my age group, which is about $26/hr. But combined with my part time job, rental revenue, and all other investment incomes I now gross over $60,000 year. Unlike a 9 to 5 job, there is literally no limit to how much income can be made through investing! My gross income would not have climbed so quickly if I had focused primarily on climbing the corporate ladder at work. I had to make some minor sacrifices like taking on another job and exposing myself to more investment risk than most people in order to get the higher returns that I need to attain financial freedom by 35 years of age.
The way to make money without working is to own assets that produce goods or services (land, businesses, etc) and wait until they appreciate. It takes money to make money. But I started just like most people – with no money of my own. Which is why most of my investments are bought using other people’s money (bank loans,) but as time goes on the value of my assets should increase, and those loans I have should decrease, which causes my net worth to expand Earlier in 2014 my wealth jumped by over $50,000 when I realized my property was undervalued and adjusted it accordingly.
Earning $50,000 by working at a job is not easy. But investing in assets that grow by $50,000 doesn’t take a lot of time or effort, as long as one understands and is comfortable with the associated risks. Many people equate income to wealth, and they mistakenly believe that it’s not possible to become a multi-millionaire unless someone makes a six figure salary or become a successful entrepreneur. Although there is a correlation between income and net worth what’s more important is understanding capital management and general financial literacy. Life is too short to stress over work, debt, and other financial matters. I believe in finding a fulfilling job that one likes, but may not pay a lot of money. In my case it’s graphic design. And then supplement one’s income by making smart investment decisions to take care of debts, inflation, retirement, and other financial worries in life
These are my life long goals
-Become financially free
-Donate at least a million dollars to charity
-Become part of the 1% wealthiest people in the country
-Start a company and create jobs for my community
-Qualify and become an accredited investor
-Fly into space
In today’s world money represents power, potential, security, influence, hope, and of course freedom. When I spend money I’m essentially buying back my time. This is why I make it a priority to invest. But life is also about balance and moderation. I try to balance my spending to make my life just as comfortable today as I plan to be in the future. I don’t want to save money so aggressively that I’d miss out on life right now. But not saving enough would leave me with financial difficulties when I start a family, or eventually retire. So currently I save around 1/3rd of my total gross income, which I find is the right balance for me. I have a similar mindset when it comes to investing. Penny stocks are too risky, but the safest investments like US treasuries do not provide a good enough return. So I balance my portfolio mostly with investments like real estate, commodities, and blue chip stocks, as well as a small handful of more volatile and higher risk equities.