I am frugal by nature. I do the mental calculations almost reflexively. Food is my favourite measure of equivalent value, since I rarely buy books these days. If I bike instead of taking public transit, that's three Vietnamese sandwiches. For the price of dinner for two at Pho Hung, we could buy and roast two whole chickens. I hardly eat out, since I know I can make my favourite meals for $2-$4 a serving.

Many people who are working on financial independence take pride in doing as much as possible themselves. It's a great way to save money and build a variety of skills. I usually do the same. It's great knowing that fixing a washing machine doesn't have to be a scary thing.

But there are some areas where I spend more than most people do, like outsourcing.  For example, even though no one expects transcripts for podcasts and even though I can transcribe my own posts, I pay other people to transcribe them for me. I pay people to research, draft, code, experiment, learn. I'm slowly getting the hang of passing on tasks even if I feel like I could learn a lot by doing things myself. If I outsource those tasks, then at least two people learn: my assistant and me. In fact, since they write down things I might otherwise just skim or take for granted, I can usually take what they send me and share that with other people.

For me, outsourcing is so much more than just a money-for-time trade off. I think of outsourcing as a way to help other people build up assets and skills as they figure out flexible work that fits their needs. It's a way for me to learn from different perspectives and experiences, too. I don't need stuff. I don't crave experiences: no exotic vacations, no once-in-a-lifetime memories. I'd rather take advantage of the abundance to scale up and help others.

(See more in Ramping up delegation)

Independence matters to me. So does interdependence. If I can carve out enough to provide reasonable security for myself and I have the skills to go and earn more money if I need to, then I'll use the surplus to make the world a little bit better. I had thought about focusing on stashing away more money so that we might have a greater margin of safety. (Who knows, maybe W- might even be able to retire.) I'm slowly adding to that stash, but that doesn't rule out helping other people along the way.

I don't want to become dependent on outsourcing. I make sure all my tasks are documented so that I can take over if needed. I establish financial limits so that outsourcing doesn't encroach on my other plans. (This is one of the reasons why I like working with assistants on an as-needed basis instead of committing to a specific number of hours or tasks a month.) I learn from small experiments before I move on to larger ones. I prefer outsourcing to people who can learn from the experience instead of to established companies with polished solutions.

I don't have to spend the money on this, but I decide to, and it's worth it to me.

During his Third Tuesday Toronto talk on How to Live an Amazing Life (see notes), C.C. Chapman saw me sketchnoting near the front and called it out as an example of a creative and unusual profession. He asked (probably rhetorically) how I explain it to other people. I said that I usually told people I was retired, which boggled even more people. He said I should tell my story more.

So this is where I am, how I got here, and what I’m learning along the way. I’ve been extraordinarily lucky, so this is definitely not a recipe for how you should live your life. (Hard to plan for luck!) But maybe it helps show some of the possibilities, and maybe that will shape some of your decisions, and maybe that will lead you to living an even awesomer life than I do. (Please share your notes!)

How I prepared for this phase

It helped that I had never been buried in debt. I graduated without student loans, thanks to scholarships, assistantships, and my parents’ financial support. My mom had drilled into us the importance of never carrying a credit card balance and of living within our means. I’ve never had a car, so I’ve never had a car loan. W- owns the house we live in, so I’ve never had a mortgage. My parents are doing all right, and so far they haven’t had any major health issues. This gives me a lot more space than most people have, and I’m grateful for this excellent start.

I had saved the majority of my income ever since I started working at IBM. I grew up reading personal finance books, so when I started working, I was excited by the opportunity to practise good habits and resist lifestyle inflation. I knew I wanted to try other things someday, and a good nest egg would help me with that. I remembered how my sister saved up for her trip to South Africa. She told us how she would say to herself something like: "One hamburger here, or one more day in Africa?" That made it easier for her to make frugal decisions. I also learned how to think about expenses in terms of how much time it took me to earn the money to pay for them. Was that purchase really worth several hours or even days of my life? Usually, the answer was no.

Keeping my wants simple meant that I didn’t feel deprived. I kept the same lifestyle I had enjoyed as a graduate student, aside from occasional new expenses like buying office clothes. I still enjoyed home-cooked meals, books from the library, and taking public transit or my bicycle; I didn’t need to swap those out just because I was earning more. I didn’t buy designer handbags, perfume, or makeup. W- and I agreed that we wouldn’t buy each other gifts. Stuff was just stuff, after all. Reading books like A Guide to the Good Life: The Ancient Art of Stoic Joy helped me realize that a lot of luxuries that other people might consider part of happiness are entirely optional and could easily be substituted by inexpensive or free activities that I enjoy. I’m a happy person by default, and I’d learned early on that happiness doesn’t come if you chasing after it. That and growing up in an advertising photography studio probably helped me gain a resistance to marketing, which made it easy for me to focus on simple joys.

I’d learned from Early Retirement Extreme and Mr. Money Mustache that reducing your expenses can drastically increase the rate at which you earn your freedom. A penny saved is more than a penny earned. If you spend $2 for every $4 you earn, you free up a year for every year you work. If you reduce that to $1 for every $4 you earn, you free up three years for every year you work. This gave me even more incentive to shift my spending to the things that really mattered to me instead of frittering it away.

After I filled up a decent-sized emergency fund, I split my savings among long-term investments as well as a short-term opportunity fund. The long-term investments were for peace of mind, while the opportunity fund was for learning how to make better decisions. I figured that as long as I was saving at least 10-20% for the long term, I’d be well ahead of where most people would be at my age. In practice, I ended up saving much more than that, and it was liberating.

Following Tim Ferriss’ advice in the 4-Hour Work Week to figure out the actual costs of your ideal lifestyle, I realized that I didn’t actually need that much money to support the modest lifestyle that I wanted. After tracking my expenses for more than seven years, I had a good idea of what my core and discretionary expenses were. When I estimated how much I needed, I was pleasantly surprised to discover that I was practically there in terms of my opportunity fund. I set aside what I needed for five years using laddered GICs, and I left my long-term investments alone as a safety net.

As I was building up that opportunity fund, I started planning what I could do with it. I wanted to learn about building businesses that could fit into the kind of lifestyle I wanted: plenty of time at home with family and other interests. I talked to many mentors about their careers – consulting, web development, startups, small companies, large corporations. Many people wished they had more time, but they were handcuffed by their financial commitments: a mortgage, college educations, private schools, expensive hobbies, and so on. If I kept my expenses low and saved up enough, I could free myself (even temporarily), and then explore from there.

I decided that instead of waiting until I had sorted everything out, I would take a risk and move some years from my "retirement," like the way Stefan Sagmeister interrupts his work with year-long sabbaticals. But I wanted more time than that, and five years seemed like a good chunk of time to work with. Statistically speaking, most businesses fail within their first five years. If I gave myself at least five years without worrying about cashflow, I probably had a decent chance of learning enough about business to build something that can last me a while. Besides, five years would be longer than my high school, longer than the time I spent in university, longer than the time I worked at IBM… If I could learn so much and grow so much during those periods, I should be able to make good use of five years too. I figured that if I could give myself the space to explore these possibilities, I should, since not many people get a chance to do so.

Like the way I get ready for other risks, I plumbed the possibilities of failure. What if I ended up with nothing to show for the five years? I’d probably have at least a story, though – people are really good at rationalization. What if something happened to W-? If I kept in touch with people and I kept my skills sharp, I could probably go back into web development or consulting easily. What if? What if? What if? When I was comfortable with the downsides as well as the upsides, I gave myself the go-ahead.

The timing worked out wonderfully. I had a one-on-one meeting scheduled with my manager to discuss the results of the yearly performance review. He told me that once again, I’d received a top rating. I told him that was fantastic – and that I was planning to leave in order to start on this experiment. I really liked working with IBM and was happy to leave at a convenient time for the team, so they asked me to stay on for a couple of projects that needed my web development skills. A few months later, I wrapped up all my work, and I started my experiment in February 2012.

So far, it’s awesome

Thanks to amazing people, I hit the ground running. I had expected to flounder around a little trying to find ways to create value, but people stepped forward right away with suggestions. A former colleague had read my blog posts preparing for the experiment and wanted to know if I was interested in working with his team, so I had my first consulting client lined up. Another friend needed help with Rails development, so I experimented with that as well. I picked the brains of mentors who helped me spot opportunities and avoid pitfalls. I read forum messages and blog posts. There’s so much out there to learn from.

I tried out different business models and found ones resonated with me. I got better at floating ideas and getting to that first sale. I dove deeper into skills that I wanted to improve, like sketchnoting and programming. If this is what I can learn in a little less than a year and a half, I can’t wait to see how the rest of the experiment will unfold.

If things work out really, really well, this is how I imagine this five-year experiment succeeding: I’ve learned and shared a ton, and I’m ready for more. I could easily see it extending to a lifetime. Wouldn’t that be neat?

After C.C. Chapman’s talk on how to live an amazing life, the people I chatted with told me they didn’t pick up anything particularly new, although they enjoyed his talk. Likewise, there’s very little that’s new in what I do, if there’s anything new at all. I just want to illuminate possibilities and show that you can get there in small, non-scary steps. I want to help people explore these paths, whether it’s experimenting with life, quantifying/analyzing your decisions, sketching your notes and plans, writing code for fun… I work on this by learning, writing, drawing, and making things, and I’m going to get even better at this learn-share-scale cycle as we go on.

If you want to do this too…

Hack your wants. I have simple wants, and what I want the most is time. I deliberately dig into what I want and what I can give up. Wants are more changeable than you might think, and letting go of attachments can actually be pretty fun. Frugality follows naturally from this, and savings follow frugality. I think it’s easier to shape your wants than it is to force yourself to be frugal if you don’t want to be. Then save, save, save, because that safety net makes all sorts of interesting things possible (and less stressful).

Have a supportive partner. This is a huge part of what makes it possible, and I often thank W- for helping me explore this experiment. He thinks it’s a good experiment and could possibly pay off well for us in terms of the decisions we want to make in life, and that means a lot to me. We have a simple lifestyle and are both frugal. It’s super-helpful to have a spouse who’s on the same financial page. It’s easy to imagine how this could’ve gone differently. If W- had disapproved of the idea or if we had a two-income mortgage, it would be much harder to explore this, or I might not even have tried it. I could probably have done this on my own, but it would have been more difficult to save up, the jump would have been much riskier, and it wouldn’t have been nearly as much fun.

It’s a little difficult to tell people, "Oh, make sure you have a supportive partner," so this is not really advice. But if you do happen to have a supportive partner, work on making the most of life together. Be that supportive partner, too. Investing in relationships pays off a lot.

Get help from other people, and help others. I learn a ton from people’s experiences as shared in books, blog posts, forum messages, e-mail, Skype / Google Hangout / phone / in-person conversations, and so forth. I get opportunities from people who are willing to take a bet on me. I always learn a lot while answering questions or helping people out. I’m amazed by the results of betting on other people, too – the world is a candy store of talents.

There’s a lot that I’m forgetting to explain because I take it for granted or because I don’t know that it’s missing, so please ask! =)

It’s getting harder to spend on leisure, because I’m getting so much better at talking myself out of it. There are just so many other good alternatives.

For example: Iron Man 3 has started showing in Canada. I’ve skipped watching most movies in the theatres, but I do like superhero movies, and theatres are great for superhero movies because they make the movies larger than life. I like the outsized situations that the writers put the superheroes in and how they have to get them out. I like the way the movies push visual effects forward without taking themselves too seriously. So I’m going to watch it at some point. I just have to decide…

• Do I watch it in the movie theatre during opening weekend, as a vote for more movies like that, maybe with W-?

• $26 for two tickets
• Can lead to rich in-joke material
• Good sound and perfect playback (no worries about scratches)
• Larger than life / immersive
• Immediate gratification
• Focused attention

Do I watch it in the movie theatre as a social event, which probably means a weekend get-together with friends?

• $25-35, depending on dinner
• Bonding time with friends – find out what’s going on in their lives
• Buying tickets and organizing seating can be difficult
• Good sound and perfect playback (no worries about scratches)
• Larger than life / immersive
• Short-term gratification
• Focused attention

Do I watch it in the movie theatre off-peak, which probably means mid-day sometime during the week?

• $13 by myself, or possibly with other friends who also have flexible schedules
• Better seats
• Good sound and perfect playback (no worries about scratches)
• Larger than life / immersive
• Short-term gratification
• Focused attention

Do I wait for it to be available in the library, so that I can watch it with W- at home?

• Free
• Can lead to rich in-joke material
• Writing time or cat time
• Can watch with subtitles
• Can pause and rewind
• Can watch extended material, commentary
• Can talk to W- while hanging out (extra in-jokes and movie references!)
• Comfy seats, clean floor (no spilled popcorn or drinks)
• I can read IMDB trivia and tvtropes entries or research interesting ideas

And you know, that library option is looking pretty darn tempting. The biggest downsides are a less immersive experience and a longer wait. I don’t need big sound or big images to get into a story (I can imagine things from books). Watching musicals from closer to the stage was much better in terms of being able to see facial expressions, so there’s something for that.

It takes a while for movies to be released on DVD, and some more time for the library to obtain copies. The DVDs are available on a catch-as-catch-can basis at various branches, and then they’re available for general holds after a year. New items are released on the 15th of every month. W- and I check the new listings on the 15th or 16th, by which time there are sometimes hundreds of holds for popular movies. For example, The Avengers (2012) has 992 holds for 107 copies. Movies can be checked out or renewed a week at a time, and transit between branches takes another day or two. That means that requesting a popular movie like the Avengers would mean a wait of maybe a year and a half from when the movie was released, which is actually not that big a deal because we’ve got a ton of other things to watch. Besides, sometimes we luck out. In this particular case, the Annette Street branch is the home branch for one of the Avengers DVD copies, so we spotted it during our regular library walk and we checked it out even before it was available for general holds. =)

Popular movies tend to be well-stocked, and I have three branches in easy reach: Annette, Runnymede, and Jane. The Hobbit was another movie that I decided to wait for as a library release, and writing this blog post reminded me that I should go look for it. It’s not available for general release yet, but one copy is due at Runnymede tomorrow and another is due at Annette on Monday. I might bump into it one of these days. If not, I can wait for it to become available for holds on October 15. (Hmm, time to set a reminder…)

Besides, there’s so much else to do, and so many other movies, shows, books, and games out there. We can keep ourselves endlessly entertained if we want to with just the things we have. So it really comes down to the question: what do I want?

• I want to be delighted by and learn from storytelling.
• I like the way that shared movies turn into great in-jokes between W- and me, layers of references building on other references.
• It would be nice to spend time with friends, but there are other things I can do to spend time with friends.

So probably library, then, for this and most other movies. W- says, “That’s a lot of thinking about $26.” But it’s this gradual shaping of wants and desires that creates the space for even more possibilities later.

The less I want, the more I can enjoy.

When I was growing up, I raided my mom’s bookshelves for whatever I could understand—and quite a few things that I didn’t at first, but which yielded under repeated reading. In one of her personal finance books, I came across an anecdote about someone who bought stocks of the companies of which he was a frequent customer. When my mom decided it was time for us to learn a little about investing and offered us a choice of several Philippine stocks, I used the same reason to pick Jollibee. Although I didn’t eat at Jollibee that often, I knew lots of people did, so I figured that it would work out the same. I haven’t been tracking Philippine stocks since then, but apparently Jollibee has been doing pretty well.

When I moved to Canada for my master’s degree, I was fortunate to have a combination of research assistantships and scholarships. I never spent more than I had – another lesson drilled into me by my mom. Living frugally helped me graduate without student debt. By that time, I’d grown to love W-, which made it easier to accept IBM’s job offer and go through the permanent residency process here in Canada.

Once I started earning money here, I wanted to apply the best practices from the personal finance books I’d been reading all this time. I set aside a portion of my income for long-term investments. After lots of research, I settled on TD e-funds as an inexpensive way to get started with index funds. I didn’t know enough about individual companies to feel comfortable buying stocks, and books and blogs said it was really hard to beat the market anyway. Index funds were a less intimidating way to get started. Small steps – a tiny investment here to see whether I’d set things up correctly, then more as I became more comfortable with the idea.

I figured that if I hold the funds for decades and get average performance, that’s still all right. If the funds lose value, well, that’s life, and I wouldn’t be any worse off than if I hadn’t been saving. I joined the workplace and started investing just as the financial crisis broke, so it was a little tough buying while people were losing so much, but it turned out all right.

Canada has a Registered Retirement Savings Plan program (RRSP) where you can shelter some of your investments and savings on a tax-deferred basis, so I put in as much as I could. When the Tax-Free Savings Account program started, I moved my emergency fund into that, and then started using it for some of my investments too (also in TD e-funds). For my long-term goals, I needed non-registered investments as well, so more TD e-funds there.

The stock market has been up and down since then. The market value of the portfolio is occasionally below the book value, which looks a little discouraging. When I use the XIRR formula in Excel or other spreadsheet programs to analyze my actual returns, though, it works out okay because the reinvested dividends are also accounted for. Besides, as long as I keep an eye on the money I may need within the next five years, I can let the long-term investments go up and down without panicking.

Investing with uncertain income was a little more difficult for me to get used to. At the beginning of my experiment, I was worried that I might not have enough in cash despite my budget, and I wanted to keep as much as possible in savings accounts just in case. Lately, though, I’ve been able to relax a little and say that at least 10% of this should be put in long-term investments. I look forward to being able to increase this proportion as I become more comfortable with managing finances during this experiment.

It’s getting easier and easier to postpone present spending for the abstract idea of enjoying extra time and flexibility later on. For example, we were at a thrift store looking for books, and we came across some DVDs for movies we had enjoyed. After some consideration, we put the DVDs back because we get a lot of free movies from the library anyway. It’s easy to keep my lifestyle simple now so that I have the space to keep exploring things later.

I still haven’t sold a single stock or index fund I’ve ever bought. Well, I guess the transfer of my Sun Life funds (from the IBM defined contribution pension plan) to TD counted as a sale, because it needed to be transferred in cash, but I put it back into investments once the transactions got sorted out. I haven’t tried doing the paperwork for capital gains in non-registered accounts yet. I might do it one of these years just so that I know how that’s done and so I’m sure I’m keeping all the records I need. At some point, I should probably convert some of these e-funds to exchange-traded funds (ETFs) for even lower management expenses. Bonds and stocks still boggle me, so it’ll be quite some time before I get around to buying these. (If ever!) Many things to learn! My sister is a lot more sophisticated when it comes to investing, I think, but as long as I can figure out something that’s comfortable for me, I’ll be fine.

Investing can be scary for lots of people, but if you can create some space for yourself so that you aren’t as worried about the ups and downs, it seems a little bit easier. The biggest risk of loss comes from having to sell at the wrong time, and that space can help. Many people struggle with saving even just a little, but if you can manage it, it might be worth trying investing. Like in gardening, it’s fun to see things grow without much more effort from you, even though sometimes the seasons can be tough. As long as you don’t have to use up your seeds for food, there’s always next season.

I’d been setting aside an “opportunity fund” ever since I started working at IBM. Last February, I embarked on the experiment for which that opportunity fund was earmarked: a 5-year adventure in learning how to build businesses, create value, and have fun. What can you do if you have a good foundation? What can you do with a long runway?

Periodically checking the status of this runway helps me make sure I have the space I think I do. I don’t want to have to cut my plans short. I’d rather adjust early and plan ahead. I’m treating business money as separate for now. I haven’t drawn any income from it, because I want to use that money to fund further growth within the business and build up its own opportunity fund.

It’s tough watching my savings account go down without putting anything back into it to top it up. Well, technically, the GIC ladder I set up replenishes my savings account on a regular basis, so I’m actually watching my GIC total go down. This is according to plan, but it’s still hard to think about, especially with major expenses such as travel on the horizon. Here the numbers are reassuring; plan the work, and work the plan.

I check how I’m doing every month. I’ve usually been near my projected monthly expenses, but November was higher because I started going to the krav maga gym that W- frequents as well. Even with the additional monthly expense and with travel budgeted for, I still have about 4.3 years of runway (pretty much right on track). I can dig into my long-term savings if necessary, so I have a bit of buffer.

It’s great to have eight years of financial data. I’ve been tracking my expenses in Ledger since 2005, when I moved to Canada for my master’s degree. I’m happy to see that I’ve been able to slash my net expenses to less than half of what they were the year before. Here’s a sparkline that shows how my expenses have changed over the past eight years: My top expense categories this year were household contributions, miscellaneous cash expenses, pet care, eating out, and gifts. I wonder if I can get friends to shift towards dinner parties instead?

Psychologically, it might be a good idea to draw a small amount from my business in 2013 so that I can top up my savings and make a small investment in index funds. I want to make sure that I do this properly, so I may need to find an accountant who can help me figure out the dividends versus salary question for small amounts. (Probably dividends, based on my research…)

I might also manage the risk as I head into greater uncertainty and more learning. I can take on short writing, drawing, web development, or consulting projects, especially during gaps between conferences and events I’m interested in.

Still, so far so good, and it’s good to have the numbers to back it up!

I have several friends who’ve also moved to Canada from other places. One of them asked me how she could figure out how much money she’d need in retirement if she doesn’t know where she’s going to live and what the costs will be. Even at 29, I’ve spent some time planning for retirement, and here’s how I approach planning for retirement when I don’t know what’ll happen.

The most important thing to realize is that there isn’t just One Number. There are different possibilities depending on how much you save. I remember reading a personal finance book that suggested coming up with three numbers: how much you need for a bare-bones retirement, what you need for a comfortable retirement, and what you need for an awesome retirement. If you take the same idea and extend it to possibilities in different places, you can get a sense of what you might need.

It’s also good to know that those numbers will change. You’ll make different decisions. You might need more, you might need less. If you’re automatically saving 10%, maybe 20%, maybe even more, then you’ll most likely be in decent shape.

Still, numbers can be good for motivation! So, how do you get those numbers? I like starting with current dollars instead of inflation-adjusted numbers. It’s easy to find articles suggesting what you need to retire in different places. For example, this 2010 article says $800-1200/month is comfortable for expats, which probably means that number’s way over the top. =) I can probably get away with something like the amount I earned while teaching there, with something extra put aside for medical issues.

In Canada, I can estimate the minimum I need by looking at my expenses and finding out what else I might need to spend for, like medicines. I’m not counting on Old Age Security, the Canada Pension Plan, or other government programs – they’ll be a nice bonus if I get them, but I shouldn’t rely on them. That gives me a number for a basic retirement, and then I can come up with other numbers for more comfortable retirements.

When you look at retirement planning as a range of numbers instead of a single number that you have to make, it becomes easier to cheer yourself on. Then you have all these numbers, and you can estimate how much you need in today’s dollars when accounting for inflation and growth. You can see what possibilities are probably already available, and how far you are to your next threshold. You can think of it as getting to different levels in a game, or unlocking different achievements. As you save and invest, you open up more possibilities – and it’s great to know that your backup plan is well-covered.

Me, I’m inching towards my “very basic Canadian expenses covered” goal, knowing that I can likely retire to the Philippines if I want to. It’s pretty cool knowing this at 29, and it motivates me to save up more so that I could have a totally awesome retirement either in the Philippines or in Canada!

I’m not a financial advisor and this isn’t financial advice. I’d love to hear what you think, though!

I’ve been in business for a little more than two months, which is a blink of an eye in the business world. It’s encouraging to see my bank account balance creep up slowly. I move the HST and an additional 30% for taxes to a separate account so that I’m not at all tempted to touch it.

I’ve made a few purchases here and there, things to help me work more happily and effectively:

• an extended battery for my laptop so that I can use it all day without looking for a power outlet
• the Artrage Studio Pro drawing program
• a few books to read and review

Those decisions have worked out well. I’m still flipflopping on the idea of getting a tablet, so I’ll postpone it until I meet some more of my other savings targets. Although I’m earning a decent income now, I plan to work on riskier, self-directed projects in a number of months. A good savings cushion will help reduce stress then, so I don’t want to get used to a level of expenses that match my current income.

I’ll try managing my business finances like the way I manage my personal finances. Because I’m still building up my business’ emergency fund, most of the income will go towards that. Some of the income will go towards an opportunity fund and other things, though, because it’s good to train myself to experiment within the context of the business.

What about long-term savings? I haven’t been adding to my investments because I’m not sure if I’ll need the money in the short term. Besides, I suspect I might be better off investing the money in developing my capabilities. Would I have a higher return on investment than the stock market, which has been up and down and sideways over the past few years? Maybe. I can probably hedge my bets by going half and half. I can’t time the market, but I can keep regularly investing in it and things will probably work out.

Many people struggle with managing irregular cashflow. If I fight lifestyle inflation and err on the side of caution, I think things will be all right. I’ll only be able to test this once I move into that pattern of work. In the meantime, I can get ready for it. Here we go!