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Slip into something more comfortable and delve into personal finance with Josh Sheluk and Colin White, experienced portfolio managers at Verecan Capital Management. Each episode demystifies complex financial topics, stripping them to their bare essentials. From investment strategies and financial planning to economic headlines and philanthropic giving, delivered with a blend of insight, transparency, and a touch of humour. Perfect for anyone looking to understand and navigate their financial future with confidence. Subscribe now to stay informed, empowered, and entertained.
Verecan Capital Management Inc. is registered as a Portfolio Manager in all provinces in Canada except Manitoba.
Welcome to Barenaked Money, the podcast where we strip down the complex world of finance to its bare essentials. Welcome this week's hosts, Ainsley Mackie and Devin Catalan, portfolio managers with VariCam Capital Management Inc.
Devin Cattelan:On today's Bare Naked Money podcast, we have 2 special guests. We have myself, Devin Catalan, and Ainsley Mackie.
Ainsley Mackie:Hi, Devin. Thanks for having me today.
Devin Cattelan:Thanks thanks for having me today. I'm looking forward to our, our chat today, on, on a topic that is is a little unique. It's it's more popular amongst the millennial crowd. It's with regards to the fire movement. Ainsley, have you have you heard of this movement before?
Ainsley Mackie:It's come up in client conversations and a lot of my friends' conversation, just because I'm a little I'm a elder millennial, so we're sort of in this age group where people are looking at how can we retire faster and do other things. But really, FIRE, it's a retirement strategy where people budget and save aggressively to achieve financial independence and retire early. And it was popularized by bloggers in the early 2000. And right now, I'm seeing a lot of it on TikTok and other social media platforms. So I think that's where clients are catching on to it.
Devin Cattelan:I guess, how what's your approach when a client says, hey. I wanna I wanna implement the fire move the fire movement. Or what's your approach to that? How do you approach those client conversations?
Ainsley Mackie:I'd wanna be asking, well, what's your capability of saving? Because the part of the fire thing is you save aggressively. So up to 50% of your income is put aside for savings and that you have a really reduced budget for expenses. So I don't know many people ability to commit to that much savings or to really reduce their expenditures, especially given today's economy and the raising cost of everything.
Devin Cattelan:It's one thing to to wanna strive for a retirement goal and save and suck away monies, but, you know, part of 50% savings to get you towards that goal, I mean, you have to compromise a lot to get there. And, you know, I I think about what type of people can save 50% of their income. It's not very many people out there that can do that.
Ainsley Mackie:No. It's not.
Devin Cattelan:And and you're probably I mean, for for most pea a lot of people, it's they're living you know, a lot of people are are are stretched to begin with. So, you know, this movement, there's there's a there's there's a range. I mean, there's elements that are a little bit more extreme where, you know, it's it's very, very, very aggressive tax savings at the 50% mark and and people who are willing to really simplify their life and and not live on much to be able to reach that retirement goal. But, you know, there's there's probably a a little bit more moderation that can be implemented as well, still keeping in mind that early retirement or, you know, balancing that that early retirement with the lifestyle now.
Ainsley Mackie:Absolutely. One thing I think of of the extreme side of the fire movement is actually fire festival and everyone in their tiny little tents with nothing and then no food. So that's that's what pops to my head. I laugh a little bit, but I don't think people are doing that with the fire movement. But that's what pops to my head at the extreme level that people have to save and, simplify things so that they can put away all that money.
Devin Cattelan:Yeah. I'm not sure if retiring at 40 is worth it if you're living on a can of beans and then a 10 for the the 10, 20 years prior. Exactly. Yeah. It's, I I think having some balances is is much better.
Devin Cattelan:There's 2 big rules that that people talk about implementing in order to to as part of the fire movement. One of them is the rule of 25, and one of them is the 4% rule. Have you heard of those those rules before, Ainsley?
Ainsley Mackie:No. Fill me in, Devin.
Devin Cattelan:Okay. I will fill you in. So the rule of 25 is saving 25 times your annual expenses in order to retire. So the idea behind that is if you're spending $72,000 a year, then you need to save 25 times that. So 1,800,000 in order to retire, at an early age.
Devin Cattelan:The problem I see with that is that whenever we're talking general rules of thumbs, it's general. So everybody's circumstance is different. And so, you know, if for one person, it may work, but for another person, it wouldn't. If you wanna have a more extravagant lifestyle, then you're gonna need to save a lot more than somebody who's who's eating that can of beans and and, living in a 10th during retirement.
Ainsley Mackie:Exactly.
Devin Cattelan:It might be a good have a good baseline for some people, but, even then, I I think it's I think it's too generic. It you it's best to talk to to an adviser and and and work out a plan that works for them based on their age and their lifestyle.
Ainsley Mackie:There's no one idea that fits every person. So having an actual conversation with an adviser, find out what your goals are, how you can make that happen is a way better option of than going to extremes and thinking I'm gonna be set with this, but you might not. You might not have enough no matter what you do on your own.
Devin Cattelan:Yeah. Yeah. I mean, it's, I mean, we see it all the time where you're dealing with clients where they're, you know, people have a very simple lifestyle in retirement and don't need much Yeah. To to retire on. And other people that live a more extravagant lifestyle and need to have significant savings.
Devin Cattelan:So there's there's a range. And and and there's, you know, you you you don't wanna compromise the now too much. I mean, there needs to be some compromising, but also you don't wanna compromise your retirement too much either.
Ainsley Mackie:And part of the FIRE movement as well the reason why it gained some popularity is the fact that, people are able to focus on personal fulfillment. So this is a way for them to be able to reach independent financial independence and do something that they really, really enjoy. So I think that has some appeal for people. But there's other ways that you can do some traditional savings and traditional financial planning so that you can potentially retire a little bit sooner and still enjoy all those passion projects.
Devin Cattelan:Well and and the other thing too is is with you know, it's a means to, achieve some fulfillment. But at the same time, if your work isn't giving you some of that fulfillment or you're dreading coming to work every day and you're really, really wanting to retire early, well, maybe that isn't the right career for you. Maybe you should be exploring other options there. And so saving's great. Putting monies aside for the future is a good thing.
Devin Cattelan:But, I mean, getting that fulfillment now is is is also very important. It's about balance all around. The other rule that we we hear a lot of to to tied into the the fire rule a fire movement is the 4% rule. And so that that's where people you look to save enough so that you're only drawing 4% of your portfolio annually. And the idea behind in retirement and the idea behind that is that you'll always, in theory, have enough because you'll be able to just live on the growth of your portfolio.
Ainsley Mackie:Yeah. There's definitely some drawbacks to that though because we don't know what the markets are gonna do. There's rising costs of, say, health care. We it's exponential as you get older. Inflation with everything that's gone in the last few years, we've seen that inflation is not keep or sorry.
Ainsley Mackie:Returns are not keeping up with invest or inflation. So there are that 4% rule, again, they can't be a standard for everyone. It's not always going to work.
Devin Cattelan:Yeah. And and, and and, you know, the to your point about inflation, your purchasing power changes over time. It erodes over time if you just if you let's say you were just for to sit on cash. And so if you need 5,000 today, you know, 5,030 years from now is gonna be very, very different. And so, even if you are able to generate 4% growth, you're living on the growth today.
Devin Cattelan:But 30 years from now, you're gonna be also pulling on capital because you're gonna need more than just the growth to to live on because of inflation.
Ainsley Mackie:And 30 now 30 years from now, you might not wanna be working a little part time job that was once a passionate job, but you're now in your seventies and don't wanna be doing that.
Devin Cattelan:Yeah. Exactly. Yeah. So if if you factored in, you know, a part time gig into your, into your retirement and making up the difference on the portfolio, you're gonna need a lot more when when you don't work that part time job. And that actually brings up a really good point about about one of the movements.
Devin Cattelan:So they've they've categorized these the fire movement to a couple different types, and, one of them, I I like the name. It's it's the barista movement.
Ainsley Mackie:That's my favorite one. I like that one. I have plenty of friends who they always say their their plan is to try to retire in their, say, late fifties and then go and work at a garden store or, like, garden center or a little cafe and just be out there socializing. That's their goal.
Devin Cattelan:Yeah. Yeah. I I I remember speaking to a a client who, retired from his full time gig and went went to go work for Home Depot.
Ainsley Mackie:And This is my dad. This is this is his dream.
Devin Cattelan:Actually, there are a few clients who've done it, but what was funny about this story is he was such a good worker. He worked his way up. So by the end, he became store manager. No. And it went from a part time job to a full time job.
Devin Cattelan:So it's you know, life life can can, can change along the way, and and I think it it ties really back to that fulfillment. Right? And and if you find something you enjoy doing, if you're working in a job that you enjoy doing, you're never working a day in your life. And and so, maybe, you know, maybe that's the solution rather than just socking away cash and living on on beans and and a tent and living in a tent.
Ainsley Mackie:The other thing I did wanna touch on is for people who do manage to retire early, a lot of times their peers are still working. So there is an adjustment of, well, who we're gonna hang out with? What are we gonna do? Not necessarily I think a lot of people well, a lot of clients that we know that have technically retired early, they go back in some capacity because they realize the people that they wanna travel with, they're still working full time. Like, their kids might not have grandkids yet, so they're not they've got no other purpose other than to be retired.
Devin Cattelan:Yeah. I mean, if your if your social network is, is all retired, you you need to you need to shift your focus somewhere. And so, actually, that's a that's a big part of of you know, a big part of planning for retirement is not just how much you're saving to get towards retirement, but it's also how do you envision your retirement. It's, you know, if your friends are are are working, if you're you're not gonna have travel companions or people to see during the day, you can only really travel so much before you get bored. At least me, that's that's me personally.
Devin Cattelan:And, if you don't have grandkids to keep you busy, then, yeah, you have to find ways to to fill that time somehow. So that's a huge thing. And, actually, that's that's something that we spend a lot of time talking to clients about is is, you know, how do you vision your retirement? What what do you wanna do?
Ainsley Mackie:Yeah. And it's interesting how it does change when you're having the initial financial planning, like, maybe 5 years out. And every year, we talk about it. And as they get closer to retirement, their plans can adjust. And then once they actually get into retirement, quite often, it's not what they thought it was going to be.
Devin Cattelan:You know, that grandkid will throw a curveball in your plans. You know, spoken to a lot of clients who their every intention was to travel and to, you know, play pickleball. And, and as soon as the grandkids came into picture, it was completely derailed. It was just, you you know, that's it. I'm babysitting.
Devin Cattelan:And those travel plans in right out the door. So life is all about curve balls, and, and it's it's it's adapting and changing. And, you know, one thing that we haven't really chatted about is is is, like, even even things like medical expenses. Right? And and so you could be planning for a certain type of lifestyle, but big events like medical related events may come up and, which which you'd need more savings for.
Ainsley Mackie:Trying to plan for all eventualities is difficult, but the more you sort of pad that savings or that retirement plan, the better off people are going to be. Because you that curve ball's gonna come and you don't know what it is.
Devin Cattelan:What piece of advice if you were to give millennials one major piece of advice I'm putting you on the spot here.
Ainsley Mackie:Oh, there's some good good things that have, I think, are coming out of the FIRE movement. Like, actually having a budget, being aware of what you're spending. That's always a good thing. Saving for yourself first, actually putting money aside every month. And this is specifically for me when I retire.
Ainsley Mackie:That's a good thing. Sometimes we get caught up in the latest getting the latest iPhone or having a little bit of envy because your friends are going on a trip, so I need to go on a trip. So just having a little bit more conscious awareness of what's going on around you and what you're doing is a good thing. And actually using investments to grow your wealth over time. Make your money work for you.
Devin Cattelan:Yeah. Yeah. It's it make your money work for you and the pet power of compounding over over a long period of time. And and the more that your money works for you, the less that you have to save towards retirement. So, yeah, there's some great elements of it.
Devin Cattelan:And the other other thing too is the one one element I like that's often, you know, making some compromises. You know, a lot of people don't like to make any compromises. They want it all. And so at least the fire movement is addressing some of that. It's it's making people aware that there has to be compromises that are made in order to achieve your longer term goals.
Devin Cattelan:Now maybe you don't need to be as extreme as as what some of the points are, 50% savings, for example. But getting there does take work. And so you need to you need to give up some of the now to get there.
Ainsley Mackie:Devin, have you heard of loud budgeting?
Devin Cattelan:No. I haven't. This I
Ainsley Mackie:was actually listening to CBC, and this there was a a little bit of an interview on there. And it's it's a style of money saving where people will ultimately decline a social opportunity, like, in public and say, I can't I can't go to dinner tomorrow night because that's gonna compromise my financial future. It's not in my budget. So you're, like, ultimately declaring that you can't do something.
Devin Cattelan:And do you have to yell it when you when you're doing it? Don't know if it's a yell,
Ainsley Mackie:but I feel like it's loud budgeting, but it's announcing to everyone that, no. I'm on a budget. I can't do this.
Devin Cattelan:Okay. And and so you're just on on social media
Ainsley Mackie:and On social media, when you're with your friends and they ask you to do something, so you're trying to hold yourself accountable by saying it out loud and expressing it to the people that you're with.
Devin Cattelan:Yeah. Okay. Well, I mean, there could could be some merit to that. Right? I mean, making other
Ainsley Mackie:self fulfillment, this is happening. And, also, I'm like, oh, are you telling your friends you should be saving more? But it was an interesting concept.
Devin Cattelan:Yeah. I mean, sharing it with others, hopefully, they help you out as well and don't, you know, don't, you know, pressure you into spending more.
Ainsley Mackie:You'll send out that mass email saying we're going on a trip to Greece next year. Come with us. Right?
Devin Cattelan:Yeah. Well and there and there was a a study that came out, and, I'm just gonna talk in generalities because I don't remember the exact figures. But it came out about, people wanting to stick to a plan. And somebody who's thought of a plan, the percentage of them achieving the plan is is lower than somebody who thought of a plan and has written it down, which was lower than somebody who thought of a plan, written it down, and vocalized it k. Which was lower than somebody who thought of the plan, written it down, vocalized it to somebody else who was gonna keep and then lower than somebody who thought of the plan well, I'm gonna lose the trail here.
Devin Cattelan:But saw the plan, written it down, vocalized it to somebody else, and asked them to keep them accountable and kept them accountable.
Ainsley Mackie:So that's totally loud budgeting.
Devin Cattelan:That's loud budgeting. Yeah. And they found that somebody who if they were accountable to somebody, their chances of success were a lot higher. And we think about it. Like, that's what clients do with us is is when we're going through the planning process.
Devin Cattelan:Right? Like, having them formalize their thoughts, vocalize it to us, write it down, and then keep them accountable to their action items, the chances of them getting towards their goal are much higher than somebody who just thought of it and and, you know, has to take action on them by them by themselves. So maybe we're onto something. Maybe the maybe the loud movement I I like the idea of just yelling, like, yelling, declaring things. It's out of the blue.
Ainsley Mackie:I'm a loud talker, so I would love to just be able to yell things out.
Devin Cattelan:I'm wanting to travel. I'm on a I'm on a budget. Yeah. You could have some fun with that. I could see that.
Devin Cattelan:Well, I mean, I I think, you know, the key is that there's everybody's gonna have different ways of of finding what works for them. You know, if declaring it out loud to your friends helps, why not?
Ainsley Mackie:It's not harming anyone. It's it's gonna help with your personal growth and keeping with your financial plan. Great.
Devin Cattelan:Yeah. And maybe even making a little bit of a competition with friends might,
Ainsley Mackie:like Healthy competition.
Devin Cattelan:Yeah. Yeah. Who can have the the best budget?
Ainsley Mackie:Maybe at our office. That's something we'd be doing. I don't know about the general public. Yeah.
Devin Cattelan:I don't think I'd have many friends if I brought that up with them. Just think any anything else that, that you'd you'd like to add on the FIRE movement?
Ainsley Mackie:Oh, I I think there are some good points to the FIRE movement, but having a more balanced approach to financial planning and personal fulfillment without an extreme focus on any one way, will lead to a a more successful plan.
Devin Cattelan:Absolutely. With everything in life, it's all about moderation. Well, thank you for joining us today on Barenaked Money. Thanks for having me.
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