If success is measured in material possessions, then Diana Salomaa and Henry Dembicki would appear to have some catching up to do in the game of life.
Their only car is an eight-year-old Chevrolet Lumina. Their home-entertainment system is a TV with rabbit ears that pulls in three channels. When they go on a vacation, they prefer camping under the stars to four-star hotels.
Oh, and don't bother calling them on their cell. They don't have one.
But if you think the couple are struggling, you're wrong. Sure, they lack the usual trappings of wealth, but the authors of a new book, Why Swim with the Sharks? An Unconventional Guide to Early Retirement, are actually set for life.
Thanks to years of frugal living, their four-bedroom, three-bathroom house in Edmonton is fully paid off. So is the Lumina -- and everything else they own. Debt is a four-letter word in the Salomaa and Dembicki household.
Living within their means has allowed the couple to accumulate a modest nest egg of between $200,000 and $300,000, most of which is invested in conservative Government of Canada bonds. No risky stocks for them. They've even put away money in a registered education savings plan that will help their two teenaged sons get through university with little or no debt.
But here's the best part: Ms. Salomaa, 53, was able to retire three years ago from a career as a policy analyst and social planner. Her husband, 56, aims to leave his government job in the next few years. That's when they'll move to a smaller house in British Columbia to indulge their passions for hiking, kayaking and mountain biking, getting by on about $2,500 a month from their personal savings and government and work pensions.
"We can afford to do this because we made a conscious decision to simplify our life," Ms. Salomaa says. "We're not wealthy. We just started saving 10 years ago."
Their no-frills journey to early retirement stands in contrast to the path recommended by the wealth management industry, which advises people to build a massive investment portfolio as a bulwark against rickety government pensions and other bogeymen that lurk in the darkness of old age. You need $1-million or more, financial planners say, or you'll be eating canned beans and freezing in the dark while everyone else is touring wineries in southern France.
But retiring early doesn't have to be so onerous, Ms. Salomaa and Mr. Dembicki argue in their self-published book.
The biggest mistake would-be retirees make is that they focus too much on building wealth and not enough on the other side of the equation -- controlling spending. The result is they end up trapped on a work-and-spend treadmill, unable to leave their jobs because they're still trying to pay for all the stuff they've accumulated, much of which provides only ephemeral gratification.
The authors argue that it's far easier to save a dollar than to earn one -- especially when the government taxes every dollar you make. But most people are too busy being swept up by the desire to buy now and pay later.
"We look at a lot of people we know and they're stuck at a job because they've got a huge mortgage, they're paying off their second or third car, they've got the big-screen TV and they've got a lot of debt," Ms. Salomaa says.
"The way we see it, a little frugality is far easier to accomplish than trying to save a million dollars or more to maintain a lifestyle based on shopping and consuming."
Their book won't appeal to folks who need a steady procession of cars, tropical vacations and lavish restaurant meals to feel complete. But for others, the book's simple prescriptions for reaching financial self-sufficiency have evidently struck a chord, judging by its No. 3 position on Quill and Quire's business bestseller list.
While advocating a life of frugality and conservation, the book also debunks many of the myths espoused by the wealth management industry, such as the claim that retirees need 70 per cent of their previous income to live comfortably. Bollocks, the authors say. Considering that many retirees have paid off their homes, are no longer supporting children and don't have work-related expenses for clothing, meals and transportation, they can live well on less than half the money they used to make.
Retirement planners also like to warn of the supposedly frail state of public pensions, but the book dismisses that as scare mongering, arguing that the Canada Pension Plan will be on solid footing for at least the next 70 years because of recent reforms that boosted contribution rates. As for Old Age Security, politicians would face a revolt if they tried to tinker too much with the plan.
They aren't alone in their view of pensions.
"I feel very confident in the public pensions of Canada. I would say they're stronger than anything else, even company pension plans," says David Trahair, a Toronto chartered accountant and author of Smoke and Mirrors, Financial Myths that will Ruin Your Retirement Dreams.
So why do investment advisers portray public pensions as shaky?
"The more you believe public pensions aren't going to be there, the more money you're going to have to give them. . . . It's as simple as that," Mr. Trahair explains.
But what happens if Ms. Salomaa or Mr. Dembicki ends up in a nursing home? Won't the costs of long-term care more than consume their modest income from pensions and savings? Not necessarily, they say. For one thing, their pension income will increase as they get older (they can start collecting CPP at 60, while OAS kicks in at 65). If they still need cash, they can always tap the equity in their home, which they see as their ultimate insurance policy.
Retiring early doesn't happen overnight. The authors' financial transformation started nearly a decade ago when a friend recommended the book Your Money or Your Life, by Seattle authors Joe Dominguez and Vicki Robin. First published in 1992, the book's nine-step program shows people how to attain financial freedom through a combination of frugal living and conservative investing.
"That's what really got us thinking that, yeah, this is possible," Mr. Dembicki says. The book's advice on tracking spending was particularly useful, he says, because it helped him cut out seemingly insignificant purchases -- a daily coffee and muffin at work, magazines he never had time to read -- that added up over time.
But even for folks who cut their spending to the bone, some things are worth the expense. With Mr. Dembicki's management pension vesting at the end of next year, he could walk out the door and start collecting his benefits.
But he may stick around for a few extra months "to upgrade a kayak or two."
