The American (and Canadian) dream hasn’t really changed in the past 50 years. You go to college, find a job, get married, buy a house, have a couple of kids and retire at 65. It’s pretty straightforward, but what would happen if that model were flipped upside down? If you skipped a few steps and went straight to retirement?
It sounds impossible, but it’s a reality for Kristy Shen and Bryce Leung, a Canadian couple who retired at 31 and are traveling around the world.
Shen and Leung, now 33, both worked as computer engineers making about $60,000-$70,000 annually. They had been aggressively saving money since about 2006, got married in 2010, and by 2012 the newlyweds had saved $500,000 to use as a down payment on a house in Toronto. But when it came time to find the perfect home, they were shocked at how expensive and limited the options were.
“When we went house hunting there were so many bidding wars and so many realtors doing shady stuff. There were a lot of games,” Shen told Yahoo Finance.
“There is this shared madness that everyone participates in, even though it’s stupid,” Leung added. “It caused us to look for another option.”
After doing some research, they discovered the concept of financial independence referred to as the “4% rule.” With this system, investors attempt to build a portfolio large enough to extract 4% every year to cover living expenses. This method is often used by people planning for retirement, but Shen and Leung simply sped up their timeline.
By saving and picking smart investments, that initial $500,000 turned into a $1 million portfolio by 2014, making the couple millionaires by 31. It sounds impossible, but they were were able to reach their goal by following these five simple investment rules:
- Invest using low-cost index ETF funds
- No stock picking or following hot tips.
- Avoid actively managed mutual funds.
- Pick an asset allocation that balances volatility based on risk and distance to retirement.
- You sell what’s high and buy what’s low.
With their new financial freedom, Shen and Leung quit their jobs and planned to travel around the world for a year.
Their adventure started in the US, with visits to Boston, Los Angeles and San Francisco, and then they headed across the pond to the United Kingdom. When all was said and done, Shen and Leung traveled to 15 different countries throughout Europe and Asia during their yearlong adventure. They returned home to Canada in Spring 2016 to see loved ones and plan their next steps.
“When we came home, we realized our portfolio had grown and that we had actually made more money than the cost of the trip … so it was basically free,” Leung said.
“During that first year of travel we actually saved money. We spent $40,000 compared to the $50,000 we would have spent living in Toronto.,” Shen said. “So why wouldn’t we just travel forever?”
So in August 2016, the couple set out on their next global adventure. They started in Japan and are currently in Vietnam. They plan to ride out the Canadian winter on the beaches of Malaysia and Thailand before heading home to spend next summer with their friends and family.
To keep their budget in line, the couple is strategic with the cities they visit. If they spend a few months in the United Kingdom, they will spend the next couple of months in a country like Vietnam, which is much less expensive.
Shen admits the couple also loves to travel hack by using credit cards to earn loyalty program points for free flights. “We saved $6,000 on our travels just by using credit card deals,” she said. The couple also frequently uses Airbnb when traveling through Europe, because they say hotels cost nearly twice as much. And finally, even though Shen and Leung are officially retired from their jobs, the couple still enjoys finding creative ways to make moneyby keeping a blog and writing children’s books.
Silencing the critics
There are plenty of naysayers who question the legitimacy and even the sanity of what Shen and Leung are doing … including her parents. “My parents are very traditional and see buying a house as a better investment,” Shen said. “They thought we were crazy, and our relationship is still pretty strained.”
Other people have expressed their belief that the couple would have been better off buying a house. Leung says they analyzed and compared their costs, and in the end, buying a house just would not have been profitable. “We broke down the costs involved with owning a home, including things like property taxes, maintenance and a mortgage,” he said. “Even if the house made $120,000, all of those costs would eat up up 95% of the profit.”
As a couple, they are pretty passionate about what they call the Millennial Revolution, which encourages young workers to become financially independent and to live the life they want, not the life they think they are supposed to want.
Sure, their methods are on the extreme side, but it does appear that Shen and Leung have a finger on the pulse of what’s going on with today’s millennial workforce. According to a study by LinkedIn, millennials who graduated between 2006-2010 are expected to change jobs four times by the time they reach 32.
“The idea of people working at Ford for 25 years is laughable now. We are told that it makes sense to buy a house, but it reduces your mobility, and if a job becomes available across the country you can’t take it because you’re tied down to a house,” Leung said.
But Shen and Leung aren’t the only ones avoiding the housing market. Many people around the US are still recovering from the Great Recession, which caused millions to lose their jobs, and forced students to rack up large amounts of student loan debt just to attend college. Perhaps that’s why many millennials are putting off buying a house. In fact, according to the Pew Research Center, more adults 18-34 are living with their parents instead of living on their own or with roommates. The research looked at data from 2014 and found that 32% of young adults were still bunking up with mom and dad. This was the first time in 130 years that this living arrangement outranked other options.
Indeed, it looks like the same rules that applied to the baby boom generation do not apply to millennials.
“We’ve broken all of these rules and it’s been awesome. I have zero regrets,” Shen said.
The future is wide open for Shen and Leung, who plan to travel for as long as possible, staying in cities where the cost of living is low. They do want kids one day, and say that they’ll continue to travel even when they have a toddler. If or when they do decide to plant some roots, it will be in a city of their choosing and buying a home won’t be a big concern.
“Freedom is the best thing. Being able to do what you want without having to listen to a boss … being able to wake up and do what you want. It’s the best thing ever,” Leung said.
Brittany is a writer at Yahoo Finance.