In a Nutshell: Buying things you don't need or expensive brands you can do without, siphons money away from your savings and prevents you from investing, making you miss out on compounding growth, resulting in a reduced retirement portfolio. As a result, when you're older, you'll wind up having to work longer due to an inadequate retirement portfolio. Instead, avoid buying unneccessary consumer products and expensive brands, save and invest early and often, and build a significant retirement portfolio so you can retire early and have financial freedom.

'Tis the season to spend on gifts
Edward Norton in Fight Club

The things you own... end up owning you 

“Do I want to be owned by things, or do I want to be financially free?”
I'll probably get into trouble for this. I know I'm not supposed to talk about it. I know I'm breaking a rule. But I'm taking the risk of talking about it for your benefit... I'm being altruistic. 

In Fight Club, Tyler Durden said something that, all these years after having seen the movie, still sits with me. It was a great line. That line is the title of this article. "The things you own... end up owning you." (I've put the clip that leads up to that line here... it's a cleaned up clip I found on YouTube with the swearing cut out, you can probably find the less sanitized version out there if you want to.)

It's all the stuff. So much stuff! We all have so much stuff. And we keep buying more and more stuff. Why? Is it to fill some empty gaping hole within us, that we've falsely been told by advertisers can be filled with their product? Is it to have stuff to show other people so they accept us because we bought the right stuff? Who needs all this stuff?? And what is it really costing us to have all this stuff? DO the things we own end up owning us? And what does that even mean?

I think there are many ways in which the things we own end up owning us:

  • We wind up having to work a long time to save enough to buy the thing
  • We often debt finance the thing we buy, so after we buy the thing, we have to keep working to make the monthly payments or credit card payments to pay the thing off
  • We get so attached to the things we bought (like a house you bought and filled with other things you bought) that you are no longer free to move to another city or country for a new opportunity or experience because you feel too bound to the things you bought
  • We think the things we own somehow define who we are, as if a thing (purse, phone, sneaker, watch, alcohol, suit, car...) with one logo versus another logo really has any bearing on who the person who bought the thing is, but we get so trapped by consumer product branding and our own imagery that we build around us with branded logo'd products, that we are no longer free to be someone else
  • By choosing to buy and own a thing, we are making a conscious decision to spend that money on the thing instead of saving that money and investing it for retirement. As a result our retirement gets delayed by the amount of time it takes to work and save the money necessary to replace what would have been in our retirement account if we had saved, invested and grown our money instead of buying a thing in the first place! 

I find that last one the most troublesome of all of them. (They're all troublesome.) A thing which you probably don't need or could do with a cheaper version of, is causing you to work longer to save for retirement. Owning that thing, which siphoned money away from your savings and away from your investment portfolio, resulted in you having to work longer to save for retirement. That thing is making you work longer. The thing owns you. 

So that's what I'm taking a look at here. The buying of a house is an interesting discussion as well. But it's too interesting to deal with here. It needs it's own article, so I'll write about that one later. Let's look at how things own you, by delaying your retirement, making you work longer, and whether it seems worth it to you.

Now I agree that things can give us modern conveniences that are nice to have. It's nice to know what time it is, to be able to text a friend and find the best route through traffic when out and about, to be able to carry some things with you in a bag, but do you believe the branding machines of major consumer product companies? Do you believe that their brand is so much better than another brand that does essentially the same thing, that it's worth spending that much more money on it resulting in you delaying your retirement? 

I remember being in New York, New York, the city so nice they named it twice, years and years ago. A friend of mine wanted to buy a wallet from a store where they engrave someone else's initials into your wallet. Only one choice on whose initials they are though... LV. Louis Vuitton. I went along for the walk to the store and we went in. The security guard protecting leather goods allowed us entry. I was asked for my opinion, once this rarified object of leather artisanship was summoned forth. I asked how much it cost, as it would have a direct bearing on my opinion of said object. I was told this LV emblazoned piece of leather was valued at over $500USD. 

I told my friend, "When someone steal's your wallet, you should be more concerned with the contents of the wallet than the wallet itself."

My friend definitely wasn't going to be carrying more than $500USD in the wallet. To me, that's akin to buying a $2000 safe for your house, so you can store a bag of chips in it. And isn't it possible to find a wallet with the same utility for less? ​ ​​
Fight Club clip that gave me the title of this article
Amazon ad for Fight Club, if you haven't seen this movie, you should
$4,450 CAD
$19 CAD
$555 CAD
Did I just wake up from a coma? Has inflation gone through the roof? Is this Zimbabwe? Why is there a wallet being sold for $4,450 CAD??? Is anyone buying it?? Why is there a wallet being sold for $555 CAD? Do either of those products have that much more utility than the wallet for $19 CAD? Does it have $4,431 CAD worth of extra utility? Does it have a parachute inside it to save you in case you find yourself on a burning plane? Has the world gone bonkers? You do realize the whole mission of a consumer product company is to take money out of your wallet. Don't let them. Save it. Invest it. Retire early. Or at least get your financial independence. Forget all the branding nonsense you've been force fed, think rationally.   

The sad thing is people who really can't afford these things clamour and save to buy these things. For some reason there are people out there, who, compelled by advertising and societal need for acceptance, spend ridiculous sums of money on ridiculous things, when they don't have much money to spend on those ridiculous things to begin with. 

Some call them 'aspirational' brands. Who aspires to waste so much money on a branded thing of little extra utility than the cheaper option?? Why is that something considered worth aspiring for?? Aspire for financial freedom. That's something to aspire for!

Now if you have money to burn, and you're already all set for a comfy retirement, then it's up to you if you want to burn it. Though I would point out that if you have money to burn, instead of burning it, that money can probably be put to better use to help humanity or to feed a hungry person.

If you understood how easy it is to have a million dollars when you retire, if you just avoid the marketing thrown at you by the thousands of consumer product companies and stop buying things you don't need, and save and invest instead...  you would find this as upsetting as I do. 

And having $1M when you retire would allow for a dividend income stream that could potentially give you $50,000 every year with that amount growing every year in retirement if you're invested in dividend growth companies in your portfolio. Add in whatever you get from CPP, let's say it's $861/month average in 15 years per person and there are two of you. That's $20,664 from CPP plus your dividends of $50,000. That's $70,664 before any other amounts. Assuming your home is paid off and no major debts, that gives you $5,889 a month income in retirement with little to no debt to chip away at it. That'll help reduce some financial stress. That'll help you enjoy retirement. If you can get to more than $1M by age 65 even better. Go for it. But I'll use $1M as an example retirement savings goal in this article moving forward. 

The Bank of Canada recently said the average consumer debt held by Canadians excluding mortgages is $20,759. That's a lot. But it's a lot worse for some. According to 4Pillars.ca, a group that helps people with debt problems, they saw a huge jump in the amount of unsecured joint debt per file. They saw it went up from $58,655 to $72,612 or 24% in 3 years. $72,612 in unsecured debt for the average couple they work with. That's consumer debt! It's out of hand!

Take a look at your own situation. How many credit cards do you have? How much debt is there on each card? How much do you owe in auto loans? How much do you owe in credit lines? HELOCs? Back taxes to the CRA? Past due bills? What is the total of all your consumer debt not including your mortgage? Do you owe all that and do you still buy expensive branded products? Do you owe all that and still buy things you don't really need?

Just stop it. Stop buying things. You don't need them. Stop paying more for things because there's a logo attached to it. You don't need it. They are trying to take money out of your wallet, money that you don't have and they are winning and you are losing.

"But it's good quality, it will last forever", that's a common refrain heard when someone justifies spending way more on a branded product than they should. You know what else lasts forever? A spoon. Does that justify spending thousands of dollars on a spoon? No! So stop trying to justify spending ridiculous sums of money on a branded product because it will 'last forever'. 

So yeah, I said it's easy to have a million dollars when you retire. Before you think I'm some elitist out-of-touch crackpot with no sense of what real people have to deal with, let's look at why. And remember, I've lived a full year on an annual salary of $12,000 without going into debt and with no more savings than what I was able to put together from working a part time retail job. I bought a car, rented an apartment, bought a couple of suits, all while living within my means and without taking on debt with only $12,000 for income. It's possible. 

I've shown that investing in Brookfield Infrastructure Partners in March of 2012 to today gave you an annualized return of 27.9%. I've shown how an investment in Johnson & Johnson from 1972 to 2017 gave an annualized gain of 11.54%. So let's assume that by investing in healthy dividend growing companies you can get annualized gains of 9%, outperforming the market average of 7%. In that case, how easy is it to retire with a million dollars?

For those of you who are 20, and who worked all through high school and your summers with a lawn mowing business, painting houses, shovelling snow, or a part time job. You saved paper route money, birthday money and Christmas money since you were a kid, and now you have $22,554.55. If you invest that in a diversified healthy dividend income portfolio, reinvesting all the dividends and never touch it, assuming you're getting 9% annualized gains for 45 years, you could have $1,000,000 when you're 65. That's without saving another penny and adding to your portfolio. If you add just $2,077 each year to your portfolio for the next 45 years, you could have $2M by the time you're 65. Seems pretty easy right? Also if you have $0 to your name right now as a 20 year old, if you can save and invest $2,077 every year for 45 years in that 9% annualized gain dividend portfolio, then you could have $1M when you're 65 as well. Seems pretty easy. And it is. Just buy less stuff. Save $2,077 each year. If you're already spending every dollar you bring in, see where you can cut spending. See where you can take on extra hours to make more money. At minimum wage of $15, $2077 is 2 hours and 40 minutes of extra work every week. Try to find a way to save that $2077. If you're 20, you're laughing. You've got it easy. So in this case, it's easy to have a million dollars when you retire at 65. See... maybe I'm not such an elitist out-of-touch crackpot afterall...

(If you've got kids, get them saving early, get them working jobs and making money, if you can get them to have $22,554.55 by the time they are 20 and get them to invest it and never touch it until they retire, you will be setting them up for lower stress and a happier retirement.)

​Oh you're 30? If you put $53,395 in that dividend income portfolio now, in 35 years it could be $1M when you're 65. If you have $0 to put in right now, but you put $5,076.60 each year in a healthy dividend growth portfolio and reinvest the dividends and never touch it, it could be $1M when you're 65, assuming 9% annualized gains. Finding $5,076.60 each year to invest is the same as finding $423.05 a month, or $97.63 a week, or $13.95 a day. What do you spend money on that you could do without, to find $13.95 a day? What can you do on the side to earn an additonal $423.05 a month? It should be possible to do this. 

Oh you're 40? Can you find $126,405 to put in that dividend income portfolio now? Can you free up equity in a home and downsize to do it? Sell your Toronto home and move to Ottawa and get a job there to do it? If you can find that money today, it could grow to $1M by the time you're 65, assuming 9% annualized gains. If you have $0 to put in right now, you'll need to put $13,022.57 each year to potentially get to $1M in 25 years, assuming 9% annualized gains. That's $1,085.21 a month. That's $250.44 a week. What can you stop buying to free up $250.44 a week. 

50? You'll need to find $299,247 to put in now to get to potentially get to $1M in 15 years. Got $0 to put in now? You'll need to invest $38,433.20 each year to potentially get to $1M in 15 years, assuming 9% annualized gains. You'll need to do some serious budgeting and you may need to work a side project. But it's possible. Hopefully you have a work pension to help, and you've got some money from CPP and OAS to help. But you've got to help yourself by saving and investing as much as you can at this point. 

So it's clear. If we can save just a little money when we are young, compounding works magic over many years to grow a small sum into a significant sum. So would you like to have $1M in a retirement account when you're 65, or would you rather buy an expensive purse, the latest smartphone, an expensive watch, a new car, etc... 

Everything you buy extends how long you have to work before you retire because that thing stole from your savings. It limited by the amount you spent on the thing how much you saved for retirement. By spending on a thing and reducing your retirement savings, you have less money to retire with. This causes you to work longer to save enough to retire. Having to work longer because you wanted things you didn't really need, is in effect allowing the things you own to end up owning you. 

Let's look at how badly things can delay your retirement. How much longer do things make you work?  

Let's take someone working in a minimum wage job who is 20. Let's call him Tyler. Tyler is about to be making $15/hour soon, and let's say Tyler doesn't pay any tax on his income. And he is 45 years away from retirement at age 65.

Let's look at what happens when Tyler buys a coveted consumer product. Let's say this minimum wage 20 year old employee, Tyler, gets caught up in consumerism and decides to buy the hottest smartphone with the bigger storage drive. That's $1,529 for the phone. Let's say he gets the warranty to protect his purchase, that's $249. Let's say he also gets a silicone case to physically protect it, that's $49. And let's say he buys it in Ontario, there's tax of $237.51. That's a total of $2,064.51... for a phone... for perspective, my first car cost $1,200. 

So the minimum wage 20 year old employee, Tyler, had to work 137.6 hours to make enough to buy that phone. Assuming 8 hour days, that's 17.2 days of work for that phone. If instead of buying a phone, he had put the $2,064.51 into a TFSA and invested in a dividend portfolio reinvesting his dividends each year to get an annualized return of 9%, it could be worth $91,534 by the time he was 65. Let's say that's the additional amount Tyler needs to finally let him retire. How much longer would he have to work to save the additional $91,534 when he is 65 if he is short that amount because he bought an expensive smartphone when he was 20 instead of taking a free phone option from his mobile phone provider? 

The average household income is $70,000 today. Assuming it grows at an average rate of inflation of 2% for the next 45 years, the average household income in 45 years will be $167,303. So when Tyler is 65, let's assume he is making the average household income of $167,303. Currently the average household savings rate in Canada is below 5%, let's assume Tyler really wants to retire and can save 10% of his take home pay. How long will he have to work to save the $91,534 that he needs when he's already 65 years old?

Well, of his $167,303, if taxes stay where they are in Ontario today (and that's a big if, given how much debt both Canada and Ontario keep adding every year, which is another discussion I'll have another day...) then he will take home about $112,506. Assuming a 10% savings rate on that take home, he will save $11,251 a year. Assuming he invests that in that same dividend income portfolio mentioned before, as he goes along working, saving and investing, he will have to work an additional 6 years and 4 months. 

Think about that! Because Tyler felt compelled to buy an expensive thing when he was 20, he is having to work an additional 6 years and 4 months to get his retirement funds where he needs them. That thing wound up owning him. He is working longer because of his spending on something he probably didn't really need when he was 20. 

Something that cost him $2,064.51 when he was 20, reduced his retirement savings by $91,534, an amount that it would take him 6 years and 4 months to save when he is 65. That $2,064 thing owns Tyler for 6 years and 4 months.

Now without getting too heavy into math on all examples, let's look at a couple other scenarios. For all of the examples I will assume the amount they spend on the thing is what they would have saved and invested. I'll also assume the saved and invested amount grows at 9% annually from a dividend growth portfolio and the final amount it would have grown to at the person's retirement age of 65 is the exact amount they are short. I'll also assume each person's income inflates by 2% until they are age 65. And I'll assume they can save 10% of their take home pay.

Ok given all that, here we go.

A 30 year old woman who earns the median family income of $70,000 buys a $4,995 high end purse. (I need to have a John McEnroe moment now... YOU CANNOT BE SERIOUS!) Yup, seriously, a purse that costs five grand! What is going on? I don't believe it myself. Who is buying this stuff?? No wonder everyone is so in debt and unable to retire. Stop buying stuff you can't afford... please stop! Ok, back to the math before I blow a gasket...

It's just a purse for god's sake!!... ok NOW... back to the math...

That purse after tax is $5,644.35. The tax alone is $649.35!... that tax alone is more money than I've ever spent on the entire cost of any article of clothing or accessory in my life. Wow! I can hardly believe a purse costs that much let alone the tax on a purse!

So instead of buying a purse, had she saved the $5,644.35 and invested it in a dividend portfolio account as described earlier for 35 years to get her to age 65, she could have $105,709.71. But because she didn't do that, and got a purse instead, her retirement was delayed by seven years and five months. That purse wound up owning her for 7 years and 5 months. Was it worth it?

Going to my car example, where someone buys a brand new high end car instead of a used car , winding up spending $25,995 more on the new car than on a used car. Let's assume it's a 40 year old named Matilda making good money. That $25,995 invested for 25 years in the dividend portfolio mentioned earlier could become $205,649. She is short this exact amount for retirement. How long will it take her to make up that missing amount? Assuming Matilda makes $200,000 today, when she is 65, assuming her income increases by the rate of inflation, she will have an income of $321,687. That's a takehome pay of about $186,613 after tax. She saves 10% each year and invests in the dividend portfolio and it takes her right about 8 years to make up the difference. That newer car made her work an additional 8 years to save enough for retirement. In other words, that newer car owned her for 8 years.
20 year old doesn't buy a phone, saves and invests the $2,064.51 and has $91,534 more when he is 65.
John McEnroe "You CANNOT be serious!"
30 year old doesn't buy a purse, saves and invests the $5,664.35 and has $105,710 more when she is 65.
40 year old doesn't buy a new car, saves and invests the $25,995 she saves by buying used and has $205,649 more when she is 65.
​​​We looked at these in isolation. Let's say there is one person, who when they were 20, bought an expensive smartphone they didn't need for $2,064.51, then bought an expensive purse they didn't need when they were 30 for $5,644.35 and then when they were 40, spent $25,995 more on a car than they needed to. That would mean they siphoned potentially $402,893 away from their retirement account that would have been there by the time they turned 65, had they invested in a portfolio earning 9% annualized. That massive hit to retirement funds is due to making just three poor consumer purchasing decisions. Think of how many poor purchasing decisions we make in a lifetime. It all adds up. But this is why I say it's easy to have $1,000,000 in your retirement account by the time you're 65. You don't need Justin Trudeau to save you, you can save yourself! If you just become more aware of how much you waste buying things you don't need, and instead be disciplined and save and invest early and often in a healthy dividend investment portfolio getting 9% annualized gains, you could have $1,000,000 by the time you're 65.

The examples really could be endless. But I hope you get the idea here. You shouldn't buy things you don't really need if it's going to delay your retirement because buying it prevents you from saving enough for your retirement. It's easy to save for retirement, just buy fewer things, and spend less on the few things you buy, by avoiding brands you've been trained to value for no real logical reason. Just buy the cheaper brand that performs the same function. Think about it. Aren't the cheaper brand and the expensive brand products providing you the same function? Who cares what the brand is? What's the function? The cheaper thing's function is the function. The branded thing's function is the function and a delayed retirement. (I feel like I'm Chretien saying "A proof is a proof". Clearly seeing people waste their hard earned money on brands they don't need and having a delayed retirement as a result, is driving me bonkers.)

I bought a watch on a trip to India years ago. I didn't have a watch and I liked the one I saw at the store. It told time. That was it's function. I bought it for about $40 CAD from an official retailer. Then one day, years later, back in Canada, I went over to a buddy's house. He saw my watch and asked if I was wearing a Rado. I didn't know what a Rado was. He told me it was my watch. I said, "No, it's a watch from India and the brand is called Titan". Then when I went home, I looked up Rado watches. From what I can tell, the function of Rado watches is that they also tell time, but they seem to cost a lot more than $40 CAD. ​​A similar looking Rado costs about $2,250 CAD after tax.
My old Titan watch, bought in India for $40 CAD...        it tells time.
A similar looking Rado watch for $1,991.55 CAD... it tells time too.
I still have my $40 Titan watch, it'll last forever...

Next time you're tempted to buy a thing you don't really need, but think you really need, just ask yourself this question:

  • "Is this thing I'm considering buying available from a cheaper brand with the same utility or function as the more expensive brand?"​

Then ask yourself this question: 

  • "Is this thing I'm considering buying really worth the amount of work I had to do in the here and now to be able to pay for it in the first place?"

Then ask yourself this question:

  • "Is this thing worth the additional years and months I'm going to have to work when I'm older, because I spent my money on this thing instead of saving and investing that amount for my retirement?"

Then ask yourself this question:

  • "Do I want to be owned by things, or do I want to be financially free?"

And then pretend there is a blue faced guy on a horse, with a sword on his back, asking you this question:

  • "Aye, saving and investing is hard, buy a new shiny expensive thing, and you'll enjoy it... at least a while...   And struggling in your jobs... many years from now, would you be willin'... to trade all the days from this day to that, for one chance, just one chance, to come back here and tell these consumer product companies, that they may tempt you with their wares... but they'll never take... your financial freeeeedooooommm!?"
Ok that's not what he really said, but imagine he does give a rousing anti-consumerism speech.
​And hopefully by then, William Wallace will have charged you up and gotten you riled up enough to not buy that consumer product and to instead, save that money, invest it, and eventually retire early. Or at least be financially free, down the road, to do what you please.​

Remember, I'm not a professional financial advisor, so please seek professional financial advice before making any financial decisions.

Be a SmarterSquirrel... Save. Invest. Enjoy... and don't let things own you.

Financial freeeeeeedoooommmm!!!

Lessons Learned:
  • The things you own... end up owning you, by delaying your retirement
  • Had you saved and invested that money instead of buying that thing, your investments would be worth a lot more by the time you're 65
  • Buying that thing instead of saving and investing means you have to work longer to save enough to retire
  • If you start really early and save and invest instead of buying things you don't need, it's easy to have $1M in your retirement account
  • $1M can potentially provide $50,000 in dividend income when you're retired
  • The longer you wait to build a retirement account the more you'll have to put into it as you miss out on years of compounding
  • Stop buying stuff you don't need, all these things you buy chip away at your future retirement savings
  • Buy for utility of the product not for what you've been brainwashed into thinking about brands
  • Ignore the brand, ask what actual function does the product perform and is it really that different from the function performed by a less expensive product?
  • ​Consumer product companies are trying to take money out of your wallet... don't let them
  • A product cannot complete you, if there is something missing in your life, figure out what it is, it certainly isn't a consumer product
  • ​Stop aspiring for brands, aspire for financial freedom
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