Let me take you through the life of a man I know who retired before his 50th birthday.

Life is good for Jim (a pseudonym). He can usually be found at the golf course in the morning, getting a round in before it gets too hot. Lunch is spent with his wife or any number of friends. Afternoons are spent reading or fixing something around the house. Evenings are reserved for time with friends and refereeing sports, something Jim does to stay in shape.

I recently had the chance to sit down for lunch with Jim and ask him how he managed to retire so early. His answers surprised me–mostly because they were so simple. At least for Jim, retiring early wasn’t hard.

Here are Jim’s three keys to early retirement.

Live cheaply

There’s a reason why Jim and his wife settled down where they did.

Homes were cheap just about everywhere in Canada in the 1980s, mostly because interest rates were so low. After growing up in Calgary and seeing the housing market crash there firsthand, Jim decided he’d be better off in a small town without the booms and busts that often plague larger centres.

Jim settled on a house that was approximately 1.5 times his household income in a small community. Five years later, thanks to a couple of raises at work and living frugally, he was able to make his final mortgage payment.

At that point, it would have been easy for Jim to upgrade his reasonable home. Instead, he stuck it out, content with throwing all his cash towards his investments. And 25 years later he still lives in that same house.

Make it a priority

It wasn’t that Jim hated work. He just knew there would come a time when he wouldn’t want to do it anymore. Besides, Jim worked a physical job and was constantly reminded about the toll it took on his body by older co-workers.

Jim threw himself into his work, getting all the overtime he could get. He accompanied that with continuing to live frugally in his paid-off house.

Cars were made to last for years, and when they were finally replaced, a relatively new used model would be purchased. Jim still insists on buying used cars over new.

Jim’s motto was pretty simple. If you paid attention to the big expenses, you could create enough savings to make early retirement possible.

Make great investments

Jim realized pretty quickly that high-fee mutual funds were a pretty crummy way to invest. So he switched to individual stocks.

One of his best investments was Bank of Montreal (TSX:BMO)(NYSE:BMO). BMO was Jim’s bank, and even back in the 1980s he was impressed with the company’s ability to pass along fees to customers. He also took a look at how much the bank made in interest on his mortgage, multiplied it by a couple of million and was pleased. So he bought shares.

The same arguments apply for investing in BMO today. It’s still a major player in retail banking in Canada, but has since added a U.S. division to help diversify. The stock also trades at a reasonable price-to-earnings ratio and pays a 4.1% dividend.

Or, as Jim recently put it, “I bet BMO is cheaper now than when I first started buying it in the 80s.”

Another stock Jim has held for years is TransCanada Corporation (TSX:TRP)(NYSE:TRP). It was obvious to him that energy production in Canada would continue to grow, and the business of moving both oil and natural gas would be lucrative over the long term.

Jim made sure to focus on stocks that paid dividends, knowing those payments would one day sustain his retirement. This turned out to be a very smart move.


It’s not easy for the average Canadian to retire early. But if they, like Jim, make it a priority, it’s very possible. From Jim’s perspective, it was a journey well worth making, even if it was difficult at times.

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Fool contributor Nelson Smith has no position in any stocks mentioned.