Money Sucking Maggots

Successful businesses make more and more money every year because they relentlessly cut costs and get their money working for them. If you are going to model yourself after these money making machines, you need to start doing the same.

It is up to you how frugal you want to live your life. If you want to spend all the money you make each month so that you can enjoy yourself as much as possible now, and you are content to work until much later in life, that’s your choice. If you are happy with this decision, you don’t need to worry about how to retire early.

If you want to retire much quicker than most, however, the best way to achieve this idyllic goal is to live below your means and use those savings to start creating multiple streams of income. This is the surest way to achieve financial freedom. The more frugal you are, the more money you will get working for you. And the more money you get working for you, the quicker you will retire. If this is the path you chose to take, the first thing you need to do is stop spending all your money on money sucking maggots.


Money sucking maggots

rsz_money_maggotMoney Sucking maggots come in a variety of forms. They all revolve around spending far more then you need and they all eat away at your hard earned income each and every month, leaving nothing leftover to build multiple streams of income with. Three of the biggest types of money sucking maggots are listed below.



1. A large mortgage that uses all disposable income just to make the minimum payments

2. A new car every few years

3. An overindulgent lifestyle early on in life


A large mortgage

I’m convinced that one of the biggest reasons my wife and I achieved financial freedom in our mid-thirties was because we bought a house for less than we could afford. We bought a house that was half as much as we could have afforded and then we rented half of it out and saved even more money. I was able to pay for the mortgage and all our living expenses with my salary alone. We then took all the rental income and all of my wife’s salary and invested  it to create multiple streams of income.

Consider the following example. Let’s say you could afford to buy a $500,000 home by getting a 25 year fixed rate mortgage of 5%, but this purchase would leave you with absolutely no money leftover to invest at the end of each month. How much money do you think you could save over that 25 year period if you bought a $300,000 home instead?

Assuming you got the same 25 year fixed rate mortgage of 5%, a $300,000 mortgage would enable you to invest an extra $1,150 a month compared to the $500,000 mortgage. If this extra $1,150 a month were invested and earned a CAGR of 7% a year, it would be worth almost $1 million by the time you had finished paying off your mortgage ($932,000 after 25 years).  Buying a $500,000 home and renting part of it out for $1,150 a month would achieve the same result. Buying a home for less than you can afford and renting it out would result in even more savings.


A new car every few years

rsz_carAlthough not quite as bad as a large mortgage, expensive new cars every couple of years are purchases that also eat away at all your disposable income and leave little leftover for you to create multiple streams of income with. My wife and I have never owned a new car. We have also never had a car loan. In fact, we have owned one car for 16 years and it has probably saved us hundreds of thousands of dollars.

My wife and I bought a 1999 Toyota Tercel in 2001 for about $10,000 (shown in the picture on the left). We have owned it now for almost 16 years. It has driven across the country, been on numerous road trips throughout Canada and the United States, and it continues to take my wife into Vancouver each morning. Other than periodic oil changes and new brake pads now and then, It has required practically no maintenance since we have owned it. Moreover, it likely uses half as much gas as many of the cars on the road today.

If I do the math on this one purchase alone, buying and holding this car has likely resulted in well over $150,000 in savings when you factor in the savings on gas and insurance. Assuming I were to be continually buying new cars, and that this behavior resulted in a perpetual car loan of $400 a month, then I would lose the ability to invest $400 a month. If this $400 a month gets invested and earns a CAGR of 7% a year, it results in savings of approximately $141,000 after 16 years. And that $141,000 doesn’t include all the savings on gas and insurance that this little car has generated.


An overindulgent lifestyle early on in life

If you can live like a poor student for a number of years right after you stop becoming a poor student, you will probably super charge your time to financial freedom. I know saving money can be difficult when one has a large student debt, but the more you can save early on, the better.

Early on in our quest to achieve financial freedom, my wife and I made paying off our mortgage a top priority. We had a mortgage with an option to prepay up to 20% each year and I became obsessed with trying to reach this 20% goal each and every year.

We came pretty close, and we ended up paying the whole mortgage off in only seven years. It’s true we both had good jobs (I was in pharmaceutical sales and my wife was an occupational therapist), nonetheless, achieving this goal meant living well below our means for a number of years early on in life.

I believe brown bagging it to work each day, making our own coffee, and limiting the times we ate out, probably saved us $7,000 a year compared to similar couples we knew. Add in all the other ways we tried to be frugal and we probably saved more than $10,000 a year compared with other couples our age. Add to this the savings we realized by having a second-hand car and a much smaller mortgage and we were saving a lot of money early on in our lives.

Sure it was a little tough, but it wasn’t that bad. Furthermore, seeing the mortgage disappear and our financial freedom fund getting bigger and bigger was a major source of happiness. We knew leading a frugal lifestyle early on in life would enable us to leave the rat race decades before most and it had invigorated us.



We didn’t just pay down our mortgage, however, we also borrowed most of this money back through a home equity line of credit (HELOC) and started using it to create other multiple streams of income. Because we live in Canada, this strategy allowed us to make our mortgage interest tax deductible and possess a large investment portfolio all at the same time.

If we had just paid off the mortgage we wouldn’t have gotten any of that money working for us. And if we had not paid down the mortgage and simply bought investments, we would not have been able to make our mortgage interest tax deductible. Paying off our mortgage and then borrowing this money back at a low interest rate to make even more money played a large role in us achieving financial freedom at a young age. I discuss this strategy in detail in my book, Think Like a CEO and Get Rich.

So what did we invest our money in? We invested in real estate, stock and bond market indices, and dividend paying stocks. Click on the link below to find out more.