Book Review: Stop Working! Here’s How You Can! – By Derek Foster

Derek Foster, self proclaimed Canada’s youngest retiree, has written a thought provoking book “Stop Working! Here’s How You Can!“. I’m sure a lot of you have heard about Derek, but for those who don’t know about him, he retired at the age of 34 while never holding a steady high paying job in his short career.

From reading about him in the newsgroups, he pulls in around $30-$35k/year from his dividends (equivalent to around $70k/year salary), along with income from book sales, and rental income from a single investment property. His home is paid off in full, he drives a new car, goes on vacation every year, and has 3 children.

How did he do this? In his book, he describes how he developed an investment philosophy which is a hybrid of the teachings from David Chilton (The Wealthy Barber), Peter Lynch (One Up on Wall Street) and Warren Buffet, which has allowed him to retire at such a young age. He made a commitment to himself that he would put away $200/month every month no matter what. With the investment money, Derek focused primarily on strong dividend paying companies with brand recognition that are recession resistant. You can read about his stock picks in his book.

Main points made by the book:

  • You don’t need as much as you think to retire.
  • Start as early as possible, and make a commitment to contribute to your investment portfolio no matter what.
  • Invest in strong dividend companies with brand recognition and increase their dividends on a regular basis.
  • RRSP’s are not for everyone.

What I liked?

  • The book shows the power of dividend growth and the minimal taxes when using dividends as income.
  • Gives a viable strategy for retirement cash flow.

What I didn’t like?

  • He picks a lot of income trusts in his book. At the time of writing, these trusts were probably a good pick, however now with the new income trust taxes introduced, they aren’t as appealing.

Who should read this?

  • Anyone who is interested in personal finance, investing, and interested in reading a great story.

Final Thoughts:

  • Another book that gets the two thumbs UP! Great book that is written clearly and flows nicely which makes it an extremely easy book to read.  This book has been added to the MDJ Must Read book list.
  • Derek gives a compelling argument for investing in strong dividend paying companies. I will follow up with an article with some dividend stock picks.
  • I’ve talked about investing in strong dividend paying companies before, Derek is actually the one that first introduced me to the concept a couple years ago.
  • This should be available at your local library.  If you want a permanent copy, you can pick one up at Chapters for around $15.

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Frugal Trader

FT

FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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Ray
11 years ago

@ Colby TFSA is a great place to accumulate wealth, but $5000 is not nearly enough to have a diversified stock portfolio. Analyzing companies and watching them over the years is not an easy task. I would take a look at a couple of broad market ETFs and make life easier, you are young and have a long road ahead of you. You will make mistakes and learn from them, do not get fooled by Derek’s book the idea is great but it does not work the way he makes one believe. He managed to retire not because he saved and invested over a long period, but he made a huge leveraged bet on a single stock during a lawsuit and it worked out very well for him. That is the main reason why he managed to retire. Fund your TFSA with $5000 and look at some broad ETFs (not leveraged etfs)….as you start your career you can continue building your wealth.

Gates VP
11 years ago

Hey @Colby: I am asking if I am taking the right next step and if how i can use my TFSA account in the stock market to my advantage?

One of the logical approaches to using the TFSA is definitely the “all-in” approach. The tax-free growth on stocks is definitely a boon if you’re expecting your stock picks to grow in value.

Of course, this assumes that you have your 3, 6, or 12 months of emergency living expenses available in a different account somewhere. (# of months will vary)

I don’t know that there are any other “tricks” here. It’s all just standard fare. Do your best not to lose money :)

Colby Oracheski
11 years ago

I have recently read Derek Fosters book. “Stop Working.” As a 22 year old I have always believed in saving hard earned money and using compound interest to my advantage in every way. Recently becoming involved in the stock market after putting $10,000 into mutual funds.

Im looking for advice the new TFSA account. I am using a stock market account to put my first $5,000 into. I am buying higher yielding stocks and intend on keeping them in there forever. This way the profit will never be taxed. With the economic state we are in now, I figured now is a good low time to buy… We have had the Stock Market Crash we were supposed to pray for. I am asking if I am taking the right next step and if how i can use my TFSA account in the stock market to my advantage?

Great Books
11 years ago

Hello,

Derek it’s good too see that you’ve posted a few blogs :) I have read all of your books and found them very good and very enlightning/inspiring!!

I heard that you sold all you stock positions around Feb 2009. Does this not go against your “buy and never sell” strategy? What drove you to sell? Will you be buying them back? If so what stocks or sectors are you buying?

Great books and great website!

Thanks

The Purpose of Money | Million Dollar Journey
12 years ago

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Market Lessons
12 years ago

A great book to read by Derek Foster! Every Canadian should read this one. Too many people focus on amassing great sums of money “hoping” it will be enough to retire on. This is largely the propaganda used by mutual fund companies to exploit people’s savings and scare us into ” not saving enough”. This only feeds their paycheques, not ours.
I have been doing what Derek suggested years before I read his book and it is bang on. We’re talking about the underlying value of the security based on its ability to churn out dividend dollars. The ONLY time I’ve ever actually made any money was when I dumped the so-called “investment professionals” (your friendly mutual fund rep.) and took control of MY money that I worked so hard for. If these people were so good at their chosen field, wouldn’t you think they’d guarantee their work (results)? Hmmm, something’s amiss here. I’ve never looked back since, as I easily dwarf what they achieve. I just wish I had the thousands of dollars I lost taken by these parasites. But you pay to learn, and I finally have.
A note on Canadian Health Care; It is NOT free. We pay heavily for it through over- taxation and it only covers the basics. Many services are not covered as well as a whole slew of medications. Why isn’t dental care covered as well as eyecare? Isn’t that health care? At least cover the “basics”!
Thanks for a great website!

Dividend Growth Investor
12 years ago

I just managed to buy this book at a super bargain price of $7 on amazon and read it in a couple of hours. I liked Derek’s strategy, since he is focusing on dividends for cash flow. I also liked the way he compared taxable income from wages to taxable income from dividends ( at current rates). If you check out his “sample portfolio”, you will notice that it was yielding about 6% in 2004/5, which is not unachievable. He did mention however, that you need to buy the stocks when they are trasing at bargain prices. He did mention that had you bought the stocks in his sample portfolio at their bargain prices you would have paid about 100k for them,rather than 300k in 2004/5. And thus your yield on cost would have been 18% ,rather than 6%.

One cautionary thing to add, is that he wrote the book right after he retired at 34. I would want to see how he has adapted to changing market conditions ( elimination of the income trust structure in canada in several years) in 2015,2025,2035 etc..I hope he will still be able to be retired even when he is in his 60’s..
Another cautionary thing to add is that this strategy worked in Canada, where healthcare is practicaly free. If you lived in the US, however, you would need to save more simply for the rising healthcare costs.

I do agree, however, that the book is truly inspirational!

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