When can I be Financially Independent?

Today is one of those days I wish I was financially independent. I don’t want the fancy things. All I want is to have enough income from other sources to cover my living expenses. Once I achieve that goal, I can live on my terms. The longer I live, the more I realize how important the freedom is. Today’s society is financially corrupt. We live in material world where money is required for everything. People are obligated to work every day to pay for mortgage, rent, cars, food, utilities, insurances, daycare, education, transportation, entertainment – basically for everything. Constant cash flow is necessary to survive in our world. Unfortunately you can’t mine money, you can’t print money, you can’t magically duplicate paper money. The only way to make money is to work. Either you work for a company, or work from home, or run a business, you constantly have to exchange your time for the money. For me, freedom means having free time. The more free time you have the more “free” you are.


How much money do I need to be financially independent?
Our current monthly expenses are roughly $4,000. That includes the mortgage and monthly contributions to buy stocks. When the property is paid off and I stop investing new money, my expenses will drop from $4,000 to $2,500 per month. As soon as I hit $2,500 from all sources then I can decide whether I want to stop working or not. Seriously, when you have a choice to work or not to work, that’s the independence right there, even if you decide to work.


When can I achieve freedom?
I will have to challenge this journey from both perspectives – income and expenses. I can probably achieve financial independence in 10 years. But I will need to speed up the process to grow my investments faster and figure out how to lower living expenses. Right now we have two TFSA investment accounts. One for me, one for my wife. Both accounts are almost maxed out and we plan to max them out for at least 10 years. After ten years, both accounts should generate $1,800 per month. This money won’t be enough to claim freedom, but here are a few strategies I can use to achieve it.


Strategy #1: Open a third investment account
I will need to open a third investment account and fund it a few times a year when we accumulate excess amount of cash. I don’t like to hold more than $10,000 in the bank, but when TFSA accounts are maxed out, the next option is taxable account. If I start a new investment account next year and fund it with “left over” money, after ten years I should grow it to a $75,000 portfolio. I don’t see any problems with that. Especially that I could accumulate money in that account and buy stocks when they are on sale a few times a year. For example, I can take advantage when markets tank in December. I would invest only in dividend paying stocks that are eligible for tax credit for Canadians. This would be the most tax efficient way to invest in taxable account. A $75,000 portfolio should generate $300 per month in dividends. Not bad!


Strategy #2: Grow the YouTube Channel
Yes, YouTube! YouTube is a great opportunity to make passive income. I’m at beginning stage but my channel is growing on daily basis. I have experience in making videos and rank them high in search engine. Right now I average $50 to $60 per month, but I can double that by next year. Filming and editing requires lots of free time, but once it’s on YouTube, the work is done. My goal is to make at least $500 per month from YouTube. By the way, I make most of the money off vacation videos. That means I will have to go on vacations more often to film content, because people are always looking for vacation videos. They never go out of style.


Strategy #3: Downsize and relocate
Let’s tackle expenses. I can drastically reduce living expenses by downsizing and relocating outside the city. Right now we live in the middle of everything and it’s very convenient to get to work, to schools, to shops, etc. City life is not cheap but convenient. But once we’re off the jobs, we don’t need to live in the city. I checked the properties in the suburbs, about 30 min drive away for the city, and properties of the same size are at least $100,000 cheaper. And if we decide to downsize to a one-bedroom condo when the kids are out, we could pocket the difference of $150,000. This money would go into taxable account to buy stocks to generate $600 per month in additional income.


Once all these strategies are in place, we should make $3,200 per month and have a paid off property. This money should be enough to live comfortably. However, if I find that the money is tight and we need more, there are plenty of things I can do to make another $1000 per month, part-time.


Well, this is my plan. This may work or may not work, I don’t know. But having a plan is better than not having one. Let me know what you think of my strategies. How long will it take you to get to financial independence? Feel free to share. I’m out. Back to the hustling life.

2 comments:

  1. nice German. Everyone needs a plan. Why not go with a rrsp account for you and the wife? Its another great way to invest and diversify. You don't want all your investments in Canadian companies, plus come tax time you will enjoy it =)

    always love hearing about your youtube experience. You are doing great there, keep it up and maybe you will surprise yourself with all the income.

    Your expenses seem really low, congrats man! City living has its perks too, our gas from country living really adds up each month..... womp womp. lol

    cheers German!

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    1. I don’t have RRSP, but my wife has. She gets employer match up to 3% of salary. I don’t have this option, but I have a separate pension plan that I’m contributing into. So for me it will not be tax efficient to have RRSP. Also, I don’t like RRSP because the money is locked until you’re 60. I rather have this money invested in taxable account, pay little tax on income and have access to money anytime I need it. Because down the road you never know the opportunities that can arise. Cheers!

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