Back in 2010 when I started this blog I set out a goal to reach financial freedom by the year I turn 35 years old 😉 I didn’t know exactly how I was going to do it but I knew I had 12 years to figure it out. Fast forward to today and I’m 26 years old with only 9 more years to reach financial independence 🙂 According to my latest net worth statement from last month, here is a simplified look at my current balance sheet.
Assets:
Home = $252K
Farms = $325K
Stocks (Inc Retirement Funds) = $161K
Liabilities
Total debts = $535K
So how do I plan to reach financial freedom by 2022? It’s simple. Invest $5,000 a year into my stock portfolio for the next 9 years. In 2022 sell my farms and use that money to pay off all my outstanding debts. Live off dividend income forever 😀
Pretty straight forward eh 🙂 If Canadian farmland appreciates by 4% a year for the next 9 years, then my farms should be worth about $463K by the year 2022. After commission and capital gains tax I can expect to keep about $420K for myself.
Right now in 2013 I have about $535K of total debt. Next year I expect to pay down $10K of it simply by making the minimum payments on my mortgage, farm loans, etc. And the year after that my debt should be down another $11K as more of my payments will go towards the principle. I’m sure you’re all familiar with a loan repayment curve 🙂
After the entire 9 years I should only have roughly $420K of debt left without having to make any additional lump sum or accelerated mortgage repayments. I will use the proceeds from selling my farms ($420K) to completely pay off this remaining debt. Hey that worked out pretty well! This also answers the question people often ask me, “Liquid, how do you plan to pay off all your debt?”
Without a mortgage or any other debts my total living expenses today would drop to just $10K a year which includes fun money 🙂 If inflation averages 2.5% annually then I’ll need $12,500 of income to sustain my current lifestyle by 2022. This money shall come from my dividend paying stocks.
My stock portfolio today is worth $161K. By contributing $5K a year, and assuming a 5% annual return, in 9 years it should be worth about $305K. I can rebalance this portfolio and have a mix of stocks and bonds to act as a long term income fund for myself with an annual distribution of $12,500, or about 4%. The entire stock portion of the portfolio will be made from a selection of dividend aristocrats so my dividend income should at least match inflation going forward from there (^_^)
So as long as I save $5,000 every year to invest, and hope for a conservative rate of capital appreciation on my assets, I will be financially free by 35 🙂 Wow, it sounds almost too good to be true 😎
Some say the average working citizen is getting poorer because of stagnant wages and higher taxes. But let us think outside the box 😀 Instead of counting on wage increases alone, why not also use investments to grow our wealth? Long term returns in a diversified portfolio will almost always beat wage inflation 😀 And instead of paying higher income taxes we can make better use of capital gains tax or use tax efficient vehicles. For example, any profits we make from Canadian stocks in a TFSA is completely tax free 😀 And the 2 stock purchases I blogged about last week was bought in an RRSP which has tax deferring benefits.
If I can afford to purchase a condo, invest in growing companies, and buy high quality farms, then so can other middle class households 🙂 We all have access to the same information on the internet, to the same financial markets, and to bank loans. We all know how to make wise financial decisions because I often blog about my investment strategies 😉 So the only difference between retiring at 35 and 65, is having the confidence to take action (^_-)
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Random Useless Fact: This is how investors see the world (click image to largify.)
I wish you the best of luck. You’re definitely on your way to achieving this and most important, you have a plan. I wish I would have been smarter with my money at your age. I’m 33 and I’m planning to achieve financial freedom at 55 (freedom 55 commercials was my inspiration haha) I’m curios about your stock holdings I’ll dig your other posts I think I remember one where you list them. Here’s a few of mine DDD, INTC, SIRI, KFN, DVAX and a few OTC stock. I need to find myself more long term stuff though, I feel my picks are very vulnerable at times even though I’m in the green with all of them.
Bonjour monchito7 🙂 Sounds like you have some pretty good companies there. I have INTC as well. It’s definitely a very good long term stock to hold 😀 DDD looks interesting. Maybe I’ll buy some of that in the new year. I’ve been looking for a way to invest in the 3D printing market. You seem to have found the answer before me, and I think it has definitely paid off for you judging by the 2013 performance of DDD 🙂
You can find most of my stocks here, although some of the lists need to be updated.
Where there’s a plan, there’s a way!
I’m impressed you can live off $10,000 – $12,500 a year even being debt free. That’s cheaper than living in places such as Thailand or the Philippines! Is Canada that cheap? We all know that the average Canadian is worth over $400,000!
I’d love to see a budget outline post to get motivated to save more money myself. I’m spending way too much.
Living in Canada is surprisingly cheap especially if you have a paid off home 🙂 Here is what I currently pay for all my non-debt related expenses. *Apartment Building fee (Strata/HOA) – $230 (includes hot water and building insurance) *Property tax – $90 (I live outside the downtown core) *Car insurance – $90 (we have a government run auto insurance company here in B.C. Everyone has to use them.) *Gas for car – $40 (I drive about 150 – 200 miles per month, not much. I live really close to work.) *Internet – $50 (standard high-speed internet) *Cell phone – $20 (I explained in an previous post how to get a cheap wireless plan.) *Food – $150 (Earlier blog posts explain how to maintain a $100 grocery budget. The extra $50 is for additional snacks, street food, and eating out with friends.) *Hydro (electricity) – $30 (includes heating/cooking) electric power is subsidized and heavily regulated in the province of B.C. We pay less than market price for our hydro energy 🙂 B.C. also sells electricity to California. *Discretionary spending – $150 (for books, movies, games, and other random spending..) That’s pretty much it 😀 Total budget is about $850 a… Read more »
Not bad! Any plans on taking a lady out to a fancy restaurant though? That could be $100-$200 right there!
@financialsamura
Good point Sam. Dating can be pretty expensive. But I’m willing to spend money on worthy life experiences. Find me a lady and I will take her to any fancy restaurant she desires 😉
No clue how you live on $150/m for groceries… I’m more of a $500/m kind of guy.
I live on $50 per week grocery, I could buy all the fruits, veggies, and meat I want. I cook once a day and would eat the same meal 4 times. If you don’t buy processed food, it’s really cheap and quality food.
That’s the main thing, don’t buy processed food. Whole food from the market is cheaper and healthier 🙂
I read somewhere that the average wage income per household in the United States increase by only 10% since 1970. With companies sending their jobs over seas to reduce their cost and people taken lower and lower wage jobs in order to survive. The answer is to think outside the box and find ways to have multiple sources of income.
You are definitely thinking outside the box (with purchasing 2 farms) along with purchasing high quality equities that pay dividends. I think you will be reach financial indepence before 35.
I like the idea of multiple income sources 🙂 That’s the only way to fight back against the current malaise in the North American job market. Earlier this year I read somewhere that Caterpillar shut down one of their locomotive manufacturing plants in Canada because union workers up here didn’t want to take a pay cut. The operation was moved to Muncie, Indiana I believe, where they found people willing to work for cheaper. Personally I would have gladly made a concession if I were working at the Canada plant because any job, especially in the manufacturing sector which always pays more than minimum wage, is better than no job. But then again, everyone values their time and expertise differently 🙂 Just goes to show job security isn’t what it used to be. Having other income streams can help a lot if one loses a job.
*fingers crossed* for your plan to come to fruition! Like Sam, I am amazed at the low spending plan. Does that account for property taxes and condo fees, too? We’re hoping for FI before our 36th birthdays as well, but since we want to spend more than you and about half as long, we’ll be putting a bit more than $5K/year into our stock accounts. =)
Yup, it accounts for taxes and property fees. Canada is a great place to live for low income earners. 1/3rd of people who file taxes don’t earn enough to pay any federal income tax lol. That’s pretty cool we have roughly the same goals. Most likely I won’t follow through with my 9 year plan exactly as desgiend since a lot can change between now and 2022. But it’s good to know I have this option anyway (^_^) Good luck and fingers crossed for you guys too.
Reading your posts always gives me some inspiration on our own journey towards FI! It’s cool that you’re local too 😀
Hey you’re local too! What a coincidence 😀
I like seeing your budget breakdown – inspiring! We’re aiming for <£1k living costs w/o the mortgage. Take away the company car though, and it would be a struggle.
Good plan Liquid. Things may change, but you're definitely on the right track.
I saw your Jan 2014 budget. Looks pretty tight, but you are really good with those no spend days 🙂 Have a great New Year.
Sounds like a good enough plan. How did you decide to start investing in farmland?
I wanted to diversify away from stocks so I decided to go into property investing. But since I didn’t have the money to buy a house or anything I chose farmland instead since the capital requirements are lower.
It’s a long road but it’s a right one to take. It might take a while but it has to start right away because we are in deep trouble the longer it takes to get finished.
Pray for the best but prepare for the worst and time will take care of the rest ;0)
Cool post. Since I only began reading your blog about six months ago I might have missed this post, but do you have anything on how you got your farmland or how you decided to get into farming? I’m a little less ambitious you and plan to be financially independent by 40 instead. Also, if you don’t mind me asking, where is your farmland located?
I got into farmland investing because I heard it provided really good historical returns. After doing some research I decided to buy one in late 2012. I found it through a real estate agent and bought it with the help of a lawyer similar to how one would buy a house. Then in 2013 I bought another one in the same area. The farms are about 30 miles north east of Yorkton Saskatchewan. More details in this post.
One of my professors used to always say, “If you don’t plan, you plan to fail.” I think you’ve got a great plan in the works. Your well diversified. Your going to exceed $1M net worth by the time your 35. Thinking back what some of the old farmers used to say (the guys who went through the depression), “sell your wheat, hay, and cows… but don’t sell your land.”
If I may make a suggestion. I know you encourage continuing education as a method to increase one’s ability to earn a larger paycheck. I did something similar for career purposes by returning to the University. But not only was I able to benefit myself with expanding my knowledge, I was also able to use night classes to meet new people. I know how hard it can be to meet women when one does not frequent bars and clubs. etc. Something to consider.
Those old farmers really knew their stuff. You could probably buy good acreages around B.C. or Ontario for mere hundreds of dollars back then and sell it for hundreds of thousands of dollars today. A lot of landowners who have farms around Regina just inherited them from family members who have passed away. Many of these owners today have moved to large cities in other provinces and have no use for their farms so they are looking to sell. There is a lot of hidden wealth in Canada that is just waiting to be unlocked.
I like your anecdote about meeting new people via your University night classes. I teach evening classes at a local college so maybe I can do the same. I certainly should put myself out there more 🙂
I like the way that you have laid out your plan as opposed to some that says I’m going to retire in X years with no actual numbers. I’m currently over a million dollars in debt (1.3 million to be exact) thanks to my home and rentals. To financial independence.
You must have either a big home or a lot of rentals 🙂 Good for you. Maybe one day I’ll get to have 1.3 million in debt as well and have a large empire of rental units. One of the things preventing me from buying more real estate at the moment is no lender is willing to give me a loan anymore because they think I’m already too leveraged. I’ll have to find a way to make more income before accumulating further assets :0) Thanks for the encouragement.
I live in Hawaii which is really expensive. On my blog I posted how I got there under my millionaire in debt post.
How do you plan on spending your time once you reach financial freedom?
On the one hand you could probably live forever if you maintained your current lifestyle if you stayed single, had no children and the dividend distribution amounts increased over time for all of your stocks (or you sold and buy new ones that did if they discontinued dividend distributions or reduced the dividend distribution amounts too much). But on the other hand, won’t it be hard to re-invest if you lived solely on your dividend distributions? At $12,500/year, I imagine your re-investable savings would be low or non-existent if that’s your only source of income.
Or am I missing the point? Is the point that you no longer have to work, so you can work at whatever job, project, venture that you want to without worrying about how much or little money it makes?
Once I reach financial freedom I plan to continue working in the creative field. I like my job so I probably won’t quit right away. But if a friend wants me to start a new design company with him then I’d be more inclined to say yes. In a financially independent lifestyle my only concern to the cost of doing business would be time. If I’m not doing something I enjoy and I’d feel like I’m wasting time. I look forward to being able to choose the projects I work on, the way I spend my time either being productive, or just watching Netflix or sitting in a boat fishing all day. If I want to make additional money besides passive income I’m sure I’ll have the time and other resources to do that. I won’t have much savings to redistribute with my budget. However if I needed money to make a large purchase I could sell some stocks. This would dip into my principle, but the capital appreciation of stocks over time should help cover the loss from withdrawal. I plan to take government pension as early as possible so that will help give me more income in my… Read more »
Great blog! So I’m guessing you aren’t planning on having kids? Just wondering if you thought about it and if this would throw a monkey wrench into your plans. Could you still make it work? Thx.
I’m on the fence about having kids. Probably 50/50 chance right now. It would basically depend on whether the future wife wants kids or not. But if I do have children I plan to have at least 2 so they won’t get lonely. I’m also building up an education fund for my potential children’s future education needs. I basically just throw money in there and put it in a couple of index equity funds. Right now there’s more than $10,000 in that future education account. I don’t disclose that in my net worth updates though because I don’t really see the money as mine anymore. If I don’t end up having kids I’ll just donate the money to a school or something eventually lol. Having 2 or 3 kids will probably push my financial independence plan back by 5 years or so but it’s no big deal. I’ll retire by 40 instead of 35. I’d still be pretty happy with that. This is also assuming the mother makes $40,000 a year and she spends 10 years out of the workforce from when we start dating to when she retires. Whatever my household situation may be in the future I think… Read more »
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