How I Paid Off $300,000 of Debt in One Week

Quitting my Job

There comes a day in everyone’s life where they have to throw in the towel. After holding down 2 jobs for the past 8 years I felt it was time for me to quit. I’m simply getting too old for the workplace. And after analyzing my financial situation I realized that I do indeed have the means right now to leave the rat race and live solely off my investments forever!

So I quit my part-time job in early March. And then a couple weeks ago I handed in my letter of resignation to my full-time employer. The company tried to keep me because I’m rather good at my job. Much like a carpenter, I’m always able to nail my work. My manager even offered me a 30% raise if I stay, but I politely declined.

Yesterday was officially my last day at work so I’m finally free from the grind! From now on I can enjoy life to the fullest on my own terms. 🙂 Woot!

Enjoy unlimited free time for the rest of my life? Yeah, I think I could get use to this.

But one obstacle that can stand in the way of true freedom is debt. 🙁 To obtain real financial security I knew I had to get rid of all my debt. So I decided to make some major changes to my balance sheet.

Selling the Farmland

I bought a farm in 2012 for $150,000. And then bought another farm for $172,500 in the following year, for a combined purchase price of $322,500.

Well I recently sold both my farms for $550,000 to a single buyer. Yay! This $200,000+ capital appreciation is due to the strong demand in this area. According to an official Farm Credit Canada report, farmland values in Saskatchewan have increased 83% on average from the beginning of 2012 to the end of 2014. Amazeballs!

We don’t have the official numbers for 2015 yet. But according to another FCC report, “increases could be as high as 9%, with some upside to reach higher.”

Although I was able to sell my farms for a total price of $550,000, I had to pay $20,000 in agent and legal fees, pay off the remaining $195,000 of farm loans to the bank, and set aside another $35,000 for capital gains tax.

So in the end I only ended up with $300,000. But hey, I’ll take what I can get. 😉

No More Debt

As shown in my most recent net worth update I had roughly $300K of non-farm debt last month, including a mortgage, LOCs, etc. Well over the last week I used the net proceeds from selling the farmland to pay off the balance of all my remaining loans so now I’m completely debt free! 😀

New Balance Sheet

So with the farmland and debts gone, here’s what my new net worth looks like.

Assets: Total = $530,000
Cash: $7,000
Primary Residence: $263,000
Non Registered Investments: $200,000
RRSP/RRIF: $60,000

Liabilities: None 🙂

Net Worth = $530,000

It’s such a relief to finally be debt free! 😀 My balance sheet looks a lot cleaner without all those pesky liabilities. Debt is evil. I will never go into debt ever again! Debtors are losers.

Income vs Expenses: Balancing the Books

After selling my farmland I simply restructured my investments to create enough passive income to cover all living expenses without sacrificing lifestyle or having to rely on active income.

• First, I went to the bank to convert my $60,000 of RRSP to a RRIF so I could withdraw money out of the account easily. The representative at TD was surprised to see someone so young want to create a RRIF. He said I remind him of a Vancouver personal finance blogger whom he’s a big fan of. Well, hello Steven!
• Next I re-balanced my RRIF to hold only high yield bonds, mortgage investment corporations, and other exempt market funds which allows the account to generate a 5% annual yield.
• Finally I re-balanced my non-retirement accounts including my TFSA to hold only dividend growth stocks like Royal Bank, Enbridge, and BCE, which all yield roughly 4.5%.

Income Breakdown
$200,000 non-registered account at 4.5% yield = $9,000 / year
$60,000 RRIF at 5% yield = $3,000 / year
Total passive income = $12,000 / year

I just finished re-balancing everything last night. So starting from today, April 1st, my restructured portfolio will automatically generate $12,000 of passive income every year. This stable stream of income is comprised of interest and dividends only, so I never even have to touch the principal.

Since most of my income is in dividends I pay no income tax at all. In fact, the government actually pays me about $500 of tax credits every year because I’m considered a low-income household, lol.

• Earn $50,000 from a job and $9,000 of that goes to the government.
• Earn $50,000 from capital gains and pay just $4,500 in tax.
• Earn $50,000 from eligible dividends and pay no tax! 😉

Isn’t it ironic how the government is giving free handouts to financially independent loafers like me, because it thinks I’m poor? 😛
Meanwhile, it has to spend tens of billions of dollars each year on just the interest payments on the outstanding federal debt!

Oh well. I don’t make the rules. I just make them work for me. I’m surprised there isn’t more public outrage about these unfair fiscal policies that benefit lazy, rich people.

Anyway, now let’s take a look at my annual spending.

Expenses Breakdown:

Strata (HOA) $3,000
Transportation $1,300
Internet + Netflix $700
Food $2,400
Electricity $300
Home Insurance $300
Phone $500
Property Tax $1,100
Discretionary $2,400
Total Expenses = $12,000 / year

As you can see, unlike Trudeau’s government I actually know how to run a balanced budget. 😛 Thankfully Vancouver is one of the cheapest cities to live in. Yes, housing is expensive here. But since I don’t have a mortgage anymore, the cost of housing is significantly reduced for me. Hydro is heavily subsidized and health insurance is very affordable. In fact, according to the BC govt’s website, anyone who makes less than $22,000 a year such as myself, don’t pay any MSP premiums at all. #freehealthcare.

Reaching this major milestone in my life has been a long but rewarding journey. So of course I would like to thank all my fans, for keeping me cool during that really warm summer a few years ago. I’d also like to thank my arms, for always being by my side. My legs, for supporting me. And my fingers, because I can always count on them.

Starting a New Chapter in Life 

Now that I’ve achieved my ultimate financial goal where my finances are self-sustaining, I have decided to work on my spiritual goals next to become a more enlightened person. So I’m traveling to the Qoikang monastery in Tibet to learn about self-actualization from the Buddhist monks. I hope to discover inner peace and spiritual fulfillment.

I wonder if they have Netflix there. Anyway, my flight leaves soon so I have to go now. Namaste!

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Random Useless Fact

The BBC managed to capture remarkable footage of some rare flying penguins.