Incomes Expenses Progress

Incomes / Expenses Progress

The cost of living inevitably increases over time due to inflation. So in order to get ahead we must make our incomes grow faster than our expenses. Then take the difference between the two, (Savings) to invest and produce real returns which will boost our future passive incomes. This self propelling phenomenon becomes exponentially more rewarding over time until eventually, the streams of passive income will carry enough momentum to not only pay for our entire living expenses, but also generate excess returns and continues to grow on it’s own. We can then leave the rat race forever and become truly free. This is what it means to become financially independent. 😀

My income is mostly fixed and predictable and I try to do the same with my monthly spending, so at the end of every year I compare my earnings and expenses. The graph below represents what my net income to living expenses look like for a typical month in a given year. Most of the increase to my expenses since 2009 comes from inflation and higher interest payments on my debt. (The graph below is updated once a year)

• Notes:
• 2008 –  Just graduated from college and found an entry level, design related job with a $35,000 gross salary. Also picked up a part-time job on the side. Living with parents rent free. That’s why my expenses were so low this year.
• 2009 – Life is good. Bought and moved into my own apartment. Spent all my savings on the $13,000 down payment though. Started to invest in the stock market.
• 2010 – Dividend income starting to show signs of growth. Bought a used car so expenses increased. Paid off all student loans.
• 2011 – Borrowed money from the bank to invest in the financial markets boosting dividends. However expenses increased as well to service the extra debt.
• 2012 – Promotion at my part time job. :0) Continuing to invest. Near the end of the year I bought a farm which is going to be rented out for income.
• 2013 – Purchased another farm this year so now I have two. The rental income from the farms, about $5,000 a year each, is nice. But at the same time my expense have also increased due to my new farm loans.
• 2014 – Making about $1,000 interest income per year from some mortgage funds.
• 2015 – Putting a higher priority on interest producing investments to make full use of my tax-advantaged accounts like the RRSP and TFSA.
• 2016 – Added more to fixed income investments
• 2017 – Started investing in peer to peer lending and increased my interest income.
• 2018 – Got laid off from my job. Received a rather generous severance package. Started working at a new company soon after.
• 2019 – Focusing more on freelance graphic design work.
• 2020 – Sold farmland to buy residential property. Annual rent doubled due to high cap rate in Vancouver real estate. Deployed over $100,000 of cash savings from selling the farmland into the stock market during the 2020 pull back. This increased my dividend income by $7,000 a year. Spending less time on freelance work. Combined after tax income now equals 3 times living expenses, woot!

People often think you need to be really smart, talented, or work really hard to have a chance of making a six figure income. But the longer you work in your respective field, the harder it becomes to significantly grow your salary. Here’s something I learned though: you don’t HAVE to make money from just your one source of income.

My full time salary is not increasing at the same rate it used to, but through investing and starting multiple revenue streams, about half of my income now comes from other sources other than a regular 9 to 5 job (as shown in the income/expense graph above.) And these extra incomes are growing faster than my full time job.

It’s important to think outside the box and put our time and money to work in the right places. 😉 It’s not about being a workaholic and compromising a balanced lifestyle either. I currently work about 40 hours a week at my full time job, and 5 hours a week at my part time job. I’m not a workaholic, but it certainly helps to work a little harder than the average person to get ahead. It’s a small sacrifice I’m willing to make for the giant reward of early financial freedom. 😀 All other sources of income I currently make like from rent and dividends are passive. 🙂

[last updated this page on August 2020]