Four Different Ways to Achieve Financial Independence


Financial independence… this concept has been discussed on so many blogs that I rarely write about it here. I’ve been working on my own crusade to reach financial independence since I entered the workforce back in 2003. I previously dedicated an entire blog to the topic, had some good fun and made some money with it. Then, I decided to concentrate on my dividend investing blog thinking investors wanted to read about…. Investing!

But it seems that I was wrong. I have discovered gradually that not only are you interested in my views on the stock market, but also about my personal goals and struggles. This is why I decided to share a little bit more with you today. I think my own view of financial independence differs from so many others. The concept remains the same, but my way to achieve it is rarely discussed on blogs out there today.


My Definition of Financial Independence (FI)

Before I start rambling on about my goals, I think it’s crucial to define what FI means to me. I have a pretty short definition of FI: being able to do whatever I want, whenever I want without having to worry about money. Obviously, I mean doing reasonable things and not entertaining ultra-rich hobbies such as sport fishing or taking my private jet to play poker over the weekend in Vegas and to return to my Hawaii mansion on Monday morning ;-).

But for me, FI means that I have the freedom to live my life as I want without having to work for someone. I actually intend to work all my life, but I would rather do it for me instead of working for the man.

My Situation Today

As you read this article, I’m about 50 days away from leaving my ordinary life to go on a one year road trip. But I’m not doing this because I won the lottery, I simply took a sabbatical year from work to leave. However, I can say that I am in a good financial situation for someone who is 34 and has 3 children (believe me, I love my children more than anything else, and being a father of 3 so young definitely reduces the opportunities to save! hahaha!). Here’s my balance sheet:


House: $365,000

RRSP account: $65,000

RESP account: $11,0000

Defined pension plan: $90,000

Freefall (my RV): $45,000

Total asset: $576,000


House equity line of credit: $237,000

Mortgage: $54,000

Personal line of credit: $17,000

RV loan: $45,000

Total Liabilities: $353,000

NET WORTH: $223,000

I consider this pretty good, and it could be much better too. Let’s just say I’m very far away from FI with such a balance sheet! This is why I had to sit down and work on some ways to reach FI. So far, I’ve found 4 different ways. Here they are:

Scenario #1 The Classic Long Road

I’m one of the lucky employees that still has a defined contribution pension plan. This type of retirement plan offered by very few employers puts all the responsibility of the cash flow on the employer’s shoulders. There is an amount taken from my paycheck which is bonified by my employer. For each year worked, I earn the right to retire with an annuity equal to 2% of my 5 best years average salary. In other words, at the age of 65, I’ll retire with 70% of my salary. This income is guaranteed by my employer and it good as long as I live.

You can calculate roughly $80,000 in today’s dollar. This will probably be more as I should continue to see my salary increase over time (I’m only 34 after all!). If I am willing to wait patiently in my office, pay down my mortgage, I’ll be able to retire without any money worries. However, I don’t like waiting that much!

Scenario #2 The Hard Worker

When I started my career, I was happy to know that scenario #1 existed, but wanted to retire earlier. The idea was to work harder and get more promotions, salary increases and bonuses in order to put money aside on top of my employer’s retirement plan.

The idea was to be able to save an additional $5,000 per year in my retirement account and reach the sum of $400,000 at the age of 55. At the age of 55, I would show 32 years of work for my employer. Therefore, I would be entitled at the age of 65 to receive 64% of my salary. Between the age of 65 and 55, I could use the $400,000 to cover my lifestyle and become financially independant 10 years faster simply by working harder.

While retiring at 55 is great, I’m looking to see if there is something better!

Scenario #3 The Frugal Investor

I have learned about those super young retirees, or FIRE adept. Those who achieved financial independence at a young age by saving an incredible portion of their income. Guys like Bert & Lanny over at the Dividend Diplomats, Tyler at Dividend Hustler, Dividend Growth Investor, Jason previously from Dividend Mantra, Mr Money Mustache and Joe from Retire by 40 all have savings rates beyond my imagination. When I am able to save 15-20% of my income, I feel like a king. These guys are/were able to save near (and sometimes over) 50% of their income. If I were to follow their lead, I would probably be able to reach FI another 10 years earlier… therefore at the age of 45. To be honest, I’m trying very hard to manage my expenses, but I find it very hard to live with a monthly budget under $6,000. I expect this will change during my road trip. We will be living a more minimalist life and hopefully I’ll be able to cut down my spending when we come back. However, so far, being a frugal investor isn’t a real scenario for me. This sounds more like torture than anything else!

Scenario #4 Creating Income to Reach FI

I have read a lot of things about FI lately. But it all comes down to the same thing; live way below your means and save money to retire early. I get it, and it works. I mean, obviously, if I live miserably with $2,000 per month and save the extra $4,000 per month, I’ll be rich in no time…. But I would still live a miserable life.

As I mentioned, I work constantly on reducing my expenses. So far, I have been able to reduce my lifestyle (yeah I know, $6K/month is a lot, but it used to be a lot more ???? ). Then, I thought “what if I could keep up this lifestyle and simply earn more?”. With about 12 months of hard work, I was able to increase my online income by 50%. The extra money is currently going to fund my road trip, but I didn’t spend more money because I made more. I simply used it carefully.

I intend to work even harder when I leave (hey! What do you want me to do at night in my RV?). At the moment, I will be able to leave for a year without any salary and will live with a $3,500/month budget. I’m not too far away from the $6,000/month I need to live comfortably at home. In fact, if I work hard on one side and cut a few expenses, I could reach FI pretty fast. Therefore, if I can continue to work very hard, which I enjoy, and my online venture keeps increasing, I will reach financial freedom by the time I come back home…. Before the age of 36!

Wow… that would be the perfect balance; not being restrained and still reaching FI at a very young age. By combining, frugal living, and most importantly a side income, you could reach financial independence without having a pile of cash put aside. Instead of working to build a $500K or $1,000,000 portfolio paying dividends, what if you create your own dividend paying machine with your own talent? My websites currently generate $3,500 per month of free cash flow. If it was a dividend paying portfolio, it would need to worth around $1,000,000 generating a 4.2% yield.

Now I’m asking you, what is easier to reach? A million dollar portfolio or a side income generating $3,500/month?

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