Financial Independence

Faith is taking the first step even when you don’t see the whole staircase.

While you may not agree with me on many views, one thing you must agree is if you have to achieve anything, setting goal is the foundation stone and the most important step. Someone rightly said, A well planned goal is battle half won! A good amount of time must be spent on what you want to achieve and any goal must have few key characteristics which you may have read already but not to worry if you haven’t. There can certainly be more attributes but below are the ones which every goal must be:

• Clear & Concise
• Measurable
• Achievable

Lose-10-pounds-in-a-month is a good goal meeting all 3 points. But let’s face it, a goal without a plan is just a random wish, I set (and forget) numerous such goals every day! Once a goal is set, next step is to put a plan together to achieve it and equally important to monitor it at regular interval to track progress and take corrective actions. I will run 2 miles every & exercise 30 minutes daily; will monitor weight weekly; adjust regime as needed.

I wish Financial Independence for my family, which in itself is a vague and quite a relative statement, hence I used the word Wish and not Goal! After careful (and long) thinking I personally came to the conclusion that we can consider ourselves financially independent if working & earning is optional yet we still have a robust Semi-passive income source in place, which will:

• Be self-sustained taking care of all our Monthly Expenses, generously
• Additional 10% for each of our daughters till they get independent
• Additional 20% for the unknowns (else reinvested towards 1st point OR a vacation!)

To come up with a reasonable Monthly Budget*, one must carefully consider all Fixed and Variable Expenses, not to forget Inflation as this budget is for the future. Our not-so-lavish Monthly Expenses is about $5000. It means our Passive Income plan must generate $5000 + $1000 + $1000 = $7000 every month. If I compare this statement against good goal attributes mentioned earlier – it surely is Clear and Precise but will require adjustment as we move ahead. To make it Measurable, I had to put together a plan. Since the time horizon to achieve this is longer, requiring self-sustained income, I will be breaking down the overall Goal into more manageable smaller chunk of “aspirations” and the first milestone in this whole grand scheme of financial independence is Goal 2025 and regular updates will be posted on the Monthly progress report page. Our FI goal is $84000 ($7000 monthly) and I aspire to achieve this by 2030. Since this milestone is still several years in future, I broke it down into smaller manageable interim goals and our next milestone I set is for year 2025 by which we aim for $36000 side income annually.

I have read several books, blogs & articles discussing passive income planning, execution & earning; and there are several ways to earn*, one prominent source which appeared many times is Royalty income from one’s creative endeavor such as book, music, movie etc. Let’s face it, I lack artistic juice altogether so considering my personal limitations, I am going to stick to below not so exciting sources for now. These income are not totally passive and do require some time to monitor, readjust etc.

• Investing in Dividend stock & DRIP* – When I started this blog back in May’20 we were in a much stronger financial situation with significant disposable cash available, so I went aggressive and aimed for $2500 in monthly dividends by 2025. But we came across few business investment opportunities in 2021 and funds got diverted towards them so I had to revise our goal accordingly. As of Jan’23 the aim is to achieve $1500 monthly in dividend income which may change again as per our situation. We track Projected Annual Dividend Income (PADI) on our Dividend Portfolio page.

• Rental Income* – By 2025, Goal is to invest in 2 Rental properties generating $975 per month in positive cash-flow from Rents post all expenses such as mortgage, property taxes, ad-hoc maintenance and any other miscellaneous expenses. We already own 1.5 houses with 3 rentable units generating positive cash-flow. A goal of $975 monthly is quite modest and highly achievable but based on future financial condition and risk appetite, we may chose to buy further or even sell if needed for debt consolidation. As of Jan’23, the Bank of Canada policy interest rate is already 6.7% and our decision will depend a lot on how long this high interest market will last.

• Interest Income* – In the beginning (May’20) I aimed to earn $250 monthly from personal lending & another $50 from Lending Loop by 2025. But again due to much tighter financial situation I toned down this income bucket a lot and now aspire to earn just $25 monthly from an already existing Lending loop investment. I have written a detailed post on lending income ways in case you are interested.

• Restaurant Income – In mid of 2021, we invested in a franchise-based restaurant business along with friends – more as an “adventure”, less of an earning source. While I am going to cover our experience extensively in coming days, for now I am just adding a token earning of $500 monthly under this bucket, the actuals may be drastically different.

In total above income sources should take care of $3000 towards monthly expenses by 2025, I don’t know about you but I don’t consider this any bad, is it? Once we achieve this 2025 goal, we will work toward our eventual financial independence of attaining $7000 monthly by 2030. At that time we will decide if we want to retire or continue working in some capacity but one thing is clear – I will leave active 9-5 job to pursue “life” in more meaningful way.

The third attribute – Achievable, that I listed in the beginning may sound less important but in fact it is a key factor in driving towards Success. After all what good a goal is if it can’t be achieved (or too easy to reach at)! A well set achievable goal keeps a person on their feet, acts as an adrenaline and provides constant motivation towards attaining the target. It provides a purpose and once achieved, you aim for more. Looking at our 2025 goal and having a plan in place, I know it can be conquered, may require some fine tuning as we progress and come 2025, we will be able to set next course of action plan to aim for the greater good!

Achieving financial freedom by no means mean you stop working, well you can if you want to (if you have better things to do!) but to me it is all about having peace of mind, sense of relief and freedom over choices.

* I will write on these topics in near future & also intend to post Monthly Progress on Passive Earnings.

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