For years I’ve been tracking my net worth with the dual goal of becoming a millionaire by the end of 2020 (Ha!), and achieving financial freedom by age 45 (in 2024). The financial freedom target did not necessarily mean a full-stop early retirement, but a point when I could realistically leave my day job to pursue other interests – namely blogging, financial planning, and freelance writing.
In my last financial freedom update I mentioned I was still on track to reach my goal, although what life would look like afterwards wasn’t exactly clear. Now I have a much better idea. What a difference two years can make!
Since then, I quit my day job and turned my side hustle into a “full-time” pursuit. I’m working for myself and doing what I love – helping people with their finances by writing educational content and providing one-on-one coaching.
They say if you do what you love, you’ll never work a day in your life. According to many in the personal finance community, by that definition I’ve already achieved F.I.R.E., or financial independence, retire early.
I’ve left the commute, the cubicle, and the drudgery of the 9-to-5 to pursue my dream. I work when I want, and for as long as I want. That, to me, is freedom.
Now, before the retirement police come out with a cold dose of reality, I am fully aware that I’m not retired. I need to earn an income to meet our current and future spending needs. In fact, my best estimate is that we could survive for about 10 years on our existing resources – not an ideal F.I.R.E. scenario.
On the other hand, I’m not looking to retire on a meagre budget of $30,000 per year. We still have big dreams to travel the world (eventually). We like good quality food and wine. We still have growing children to feed and clothe. And we’re not the kind of people who want to sell it all and roam the continent in an RV.
Have I already achieved F.I.R.E.? I’ve never branded myself as a F.I.R.E. blogger because I don’t believe you can call yourself retired if you’re still earning an income. But I’ll admit I’ve had a loose definition of financial freedom because what I really meant was the freedom to stop working for someone else and start working on my own terms.
The truth is, I’m still striving for that freedom – just now I aim to be a financially independent entrepreneur (FIE?). Here’s what that might look like:
Financially Independent Entrepreneur
I’ve been working on my own business full-time since December 2019. Revenue has exceeded my wildest expectations. But when I say ‘full-time’, just know that means working an average of 20-25 hours a week. I’m not busting my butt 24-7.
In a typical work day this summer, I’d get up at 6am and go for a run, come home and make breakfast for the kids, then sit on the deck with a coffee and eat breakfast with my wife, clean up and have a shower, and start working on projects by 10am. I’d pause for lunch and a 30-minute walk around the neighbourhood, and then finish up any writing or financial planning by 3:30pm. I like to be finished by noon on Friday.
Now, just because I love what I do doesn’t mean I want to do it forever. I’ve mapped out a plan that has me ‘working’ until age 55. I doubt I’ll stop at that age, but it’s a reasonable guess at this point.
I’d also like a large enough annual spending target that gives us the flexibility to travel and maintain our current standard of living. We’ve built $15,000 per year in travel expenses into our budget (spending is that much lower in the chart this year because 2020).
We’ve talked about spending our summers abroad when we’re able to travel again – renting a house somewhere in Europe or the U.K. for two months and using it as a jumping off point for other destinations. Working online means I can check-in from anywhere in the world if needed.
I’ve given us a spending boost once both of our kids are in post-secondary (my age 50 year). The thinking is that we’ll have a lot more flexibility to travel during the school year.
Our net worth will reach around $2.9M by my final working year (age 55) and stay relatively constant for 20 years before we spend down our investments and savings by my wife’s age 95 year. That’s the “die-broke” scenario that has us spending all of our savings and investments, but still leaving the house in our estate.
I’ve mentioned before why I’m not aggressively paying off the mortgage – not while the interest rate is at 1.45%. This projection has us paying off our mortgage in 7.5 years – well before I stop ‘working’ so we avoid the risk of carrying a mortgage into retirement.
One important note is that we don’t have big annual savings targets. Both of our RRSPs are already maxed-out, as is my TFSA. The next three years will see some pretty big catch-up contributions to get my wife’s TFSA fully funded. Outside of that, we’re only projecting to max out our TFSA contributions each year. We’ll also continue to max-out the kids’ RESPs.
That means I can work just enough to meet our spending needs and hit those modest savings targets while our investments grow.
Final Thoughts on Financial Freedom 45
I’m going to ‘retire’ this financial freedom 45 series now that I’ve officially quit my day job and started working on my own terms. While I haven’t achieved F.I.R.E., I do think I’ve unlocked what most F.I.R.E. enthusiasts are searching for – the freedom to stop working for someone else and start pursuing your passion.
Truth be told, it does sort of feel like I’m retired. I mean, I am working a bit more than I need to right now. But that’s because we’re in the middle of a pandemic and I’ve spent more time at home than I had planned. Stuck at home, I might as well write an article or work on a financial plan. That’s actually how I started my blog in the first place – when our first born daughter started sleeping through the night from 7pm – 7am and we were stuck in the house with free time every night.
I’ll keep tracking and updating my net worth, but that $1M goal has never mattered to me as much as achieving financial freedom. Now that I’m doing what I love, I have a better idea of what financial freedom actually means.