How I Plan To Be Financially Free By 40

I did some financial daydreaming after my net worth update last week.  I took our current financial trajectory and projected out 10 years from now to see how that might look.  I was surprised by what I found, and the exercise gave me the inspiration for a new objective – becoming financially free by 40.

When MoneySense editor Jonathan Chevreau coined the term, findependence, he described it as the point in time when the income from your investments and other sources surpasses the income you get from a single employer.  Financial freedom doesn’t mean retirement; it’s more like a state of mind.

Related: My Fast Track To Financial Freedom

So when I circled January 1st, 2020 on my calendar, it wasn’t to highlight the day I’ll quit my job to lay around the house and do nothing.

That’s the date when our mortgage will be paid off and we’ll be earning enough from our business and investments so that I won’t need to remain at my day job – if I don’t want to – in order to pay our bills and save for the future.

Here’s how I plan to be financially free by 40:

Pay off our mortgage

The big elephant in the room is our $280,000 mortgage.  How the heck are we going to pay that off in six years?

I’ve written before about how we’re paying an extra $1,100 per month on top of our regular mortgage payments.  That alone has taken our amortization from 25 years down to about 14 years.

Last year I put a $5,000 lump sum payment onto the mortgage at the end of the year, and I plan to do the same this year.  Assuming I continue to put an extra $5,000 down annually, that’ll reduce the mortgage amortization to 11.5 years.  Hmm, still not soon enough.

I used this mortgage calculator to try different payment scenarios that would make us mortgage free by January 1st, 2020 – 99 months after our first mortgage payment in 2011.

To reach our goal, we’ll need to increase our monthly mortgage contributions by $500 per month, starting next year, and increase our annual lump sum payment from $5,000 to $10,000 by 2015.  Not an easy feat, for sure.

Replace my income

Some people question our mortgage-killing strategy and say it would be smarter instead to use our extra cash flow to invest.

Related: Should You Pay Off Your Mortgage Early Or Invest?

The reason we’ve decided to make the mortgage a priority is because we want the income generated from our online business to eventually replace my employment income.  For this to work, we need to eliminate our biggest expense – the mortgage.

With the mortgage paid off, we could live comfortably on $36,000 per year.  Here’s how our expenses break down per month, adjusted modestly for inflation:

Home expenses

  • Property taxes – $350
  • Utilities – $290
  • Phone/Cable/Internet – $160
  • Insurance – $85

Daily living

  • Groceries – $850
  • Dining/Eating out – $250
  • Clothes/Haircuts – $200
  • Prescriptions – $35
  • Spending money – $200


  • Gas – $115
  • Insurance – $120
  • Repairs/Registration – $25


  • Charity/Gifts – $125

Education savings

  • RESP contributions – $200

We currently draw about $3,000 per month from our business (paid to my wife as dividends), so that could cover our day-to-day expenses if I quit my job.

Unfortunately, our list of expenses doesn’t include setting aside any money for saving, or any money for travel or other big ticket items that will surely come up.  The list also fails to consider one very important item – taxes.

Related: Tax Considerations For Single Income Households

So the plan would then be for me to draw an additional $3,000 per month from our business.  That would cover the following:

  • Savings/Emergency fund – $1,000
  • Tax Free Savings Account (investing) – $1,000
  • Taxes – $1,000

Now I can’t just magically create $3,000 per month from thin air, but this is something I can work on over the next few years as the business evolves.

The web is constantly changing, so it’s tough to predict what our business will look like next year, let alone in six years.  Don’t worry – we won’t put up a pay wall and charge a monthly subscription here.

Related: How To Prepare Yourself Financially Before Starting A Business

Our investments

Even with a mortgage-first focus, by the time I reach financial independence I’ll have built up a sizeable investment portfolio.

My RRSP will be worth about $225,000, assuming annual contributions of $15,000 per year and annual growth of 7 per cent.  Left to grow, without any additional contributions, this portfolio could be worth $875,000 by the time I turn 60.

I’ll also have a defined benefit pension with 10 years of service and commuted value worth about $200,000.

There won’t be much in our tax free savings accounts, but they’ll become a priority once I’m no longer working full time.  We’ll invest $12,000 per year in our TFSAs and build this portfolio up to be another income stream in retirement.

We’ll keep putting $200 per month away into our kids’ RESP account.  By the time January 1st, 2020 rolls around, we’ll have about $30,000 in our RESP account, with plenty of time before our kids need the money for school.

Final thoughts

Reaching financial freedom by 40 would be an incredible achievement.  I’ll admit this is a pretty big stretch goal, and I’ve made a lot of assumptions in this rudimentary plan.

I’ve assumed we won’t have any major expenses or life events that could derail these plans.

I’ve assumed my wife will continue to be healthy and able to handle her Multiple Sclerosis symptoms without expensive treatment or extended care.

I’ve also made the assumption that our online business will continue to grow and be stable enough to support our income requirements for many years.

It’s an ambitious target, but what’s life without something to strive toward?  If we make it, we’ll reward ourselves with that month-long trip to Ireland and the UK in 2020 – which was one of our financial goals we set last year.

I want to be financially free so I can choose how to spend my time, so I can work on projects that I’m passionate about, and so that I can be around more for my family.

Wish us luck!

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  1. Tricia on July 8, 2013 at 6:48 am

    Just wanted to wish you and your family luck in your plan! I’m impressed how organized and future planning based you are with being able to delay gratification (e.g., Ireland trip). If more individuals planned this way they would have a smoother and more enjoyable transition into retirement (including my family!).
    Thanks for sharing your thoughts,

    • Echo on July 8, 2013 at 9:46 am

      @Tricia – thanks for the kind words. The trip is less about delayed gratification and more about wanting to take our kids when they’re old enough to enjoy it (they’d be 11 and 8 in 2020).

  2. Hazy on July 8, 2013 at 8:17 am

    $1000 per month taxes on $36000 seems very high.
    I think many retirees would get by paying next to no tax on that amount.

    • Echo on July 8, 2013 at 9:47 am

      @Hazy – the $1,000 per month would cover our combined $6,000 per month income ($3k each).

  3. Jin Won Choi on July 8, 2013 at 8:19 am

    It looks like a well thought-out plan. Good luck, Rob. I hope your online business takes off the way you envision. You’re doing a great job so far.

    • Echo on July 8, 2013 at 9:48 am

      @Jin – thanks very much for your support!

  4. Ed on July 8, 2013 at 9:13 am

    Good luck. Although I would continue doing exactly your plan for another seven years and pad that nest egg for the unexpected which you really should expect.

    • Echo on July 8, 2013 at 9:50 am

      Hi Ed, thanks for the well wishes. If the plan is overly ambitious I would at least like to be in a position to negotiate summers off or a three or four day work week. That might be a better transition than quitting cold turkey.

  5. Mrs PoP @ Planting Our Pennies on July 8, 2013 at 9:17 am

    Unlike hazy, I was looking at $1000 on taxes for $6000 of income each month and wondering if that is too low. In the US, self employment tax is 15.3% and then income tax goes on top of that…

    • Echo on July 8, 2013 at 9:53 am

      @Mrs PoP – I’m no tax expert. I just plugged in the numbers to a 2013 tax calculator and it said we’d pay about $1,200 per month, and that was without any deductions. So I think we’re in the ballpark.

  6. Dan on July 8, 2013 at 10:22 am

    Rob: well done, impressive progress so far. I am surprised your taxes are $350/month. Is that a future amount or are taxes really that high in Lethbridge? Here in Calgary they’d be a bit less but steadily climbing each year

    • Echo on July 8, 2013 at 10:33 am

      @Dan – Taxes are pretty high in Lethbridge. We currently pay around $3,900 per year, so that estimate might even be on the low side.

  7. Joe Wasylyk on July 8, 2013 at 10:33 am

    Congratulations on your efforts to achieve an honorable financial plan. I think that financial planning is only one area for consideration. If you have more problems in your business you might need more entrepreneurial financing. As we get older there is a greater probability that family members will have health problems.

    Personal money management is also a concern since I notice you have had line of credit and credit card problems in the past.

    Most people desire in life to go from point A to B in a solid straight Line. As we have seen with too many people is that life is a series of up’s and down’s; and it requires each one of us to make better choices in our pre-retirement and retirement life.

    Finally, what do you have planned for your retirement life when you actually get there achieving your financial goals?

  8. Bet Crooks on July 8, 2013 at 11:31 am

    I may have missed this but does the budget include
    a) monthly savings for the next car (ours last about 15 years on average but we still have to keep saving for the next one)
    b) monthly savings to replace the roof/repair exterior siding or re-point bricks/re-pave or re-gravel the driveway/replace the windows/refit the bathrooms/replace the appliances/etc
    Those things usually also occur only every 10-25 years but they need to be saved for outside of a TFSA if the TFSA is intended to fund travel and retirement.

    (PS Don’t let the kids take up hockey unless you increase your budget a bit!)

    I see nothing wrong with targeting 40 to make a career switch as ambitious goals are more powerful than wishy-washy ones. Good luck!

    • Echo on July 8, 2013 at 2:08 pm

      @Bet Crooks – I’m using the $1,000 per month in savings/emergency fund to cover some of the things you’ve suggested. That should be sufficient.

    • The Passive Income Earner on July 9, 2013 at 9:17 am

      The Kids is very much a random set of expenses … I have 2 and they play hockey, ringette and fastpitch. With tournaments out of town, the cost go up fast 🙂

  9. Adina J on July 8, 2013 at 1:29 pm

    That’s a plan I would definitely co-sign! We’re in a similar position – 7 years to go till 40, 2 kids under 5 – but our mortgage is higher, and our net worth a bit lower than yours. Add the fact that we don’t have any viable side businesses, and we definitely won’t be reaching Findependence at 40. Sigh! It’s a good thing we both enjoy our current jobs (and have time for non-paying hobbies). We’re on track to be mortgage-free by 43, though, so that will be a sort of mini-Findependence day for us.

    Congrats on your amazing progress!

    • Echo on July 8, 2013 at 2:14 pm

      @Adina J – Thanks! At this point, the side business isn’t much more than a decent paying second job. Hopefully it continues to grow (or remains at this level) so we can fast track our financial goals.

  10. Gary on July 8, 2013 at 2:36 pm

    That’s a pretty impressive plan robb! i don’t know of any other 33 year old who is even close to the progress you have made to date. good luck with your plan; i’m sure you will give it your best shot.

    • Echo on July 8, 2013 at 3:36 pm

      @Gary – thanks very much for your support!

  11. Wade on July 8, 2013 at 3:31 pm

    3K a month from a blog?

    • Echo on July 8, 2013 at 3:39 pm

      @Wade – You sound skeptical 🙂 I have two other web properties and do some freelance writing on the side. Might be making minimum wage if I added up all the hours.

      • Wade on July 8, 2013 at 4:14 pm

        I’ve derived some income in the past from banner ads, adsense, sponsored posts, etc in the past, so yeah, skeptical…

        Including freelance as “passive” income is an interesting perspective, tis really just another type of job.

        Good luck on your journey. Findepence in your thirties is a nice thing indeed. 😉

        • Echo on July 8, 2013 at 5:17 pm

          @Wade – there’s a reason why I didn’t use the ‘p’ word. Freelancing is anything but passive income.

          Thanks for stopping by!

  12. My Own Advisor on July 8, 2013 at 6:43 pm

    I think you stand a great chance at making it Robb.

    Hitting the big 4-0 this year, so I have no chance of retiring at 40. Findependence is within reach for age 50 though, working part-time from age 50-55 with full “retirement” at 55.

    We can have the best laid plans but truly our health is the most important piece of the financially free puzzle. I find myself thinking about this more, after my grandmother’s severe stroke. She had 90 great years, we should all be so blessed and fortunate.

    Keep up the great work Robb, hard work pays off – this you know. 🙂


    • Gary on July 8, 2013 at 6:55 pm

      mark — you are so right about health being the most important part of a great retirement. i’m in my 67th year and my wife is being tested for ms. we have so many plans which can be thwarted in an instant! saving is important but so is enjoying life as it comes.

    • Echo on July 8, 2013 at 9:12 pm

      @Mark – I’m really sorry to hear about your grandmother’s stroke, Mark.

      Our health definitely plays a big factor in our financial plans. One of the reasons I’m striving for early findependence is so I can either work from home or spend more time with family.

  13. Dividend Tactics on July 8, 2013 at 8:10 pm

    I agree with the group, this goal is totally achievable. Do you have a financial plan? I find that the act of writing a clear but detailed plan, although time consuming, does help to outline the steps involved to reach a given financial goal. In addition it may spur thoughts on an aspect you may have otherwise overlooked. Anyway – I wish you nothing but success!


    • Echo on July 8, 2013 at 9:17 pm

      @Dividend Tactics – I do have a plan and that’s how I was able to project out a few different scenarios to see if this is possible while still achieving our other goals.

      Thanks for your comment!

  14. The Passive Income Earner on July 9, 2013 at 9:28 am

    Good luck on your plan. I too am accelerating my mortgage payments. I think of investing first at times as it can be much more profitable from a number’s game but having our home paid off offer a security that isn’t tangible.

    I currently have an amazing variable rate of 2.40% on my mortgage and I am thinking of swapping to lower payments, to invest and make large lump sum contribution to close it down. I have also though of the point where I can pay it off in full with investments and borrow to invest. Essentially accelerating a smith manoeuvre. Have you thought of that?

    My plan is to be mortgage free by 45 (6 years to go). I am not sure I can be financially independent just yet though.

    I am surprised that you are not filling your TFSA. If your business is anything but successful in retirement, you would be much better with the TFSA than RRSP from a tax perspective. I first fill up my TFSA and then I do my RRSP.

    • Echo on July 9, 2013 at 9:50 am

      @PIE – That’s why I’m switching from RRSP contributions to TFSA contributions once I reach 40. Right now, it makes sense from a tax savings perspective to make the RRSP contributions.

      No plans to do a Smith Manoeuvre. I think investing in our business gives us a better chance of success.

      The income potential is much higher when you consider how much capital you’d need to invest in order to generate $3k per month in dividends.

  15. Kellie on July 9, 2013 at 2:22 pm

    That’s an admirable plan! Too bad most other Americans don’t follow suit and strive to accomplish the same. Debt is killing us as a society for sure. I aspire to do what you are doing, but am a little behind you on the timetable. We are working on eliminating the revolving credit death trap right now, and luckily I’ve had some nice pay increases to make it easier to do that. Next is getting that 30 yr mortgage cut in half! Best of luck in your goals!

  16. Kyle @ Young and Thrifty on July 10, 2013 at 8:54 pm

    Great plan Rob, it was informative to see your theories applied like this. I think you’ve inspired me to write my own post about my findependence plan for 45 (I’m not as ambitious as yourself!).

  17. Cathy on July 11, 2013 at 7:37 am

    I think this is an ambitious plan, and definitely a positive that you have such a great goal to work towards. However, you mention wanting to spend more time with your family as well as some underlying health issues; wouldn’t you want to take some time now to travel and experience life? Your budget doesn’t even seem to take into account a share at a summer cottage, camping trips, etc. My husband and I save over 20% of what we make towards retirement (and I have a defined benefit pension), have a healthy emergency fund and have managed to put down an extra lump sum amount on our mortgage each year (even if it’s just an extra $2000, it all goes toward our principal!), and yet we still believe that travel is one of the best experiences you can give yourself. I would not want to delay these experiences for the opportunity to pay off my mortgage 5-10 years earlier.

    • Echo on July 11, 2013 at 8:44 am

      @Cathy – We considered all that you mention here and came to the realization (after a few failed attempts) that travelling with kids under 5 is not an ideal way to spend a vacation. We’d much rather save our meaningful travel for when the kids are older.

      That said, we do still make two or three smaller trips each year, into the Rockies and interior BC.

      I’d never buy a timeshare – waste of money.

      • Mike Holman on July 19, 2013 at 9:20 am

        We did a three week trip to Europe with a 2 month and 20 month old and it was a story-book fairy tale trip – amazing.

        No wait, now that I remember, it was three weeks of hell and I wanted to come back after three days. 🙂

        Definitely wait until they are older. My kids are 5 & 7 now and I still would rather wait another couple of years to do a big trip again.

        Good luck with the financial independance plan!

        • Echo on July 19, 2013 at 9:32 am

          Thanks Mike! I’ve talked to a few people who confirm your experience. We’re definitely going to wait and hopefully the whole family will be able to enjoy a big trip like that.

  18. Anton Ivanov on July 11, 2013 at 5:09 pm

    Sounds like you are on the right track and have your goals very clearly laid out in front of you. I don’t think becoming financially free by 40 is that hard with good planning and maintaining good financial habits.

  19. Mike on August 1, 2013 at 2:28 pm

    Well you already have the lion’s share of work done for reaching your goal: you have a written plan! Good sounds like you will make it happen.

  20. L on August 11, 2013 at 4:24 pm

    That looks like a very well-throught out plan! Sometimes ambitious goals are the best kind! 🙂

  21. Jesse on December 27, 2013 at 8:45 pm

    I think your plan is great, it’s neat to see what being really well organized and methodical looks like. Go Robb! You can do it!

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