Showing posts from March, 2017

FI - Strategy

Well everyone knows the basic formula for financial independence because it’s extremely simple. Earn more than you spend, invest the excess. Keep doing that until you can retire.

I have been taking a somewhat blended approach with my investment strategy. I started investing approximately 17 years ago as a University student. At that time I was very focused on value investing in dividend paying blue chips ie- (TD, MMM, JNJ, PFE, TRP etc.) However, over the years I’ve expanded my approach and now also allocate some of my portfolio to contrarian type investments. I’m currently 98% invested in equities but over the long term plan on reducing my weighting to 90% equities, 10% fixed income.

My goal in retirement is to receive at least 60% of my income through dividend payments with the other 40% coming from capital gains. I have also not ruled out purchasing a rental property to diversity my passive income sources. However, real estate has appreciated much more rapidly than rental rates, so…

4% Withdrawal Rate

Since you’re reading a personal finance blog you’re probably already familiar with the 4% rule. However, for those who aren’t the 4% rule is basically a rule of thumb that many financial planners use to calculate a “safe” annual withdrawal rate from your retirement nest egg. This “safe” withdrawal rate is also supposed to account for inflation. So in my case I calculated that we’d need approximately $34,000 (then I added another 20% for contingencies) which comes out to approximately $40,000. So $1,000,000 X 4% = $40,000.
An easier way to figure out how much you need to save is to simply multiply your estimated annual spending by 25. So if you require $40,000 a year you would need an investment portfolio of $40,000 X 25 = $1,000,000
There are 3 major assumptions built into the 4% rule that you have to be comfortable with:

1. Your portfolio will generate annualized returns of 7%. So if you have a very low risk tolerance and plan to have a large percentage of your portfolio in bonds/cash…

FI 3000 Is Born

Well here it goes. I’m 37, married with 2 kids, we own 2 vehicles a modest house and a small cottage. We both work in government type positions with government type pay.  So all in all very middle class. Actually, we may be the very definition of middle class.  So what sets up apart from every other middle class family? Well, the answer is not much…except for one thing. I have a goal, in 8 years, approximately 3000 days (thus Financial Independence 3000 is born) I plan on having enough money for us to continue our middle class lifestyle without the need to continue working. Based on our relatively modest lifestyle this is going to take approximately $1,000,000 and no debt. I’ll go over how I’m going to go about accomplishing this in my next few posts.