Financial independence by collecting underpants? Are you serious?
When it comes to the concept of early retirement, it is not a strange or unfamiliar idea for me. My dad semi-retired in his mid-40’s and fully retired in his early 50’s; my cousin retired before he turned 40. Having family members that retired early meant I knew early retirement is indeed possible; I just need to have a plan and put my mind to it.
Growing up, my parents have always taught me to be frugal, save money, so I can eventually retire early one day.
But like the underpants gnomes in South Park, I had an incomplete plan. You see, the gnomes had the following business plan:
1. Collect Underpants
My early retirement plan was like below:
1. Save money
3. Early retirement
I had no idea what it takes to go from step 1 to step 3. Step 2 was a complete mystery to me. Although my dad and cousin have gone through the three steps, I was too ignorant to ask them for advice. I wanted to figure this out for myself.
It wasn’t until I was in my late 20’s that I began to figure it out with my wife (whom I’ll call Mrs. T from now on). In late 2011 we had our financial epiphany in which we determined what we needed to do in step 2 to achieve early retirement.
The magic in step 2 is of course creating passive income… or in our case, dividend income! This is why I provide dividend income updates on my blog every month.
Before we get into more details about our dividend income, let’s step back a bit.
Early retirement vs. financial independence
First I want to define early retirement. I typically don’t like using the term early retirement. Rather, I like to use the word financial independence. Why? Because too many people associate the word early retirement with the image of someone sitting on the beach, sipping piña colada all day, collecting money from the government. But that’s not how I see early retirement.
To me, financial independence simply means that our passive income exceeds our total expenses so we can have more freedom and choice in our life. So the simplified formula for financial independence is as follows:
Passive income > expenses = Financial Independence
Financial independence means I can quit my job (we’re a single income family) and spend more time with Mrs. T and our children if I wanted to, it can also mean that I can continue working in some sort of capacity. What we want to do once we reach financial independence is entirely up to us. We’re the ones in full control of our life, rather than having to listen to the “boss man.”
Financial independence – Reasons for being financially independent
As mentioned above, I want to have more freedom and choice in determining what I want to do in my everyday life, not just the weekends and holidays.
A quick introduction of myself, I’m in my early 30’s living in beautiful Vancouver Canada. I’m happily married with an energetic 2.5 year old toddler and a brand new 2 month old baby. I’ve been working in the high tech industry for 10 years since graduating from university.
Working in high tech means things are moving very fast and there are new challenges every day. Because the fast moving nature, it is quite restrictive when it comes to taking a vacation. The unwritten rule at work is that 2 weeks is the maximum vacation time one can take. It doesn’t mean I can’t take a longer vacation if I wanted to. I can certainly take a 4 week vacation or longer if I wanted to, but taking a vacation for more than 2 weeks means it becomes extremely challenging and sometimes nearly impossible to catch up and perform the daily job tasks once returning to work. It also becomes extremely challenging for my co-workers to cover for me for any extended period of time. Unfortunately, this means vacations require a bit of planning. I can’t just drop work and go on a last minute trip.
It’s funny because work travels, on the other hand, are completely the opposite. Work travels are almost always on last minute notices. Due to my job, I travel regularly. When there’s a work trip, I usually have to work my life around the trip. With two little ones at home, it’s certainly a challenge for Mrs. T to handle both children if I’m gone for more than a couple days.
The one major reason to want to be financially independent is so Mrs. T, our children, and I can travel more. Mrs. T and I love to travel. We’ve been to quite a few countries separately before we met (20 for me, 24 for her) but we have only been to 6 countries together. One of our goals is to go to all 7 continents; so far we got 3 down, 4 to go. A personal goal of mine is to have travelled to more countries than my age one day. When we are financially independent, we’d love to travel around the world extensively and possibly living abroad. Instead of hopping cities to cities and only spending a few days in each city, we’d love to live in a foreign city for an extended period of time and learn more about the local culture. Living in a city extensively would also allow us to travel in the nearby areas while having a home base. When it comes to our children’s education, we’ll probably do a combination of home schooling, international schools and when living in Canada, public schools. I’m a true believer that one can learn more by traveling than only reading books.
Thanks to work, my weekday schedule is set. I get up in the morning, eat breakfast with my family, go to work, work hard, come home, have dinner, spend time with my family, go to bed, and repeat the process. I’m sure this is how most people run their lives these days. Because I deal with people all over the world, I often have early and late meetings, either at the office or at home. This really cuts into the amount of time I get to spend with my family. It’s only on weekends that I get to enjoy my life and dictate my own schedule. Wouldn’t it be great to have the flexibility to determine my “own schedule” every single day? I’m using this term loosely because when we’re financially independent, I probably wouldn’t be making set daily plans. Rather, we’ll probably be more spontaneous.
Furthermore, being financially independent would mean being able to spend more time with my family. It’s a shame that during weekdays I only get to spend a few hours with my son, daughter and wife each day. Although my children are still very young, I have noticed that they grow up very fast and are learning new things every single day. I want to be more involved in their growing up. Furthermore, I want to spend more time with Mrs. T and continue having a strong and healthy relationship.
The magic of dividend income
I mentioned above that magic in