True Financial Freedom

How do you really obtain true financial freedom? Basically to create a passive income that would cover all your monthly expenses, plus give you extra money to do whatever you want! I came across Mr Free at 33’s Blog. In this post of his he talks about the true cost of everything we buy/need/want. “In my view, the true cost of expenses is how much capital would be required in order to generate the passive income necessary to cover the associated expense. ” – Mr Free @ 33

True Financial Freedom

I love this idea, and by really crunching the number’s I think it will help me cut the stuff we don’t need. It will also help encourage me to continue to make saving a priority. I know what we spend roughly every month and now I must do the math.

First things First, I got to figure out the average yield of my portfolio. By adding all the yields up and dividing by the number of stocks I own. My average yield is %4.72, not bad at all! Let’s say I want that reese’s peanut butter cup once a week. I’m not no twig so I got to have the 4 pack. mmmmmmm! oh yeah. So that’s costs me 1.50 per week. How much money in stocks do I need to support that habit for the year? Well if I continued averaging 4.72% for the year, I would need $1525.42 invested to continue that $1.50 a week habit.

Now Let’s Calculate The Real Stuff

Financial Freedom

This post will list my real monthly expenses and calculate how much of a portfolio I would need to carry the life we currently live. Let the fun begin!

House Expenses

Mortgage and Property Taxes Bi Weekly – $1100 or $2200 Monthly

  • $26,400 yearly ————— We would need $559,322.00 Invested to Carry our mortgage and property taxes.

Water Heater Rental, Hydro and Water – Average $160 per month for all 3

  •  $1920 —————– We would need $40,678 To Carry these bills.

Cable, Netflix, Internet and 2 Cell Phones —— Monthly $260

  • $3120 ————— $66101 Needed

Insurance

Insurance on our 2 cars and house – $360 Monthly

  • $4320 ———————- $91,525

Gas

Gas for our 2 cars for the month —- $300.00

  • $3600 ———————– $76,271

Groceries

Groceries for the 3 of us plus dog food monthly —— $450.00

  • $5400 ————- $114,406

Day Care

We got it good, one of our aunts watch our son for $25.00 a day or roughly $500 a month

  • $6000 ————– $127,118





 

Additional Expenses (Entertainment, Maintenance,Gifts, Etc)

I think $800 monthly for additional expenses seems right, some months we are over some we are under.

  • $15,600 —————- $203,389

Well I think that generally covers everything. Of course Investing is not included as this is the math to our financial freedom. So the total monthly expenses comes out to $5030 or $60,360 per year. Based on our current average yield of 4.72% we would need $1,278,813 Invested to live with complete financial freedom. Of course things can happen to throw these number’s even more off. A car break’s down and we need to get a new one (we never buy brand new) or roofing etc etc. I didn’t even account for all the vacations we would go on if we were retired.

Writing this down and talking it over with the wife, was really good. It’s pretty insane when your spending that much more on your cell phones/internet/cable then your necessity’s Hydro/Water/water heater. Talking can only go so far though, we need to take action. Maybe something like cancelling netflix would get the ball rolling. (we have a android box anyways) Be sure to check out Jason’s Blog. (Mr Free @ 33) Clearly he has some great ideas. What do you guys think? Are our expenses way to high? What would you cut first?

Cheers!

 

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14 Responses

  1. It does seem a bit high for the cell phones/internet/tv packages but then again I don’t live in Canada 🙂 So I’m not sure if that’s considered high or not. Our package is closer to $200 with everything included as a comparison.

    • That’s another benefit of the state’s. While watching TV and I see the verizon or other cell phone providers ads it blows me away. Actually makes me a little worried investing in canadIan telecoms because of the price difference. I own my cellphone and the bill is still 60 a month with data.

  2. misterslm says:

    You spend $300 / month on gas? I think we spend about $20-30 / month. Walking, biking, all good options.

    And you spend $260 / month on cable/phones and you’re looking at netflix (which is $7.99 for the basic package) as the first thing to cut? Why not keep netflix/internet and either cut or seriously downgrade the rest? That’s what we do.

    • Hey mister, we live in the country and both commute about 20 minutes to work. (separate ways)
      I agree I miss the really short commute but I will take country life every day of the week. So there’s not to much we can do there unless we switch our cars to more gas efficent cars. The cable is one I’d really be intrested in cutting. Just can’t find a good alternative for sports at the moment and the wife likes all her shows. I think it’s something we could seriously look into though. Cell phones are a big cost in that bracket and I would love to lower those bills.

      Curious mister since your from Canada. Do you and her both have cell phones? If so what do you guys pay for your cell phones Internet and cable/Netflix monthly? Our cell phones are the biggest cost in that bracket

      • misterslm says:

        We both have the $45/month plan from Fido (2 gb per month). It’s probably excessive for us, given that neither of us goes over 1 gb in data usage in any given month.
        Netflix I think we have the standard plan, $9.99 / month. Also subscribe to CraveTV which is another $7.99 / month.
        Don’t have cable.

        What cars do you two drive?
        misterslm recently posted…Financial Update – March 2017My Profile

  3. Leo T. Ly says:

    We live in Canada and need to pay taxes. I think your numbers needs to take into account that the money you need are after tax amounts. In addition, you won’t be paying your mortgage forever, so that’ll need to get in the mix. Also, I hope that we will all get CPP and old age security when it’s our time to retire. Do you have a pension plan at your work? Just playing devil’s advocate :).

    • Haha all great points. I was basically figuring out our current situation. True didn’t factor in taxes on the dividends. Yeah its refreshing knowing the mortgage will be gone so that frees up 600k future investment income. I honestly don’t know about cpp and old age security. I think all these baby boomers will use the fund up. Here’s hoping there’s something there when we retire. But I definally don’t rely on it. No unfortunately we both don’t have pensions…. wah wah

  4. Isn’t it crazy/humbling when you crunch the hard numbers? The good news is that when you become so fed up and want financial freedom bad enough, you will know exactly where to cut and look. That’s the benefit of laying it out there now. I love how you talked about it with your wife too. Can’t cut the expenses without her signoff!

    Bert

    • Haha thanks Bert. Surprisingly yes. We haven’t done a budget since we got debt free (other then house) that was at our old house. It’s kinda shocking to see the costs with this house. Time to start cutting something

  5. Your mortgage and housing costs seem to be a little bit too much. Over time, you could refinance and/or pay off the mortgage – forecasting this would be beneficial because without a mortgage, you could potentially retire much earlier!

    • Mortgage is definally higher then our old house. Canada’s housing is more expensive then us that’s for sure. Our mortgage is only on 330 thousand but our house is worth about 700k. Luckily we don’t have a mortgage payment on 700k haha. We are trying to pay down the house early. That’s part of the reason of it being bi weekly. Refinance or paid off mortgage this is the million dOllar question.

  6. Nice feeling when the numbers are all in front of you. Gives you a goal to shoot for and helps you come up with strategies on how to get there faster. I know you didn’t explain your “additional” monthly expenses very much, but seems like $1300 is a bit excessive. I would start there and cut out what you don’t need. I agree you should put some money aside for emergencies but if it isn’t important enough to warrant an explanation in your article or have an actual name, then it shouldn’t be important enough to have all that money dedicated to it. Thanks for sharing.

  7. Hey daze definally great point. No this doesn’t even factor into emergency funds. This is more like spending, money for kids sports, wedding gifts birthday gifts/ entertainment. I agree with you 100% and after making this post it’s made me want to basically figure 100% month end costs. You could be right and I’m way off with this number. I haven’t budgeted in a couple years would be great to know 100%

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