Financial Philosophy

First let me start by welcoming all of you to my blog. I’ve always known my real passion is finance . Not necessarily money as money , although you would agree that it plays an integral part of our lives, but finance. Here is my financial philosophy:

Financial Motivation

For our family it was always obvious that working hard will not provide us with a retirement at the level of lifestyle we have while we work. There is a need to save and invest money to guarantee a comfortable retirement and even an early retirement. We have been living in Canada for almost five years, and while the following example is relevant for Canada, but we are sure that concept is relevant for other free countries in the world.

According to the Canada Revenue Agency (CRA) income survey, the median after-tax income of families of two or more people is 75,700 CAD.

Now we can show that with this salary any family can be worth a million dollars within 30 years. Saving 11,000 CAD per year and investing this amount of money for very conservative 3.5%, which grows at a rate of 5% annually, guarantees your family will be worth a million dollars after 30 years. Even better, your family will be able to live on dividends, received from that million without touching it. The income stream of dividend received yearly will be 91,000 CAD.

It Is Achievable

The calculation is simple. In the first year, the dividend is 3.5%, which is 385 CAD. The second year dividend amount is 3.68% of the 11,000 CAD and  3.5% on an additional 11,000 CAD in the second year. At the end of the second year, we will have 23,188 CAD, which is 11,000 + 385 and 11,000 +803.40 = 23,188 CAD. Continue this calculation and after 30 years, we will have 1,011,336.24 CAD in our account and an annual dividend income stream of 90,930 CAD. It is  sooner than the actual pension age 65 and with comfort.

After 30 years our family can stop working and have an even better lifestyle than what we had. The truth is that it will happen in less than 30 years.

  • There are opportunities that provide more than 3.5% on the market today.
  • The average family income will probably grow and allow more money to be invested.
  • Some equities raise their dividends more than 5% annually.

Only 330,000 CAD was actually invested, and the extra 681,336 CAD was earned.

The 11,000 CAD is about 14% of the family’s annual income. The 64,700 CAD, which is 5,391 CAD monthly, can be spent wisely on family needs. There are family expenses that cannot be eliminated such as home costs, groceries, and daycare for the children. There are many other items that won’t help us achieve financial independence such as owning a second or luxury car, taking expensive vacations, and eating out.

We will track our journey to financial independence on this blog. While we continue to enjoy our lives, we hope that our readers find this information useful.