Aug 102020
 

I have achieved financial freedoooom!

Freedom 35 has become financially independent

After 12 years of saving and investing I have finally reached financial independence! This means the passive income generated from my investment portfolio is enough to pay for all my current and future living expenses. It’s not about spending more money on things. It’s about spending more time on the things that money can’t buy!

In my first ever blog post I questioned if freedom 35 was even possible for me. After 851 more posts I now know!

Financial independence triumph

Wow. This is unreal. I would like to thank everyone who has taken the time to read my blog, especially those who have been following me since the early days. You know who you are. ūüėČ I certainly wouldn’t be here today without all your support and encouragement. You guys rock! You have all done plenty. It¬†means a lot. ūüėé

 

What’s my secret to financial independence?

Everyone’s path to financial freedom is unique. In my case I have to give credit to these 5 key reasons.

  1. Adopt an abundance mindset instead of a scarcity mindset.

    I learned this from reading lots of self development books & watching motivational and introspective YouTube videos. I cannot emphasize enough how important it is to have a positive outlook and growth mentality. There are no problems in life. Only possibilities for growth.

    Rather than sitting on the sidelines because the markets may crash, I choose to invest anyway despite the risks because I focus on the potential gains rather than the losses.

  2. Low interest rates.

    Nearly all of my financial strategies have thrived on cheap money. Low interest rates boost stock and real estate prices. Thank you, Bank of Canada! ūüćĀ Policy makers would rather devalue the currency than let financial markets crash. That’s why real interest rates are negative right now. This trend has created a great deal of moral hazard and social divide. And it appears interest rates will continue to stay low for a very long time.

  3. Understand how to value investments.

    As an opponent of the Efficient Market Hypothesis I prefer to buy underpriced individual stocks rather than the entire market.

    Diversification is great for protecting wealth. But concentration is more effective for building wealth. ūüėČ By finding and buying undervalued assets I have made tremendous gains in stocks, farmland, and urban real estate.

  4. Invest with other people’s money.

    Without borrowing any money to invest it would probably take me 36 years or longer to become financially independent. But leverage has allowed me to cut that time down to 12 years. Assets produce wealth. Leverage gives me the ability to grow my assets and multiply my wealth. As long as interest rates stay low leverage will continue to be instrumental in my financial plans. ūüôā

  5. Copy the best of what others have already figured out. 

    Financial success depends more on the methods and principles you practice than how hard you try. Good strategies create wealth. Great strategies create even more wealth. All the strategies I use have already been vetted and proven to work by highly successful people. I have gained invaluable knowledge by learning from these experts in their specific realms of the financial world:

    ‚ÄĘReal estate (Graham Stephan)
    ‚ÄĘLeverage (Robert Kiyosaki)
    ‚ÄĘRisk management (Ray Dalio, James Rickards)
    ‚ÄĘMacro economic trends (Peter Schiff, Raoul Pal)
    ‚ÄĘFarmland (Jim Rogers)
    ‚ÄĘFinancial markets (Warren Buffett, Peter Lynch, Jeffrey Gundlach.)

    I’ve been shadowing these experts and others like them for years – reading their books, studying their next moves, watching their interviews. There’s no reason for me to reinvent the wheel. These smart individuals have already written the indispensable playbook to prosperity. They have generously shared their abundant wisdom with the world. I simply copied their mental models and behaviors.

 

Jump directly to….

 

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Financial independence 2 years ahead of schedule

I was initially aiming to reach FI in 2022 when I turn 35. I was on track to realize this blog’s ultimate raison d’etre. But then something unexpected happened which forced me to change my plan. ūüėģ

As you know earlier this year the stock market experienced a big sell-off, which gave me a major case of FOMO.ūüėĖ Not wanting to miss out on bargain prices I purchase over $100,000 worth of dividend stocks in March. My dividend yield on cost was over 6% on these new purchases. I still remember the excitement of buying TD Bank shares and see it jump nearly 18% the very next day.

Warren Buffett famously suggested to be “greedy when others are fearful.” So I followed his advice. I bought when others were selling, and I held when others were buying. As a result my passive income in 2020 soared by over $7,000/year – fast tracking my progress.

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Net worth update as of August 2020

Assets:
Cash = $21,000
Non-registered accounts:
↳ Canadian stocks & bonds = $267,000
↳.U.S. stocks = $159,000
↳.European stocks = $19,000
Retirement (RRSP) = $166,000
Tax free savings account (TFSA) = $135,000
Peer-2-peer Lending = $36,000
Principal residence = $331,000 (assessed land value)
Rental property = $450,000 (2020 purchase price)
Total = $1,584,000

Liabilities:
Home mortgage = $181,000
Rental property mortgage = $312,000
Margin loan = $22,000
Total = $515,000

Net Worth:
Assets – Liabilities = $1,069,000

tracking net worth over time

 

Here is a snapshot of all my stocks and bonds on August 10, 2020.

TFSA                                RRSP                                 Margin                              Cash

                       

Altogether I have about $800,000 of liquid financial assets generating $30,380 of passive income. This represents a 3.8% annual rate of return in cash. The typical Canadian requires $756,000 to retire on, according to the Financial Post.

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May 232016
 

The Problem with Vertical Structures

I once applied for a job at McDonald’s. But I soon¬†got myself¬†into a pickle when I couldn’t cut the mustard answering some¬†tough interview questions. ¬†I’ve always admired how quickly fast food workers can be promoted to manager if they work hard enough.¬†When most people think about their careers they imagine themselves moving up the ranks, or climbing the ladder, which are both vertical analogies. In today’s corporate world, the idea of a hierarchy is not only a way to organize a company, but it also dictates how people think about relationships, contribution, accountability, and power.

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But in a fast changing economy that requires communication and interdependence across multiple¬†disciplines, locations, and specialties, the top down method of management often isn’t flexible enough to deal with every situation. Instead, a sideways approach that aligns the values of same level workers might provide more value. ūüôā

Let’s pretend there is a boat in a lake. If we want to raise the boat higher, we could¬†try to lift it out of the water. But that would take a lot of energy and sooner or later the boat will¬†drop back to its original level. But if we add water to the lake the boat will eventually rise on its own. This is the essence of the horizontal approach to financial success.

A big impressive job title doesn’t trump a good idea. The best value-creating initiative can come from literally anyone in an organization. In fact, the person who most understands the processes, concerns, and responsibilities of a software engineer isn’t his or her manager. It’s other software engineers. ūüėÄ Real influence doesn’t come from controlling others that report to us. It comes from our ability to add value across the field we’re in.

The horizontal approach has seen success in real life situations. Valve Corporation develops video games such as the Counter-Strike and Portal series. It also operates Steam, a popular digital distribution platform with over 125 million active users.

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According to its employee handbook the company has no managers or bosses. The company employs about 300 workers. There are different roles and disciplines within Valve but everyone is treated as equals in terms of their job positions.

Horizontal Approach to Everything

Branching out horizontally to find success can be applied to pretty much anything.

  • One¬†way¬†to become the best¬†point guard on a basketball team is to play other positions. By adding skills horizontally instead of aiming for one specific goal¬†we can develop a better¬†understanding of¬†how the entire game is played.
  • One way to become a good parent and have a healthy relationship with our kids is to be more supportive to our spouse. By helping to lift each other up the family bond will become even stronger.
  • One way to become the best pastry chef is to study¬†a wide variety¬†of other culinary baking skills to gain inspiration and unique ideas.
  • When it comes to personal development, meditation and positive thinking is important to create¬†a¬†happier and healthier¬†state of mind. But doing these things alone may not be enough. Instead of focusing 100% on spiritual enlightenment, we could also extend our efforts horizontally to other aspects of our well-being such as¬†eating a cleaner diet or¬†getting more exercise. A healthy body will help to create a more fulfilled¬†mind and spirit. ūüėČ

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Feb 242015
 

In self defence¬†class we learn to fight… so that we won’t have to. Personal finance is very much the same way. ūüôā The best thing that money can give us, is the freedom to not worry about money anymore.¬†Sometimes we can become so focused on our finances that we can easily forget about actually living a life. To me financial wealth is not simply about having money. It’s more about having better options in life.¬†A lack of money is a great disadvantage. Poor people have a greater affinity to stay poor. Their lack of resources keeps them from having access to better opportunities and choices that many middle class and rich people take for granted. Having a limited amount of choices can lead to further unsatisfactory circumstances, so it becomes a self-reinforcing cycle.

We spend a lot of time planning our budgets, building up our savings, and looking for profitable investments, but in the end we should realize that doing all this work is not about the money. It’s about the freedom and the awesome choices we’ll be rewarded with!¬†ūüėÄ We do not want to become obsessed about “money,” in and of itself. We don’t want to turn into those¬†kinds of people who think¬†that the best thing about wealth is that it allows them¬†to buy material things. ūüėź If that’s what they really want to believe then I wish them good luck in life. ūüėõ

15-02-life-choices-chasing-money

There’s a popular story that demonstrates the silly¬†nature¬†of materialism in the world today:

A¬†successful businessman¬†bought a brand new BMW M6 convertable. He parked it right in front of his office so that he could show it off to his fellow co-workers. As he got¬†out his vehicle a passing garbage truck lost control and side-swiped his car, ripping off the door on the driver’s side. The police quickly arrived and the businessman began ranting hysterically that his new BMW was now ruined. ¬†ūüė° After 10 minutes of profuse shouting¬†and cursing, the businessman was finally able to calm down. The police officer then said to him, “You are so focused¬†on your car that you don’t notice anything else.¬†I can’t believe how materialistic you are.” The businessman looked confused. “What do you mean?” he asked. The police officer¬†explained; “Haven’t you noticed that your left arm is missing? It must have been torn off in the accident.” The businessman’s face went white. “OH NO!” he screamed. “My Rolex!!”

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