Tag Archives: finance

How can we afford to live like we do?

I’d like to be able to report that I’m one of the impressive people who travel continuously, funded fully by a sustainable income from a  location-independent business, e.g. http://manvsdebt.com/     Although this could happen eventually, I’m not currently actively pursuing this. But people often ask how can we do what we do.

The key to financial independence is having the correct balance between financial inflows and outflows on a continuing basis.

Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.

Charles Dickens in David Copperfield, 1849

On the Income Side

Both my wife and I worked full-time for over 15 years.  We each worked for one primary employer during this period, and we were both successful within our organizations.  During this time, we utilized ‘pay-yourself-first’ techniques to pay off our mortgage at an accelerated rate, and to invest in equities (mutual funds in RRSPs and rental real-estate).  We also received a small inheritance with the passing of my parents.  As a result, we currently have passive income to fund the majority of our lifestyle, and we are slowly drawing down the principle of our investable assets.  In our sixties, we expect to continue doing this (at a reduced rate), as well as receive government benefits (CPP) and a modest defined-benefit pension from my employer.

There is still considerable uncertainty as to whether these income sources and eventually the liquidation of the underlying assets will provide a life-long source of income.  There is lots of published information on this topic (e.g. Unveiling the Retirement Myth by Canadian Jim Otar, many related technical articles at http://wpfau.blogspot.com/).  Both the magnitude and sequence of investmen returns have such significant and variable impacts on the probability of outliving one’s assets that unless the majority of one’s income is annuitized (e.g. defined benefit pension, secure government benefits, annuities, etc.), or one has huge assets relative to one’s expenditures, one can never be totally certain nor completely secure.

As a result, we don’t rule out the possibility that we might need to find additional sources of income.  We also might choose to work or own a business for the gratification they might provide.  If so, we will only do things we are passionate about, so they don’t feel like work.

On the Spending Side

There are several things which make our lifestyle, if not feasible, then much easier than it might otherwise be.  We do not have children.  We are both in good health.  We live and travel according to our own rules, not those of others.

We try to live a cost-effective lifestyle, obtaining maximum benefit at a reasonable cost.  I’d call us frugal (hopefully not cheap), but only to the extent that one can be deemed as such while living what some consider a desirable lifestyle.  As a result, we prefer long duration, low budget travel.

In this process, we have traded some of the material benefits we might otherwise have enjoyed (a bigger house, a newer or second car, some of the latest toys) for far more satisfying and lasting benefits like authentic experiences, good health, leisure time, intimacy, and making contributions to others.

Most Importantly

The single most important thing that makes our lifestyle possible is a change of context.  A simple but powerful change of perspective.  Like many people, I’d always imagined that I’d work hard until my mid-fifties or later, trying but never quite living a balanced life, then retiring to start pursuing my dreams in earnest with the time and health that I had left.  This all changed in the blink of an eye, when a conversation with a friend opened my mind to the possibility of something else. I experienced the pre-requisite paradigm shift that made our lifestyle possible.  Without this, I’d still be working too hard, commuting too far, and stressing too much.

The limiting factor is never time nor even money.  It is imagination.