Posted by Tim Stobbs on December 21, 2009
Well after this post I suspected I would have to provide some follow up. One comment from Jordan summed it up well with:
I’d be really interested in reading an update on your household balance sheet, how you’ve managed to swing this so soon. Maybe give me some tips to get closer to the same goal.
So I’ll try to answer that question. First off my year end net worth post is coming up next week so I won’t jump into specific numbers on each account, but I’ll provide a brief overview of the items that make up what happened.
First off it’s important to recall I have a low cost lifestyle, so if you added up everything I typically need about $3100 a month to cover my costs, but that includes a larger mortgage payment than required. My normal mortgage payment would be around $750/month, but I’m currently paying about $1100/month.
Then you need to add up my non-day job income which includes:
- Distribution and dividend income from TFSA and taxable accounts which is about $2200/year
- I assumed a return off my RRSP’s and other retirement accounts of 4%, so that’s another $2200/year (based on my last Net Worth post)
- My wife’s daycare clears approximately $6000/year in profit
- My school board job pays about $23,400/year
- Total $33,800/year or $2816/month
So from here it is simple math. If I lowered the mortgage payment to the $750 my income from other sources is greater than my expenses. Or if my wife takes another kid in the daycare and clears another $350 a month in profit we also get to the same place.
Obviously there are a few holes in this crude analysis. Income taxes have not been considered on that income so that will lower the monthly amount a bit and it isn’t sustainable since it doesn’t include cash for retirement savings or expenses that are currently covered by my dental/health coverage at my day job. Yet once the mortgage is paid off in the next three years I’ll firmly be fine without the day job regardless of taxes and other expenses.
So by looking at the numbers you can see the major driver for this is my school board trustee job, which ironically I took without caring about the pay at all. So it brings for an interesting conclusion: following your passion will sometimes lead you to where you want to go sooner than you thought possible.
For many years I’ve been focusing on the expenses and savings part of the early retirement, but the other side, income, is ultimately what go me to this milestone. So this leads the path of semi-retirement which I intend to investigate in the New Year a bit more. Perhaps the issue isn’t that I want to retire early, but rather leave my day job and work on other things instead.