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Wednesday, March 29, 2017

Interesting Implications of a High Free Cash Flow

Posted by Tim Stobbs on March 17, 2010

A big free cash flow into the house I have to admit is very nice.  Our goals seem that much closer when you are pushing through the mortgage at a break neck speed.  Actually we are doing it so fast that we decided that any extra cash flow into the house would be used for fun stuff.  So this has resulted with my wife is having a bit of problem, which to be honest I think most people would like to have.  She has to pick a new client for the daycare where money really isn’t an issue.

Therefore as she does interviews and looks for parents that seem nice and will have a similar parenting style to our own. Yet more importantly she watches the interaction between our kids and theirs.  If the kids play well together the odds of getting accepted increase hugely.  Yet now she has run into a problem.  She likes two families and their kids a lot, but their care requirements are different.  One option is two kids three days a week, the other would be one kid for five days a week.

I think in an attempt to find some difference between the two cases we discussed the money side of the equation, which at one point I summed it up nicely “Depending on how soon you want to renovate the kitchen, you would pick one over the other.”  Her response was “I don’t really care about renovating the kitchen that much.  I’ve lived with it for almost four years, what’s another couple of years?”  Then at that moment a thought stuck me: this is the kind of discussion you have when you are financially independent.

Our basic needs are covered and we are making fine progress to our goals so any extra money is just that extra money.  If we want to do something that is nice to have, like renovate the kitchen, we can do it.  Yet we also have the luxury of letting my wife choose to work less if she wants.

In the end, this just proved to me an interesting point.  I think we are the right kind of people to retire early or be financially independent.  We consider money in our decisions but we are not driven by it.  Happiness is usually a more important factor.

Has anyone else been in this situation where you were picking a choice not really based on money for a small business?  What did you choose?  Perhaps you can help my wife with her decision by telling your story.

Comments

4 Responses to “Interesting Implications of a High Free Cash Flow”
  1. The Rat says:

    This may be a pretty boring story for a lot of people to read about but here goes mine:

    When I left the private sector in January, three discussions transpired between my wife and I:

    1 – I was offered a temporary full-time position for the government (a one year term which could have kick-started a new career for me) about a month after leaving the workforce.

    2 – We talked about renovating our whole downstairs in our home

    3 – We talked about visiting her immediate family for the whole upcoming summer (her family lives in another province) and taking a one week vacation down south to celebrate our wedding anniversary.

    If I took the job, it meant she was traveling alone, I would be home for the whole summer and I wouldn’t get to spend time with her family, nor enjoy our anniversary. I also would scale down on the blogging side sine a new job would take up a lot of time to get my head around.

    If we renovated the downstairs, we would have to scale down our summer vacation or cancel it entirely as our budgeted amount or more would have to go to renovations.

    In the end, we ended up discussing what was most important to us. Our home was paid off, and like you our basic needs are covered. We have no kids as of yet and there is plenty of time to renovate the basement when kids are on the way and maybe even get back into the workforce at some level. We have a golden opportunity to visit her family for the summer and it may not come again. Because we worked so hard over the past 10+ years, we’re normally ‘programmed’ to just keep going, going, going. But this time, probably because it was the first time ever, we realized that we actually had a real choice in the matter. We chose the decision with the least financial gain because we want to be with family even though we have to budget things within reasonable levels. We are really happy with the decision to date.

  2. JMK says:

    By living well below our means on 55% of our take home for the essentials, we are making excellent progress on our RRSPs, TFSA and killing the mortgage in record time. Every other year we take a major vacation with our kids – 2008 was a month in Europe (Italy, Greece and Germany mostly). This August we intend to be gone for another month. Yes we could save a whack of money by doing a more modest holiday and continuing our high savings program. Yes it would mean we would retire X months earlier.
    We’ve simply decided that these adventures with our kids are more important than saving like maniacs at the expense of everything else. We only have these years with them once. We happily skip other stuff that’s just not important to us (new cars, trendy wardrobes, cable, gian TVs with 500 channels, etc) but the travel is something we’ve decided isn’t negotiable. If we weren’t feeling so “on top” of all our other savings goals we certainly would have to rethink the logic of doing trips of this scope instead of saving, rather than in addition to saving. Living well below your means gives you the freedom to live a little now and still retire young enough to enjoy yourself.

  3. b foot says:

    I’ve been following this blog recently, I enjoy reading it very much. I can see people sharing the same goal (saving and paying off mortgage asap). Our mortgage will be paid off in 9 days! I can already feel the good feeling of mortgage free.

  4. Charles says:

    Great post! We’re having similar discussions in our household. My wife and I both make a great salary, and before we got married, we never had to worry about saving for anything we wanted. If we wanted something, we just went out and bought it.
    Those years were great, and although we saved a sizeable down payment for our house, we lived life to the fullest. We took several trips a year, fine dining, hosting large parties, etc. Once we got married, our focus shifted to paying off the mortgage as quickly as possible. We managed to pay off almost half of our mortgage in a span of 2.5 years. Last year, we were blessed with the birth of our precious baby boy, and again our life focus shifted. My wife was lucky enough to have a govt job and was on Maternity leave for one year while being paid 93% of her salary. Her maternity leave has passed and she is now on leave without pay (for up to 5 years), and she(we) wouldn’t want to have it any other way. We have had to make adjustments as the days of buying what you want are gone, and the dream I had to pay of my mortgage in 5-7 years has now had to take a back seat. We know that we are lucky to even have the choice of her staying home without pay and although money is tight now, we are discussing the possibility of downsizing our home just so that she could stay home for the full 5 years without the financial stress. We love the house we are living in, but would move in a heartbeat if it means a better quality life for our kids. We both came from parents who struggled and worked hard to provide us everything we ever needed, and so moving to a smaller place or renting temporarily is no real issue for us. Anyways, that’s the current discussion we are having, and being the level headed couple that we usually are, we’re sure we’ll make the right decision for our family.

    Of course I sometimes truly miss the double income (especially considering she makes as much as I do), but you only have the time with your kids once, so in the end we believe it will all be worth it. Just thought I’d share my experience.

    Keep up the good posts.

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