My journal articles are becoming less frequent. It's not because I no longer have time to write, nor because I'm less motivated. No, it's simply because after major successive changes in my professional life over the past several months, I've finally found a semblance of tranquility. I say a semblance, because we're still far from the idea I have of the life of a rentier. The hours are still long, the work rate high, but at least the general climate is positive. And that's what makes all the difference.
Nevertheless, I do not lose sight of my goals of financial independence. The changes made in my professional life were necessary to hold out longer, because the path to autonomy is long, but it is clear that at some point I will say STOP to working as an employee. I am too free-spirited to take orders from someone, and the older I get, the more this character trait becomes more pronounced. Even the best boss will not be able to satisfy this need for independence.
Today I have traveled less than 5% of the path I have left to do. The road is long, winding and could discourage more than one. Nevertheless, thanks to a desire for autonomy stronger than anything, I am not giving up. Financial independence begins with independence, period.
If the market allows it, that is, if it goes back down to reasonable levels, I will start investing again in a more sustained manner. In this case I could easily double the distance traveled. I would still have 90% to do, but from a certain threshold, the machine feeds itself, the income from dividends becomes more and more important and allows for more massive reinvestment. In short, the progression is not linear, but exponential, thanks to the magic of compound interest.
I hope to be able to pass the milestone of 10% traveled by the end of this year. It is an ambitious but achievable goal, with a little help from the market...
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Hello Jerome,
There is a figure in your article that strikes me. You say you have covered less than 5% of the distance you have left to go.
In another post, you estimate your needs to be an annuitant at 1.1M CHF.
As I don't think your assets are limited to 55k CHF, what do these 5% correspond to and in relation to what / how much?
Hello dom67
Regarding the 1.1M CHF I think you are referring to this article: http://www.dividendes.ch/2013/03/ou-va-votre-argent/
This post addresses the issue in relation to expenses. The idea of this article is to know how much capital would be necessary to cover the main needs (taxes, housing, food, transport… and not all the needs) by “eating” this capital from the moment we retire until the grim reaper comes to get us. Since we are only talking about basic needs here and the capital is consumed, the goal is obviously easier to achieve.
When I talk about 5%, I look at it from an income perspective. I set a goal based on what I need to live on today, from which I remove my savings capacity (which will no longer be necessary once I retire). This means that the more I save today, the faster the income from my capital will not only be greater, but also the less income I will need in the future). And unlike above, I do not deal with the capital. I just want it to produce income. I do not start with the idea of consuming it, which at worst can leave a safety margin, or at best leave an inheritance for one's descendants. As for inflation, it is covered by the fact that I invest in growing dividends.
Hello Jerome,
Thank you for your very clear answer. At the same time, the 5% remains a very low figure or your income needs are and will remain very high once you are an annuitant! Also, wanting to live off your capital without consuming it is still very ambitious.
The 4% rule, very popular among the Anglo-Saxons, takes into account the consumption of capital.
As for inflation, a dividend growth strategy does indeed protect you from moderate inflation but not from hyperinflation. It is also true that the latter hypothesis is no longer very fashionable these days.
Good morning
Certainly 5% is a low figure and it is not because my future needs are high. It is first of all because I have not yet invested all of my cash, because of the high level of the market. I intend to do it gradually if the prices calm down, more massively if we see a good correction. And then we must also take into account that I am basing myself on a strategy of increasing dividends, which means that in any case this rate of achievement of my income objectives increases regardless of what I do. Currently the dividends of my portfolio grow by 10% per year and given the nature of the securities that compose it there is little chance that this rate will weaken significantly. Which also answers your second remark, it would take monstrous inflation for that not to be enough. I have never experienced a case like that in our latitudes.
In short, I intend to approximately double my achievement rate by the end of this year and of course not stop there.
Wanting to live off my capital without consuming it is certainly very ambitious. It is the ideal objective that I am aiming for. I prefer to aim higher today, even if it means revising my ambitions a little lower later, it is always easier than the opposite. And then aiming for this ideal allows me to keep a good margin of safety at the same time as a wide latitude of options.
Indeed, the Anglo-Saxon rule of 4% takes into account the consumption of capital. This is precisely the one that was used in the post http://www.dividendes.ch/2013/03/ou-va-votre-argent/ and which explains the difference between the two approaches.
Hello Jerome,
Thanks for your explanation and good luck doubling your rate this year.