In 2016, I spoke to you steps to financial independence. I have reached:
- There financial solvency (step 1) in 1998, with my first real job.
- There financial stability (step 2), via the creation of a emergency fund, as well as the absence of bad debts (step 3) in 1999.
- There financial security (step 4) from 2010, through the use of my second pillar to amortize my first main residence, then renting it out. This coincided with my first passive income from my growing dividends.
- L'financial independence (step 5) from 2017, thanks to the increasingly significant income generated by my investments. This materialized with the cessation of my gainful employment in 2021.
Since this important milestone, my standard of living has not really changed. I simply continue to cover the usual expenses thanks to my assets, without the help of a salary.
So I haven't reached stage 6 yet, that of financial freedom, in which one can afford to go beyond the previous standard of living, by means of ad-hoc budgeting of new expenses. In fact, I could already do that, but I still need a few months of perspective, especially for tax reasons, before launching into it. I am setting myself 2024 as a target.
Then there will be the last step to take, that of financial abundance, where you can live the high life, with a comfortable margin of safety. It is difficult to define a precise time goal for this stage. If I refer to my journey so far, it should be accomplished within five to ten years.
And you, what stage are you at?
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Hi Jerome, thanks for your post! These different levels are interesting, it gives you a direction ;). For my part, I would say that I am at the stage of "financial security" currently and aiming for (partial) financial independence within 7-8 years.
I will amortize my RP this year thanks to my LPP and I plan to get into debt again in a rental investment. At the same time, I also see my passive income increasing but it remains relatively reasonable / our salary income and I prefer to reinvest it currently. Not yet sure to completely "let go" of my main activity as you did since my job already gives me "a lot" of freedom and flexibility and I also find my account in my activities, but reducing it for example to a maximum 50% is at least a 1st objective that I set for myself (hence my objective of "partial" financial independence!). To be continued!
Well done, the recent example of Credit Suisse proves to us, if it is still necessary, that pension funds are not the solution.
That's what you have to do! Reduce your activity little by little, to find your bearings and not pay too much tax, because of the addition of income from work and passive income. I did the same with my lucrative activity, before stopping it completely.
Hello Jerone,
Thank you for your feedback.
Indeed, the 50% of main salaried activity is the objective and the reduction must be gradual.
On the other hand, at your level, I was wondering how you are currently “managing” your “withdrawal” phase to pay yourself passive income?
Do you "live" only on stock dividends or do you also draw on stock sales? What percentage of this represents / other real estate or ancillary income (such as your book or website or other "side business")?
At the risk of surprising you (and it still surprises me), not only did I not have to draw on my capital, but also not on my dividends. In fact, I had underestimated:
1) the amount of professional expenses, meals outside the job, etc.
2) what I manage to save today because I have time to do it myself (DIY, cooking, etc. =
3) income from my side business, which has grown more than I expected
So for the moment I live only on my real estate income and my small side business. I could therefore have stopped my lucrative activity several years earlier.
Today I am in a process where my goal is rather to limit the growth of my secondary activity (my goal has always been to achieve a maximum of 15 hours per week, and there I am already too high).
So I am already at financial freedom, because de facto, if we consider the income from my securities that I am not using at the moment, my standard of living could already be higher than it was when I was an employee. But, always cautious, I am still waiting to see what the exact tax implications of these big changes in my life will be, even if I do not expect any big surprises.
As for financial abundance, in other words the high life, we will have to wait a little longer 🙂