take a break

What if you didn't have to work?

What would you do if you didn't need the income from the job you currently have? Let's say you won the lottery with a jackpot of $10 million. Would you continue to be doing the things that you are doing today? Would you be going to work every day? Do you go to work for the love of the job or for the money? Do you go to work so that you have a sense of purpose, a feeling of contribution or do you go to work mostly for the financial rewards?

I suspect that for most people it isn't a black and white thing. Maybe some days you feel you have made the world a better place or maybe you just had fun. Then there are other days that nothing seems to go right, you don't get the recognition you feel you deserve, you got caught on the wrong side of a corporate game some one else was playing, there just doesn't seem to be a point to what you are doing other than the paycheck at the end of the week. If you wouldn't change anything about what you currently do in your day-to-day life then that is great, you are where you want to be and I congratulate you on your success. If however, you thought about the lottery example I gave in the last paragraph and thought "I'd quit my job as quickly as I could" then maybe you need to really question where you are spending the majority of your waking hours. I have been doing that questioning for at least a year now.

In a previous post I talked about tracking your expenses. I didn't talk about doing that because I want to bring everyone up to my level of financial geekiness so I don't feel like so much of a geek; there are actually a few good reasons for doing this. One good reason is getting an understanding of where your money is going. Another reason is to make sure that you aren't wasting a lot of money on things that aren't really important to you. A third reason for tracking expenses is to come to an understanding of exactly how much income you need to maintain your current lifestyle. In upcoming posts I will look at each of these reasons (and their impact) in more detail. For now lets look at how you can know when you don't actually need the income from your current job and what you can do to get closer to this.

If you are tracking your expenses and have been for a few years you should be able to pick out some patterns and trends. For example, you should be able to estimate within less than 10% how much you spend on food every year. You should also be able to figure out how much you have been spending on home heating (provided you haven't moved recently). Using this information you should be able to start to get a picture of what level of cash flow is required to maintain your current lifestyle. That level of cash flow hopefully is below your current level of take home income. If your current income isn't below your current expenses you will need to investigate that before going any further.

Once you know how much cash you need over the course of a year you can start to look for ways to meet that cash flow. Obviously you are getting that income now through some means (unless you are getting deeper and deeper into debt every year) but there could be other sources of income you haven't considered. Maybe you can meet your income requirements through investment income. Maybe you can actually afford to start your own business because the cash flow you require from the business is actually significantly lower than your current income. Or maybe you don't need the stress and anxiety that comes as a part of your current job and you can afford to make a switch to something you think you would like better but were scared to switch because of the financial impact.

When I was in University one summer I had a job working as a clerk for the Recreation and Parks department for the city I lived in. It was a great summer job, it paid well (for a summer job), I got to work in an air conditioned office, I arrived at work at 8:30am and left at 4:30pm Monday-Friday. I had a few tasks that I had to take care of, help residents register for programs (swimming lessons, day camps, etc), occasionally set up coffee and tea for some city meetings and take care of the city-run vending machines. It was fairly stress-free, it had a variety of activities to keep me interested, and there weren't any games being played (well there were but I was able to mostly ignore them). If I could go back to that job today while maintaining my current lifestyle I would jump at the chance. I actually think I could handle going back to that job from a financial perspective, I don't think the position even exists anymore.

Let's take a look at dividends as a source of income. Did you know that in Ontario in 2004 you could take home $31,220 a year in dividend income without paying tax? Check here (on page 2) for your province. Also note that number is for 1 earner, not per household so if you have 2 earners you can have $62,440 in dividend income before paying any tax. That only applies if your only income source is dividends though; other forms of income generate a tax liability at a much lower income. Also you should note that the average dividend paying Canadian corporation is currently yielding something like 2.5%-3%. So if you wanted to generate $62,440 in dividend income you would need between $2 and $2.4 million in value in your portfolio. That may sound discouraging but there are a few things to consider. First, you probably don't need $62,440 a year in after tax income to maintain your current lifestyle. Second, there are some good investments out there that will give you better than a 3% yield. Third, just because you need that much in the value of your portfolio doesn't mean you had to pay that much. There are times in the market's history where great dividend paying stocks were on sale, you just need patience and some saved up cash to take advantages of opportunities as they present themselves.

Maybe through a combination of income from investments, reducing some 'unnecessary' expenses and making a change to a job that pays less but gives you more control and a higher level of satisfaction you can maintain your current lifestyle and by happier while doing it. As I mentioned earlier, maybe you can afford to start that business you have been dreaming about, or maybe you don't actually need two incomes to support your current lifestyle (after removing expenses incurred for earning that second income like child care expenses, the second car, etc...).

I have been thinking about starting up an example portfolio on this site and maybe setting up an example monthly cash flow statement and then working through what it would take to become financially independent. Starting with something like an initial $3000 investment, adding $200-$400 a month and seeing what could be done with that. Anyway, that is a topic for another post...
category: Personal Finance posted on Tuesday January 31, 2006 at 08:55:36 by: 0xCC

Where's my hammer?

You can't be serious! I can't understand why people allowed her to keep her seat.

It seems like in less than 24 months we will get to do this whole thing over again. A least there was a change and the Liberals got the kick that they deserved.

So what will Harper's team be able to do before being forced into another election? I predict that the $1200 child-care thing won't happen (there isn't support from any other party for that, the Bloc already has good child care although they might support more cash in the people's pockets, the NDP and the Liberals want government-funded child care), the GST cut probably will happen and I think the capital gains tax thing is a coin toss.

So let's all set a date in the next 24 months or so, we'll get together, grab a hammer and hit ourselves in the head a few times again.

Oh, and Jack Layton should have said that they did a little Trooper on the bus. That would have made Rick happy.
category: General posted on Tuesday January 24, 2006 at 09:16:59 by: 0xCC

Comments back on

I have turned comments back on because I have installed a comment moderation plug-in. I will see how this goes, I turned comments off awhile ago because I was getting comment spam but hopefully this will improve things.
category: General posted on Sunday January 22, 2006 at 18:27:51 by: 0xCC


I have been working a little bit on my other website over the last couple of months. Emphasis on little bit. I have a basic structure set up, or at least the way that I want the site layout to work. I have an idea for how I want the site to flow and I have the basic home page up. I wanted to have a separate blog on that site as well as an articles section and all the 'normal' web site stuff like an about page (which is lacking on this site) and a contact page and a spot for the web app I am currently working on. I have Word Press installed on that site for what I plan to be the blog area but I don't have any content on there yet.

I haven't looked into Word Press too much (Dreamhost offers it as a one-click install) but I don't quite get it. I took a closer look at Textpattern this morning and at a first glance it looks like it will do everything that I want to do with the other site. So I might be playing around with that later this weekend. I also have a couple of ideas for some testing/fleshing out of my currently very basic web app that I want to work on this weekend.
category: General posted on Saturday January 21, 2006 at 10:42:12 by: 0xCC

Your Personal Cashflow

Ok, I admit it. I am a financial geek. I am the kind of guy that watches my portfolio on a daily basis. I notice when my paycheck is 50 cents off. I know how much of my next mortgage payment is principle and how much is interest. I am the guy that my family turns to for an opinion on what to do with their mortgage or investments. I have taken a couple of university level accounting classes for personal interest. Like I said, financial geek.

If you are in the 50% of Canadians that, according to this study, don't know where their discretionary money goes; this post is for you. I want to use this post to get you to start thinking about where your money went in 2005 and where you think it is going to go in 2006. I think that budget for most people is a dirty word. It is a word that is associated with restrictions, with 'tightening your belt', with being concerned about every single penny that is spent. Having said called myself a financial geek I have a bit of a confession to make. I don't have a household budget.

Part of the problem that I have with the word budget is that it does carry negative connotations. Also, I think that most budgets are created in a bit of a vacuum. People try to sit down with the best of intentions and make a budget. They plug in amounts for various categories that they think they should be spending on that category. For some categories this makes sense, the mortgage payment or rent for example. For other categories this doesn't amount to much more than wishful thinking. If you rarely eat at home for example and you set your 'eating out' budget to $50/month because that is what you think you should be spending on eating out the budget will be blown in the first two weeks or shorter. The budget now gets a negative feeling associated with it and gets shelved until next year's resolutions are thought up.

When you are first setting things up for a budget my personal opinion is that you shouldn't be thinking of what you are doing as a budget at all. You should be thinking in terms of simply tracking your expenses. The first step in moving from point A to point B is to figure out where exactly point A is. Once you know where point A is you can figure out a way to get from there to point B. Simply tracking your expenses doesn't have the same negativity that a budget does.

So if you have made a resolution to take control of your personal finances this year, I want to provide you with the first step. To start tracking your expenses all you need is something as simple as a notebook and a pen. Or to make calculations a little less tedious you can use a fairly simple spreadsheet. Here is a slightly simplified version of the spreadsheet that I use to track our household expenses.

For the first few months that you track your expenses you probably shouldn't worry about the monthly goals section. Just get used to entering your expenses into the spreadsheet. After a few months you will begin to see how much money goes to different categories. For some expenses, like groceries and phone bills, the monthly amounts will be fairly consistent through the whole year. For other expenses, like heating costs, you could have big swings depending on the season so it could take a whole year of tracking expenses before you know what a reasonable average monthly amount will be.

So download the spreadsheet and start tracking your expenses. You can either go back to your bank statements and add in what you have spent over the last few months or just start tracking expenses today. If you have any questions that you want to ask me you can reach me at 0xcc at this domain (that is a zero before the x, not an oh).
category: Personal Finance posted on Thursday January 19, 2006 at 21:19:18 by: 0xCC

Happy Belated New Year!

How did that happen? It's 2006. It's almost 2 weeks into 2006. It has been more than a month since my last post (although I did try to post once since my last post but Nucleus ate the post somehow).

The holidays were pretty quick for me. My last day of work in 2005 was December 23 and my first day of work in 2006 was January 2 which came way too quickly. Even though the holidays were too short I had a good time with family and a good, relaxing time with m for the part of the week not taken up by the family Christmas stuff. Speaking of the family Christmas stuff I got a few really cool presents for Christmas.

The first one is a Chef's jacket that I got from my brother. It is one of those double-breasted looking white jackets that you see professional chefs wear. I find that when I am doing something as simple as cooking dinner or as complicated as making chocolate-dipped biscotti I end up with stuff on my clothes. Having a chef's jacket to protect against that is great.

The next good present was this book from my parents: Programming Ruby which I hope will help me with the Rails development I am working on for another site.

And the third really good present was one of these, a Nikon D50. This one I sort of bought for myself but m kept me in suspense by not allowing me to touch the camera until Christmas day even though we had it 8 days before.

Beyond the New Year/Christmas stuff I wanted to outline a bit of a plan for the upcoming year. I don't really want to use the R-word to describe these but I will call them goals for the year. So I think I know what sort of general direction I want to take over the next year in a few areas. First for this website I would like to set a goal of posting at least once a week. I have been thinking of posting once a month (as a minimum) on four different topics: Personal Finance, Software Development, Fitness/Training, and since I now have the D50 a 'Photo of the Month'. Second, for my new website I would like to set a goal of posting one training-related article a month. My plan is for the articles on my new site to be more specific, to follow a theme for the year and to be more 'rigorous' than the articles I post here.

I also have some specific goals for our portfolio/net worth as well as for what I want to accomplish with my other site/app but I will save that for another post. I have to make sure I have something to post about next week. The next post is seven days or less away.
category: General posted on Friday January 13, 2006 at 23:27:50 by: 0xCC