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Five Year Plan, Update #1

A year and half ago (August 2015) I announced my Five Year Plan to achieve what I dubbed at the time to be “Semi-Financial Freedom” (SFF). What this implies is having reached a point in life where a large number of lifestyle expenses are covered by passive income and the individual needs only to exert minimally to cover the rest. Acknowledging and making room for SFF makes the journey to absolute Financial Freedom must less daunting.

I indicated at the time of the original article that when I achieve SFF I will continue to be as productive as ever. That is still my stance. Plato recounts Socrates’ declaration that the unexamined life is not worth living. I would add to that by suggesting that a life without productive output is likewise not worth living. Every person should have a reason to get up in the morning. Creating value for others is a worthwhile pursuit. Without it, life loses its flavour.

The Plan

My Five Year Plan to SFF runs to December 31, 2020. After that, I should be in a very comfortable place financially in my life. The end goal at that time is $5,100 in annual income ($425 monthly). The targets are outlined in this table:

Five Year Plan Dividend Table

YearAgeAnnual (Div + Int)Monthly (Div + Int)% Increase YOY
Anticipated dividends through 2020.

As indicated in my 2016 Review, I was actually able to hit $2,713.16 in passive income for the year, surpassing my target by $213.16. This positions me well to hit my 2017 target. The key will be to continue to reinvest dividends, add additional capital, and ensure my cash on the sidelines continues to earn at a reasonable rate. On that note, I intend to call my bank every three months to keep renewing the special rate that I negotiate with them; bumping my rate up to 2% from the 0.8% Posted Rate is actually a 150% increase. I’d say that’s worth a fifteen minute phone call every few months.

I am earning more income from work than I was at the time that I initially penned my Five Year Plan as well. This provides me with a stronger base on which to build my passive income machine. The more money I can put to work every month means a shorter span of time to reach SFF.

The Challenges

I would say that my biggest challenge at the moment is an inflated stock market. Prices are quite high and it makes it difficult to feel comfortable putting large sums of cash to work all at once. I’ve been waiting and hoping for a pullback so that I can lock in some juicier dividend yields. However, I understand well enough the cost of sitting on the sidelines for too long. As a result, I’ve begun to commit relatively small sums just to nibble away as I wait for better prices to present themselves.

If we were to be granted a 20% pullback in the market, I would begin to get very aggressive adding to my portfolio.

While I spend a lot of time focusing on the income side of the balance sheet, expenses are equally important. I have been spending more lately on entertainment and dining than I likely was at the time of first writing the article. It will be important to keep an eye on lifestyle inflation over time. There is a price to be paid for conveniences such as eating out every night instead of making food at home. With that said, making food is not something that I typically want to do on a regular basis, so there is a trade-off as well in terms of enjoying the way I am living and being frugal.

Other Opportunities

Given the elevated levels of the stock market, I have actually taken some time to look elsewhere for investment opportunities. Real estate has caught my eye as one potentially attractive area. I’ve written before on the importance of having multiple streams of income and this would make sense given that I currently own no physical real estate (I do, however, own RioCan Real Estate Investment Trust (TSE:REI.UN)).

In scanning the market and considering the duplexes and triplexes on the market in my area, I haven’t seen anything that really stands out as being worthwhile. The vast majority of genuinely good deals, I have no doubt, are sold long before they become listed for the average folks to take a crack at.

In saying this, I am also cognizant of the downside risks to real estate which can become a bottomless money and time sink if the property turns out to have structural difficulties which get missed on inspection. Likewise, a bad tenant or two can create a headache for the unwitting real estate investor. I am reminded of two pieces of advice from Warren Buffett which first tell us to never lose money and then to also stay within our circle of competence. I have an excellent track record in the stock market and would be treading uncharted waters with a foray into real estate. For these reasons I have thus far not made the dive.

Additional Thoughts

A lot has changed in my personal life over the course of the past year and a half. I am really enjoying the work I am doing at the moment on an electronic health record. While initially SFF was going to be an opportunity to scale back earned income from direct employment and perform more freelancing, at this stage I am quite content to continue at the pace I am currently maintaining.

In other words, upon achieving SFF I do not see at this stage any need to scale back to a point where I would be only bringing in $1,200 directly from employment as I initially hypothesized. All signs point to the fact that I would continue working as I have been and earning significantly above that which of course means I will be able to continue rolling the passive income snowball further down the line.


My Five Year Plan remains well on track for the beginning of 2021. I have been able to exceed my targets to this stage and am poised to do so again through 2017. The challenge presented by an elevated stock market is best handled through a combination of nibbling away at what value there is and then also having a healthy dose of patience. When a pullback happens, it will be important to be ready to put reserves to work.

Thank you for your continued interest.

What are your thoughts on the progress I have made to this stage?

Full Disclosure: Long REI.UN.


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