Financial freedom isn’t a theoretical concept but rather a lifestyle founded on real, hard math.
I believe one is financially free when they’re free from financial concerns. More specifically, being free of financial concerns would imply that one is able to generate enough passive income so that their basic expenses are effectively already covered.
Well, I can say that I’ve worked hard enough – along with receiving a little luck along the way – to get to this position, and it’s in these updates that I show the math behind the lifestyle.
I’m paid just to wake up and exist these days, which feels incredible!
Before I even think about taking on challenges or somehow exchanging some of my time for money, my core personal expenses are already covered. Whereas most people are “in the hole” every morning they wake up, I’m in neutral or positive territory. That means I’m in a position of power and control rather than a position of weakness.
I own my own time now. This was the one thing I set out to own many years ago, when I first started my journey to financial freedom. I could never understand why people want to own stuff and things if they don’t own their own time yet. Time is the ultimate and most valuable commodity in this world. And I’m now free to spend it as I please, which allows me to pursue happiness and live a purposeful life.
Keep in mind, however, that while my aim is to show the basic “infrastructure” of my financial freedom via these real-life, real-money reveals, I’ve come to realize that much of the math is moot. One is very likely going to go on to make much more money past the point of financial freedom, which means that one shouldn’t anchor their entire life on hitting $X in passive income. It’s just really not that vital.
Money shouldn’t be thought of in terms of having to live off of it but rather in terms of providing the flexibility and courage to live life on your terms.
Nonetheless, I think it’s still important to operate with all of the benefits (like that aforementioned flexibility and courage) that financial freedom confers. And so I present my passive income and core personal expenses, as you can see below.
The majority of my passive income is made up of the growing dividend income my Full-Time Fund generates on my behalf. The Fund is like an invisible worker, sending me the entirety of their paycheck. It’s a great relationship, but I can’t seem to shake this feeling that I’m really getting the better end of the deal. (Shh. It’ll be our little secret.)
The dividend income my Full-Time Fund generated for me in December 2016 can be seen in the table below. In the first column, you’ll see the name of the company and its ticker. The second column is the dividend paid. You’ll then see the total of all dividends paid to me this past month on the bottom right, in bold.
Without further ado:
|Wells Fargo & Co. (WFC)||$34.20|
|Southside Bancshares, Inc. (SBSI)||$23.40|
|Phillips 66 (PSX)||$17.01|
|Pfizer Inc. (PFE)||$18.00|
|Aflac Incorporated (AFL)||$38.70|
|Starbucks Corporation (SBUX)||$5.75|
|Spectra Energy Corp. (SE)||$18.23|
|Harris Corporation (HRS)||$21.20|
|Johnson & Johnson (JNJ)||$80.00|
|OTC Market Groups Inc. (OTCM)||$81.40|
|Southern Co. (SO)||$30.80|
|Visa Inc. (V)||$3.30|
|Archer Daniels Midland Company (ADM)||$13.50|
|Amgen, Inc. (AMGN)||$10.00|
|Microsoft Corporation (MSFT)||$9.75|
|Magna International Inc. (MGA)||$8.75|
|Emerson Electric Co. (EMR)||$50.40|
|Unilever PLC (UL)||$34.96|
|Exxon Mobil Corporation (XOM)||$15.00|
|CenterPoint Energy, Inc. (CNP)||$23.18|
|United Technologies Corporation (UTX)||$26.40|
|3M Co. (MMM)||$11.10|
|Norfolk Southern Corp. (NSC)||$41.30|
|International Business Machines Corp. (IBM)||$28.00|
|Chevron Corporation (CVX)||$21.60|
|Target Corporation (TGT)||$30.00|
|Main Street Capital Corporation (MAIN)||$55.20|
|Stag Industrial Inc. (STAG)||$12.74|
|Avista Corp. (AVA)||$18.84|
|The Coca-Cola Co. (KO)||$49.00|
|Compass Minerals International, Inc. (CMP)||$10.43|
|Cullen/Frost Bankers, Inc. (CFR)||$10.80|
|Hershey Co. (HSY)||$12.36|
|Polaris Industries Inc. (PII)||$11.00|
|Praxair, Inc. (PX)||$7.50|
|Realty Income Corp. (O)||$14.14|
|EPR Properties (EPR)||$6.40|
|Royal Dutch Shell PLC (RDS.B)||$47.00|
|BP PLC (BP)||$65.45|
|Duke Energy Corp. (DUK)||$21.38|
|Flowers Foods, Inc. (FLO)||$43.20|
|VF Corp. (VFC)||$8.40|
|Principal Financial Group Inc. (PFG)||$8.60|
|Union Pacific Corporation (UNP)||$36.30|
|Travelers Companies Inc. (TRV)||$6.30|
|South Jersey Industries Inc. (SJI)||$13.63|
|T. Rowe Price Group Inc. (TROW)||$13.50|
|Gilead Sciences, Inc. (GILD)||$9.40|
|Brinker International, Inc. (EAT)||$11.90|
|Chatham Lodging Trust (CLDT)||$15.95|
|Ventas, Inc. (VTR)||$38.75|
|Service Corporation International (SCI)||$2.60|
|C.H. Robinson Worldwide, Inc. (CHRW)||$9.00|
What can I possibly say?
I’m almost without words.
More than $1,300. I collected more than $1,300 this past month – for practically doing nothing at all.
That’s the equivalent of working 40 hours per week for four weeks straight at a pay rate more than Florida’s minimum wage (which is $8.05 per hour). This portfolio is working full time on my behalf, indeed.
I remember my first traditional paying job was as a bagger/cart collector at a grocery store in a small town in Michigan. I made a little more than $5.00 per hour. And the work, my friends, was not easy. I was 15 years old. I had to be driven to and from work. I remember collecting those checks with great pride. And I’ve worked pretty hard ever since.
And so it’s really that much more exciting (and bewildering) that I’m able to collect this much money without lifting a finger. The 14-year-old me would be simply amazed. Although, the 34-year-old version of me is pretty amazed, too. It just goes to show you how many incredible opportunities we have at our disposal.
This is the first time I’ve collected more than $1,300 in dividend income in a single month. But the great thing about dividend growth investing is that records are only meant to be broken. You set a new record. Then you break it. It’s the snowball effect.
The dividend income I earned this month puts me at $10,616.40 for the year of 2016. December’s tally is 33.1% higher than what I earned in December 2015. And the dividend income I earned for the entire year of 2016 is 41.5% higher than what I earned for the entire year of 2015.
In addition to the dividend income you see above, my book, The Dividend Mantra Way, earned me $115.37 in passive income this month.
So my total passive income came in at $1,432.77 for December 2016.
Core Personal Expenses
That passive income is designed to cover my core personal expenses.
I define core personal expenses as all money I spend in a month, except that which is spent on the following:
- Business Expenses
- Student Loan Repayment
- Health Insurance
It’s quite simple why I exclude those specific categories.
Excluding business expenses is self-explanatory; business expenses are not personal expenses, and they wouldn’t exist if I didn’t have a business.
Philanthropic ventures are also fairly self-explanatory. I won’t/don’t give what I don’t have.
I started my philanthropic giving in early 2016 in earnest, just after realizing I’d become financially free. I see my position of strength as an incredible gift but also an incredible burden, as I believe it’s my duty to humanity to help those in need. In order to become the best version of myself, I need to transcend myself and make the world a slightly better place.
I see philanthropy much like investing, where I’m able to incrementally give to a diverse range of organizations. Over time, these sums will be substantial. Furthermore, I foresee the last 1/3 of my life dedicated almost exclusively to philanthropy. I hope to share more about these ventures in time.
I exclude student loan repayments and health insurance because these are expenses that wouldn’t exist if I were truly living off of just my passive income. Both would effectively be ~$0 at the income level my passive income alone provides.
Thus, core personal expenses are essentially just the essentials. We’re talking rent, food, transportation, internet access, mobile phone bill, household goods, etc. Everything except that which I just laid out.
Core personal expenses for December 2016 came in at $1,071.00 (rounded to the nearest dollar).
This is a bit higher than my average, but Christmas spending pushed me up above the $1,000 level. All in all, however, I’m pretty excited to have come in so low even after factoring the extra spending that the holiday season usually encourages. I didn’t travel anywhere. And the whole season was unusually quiet for me. This all contributed to the final result.
If you’re looking for a great way to manage your budget and your investments in one spot, I recommend Personal Capital. It aggregates not only your spending but also your investments, allowing you to see exactly what’s going on with all of your money in one spot. Plus, it’s free!
My coverage level this month (passive income/core personal expenses) was 134%.
As expected, I came in well over 100%. The last month of each quarter balances out the other two months, which means I usually come in at below 100% for two months each quarter and above 100% in the last month. It looks like my coverage level was pretty close to 100% for Q4 2016 – and that’s factoring in a rather expensive and one-off trip to Chicago. I honestly couldn’t be more pleased with the financial position I’m in – and the freedom that position provides – while still in my early 30s. The hard work has really paid off. And I’m so incredibly blessed.
Some people may look at my passive income and core personal expenses and think it’s not enough. Well, that’s really an individual call. I have more than enough for me. I want for nothing. I’m for the most part living the life I’d live even if I had access to unlimited wealth. I’m doing what I want, when I want, with whom I want. I no longer worry about buying stuff I neither want nor need with money I don’t actually have to impress people I don’t care about. Now free from such silly expectations, I’m able to pursue happiness and live a purposeful life with reckless abandon. I’m honestly happier than I’ve ever been. I have the flexibility and courage to live life on my terms.
I could actually spend more than I do, as I earn money on top of the passive income I collect. And if I thought I’d be happier doing so, I would. Instead, I’m more interested in new challenges, writing, reading, exercising, spending time with my puppies, relaxing, and becoming a burgeoning philanthropist. These activities drive my happiness; money does not. Of course, I still invest here and there with any excess capital I might have, as that’s a passion of mine. And seeing as how I’m just barely financially free, I continue to grow my coverage level beyond what passive income growth alone will do.
But how much passive income you need is really your call. Your expenses are your own. Your life and happiness are unique to you and your worldview.
What I intend to show through these updates is simply what financial freedom, in purely distilled math terms, looks like for one man. Of course, financial freedom is so much more than math, with the math itself being largely moot anyway. But the basic infrastructure should still be as intact as possible.
That’s it for this month. I hope you enjoyed seeing what things look like on my end. And I hope you take away some inspiration here, knowing that it’s possible to achieve financial freedom quite early in life, even if you don’t start all that early.
How was December for you? Finish 2016 strong? Interested in putting yourself in a position where passive income could cover your bills? Check out my coaching service.
Full disclosure: I’m long all aforementioned stocks.
Thanks for reading.
Image courtesy of: bplanet at FreeDigitalPhotos.net.