A few weeks ago, my wife and I went through our little monthly ritual and reviewed our finances for the month of July and we got a little surprise. I can hardly contain my excitement typing these words. 🙂
We realized that our net worth had increased by as much as a our net income so far this year. This has never happened before so it took me a little while to understand what it meant.
In other words, the returns from our investment have paid for all our expenses so far this year.
Put another way, we made enough money sleeping to pay for our mortgage, our groceries, our internet and a bunch of other things, for 7 freaking months!
That by itself should be enough to get anyone FIRE’d up.
So what happened?
Really what made a difference in July is our Employee Stock Purchase Plan.
Twice a year, in January and in July, we get to buy stock in our company at the lowest price it was either in July or in January. On top of that discount, we get an additional 7.5% discount.
our investments gains are exactly matching our expenses
It’s a pretty sweet deal if you ask me.
Oil & Gas stocks got a beating last year, bottomed out in January and bounced back nicely since then. So when we bought our stocks in July, at the price of January 4th, plus a 7.5% discount, we basically bought stock at a 25% discount. Nice.
As things stand today, we’ve reached a balance where our investments gains are exactly matching our expenses for the year.
July might have been a very exceptional month though. I don’t expect this to hold true in August, despite the nice gains we’ve seen this month. It’s not even sure that I’ll see this again next year when I’ll have to start paying for daycare.
However, it is an amazing feeling to see the benefits of “Spend less than you Earn and Invest the rest” in action. It’s also a confirmation that I’m doing the right thing and that I just need to keep going.
- Stay the course and don’t sell stocks when an industry as a whole is underperforming. The Oil & Gas industry is a good example these days and even if market dynamics have changed, the largest companies will come out of it stronger. The market typically overreacts when things turn sour, but they usually turn around soon enough. Selling low when everyone else is panicking is not a good way to build wealth.
- Participate in your Employee Stock Purchase Plan if your employer offers one. Some plans have even greater discounts than the ones I listed. If the company stock stays flat, you can lock in the discount rate every 6 months. If the company stock is on a growth trajectory, you can make sizable profits over the years. You can’t ignore the free money.
- It’s not always about the money and before you reach FI (at 25x your expenses) you’ll see that your investments returns will start to cover your expenses. It is something to keep in mind if you need to time off to take a leave of absence, take a sabbatical, take a maternity leave or take time to find a great job. When your investments are working for you, a break from work to pursue a personal goal may have turn out to have very little impact on your finances.
How much of your expenses are your investments returns currently covering? Do you have access to Employee Stock Purchase Plans with your employer? Have you taken unpaid leave only to realize that your net worth was still growing?