My Investments Have Paid For All My Expenses This Year

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Credits : Jeremy Thomas

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.

Maximize opportunities

It takes many years for a portfolio to reach a point where the returns alone can cover someone’s expenses, and there are a few things that can help:
  • 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?

-Nick

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22 COMMENTS

  1. That’s great well done. We’re right at the start of our financial journey so it’s going to be a very long time until we have a good % of our expenses covered by our investment income – but we’ve started, and that’s what counts.

    I’d definitely get involved in a stock company plan, but I don’t work in a company like that 🙂

    Tristan

    • My previous companies didn’t offer that either, but this one does, so it’s definitely worth asking about such plans during interviews. It’s a great benefit.
      You’re spot on when you say that what matters is to get started. I wish I had started earlier!

    • Time and savings are your best allies. The stock market can help tremendously when it wants to cooperate. Every month you get closer and then it’s worth it!

  2. Congrats Nick! I Look forward to every single little milestone like that: “My investments covered the utilities and food this month!” (slow going… but we’ll get there!)

    • Thanks Matt! I’m sure the public sector has other kinds of benefits that we can’t get access to in our company (like protection from massive lay offs every time the oil prices crash).
      The best feeling is knowing that with time, financial independence feels more and more concrete!

    • I didn’t realize that this was what Financial Independence would eventually feel like, but you’re right, I can see how I could get used to it 🙂

  3. Oh man, that is absolutely fantastic, congratulations Nick! You got paid to basically just sleep and live on, which is a life that I’m sure a lot of people want to have 🙂 that means you’re that much faster to reaching your retirement goals, keep it up!!

  4. Navigating stock plans or stock options grants can be a minefield. Especially when you throw in the MIND field to the minefield.
    sticking with a disciplined plan and avoiding things like MarketWatch or plethora of other financial media outlets will help.

    July was great for us. Two weeks vacation and our investment portfolio grew by 2.5% alone in month of July. Can get used to that although market is moving sideways in August…..!!

  5. Congrats, that’s an awesome milestone! I haven’t looked at our finances or investments from that angle, but it sounds like a good one to get little goals in quicker. Currently I get updates like “If we quit working today we’d have $25k/yr to live off of!” or whatever the number is…
    You get the idea that it sounds more negative than positive though, hahahaha I’ll have to find some ways to look at it from a better light, especially the closer we get to FI. 🙂

    That’s awesome timing with getting to get those stocks at a good discount too. I don’t think we have that type of program at my work, but that’s great that you can take advantage of that. Right on!

    • You should check if your company offers it, many of the larger operators or service companies have such plans, some with much better discounts than the one I get.
      I like to look at the investment from this angle to because it helps me put things in perspective. The number required to FIRE with the 4% rule is very conservative and basically includes a buffer so you never run out of money.
      In reality, you’ll see that your investments cover most of your expenses much earlier than that.
      Do the check, you might be surprised !

  6. That’s brilliant! Such a huge milestone, and something most people are probably very far from. At least I know I am 😉

    I also love the idea that, as your money stats to work for you in a significant manner, you gain the freedom to take time off or spend a few months looking for a better job. Like a sort of partial FI!

    • You’re right Ricardo, we’re partially FI. I like the sound of it. The whole idea is that we work for money our whole lives, but I can already see the future where money will be working for me. I know I’m on the right path.

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