# Financial Independence One Bill At a Time

I was reading over at Early Retirement Extreme a post about breaking down financial independence into smaller parts (I can’t find the exact post I was reading yesterday so if anyone knows please send me a link). Basically you take your saving to date and divide it by 25 and that is how much of your annual expenses you are financial independent on (you are basically using the 4% rule).

For example, if you have \$50,000 saved, that would produce about \$2000/year or \$166/month. So out of my usual bills this would represent about my power bill (\$55), water bill (\$50), my wife’s cell phone (\$11) and about half my internet/cable/ phone bill. So in order to cover the rest of my phone bill and my heat (\$59+\$90=\$149/month) I need to save about another \$45,000 to be financial independent on my basic utility bills.

Really this is only a mind trick of breaking down a huge goal of complete financial independence into smaller bits that are easier to deal with. Saving another \$45,000 is a lot easier to think about than looking at saving another \$450,000.

Yet there is another side to this trick, which is realizing of the cost to you of repeating expenses. For example, if you buy a coffee and a muffin every morning for breakfast at a cost of \$4 per day, compared to making your own muffin and coffee for around \$0.50/day.

In the first case that is an annual cost of \$1460 which represent about \$36,500 of your savings to pay for the in retirement. The second case costs about \$182.50/year which represents about \$4562.50 of your savings. For a difference of almost \$32,000!

So every little choice on repeating expenses makes a huge difference to your savings goals. Just something to think about as you go through your day.

## 6 thoughts on “Financial Independence One Bill At a Time”

1. Warren says:

Good post, I think it helps to break things down like that when you’re trying to look at the big picture. I like to look at my dividends coming in and think what they could potentially be paying for.

As another note, I hope I’ll be making my own coffee when I’m retired, with all of my new free time. ðŸ™‚

2. MM says:

I couldn’t agree more with this post. In fact, it’s exactly how I’m tracking my progress towards financial independence….one bill at a time.

Apparently a lot of those daily coffees, disappear as expenses once you’re living the retired life, but I can’t help but wonder if they get replaced by other costs. Example: If you’re spending more of your day at home you may end up with larger heating and electricity bill than if you were at work.

3. Canadian Dream says:

Jacob,

That would be the one. Thanks. I got lost in your archives and couldn’t find on Monday.

Warren,

True you might be making your own or perhaps you will be out so much you will still be buying it.

MM,

It depends. In my case, with the daycare in the house my bills should go down after we both stop working (eg: kids washing hands -WOW that’s a lot of water). In your case there will be a difference but it might not be that much if you not home too often.

Tim

4. Jordan says:

Good ideas, but I have to ask ,where’d you get a cell phone deal for only \$11/month? I’ve been wanting to get a cheaper plan. I’m on Fido in BC which is \$20/month but then they get you with the extra fees, it ends up being \$31 and I only get 200 mins.

5. Canadian Dream says:

Jordan,

My wife has a Roger’s pay as you go plan. So she just puts on the minimum each month. It only gets us about 30 minutes a month, but when the phone is off for 95% of the time it works well for our usage.

Tim