The Prairie FIRE Plan to Financial Independence
The Prairie FIRE Family’s journey to Financial Independence has just begun. Like all good journeys, one needs to keep the end in mind, enjoy the process, but most importantly have a plan to get there. So I’ve decided to create what I call my Financial Independence Policy Statement. The FI Policy Statement highlights our values, top money priorities and SMART Goals/Objectives/tactics to help us reach Financial Independence.
Our FI Philosophy 1In order to keep me focused and measure my progress, I created for myself a “Financial Independence Policy Statement”. I will take the time to review this annually to make sure that everything is going according to plan. Click here to find out what it is and how to construct your own FI Policy Statement. <——-click here- you won’t regret it
Our Values: The Prairie FIRE family is driven and founded on our values. We want our spending and investing to reflect those values:
- Stewardship: We understand that we do not own the money, home, resources, and people that have come into our lives. Instead, we see ourselves as stewards and are responsible to look after these gifts and use them to our best ability to make a better world. We believe being a good steward means living within our means and not depending on credit and getting into consumer debt to support our day-to-day living.
- Home: Having a good, stable, and welcoming home is important to us. We want to invest in a house, neighbourhood, and community that we can make better and long-lasting.
- Family: We make our family a priority, making sure their present and future needs are taken care of and that we spend as much time together to support each other throughout our life.
- Friendships: We want to have healthy and supportive relationships with our friends. We want to do this by offering hospitality, grace, and a welcoming space for people to feel safe and supported. The best way for us to do this is to have a good home-base for people to visit and experience life together.
- Giving Back: We believe in giving back and investing in the community we live in. This includes tithing, donating to causes we believe in, and volunteering.
Our Money Priorities
When we receive income, money will go to the following areas first:
|1.||Basics: Food, mortgage, property taxes, utilities, etc.|
|4.||Investment savings (RRSP, RESP, TFSA, emergency fund)|
My FI Goals, Strategies, Objectives, and Tactics
My FI Target Date: 2033
My FI Number: $1.4 million (click here to find out how I calculated my current FI Goal)
Goal #1: Reach FI by 2033
Strategy: Grow an investment savings portfolio to $1.4 million by 2033
|Build up an investment savings portfolio||Find a full service financial adviser||Complete|
|Max out matching work pension contributions||Automated – Complete|
|Increase overall monthly savings rate to 35%||Create a Budget||Complete|
|Create automatic savings/contributions to investment savings||In Progress –||7% Pension||2% TFSA||2% RRSP|
Strategy: Develop and expand rental properties
|Become more efficient at managing existing rental properties||Outsource property management||Complete Feb 2018|
|Purchase two cash flow positive multi-unit rentals in 5 years||Identify financing options||Not started|
|Find an experienced real estate agent||In progress –||Scoping out 2 real estate agents|
|Identify communities to invest in||Not started|
|Join and participate in landlord association||In progress –||Signed up as a member of the landlord assocation|
Strategy: Secure other forms of income
|Have a part-time side gig for Mrs. Prairie FIRE when kids are in school||Support her home organizing and landscaping business||Not started|
|House hack empty spaces on our property||Host an international student during the winter||Complete Feb 2018|
|Be an AirBNB host in the summer||Not started|
|Rent out section of backyard for RV storage/parking||Not started|
|Have a cash positive blog business within three years||Integrate affiliate marketing||In progress|
Goal #2: Have enough money to pay for some of our children’s tuition costs when they go for post-secondary education
Strategy: Create and grow an RESP
|Invest contributions in an RESP portfolio that is growth focused||Open RESP||Complete|
|Invest 100% equities||Complete|
|Max out matching contributions of $2,500 /child/year||Budget and automate $416/month to go to RESP||In progress|
|Encourage friends and family to contribute to RESP for birthdays/Christmas instead of toys/gifts||Not started|
Goal #3: Be completely debt-free by 2037
Strategy: Pay off all consumer debt within 2 years
|Establish a repayment plan to pay off debt||Create budget and include debt repayment||Complete|
|Reduce dependence on credit||Create budget||Complete|
|Have a $1,000 emergency fund (easy access)||Complete|
|Have a 6-month unemployment fund (separate account)||Complete|
Strategy: Pay off mortgage by 2037
|Make extra payments to mortgage||Allocate any extra income and make extra payments to mortgage||Not started|
|Take any tax refunds and make extra payments to mortgage||Not started|
|When consumer debt is paid off, convert regular consumer debt repayment towards mortgage||Not started|
Our Investment Approach
- Tax efficiency: Will shape portfolio to ensure the most tax efficient path towards our financial/early retirement goals.
- Risk Tolerance: Rather high risk tolerance
- We will accept market returns, won’t panic, and stay the course by continuing to invest during downturns.
- Reduce costs: To find the most cost efficient forms of investment that produce the greatest return. In this case, market investments will focus on a diversified portfolio of index funds.
- Downturns in the economy are expected and offer buying opportunities.
Investment Savings Portfolio
- 70% Index funds
- 80% Equities
- 20% Bonds
- 25% Work pension matching program and tax sheltered accounts
- Aggressive growth funds – 100% equities
- 5% Play money – non-tax sheltered
Post Retirement Allocation
Once we reach retirement, investments will be allocated as follows:
- 40% Bonds
- 40% Equities
- 20% Cash or cash equivalent
Draw Down Plan
When we reach FI/Retirement, we will take a conservative approach to withdrawing funds from our portfolio. This will be at a rate of 4% per year or lower.