Have You Run the Numbers?
The math behind our boldest financial decisions.
“How did you make the decision to sell your house and invest it all in the market?”
“How did you know Flynn could quit his full time job and you’d be ok?”
“The market is at an all time high… is now a good time to invest?”
For over 11 years, I’ve had a successful business in the health consulting space, but recently, the questions I get are changing.
Instead of being about Oura ring stats and nutrition plans, now they are about financial independence, freedom and money.
But more so, the undertone of those questions is emotional.
Fearful of losing money.
Nervous to make the wrong decision.
Overwhelmed with everything there is to know.
And as easy as it would be to just offer my ideas on exactly what I’d do, it doesn’t help ease the discomfort that comes with doing something new and different.
So in today’s Freedom Diary, I’m going to share one of the single biggest lessons I’ve learned that has boosted my confidence in moving, making and growing money.
Run the Numbers
Quite often I’ll answer a question with a question.
That question usually sounds like this: “Have you run the numbers?”
Most people try to make educated guesses when it comes to money, but all that creates is uncertainty.
They say they know their numbers, but until you have intimately mapped out how the money will move and work, it’s a guess.
The numbers don’t lie.
It’s how we’ve made the biggest financial moves of our life so far with complete confidence and excitement (and yes, a bit of nerves).
It can be as simple as a google spreadsheet or pen and paper.
In the end, the numbers give us a result.
All we had to do was take action.
Ready for a few examples?
Selling the House
In 2021, we sold our townhouse in an up and coming neighbourhood and invested it in the market to generate cash flow every single month.
Our family thought we were crazy, but the numbers don’t lie.
(Read the whole story and the numbers on the sale of our house here.)
The first thing we did was add up our monthly housing expenses and take the average of 3 months.
This included all hard costs that went into owning a house each month, including mortgage, strata fees, property taxes and other costs. This came to ~$2,300/month.
Then, we did a 3 month average of our living expenses, including food, entertainment, internet, life insurance, car payments, gas, etc. This came to ~$3,000/month.
Third, we found our average monthly income between the two of us after taxes, which came to $6,576/month.
+$6,576 (income)
-$2,300 (housing)
-$3,000 (living expenses)
__________
TOTAL: +$1,276/month left over for saving and investing, while living in our 2 bedroom townhouse.
Then, we ran the numbers on an alternate scenario of selling our house and investing it in cash flowing funds.
Here were a few of the assumptions we made:
We would need to budget up to $3,200/month to rent a new, bigger house for our growing family.
We would net approximately $408,000 into our bank account after the sale of our house.
We would earn a 9.7% rate of return in cashflow annually based on a 4 month test investment in the same funds we planned to enter with our house money.
With these numbers, our $408,000 x 9.7% annually could generate $39,576/year, or $3,298/month.
Here is how the numbers worked out:
+$6,576 (income)
+$3,298 (investment income)
-$3,200 (rent)
-$3,000 (living expenses)
__________
TOTAL: +$3,674/month left over for saving and investing, while living in a much bigger 3-4 bedroom home.
We would MAKE money to sell our house.
We would put $2,398 EXTRA into our pocket every month, essentially grossing us nearly $29,000 annually if we made the decision to sell.
We didn’t need emotions to make this decision.
Logic won out. We sold.
Flynn Quits His Job
When Flynn (my husband) quit his job in 2022 on the birthday of our second baby, he was making good money.
As a mechanic at Lexus, he was grossing $6,000-$7,000 per month. The month before he quit, they even offered him a $1.50/hour raise.
This decision wasn’t even on our radar until one Sunday morning on one of our money dates that I did something unexpected.
I was reviewing our Google Sheet cash flow budget of all of our numbers, incomes and expenses.
We had already sold our house and the gap between our income and expenses continued to grow as we compounded our earnings month after month into our investment portfolio.
I had just found out I was pregnant with baby #2 and had run my business from home while raising our first daughter.
Flynn missed out on a lot of those first milestones with her because he was at work everyday.
I didn’t want to repeat that.
So I moved my cursor over to Flynn’s income box on the spreadsheet and hit DELETE.
The box showed $0/month in income for Flynn and we still were in the green every month.
Dividend Income + My Business Income - Living Expenses = A positive number.
Wait a second - if Flynn didn’t work again, we’d be ok. The margins were tight but it was doable!
So we set a goal: in 8 months when the second baby was born, Flynn would quit his job and become a stay at home dad, retiring at 33.
This gave us enough time to continue compounding our money so that by the time quitting day came, we could comfortably manage the drop in income.
And we did it.
Because we had been tracking our income and expenses so closely for years, we could easily see how flexible our plan was.
The numbers don’t lie.
The Certainty of Math
There’s something so reassuring about being able to make a decision on facts instead of emotions.
This isn’t to say that you won’t still get that thrill of excitement, the rush of nerves or even the (small) terror of putting your first $300 into the stock market, but it’s underscored with the certainty of math.
And sometimes, the numbers don’t work in your favour.
Sometimes it does work, but it’s too tight and you have a few extra years or dollars to grow.
This is where you can create hypothetical future projections - and this is my favorite part.
If you could save X amount, or reinvest 50% of your dividends, or earn an extra $$ of dollars, what would the numbers look like….
…in 6 months?
…at this time next year?
…in 5 years?
…in 10 years?
This is where dreaming becomes fun.
This is where the target is drawn and your sole focus narrows to this super clear future where you are living a dream life and wondering how the heck you got there.
For us, it required sacrifice and skipping dinners out and new clothes and new computers.
And it’s interesting - some people might say we are frugal…
…but in my opinion? We spend A LOT of money. Instead of spending it on material consumerism and short term pleasures, we use it to buy back our freedom.
We spend it on buying back time so we don’t have to work.
And right now as I’m writing this, I’m sitting poolside in the Dominican Republic, overlooking the ocean as the sun sets.
The wind is so warm and the sun is hitting my skin, filtered through the palm trees.
There are kite surfers gliding across the ocean and this island is my home for the next 3 months while we escape winter back in Vancouver.
This nomad life isn’t for everyone, but I can tell you it never would have been possible if we were stuck in our limited reality, guessing and wondering what was next.
It’s a life Flynn and I created because we dreamed it and then ran the numbers.
And this time, the numbers worked.
Tanessa