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September 3, 2009, 4:36 am

Living on a Single Income; Where Are We At After 3 Months

by: The Financial Blogger    Category: Personal Finance,Project $1500

 

single-income

Back in May, I announced that my wife was quitting her job and we were starting to live on a single income. I didn’t win the lottery, no  promotion either. I actually dropped in revenue as I am now working 4 days!a week! We didn’t inherit or receive financial help either. So how and why can we live on a single income with 2 kids at home?

 

There is no easy answer to this one. You know that I am not the most frugal guy on the planet. We haven’t really cut our day-to-day expenses much either. Yet the very first step was to decrease our existing expenses:

 

– Exit the cleaning lady (aaahhh… I miss her… well not HER personally but the super clean house!)

 

– Benefit from the low interest rates. Some smart people are paying down their mortgages at high speed; we simply lowered our mortgage payment according to the ridiculously low rates. It is not the wisest choice, but it allows me to do other stuff while keeping my house.

 

– I really wanted to add something extra, like that I was able to miraculously drop my expenses by $1,500 per month… but I didn’t…  In fact, the difference in my mortgage payment has been replaced by a car payment. As you can see, I am not really saving much right now.

 


 

 

I am diving directly into the bankruptcy hole! (this is why my parents and a few friends feel bad for me… hehehehe!).

 

Seriously, I have a plan. I actually have 2 plans! So here’s how I intend to live with a single income without cutting my expenses (and bringing back my mortgage payment to a normal rhythm).

 

#1 Quebec Pension Plan (QPP) has been paid in full

In Quebec, we have to pay a general pension plan for all workers (withheld at source by the employer). However, there is a maximum of what you pay in one calendar year. I had reached the maximum a couple of weeks ago so I won’t feel my net income cut until January 2010. This leaves me 3 months to generate more income. Since this is recurring annually, I have 3 months with the same level of net income (this surplus was never calculated in my budget… we used to spend more until the end of the year!).

 

#2 Getting a nice fat bonus

As funny as it seems, I might be able to get a bonus big enough to cover most of my wife’s missing income. Considering she was not earning much and I am having a really good year at the bank, I will be around 50% of her income by the end of the year. This should buy another 6 months to find more revenue.

 

#3 Dividing my single income into multiple sources of passive income

While point #1 and #2 help me find 9 months of my previous income level, I am still far from keeping the same lifestyle with a single income. Therefore, I have to find a solid, reliable solution to increase my income.

 

Well, increasing my current income would be the “normal reflex”. As this is how we have been raised and educated; work harder = get a bigger pay check. But what if I could multiply my sources of income and live from passive income? I would become a single income earner with tons of checks coming into my bank account…

 

Ok, back down to earth. My main plan is obviously to improve my blogs and other websites. If John Chow can make $40K/month, why can’t I? The best part about this plan is that I can still “survive” with a single income for at least 12 months. This is long enough for me to realize if I can keep up with my sites alone or not. Worst case scenario would be that I keep my day job and have a bigger side line with blogs. This would also work.

 

What about plan B?

 

My second plan is quite simple. It is the “hard work and earn a bigger pay check” option. I could probably change offices at work, move closer to downtown with a bigger book of clients. They offer a bigger base salary and bonuses are the same. This way I could compensate for my wife’s income and still live with a single income.

 

I prefer to take more risk and give my business a try. If I have to lose money, I rather do it in my twenties. I have the rest of my life to get it back 😉

 

 

 

image source: Krish Tipirneni

 

 

 

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January 12, 2009, 6:00 am

The Funny Thing About Plans Is…

by: The Financial Blogger    Category: Project $1500


I am a financial planner. Most of the time, I make plans. I make plan for my retirement, for my client, for my investment strategy, when I start a daycare at home, when I do home renovations, when I start a company. I love to make plans. However, the funny thing about plans is that they sometimes seem to be the Financial Chaos Theory puppet. It seems that you can spend your whole life making plans that will fall one after the other 😉



It’s okay ‘cause I am good with chaos. I actually got that nickname when I was a kid. Chaos would not exist without planning and planning would not exist without Chaos. This is an interesting balance.

So, Chaos knocked on my door once again over the weekend. We are not starting the daycare at home anymore. Say what? I asked my wife. “I changed my mind”. Hum… that sounds very familiar 😉 hehehe!

However, I must admit that I have to take my share of responsibilities in this mind turnover. I am actually trying to convince her of having a third child (since we are at it!). The thing is that if she keeps her job and she becomes pregnant, she will automatically stop working (because her job is too dangerous for the foetus health) and still get paid. Therefore, she will get 21 months paid at 90% (9 months), 70% (6 months) and then 55%(6 months) of her pay cheque.

By that time, I would probably be able to tell my wife that she can stay home forever! My job is going well, the internet company is growing, everything is in place so she can stop working and take care of the kids.

I was actually thinking about having another one for a while now. However, I had to make sure that the financial advantages were not the main reasons why I wanted to have one right away. It obviously played a role in my decision. However, it was important for me to make sure I was not mainly benefiting from the fact that my wife could stay home as of 2009 without any other effort.

So plans are plans and reality bites you in the neck when you are about start a new project! So the daycare is ready but we are not anymore. The good news is that we have the option to start it whenever we want (and that I now have a 5’ X 3’ full ceramic shower and my basement!!!).

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November 5, 2008, 6:00 am

We Are Going For It!

by: The Financial Blogger    Category: Personal Finance,Project $1500

It is funny to think that our Daycare Project was being debated for a good 2 months and the week after I write about it, we decided to go for it! I think that writing about it helped me putting everything in place and my wife and I discussed it again with a different perspective. Now that we are all excited about this new project, we have a lot of things to do in order to be ready to welcome those little angels!|



Our efforts paid!

Those who have been reading this blog for a while will remember that I was working for a year on the $1,500 project. Back in September 2007, I gave myself a year to increase our cash flow by $1,500 a month in order to give my wife the opportunity to stay with our kids until they go to school. Last September, I post my latest results on my project and deception since I didn’t achieve my goal in the required time. However, our efforts were not lost since we increased our cash flow enough to accept the drop of income incurred by the fact of having a daycare at home.

In fact, I was wondering why we didn’t start the daycare right away last year. I pulled out my old calculation sheets and find out that the daycare revenue were not sufficient to cover for our expenses. The irony stands when my wife’s daycare will be accredited by the government. She will actually make more money than she is right now. The problem is that since it’s a government program, we know when we start the process, but we have no clue as of when we will receive our accreditation. Anyway, in both cases, we can live with the “temporary” drop of income.

It requires time and planning

Since we want the children to be in a nice environment, we decided to finish our basement and build a bathroom on the same floor. Those changes will improve both children and my wife’s working environment. This will definitely be a plus to compensate the extra hours.

In order to do so, I need a contractor and to plan everything so the daycare will be ready for January 5th. We thought it would be nice if my wife can stop working before Christmas and start the daycare after the holidays. So we are now shopping around for the best deals on materials and bathroom equipment.

Projects make us feel alive 😀

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October 27, 2008, 6:00 am

My Thoughts On Having A Daycare At Home Part 2

by: The Financial Blogger    Category: Project $1500

It is funny to think that I am currently dead tired but I still wanted to write another post before closing my computer simply because I am thinking of my wife at work and I really want this to stop. Last week, I discuss the pros of having a daycare at home. Today, we are looking at the other side to make sure this project is a good idea. I would say upfront that our decision is not taken yet and that we are still debating on the topic.


Visa Prepaid Card

Still less money in our pockets

Even though I said in my previous post that this project was viable, it is still creating less cash flow than my wife’s regular job. Since she would only take four kids (counting that we already have 2) and charge about $22 per day per kid, she would be getting a maximum of $440 a week. This sounds like a good income, but we have to deduct expenses such as food (yes, we have to feed the kids while they are at the daycare 😉 ), toys and other stuff for activities (papers, pencils, stickers, etc.). The good news is you can register your daycare through the government system. Once registered, you get $27 per kid from the government and parents are paying you another $7. That would make the whole thing very interesting. However, we have no clue how long it could take to get approved.

More hours

My wife is presently working 35 hours over four days. Daycares usually open at 7AM and close around 5PM; that makes 10 hours per day, five days a week. Depending on days, she would be able to take a break when kids are sleeping during the afternoon. Hopefully she could be lucky enough and they will sleep 2 hours in a row 😉

Added tasks

There are tasks that need to be added such as cleaning and disinfection along with cooking. You need to be able to offer balanced meals every day to these little angels. That will definitely added more “off hours” since she can’t really cook while children are there.

Dealing with our children

The final obstacle is to deal with our children. They are lucky enough to have a play room in the basement. This play room would actually be modified to become the daycare. They would also have to learn to share some of their toys as we won’t transfer everything in their bedroom (only their favourite). This might be a challenge to make them understand what is going on. On the other, I would love to see my children sharing with other kids. This is definitely an important value.

So this is where we are; still thinking about the pros and cons of having a daycare at home. If we ever make a decision, I’ll let you know 😉

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October 24, 2008, 6:00 am

My Thoughts On Having A Daycare At Home

by: The Financial Blogger    Category: Project $1500

As many of you know already, I am continuously trying to find ways so my wife can stay at home and take care of our kids. I called it the project $1,500 since we need to increase our net monthly cash flow by $1,500 in order to achieve this goal. I recently wrote about my failure in this project as I wanted to make it happen within one year. However, I was still able to increase our cash flow significantly.



We are now discussing the possibility of having a daycare at home. My wife could take care of our two children and get four more. This solution was brought up by several readers since the very beginning of this project. Back then, it was not possible because it was not creating enough income. Since I was able to increase my revenue, start a company and decrease our expenses, we can now reconsider this option.

This will be a two part posts where I will write down the pros and cons of having a daycare at home. Since I’m a positive person, I’ll start with the pros:

The project is financially viable

This was the very first reason why I reconsider having a daycare at home. Without enough revenue, there was no reason to make all those changes. Since we don’t need the daycare to generate $1,500 a month anymore, we can easily use this income to maintain our lifestyle.

My wife could stay at home

This was definitely an important point. It is not the perfect situation (you’ll see with my second post!), but at least, she will be spending more times with our two children. They won’t have to wake up a 5:30 in the morning and rush to work. Our life would be a lot smoother.

It gives us the opportunity of renovating our basement

In order to be able to offer a quality environment to the other children, we would have to renovate our basement. At the same time, I will put a third bathroom and finish my home theater. Which guy would spit on a brand new room for his home theater? After all, Hockey just started and my Canadiens will surely go far in the playoff this year!

We could use the tax system to help us out

Remember my post on how to use taxes with a company? By shifting my wife income to company income, we will be able to deduct several things and therefore reduce her declared income significantly. She will pay fewer taxes and we will benefit from more government allocations since they are based on our family income.

Even though it is very tempting to put all expenses on the company’s back, it is important that you deal with an accountant for this part. The last thing we want is to do something illegal and have to pay thousand in taxes and charges in a few years! Anyway, you don’t need to go this route to save money on taxes. The government is allowing several type of expenses which are more than enough.

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