It Is Not How Much You Make, It Is How You Spend It

The mindset almost everyone has today is they will be financially stable and healthy if they can work hard enough to be rewarded a nice salary, promotion or raise.  That the more money they make the more they will be okay.  I am not saying that this is not true, because if you make a nice salary and spend your money wisely you can very well be financially stable, healthy and even create great wealth in the process.  However, you can take that very same salary and spend the money much differently and you can end up being financially unstable, unhealthy and get yourself into more bad debt than you can handle.

These two different financial paths are a reality for everyone, everywhere and every day, no matter how much money one makes.  The unfortunate thing is that the financially stable path is often the one less travelled.  And the simple reason why is because we live in a society of consumer spending.  Where driving a nice car, having the latest smartphone or iPad, having the latest flat screen television, or having any other of the latest toys out there, seems to be more important than creating, building and keeping wealth.  Travelling the financially stable path takes hard work and discipline.  The mindset to travel that less taken path is often getting into the habit of not buying that “something” because you need to put the money elsewhere.  And that is at the very least a savings account, or even better, towards assets like paper investments or real estate.


Let us look at two examples of what I am talking about here:

Couple A

Couple A has a net yearly salary of $75,000 when you put both their yearly salaries together.  This $75,000 is after tax dollars, so it is their disposable income (or the money they have to spend) on a yearly basis.  Let us assume they have no children.

Here are their expenses:

  • Cell phones (2 cell phones) = $150 per month or $1,800 per year
  • Home cable, internet and telephone = $200 per month or $2,400 per year
  • Cleaning lady = $140 per month or $1,680 per year
  • Car lease payments (2 cars) = $800 per month or $9,600 per year
  • Car insurance (2 cars) = $150 per month or $1,800 per year
  • Home insurance = $115 per month or $1,380 per year
  • Home mortgage ($400,000 single family home) = $1,800 per month or $21,600 per year (note that I have included property taxes to the amount)
  • Home maintenance = $225 per month or $2,700 per year
  • Home electricity = $250 per month or $3,000 per year
  • Credit card and/or cash spending (restaurants, shopping, gas for cars, night’s out, vacations/getaways, etc.) = $3,000 per month or $36,000 per year
  • Total monthly expenses add up to about $6,850 or $82,200 per year

Now, let us make a quick calculation of the cashflow Couple A generates.  Their net revenue (or net salary) is $75,000 per year, which turns out to be $6,250 per month.  Their expenses are $82,200 per year, which is $6,850 per month.  When we do a simple subtraction of their expenses from their revenues, we come up with a cashflow of -$7,200 per year or -$600 per month.

So Couple A has a monthly cashflow of -$600 and they have not saved or invested a single dollar.  Therefore what you see is what you get and they keep living on a negative cashflow without any extras, creating and building bad debts.  They probably think that their $400,000 single family home is an investment, but this could not be further from the truth.  You see, the only thing that can be considered an investment when looking at their personal residence is appreciation and capital gains.  And they cannot take advantage of this unless they borrow from the equity in the house, or altogether sell it.

Let us first tackle the option of selling it.  Regardless of how much they sell the house for, they need to answer this question: “Where are they going to live?”.  Okay, so they sold their home for $450,000 a number of years later, but now they have nowhere to live.  That money they just made on the sale will go onto another home.  And their home is not the only one who has appreciated throughout the years, so they will most likely end up buying a home of equal value or even more expensive.  Then factor in the purchase costs and so forth, and they are right back where they began, except now they have a home they purchased for $450,000 with a negative cashflow and no savings or investments.

Now we will take a look at the other option of borrowing the equity from the home.  Every month they paid their mortgage was like putting money in the bank as a portion of the payment went towards repaying the capital.  Then take the appreciation throughout the years and they can borrow a nice amount against their home to do something.  This is a great opportunity to buy something that can create wealth, such as a rental property for example.  Unfortunately they will do what most people do, and that will be to pay down their bad debts (remember, they are living on a cashflow of -$600 per month) or simply go on a vacation.  Paying off their bad debts is a great idea, but living on a negative cashflow is simply living like they are chasing their tail, as they pay off some of their bad debts they add to it every month.  This situation will never stop for as long as they keep living and spending the way they are.


Let us now take a look at a different way of spending the same amount of money.

Couple B

Couple B has the same net yearly salary of $75,000 when you put both their yearly salaries together.  This couple is in the same situation as Couple A, whereas they have no children.

Here are their expenses:

  • Cell phones (2 cell phones) = $150 per month or $1,800 per year
  • Home cable, internet and telephone = $200 per month or $2,400 per year
  • Cleaning lady = $140 per month or $1,680 per year
  • Car lease payments (2 cars) = $800 per month or $9,600 per year
  • Car insurance (2 cars) = $150 per month or $1,800 per year
  • Home insurance = $175 per month or $2,100 per year
  • Home mortgage ($600,000 4-unit rental property) = $750 per month or $9,000 per year (note that I have included property taxes to the amount)
  • Home maintenance = $200 per month or $2,400 per year
  • Home electricity = $350 per month or $4,200 per year
  • Credit card and/or cash spending (restaurants, shopping, gas for cars, night’s out, vacations/getaways, etc.) = $3,000 per month or $36,000 per year
  • Total monthly expenses add up to about $5,950 or $71,400 per year

Let us see what cashflow Couple B generates.  Their net revenue (or net salary) is $75,000 per year, which turns out to be $6,250 per month (exactly the same as Couple A).  Their expenses are $71,400 per year, which is $5,950 per month.  When we do a simple subtraction of their expenses from their revenues, we come up with a cashflow of +$3,600 per year or +$300 per month.

So Couple B has a monthly cashflow of +$300 and though it seems as though they have not saved or invested a single dollar, they opted to purchase a 4-unit rental property and live in it instead of buying a single family home like Couple A did.  This means that Couple B has three tenants helping them pay their mortgage.  You see, the entire mortgage on the 4-unit property is about $2,000 per month, but the rent from the apartments is about $2,000 per month.  With the payment of the property taxes Couple B generates about -$750 cashflow per month on the rental property, which is their share of what they need to pay on a monthly basis to keep the rental property in operation. This means they are paying off a $600,000 mortgage with a $750 per month payment.  And the capital they are repaying on a yearly basis is about $13,200 or $1,100 per month.  Remember, this is like putting $1,100 per month in the bank!

While Couple B has a cashflow of +$300 per month or $3,600 per year, they are also creating wealth at a rate of $1,100 per month or $13,200 per year in the form of equity.  The same vacation that Couple A went on using their home equity (or line of credit), Couple B will simply use the cash they generated throughout the year from being efficient with the money they spend.  And the $13,200 per year Couple B accumulates in equity will grow to $66,000 in five years, not including appreciation.  Using this $66,000 equity they would be able to look for another rental property of about $264,000 (if we use the $66,000 as the 25% needed for a down payment of the purchase price).  And within five years Couple B has no bad debt (remember they have a positive cashflow) and they have $864,000 of rental properties in which their tenants are paying the mortgages for them.


If you notice, the only thing I changed from the expenses of Couple A and Couple B is that Couple B has a 4-unit rental property, so their home insurance, maintenance, electricity and mortgage reflects those changes.  Everything else on both expense lists are exactly the same.  So imagine the possibilities if Couple B refines the other items on their expense list!

The above examples are simplified, but they give you an idea of how to look at things from another perspective, from another mindset.  Remember, it is not how much you make, it is how you spend it.  And the above two couples show you how the same salary can be spent two different ways, and yet the results are completely different.  We can clearly see that Couple B is creating wealth while Couple A is living paycheck to paycheck.  If Couple B keeps it up and continues creating wealth, their cashflow from their rental properties will rise, and eventually this cashflow will be enough to live on, giving them the opportunity to choose whether to work or not, as they would be financially free to do what they choose.


Again, I am simplifying all this, but the basic idea is there.  The mindset you need to have to begin creating wealth is there.  And the fact that someone makes a big salary has nothing to do with how wealthy they are.  The biggest factor in all this is how you spend your money.

Remember, do not work to live.  Work to accumulate assets that will make you live.

The Freedom Spinner


It All Starts With The Right Mindset!

When I made the decision to retire from my job, I did not make this decision out of the blue.  It had been a work in progress for a little over a decade.  It was through hard work, discipline and perseverance that got me to the point in which I was able to decide whether I wanted stay at my job or retire from it.

For me, retirement (or financial freedom) came from rental properties.  I have read stories in which people have retired young and the different ways they did it.  Some did it by being extreme savers.  Some did it by accumulating stocks that pay out dividends.  Others did it with real estate and some did it by starting businesses.  Whatever the vehicle, they were all able to retire young because they not only created a plan but focused and took action on following it through to make it a reality.

Financial Plan

The very first time I thought about retiring young was when my flight coming back home from vacation was delayed.  During the layover my wife (girlfriend at the time) and I started walking around the airport trying to keep ourselves busy.  We stopped in front of a book store and on display in the front window was a new book out by some guy I had never heard of before.  The cover of the book was purple and it read, “Retire Young Retire Rich” by Robert Kiyosaki.

The book explained how balance statements and financial statements are so important to understand, not only for someone wanting to retire young, but for everyone in their everyday lives.  It also explains that understanding assets and liabilities are also very important.  That financial IQ, not academic IQ, is what someone needs to be able to control their lives and retire young if they want to.  More about balance statements, financial statements, assets, liabilities and financial IQ in future blogs, where I will spend time really going through each one in as much simple detail as possible.

“Retire Young Retire Rich” by Robert Kiyosaki also shadowed all of what my father had been telling me for so many years but never really thought much about it.  My father was (still is actually) very much into investing in real estate.  And Robert Kiyosaki explained that real estate was his preferred investment vehicle and he was able to retire young mainly on the positive cashflow his rental properties generate on a monthly basis.

It was this very book that gave me the realization that if I wanted to retire young, I needed to change my mindset.  It made me realize and understand all of what my father was telling me all these years.  It was like a light was switched on inside my head and from that day forward I never had another mindset other than the mindset I needed to become financially free.  Since I was somewhat comfortable with real estate investing because of my exposure to it from my father, I immediately began reading all the real estate books and articles I could read and attending any real estate seminars I could attend (these were above and beyond reading all the Rich Dad books from Robert Kiyosaki, which you can find at  I wanted to increase my financial IQ as well as my real estate IQ as much as I could because my next step would be to begin looking for revenue properties to purchase to begin my journey towards retiring young.


Once I was comfortable with real estate and understood the lingo and how to find and analyze buildings, I began searching for my first rental property.  And when I was twenty-four years old I purchased my first revenue property.

My goal with this blog is to help you find your way to a sound financial situation.  Whether you want to create a plan that will enable you to save money, or invest in real estate or any other investment vehicle, or simply create a sustainable budget based on your situation.  Anyone can successfully do this no matter how much you make.  You just have to be honest with yourself and create a proper plan that will be a challenge but achievable within your own situation.  You do not want to create a plan that is unattainable because you are just setting yourself up for failure.  And no plan is the same because everyone is different and everyone has different financial situations they are starting from.  But what everyone has in common is the possibility to create a financial plan that works for themselves.  And another thing that is possible for everyone to achieve is early retirement, as long as you create a proper plan and take action.  Remember that the most important thing is not how much one makes, but how much one spends.  This is what eventually separates the people who are financially successful with the ability to retire early versus people who will have no choice but to work much longer if not for the rest of their lives and continuously be in unhealthy financial situations.

I highlight real estate often simply because this is my preferred investment vehicle.  I find there is no other investment like it.  You can see it, you can touch it, you can manage it the way you want, and you have complete control over it and what happens with it.  Real estate is the complete opposite of paper investments such as stocks, mutual funds and such vehicles of that nature.  And the reasons are simple.  You cannot see it, you certainly can not touch it and by far you certainly have absolutely no control over it.  Do not get me wrong, people have made quite a bit of money with stocks and other paper assets (someone by the name of Warren Buffet comes to mind!).  But I like something you can put your hands on and have pretty much complete control over.  And one other pretty nice advantage of real estate is how you can actually buy property without using your own money, basically eliminating much of the financial risk.  Using other people’s money (or OPM) is the greatest advantage about buying property as banks give you the money to buy the property and the tenants pay your mortgage while giving you the chance to reap the benefits such as cashflow, equity and appreciation.

multifamily-properties 3d blue stock chart

In short, cashflow is the money left over after you have paid your property’s expenses, your mortgage and any other expenses you incur.  The idea is to manage your property to the point in which this cashflow becomes positive.  Once you have positive cashflow coming from your revenue property, you are making money using other people’s money.  Generate enough positive cashflow to cover your personal expenses and you are financially free, eliminating the need of relying on a job to live.  Remember, cashflow is freedom.  More on cashflow in future blogs.

Other benefits from having tenants pay your mortgage is that you take advantage of equity and appreciation.  Appreciation is the increase in value of your property from the time you made the purchase.  And this is in terms of equity.  Equity is the money available on the property once the mortgage is paid.  This means that every time you pay your mortgage, the amount of capital you pay back is creating equity in your property.  You can say this is similar to putting money away every month.  Only difference is that this money is being created using other people’s money, not yours.  And this equity can be used to buy other properties using the same principles as above, where you get a bank loan and tenants pay your mortgage while creating cashflow and equity for you.  More on all these terms in future blogs.


There is much more to know about real estate but this is essentially how it works.  And it is amazing.  When you can grow your revenue properties to a point in which the cashflow generated from them is positive enough to live off of, the feeling of not relying on a job anymore is the nicest feeling you will ever have.  It simply opens up so much freedom for you to do what you want and when you want that you will realize life as an employee really sucks.  But the normal mindset in today’s world is that having a job is a normal and obligated way of life.  And this mindset starts from when we are very young and in school.

Now, do not get me wrong, school is very important.  But I strongly believe that schools do not get anyone ready for real life except for preparing students to become employees.  They teach you nothing (or almost nothing) about finance and budget control, which become the most important things someone needs to know to become financially stable.  Remember that school can get you the high paying job, but without financial intelligence a high paying job leads to higher expenses which render a high paid employee no richer than an ordinary employee making a regular salary who is financially intelligent and in control of their budget.  And in these cases the ordinary employee making a regular salary and who is financially intelligent is actually richer than the high paid employee who is financially unstable.

You see, that high paid employee is making a good salary and all, but spends money on many liabilities.  These can be in many shapes and sizes such as big homes, expensive cars, lavish vacations, televisions, smart phones and tablets, etc.  Why are these called liabilities?  Because they take money out of your pocket every month.  So these high paid employees fill their lives with all these liabilities and get caught up in their expensive lifestyles that they need to keep working to keep it up or they can potentially lose everything because they need that job to pay for their lifestyle.  Liabilities do not pay for themselves, you pay for them!

And this is where the ordinary employee being paid a regular salary who has financial intelligence is richer than the high paid employee with no financial intelligence.  With their money they create a budget and follow it while investing the excess in assets such as real estate.  Why is real estate considered an asset?  Because it puts money into your pocket every month.  While the high paid employee is buying liabilities the ordinary employee is buying assets.  Soon those assets will start putting money into the pocket of the ordinary employee, in the form of cashflow.  Once this cashflow is positive enough that it pays for their personal expenses, the ordinary employee is free from working a job.  All the while, the high paid employee still needs to work as they have no assets that pay for their personal expenses so they are relying solely on their high salary.  These people will keep on working for a very long time, while the ordinary employee will be able to retire much before.


This is a general idea of how financial life really works.  The idea is to control what you spend and how you use your money.  It has nothing to do with how much you make.  The sooner you start controlling your spending and how you use your money, the sooner you will be able to see the benefits your life will experience.  And it all starts with the right mindset!

The Freedom Spinner

What does Financial Freedom really mean?

The term “Financial Freedom” often gets misunderstood.  The most common misunderstanding about financial freedom is that the bigger the salary one makes the more financially secure, or free, one is.

While earning a good salary is good enough to live a fruitful life and potentially reduce or even eliminate debt, it is NOT what financial freedom really means.  And the biggest reason is because of the word “salary”.  A salary is the furthest thing away from financial freedom.  The biggest misconception nowadays is how much money someone makes.  And this is ALWAYS related to salary.  The bigger the salary the more financially stable, or free, someone is.  This misconception is unfortunately the way most people think and it has become a way of life, the normal mindset.  The bigger the title, the bigger the salary, the bigger the status, the more stable or free someone is.  But any which way you put it, having a big title or a big salary is absolutely NOT what financial freedom is.  It actually is the complete opposite.


Why is a salary the main reason for the misconception about financial freedom?  It is because a salary is what someone makes for being an employee in a company.  In other words, for having a job.  An employee simply trades their time to an employer for money.  As long as the employee is willing to do this, the employer is happy to give the money.  So the harder an employee works, the more money they make in raises, promotions, bonuses and so forth.  However, in return of these raises, promotions, bonuses and so forth, an employer expects the employee to accept more responsibilities and more work.  Usually these new responsibilities and more work turns into longer working days and weeks.  This relates to less personal time for the employee as they need to work more.  And the vicious cycle continues as the employee gets raises, promotions, bonuses and so forth year after year.  The salary of the employee keeps on rising as the title and responsibilities become bigger and bigger.  When the salary rises, the employee has a sense of self-worth and is proud of the money they are making and they decide to buy things like homes, cars, or go on expensive vacations.  Because their salary is large enough to pay for their living expenses and maybe even enough to put away for their savings and investments such as RRSPs or mutual funds, they believe they are succeeding so much in life that they consider themselves financially free.  Unfortunately this is often the misconception of financial freedom.

Why the misconception?  It is because the employee, as well as they are doing in their job at their company and making a good salary, is simply trading their time for money.  This means that if they stop being an employee for whatever reason, like quitting or being laid-off or being fired for example, the money stops coming in.  They stop giving the employer their time, the employer stops giving them money.  Therefore, the person who relies on a salary is not really free to do what they want because if they do, the money stops coming in and they cannot pay for their living expenses as well as their big cars or homes or vacations.  Now you can see that having a big salary is not what financial freedom really means because you need to keep working to keep the money coming in and keep up with the expenses.  The whole idea of financial freedom is the ability of not having to rely on a job to pay for your expenses.  That if you stopped working you can still pay for your living expenses and whatever else you desire.


There are different ways to financial freedom of course.  For example, there are paper assets, where the dividends are enough to live off of.  Another example would be saving and investing enough money during your working years that once you stop working you can live off of the interest and returns.  For me, financial freedom came in the form of real estate, where the rents from my rental properties generate more than enough cashflow to pay for my rental property expenses and my living expenses.  Whatever vehicle is used to get to financial freedom, they all have the same thing in common, and that is to generate enough cashflow to pay for someone’s living expenses regardless of the existence of a job.  You see, the cashflow generated through investments, such as real estate for example, is money coming into your pocket whether you work or not.  Get that cashflow to a level where it pays not only for the building’s operational expenses, but it also pays for your living expenses, and you have made it to financial freedom.


Now, there are some people who are brave enough to start their own businesses and work for themselves as they do not want to be employees and work for someone else.  That is very good and all but this is NOT financial freedom as the business is run and operated by the business owner.  If the business owner stops working the business does not bring in any money.  The only way a business gets the business owner to financial freedom is if the business grows big enough to have employees run the business for the owner.  This type of business is usually a big business as there are levels of employment such as CEOs, VPs, managers, etc., that run the company regardless of if the business owner is actively involved in the company or not.  And this is totally possible, although much work is needed to get to that level.  But again, many people have done it and if you are strong enough to take this on I applaud you and wish you luck in your journey.


So, what does financial freedom really mean?  It means being able to live without the need of having a job.  It means having the necessary cashflow from your investments to pay your living expenses whether you work or not.  The only way to financial freedom is having your money work for you instead of you working for money.  This essentially means investing in vehicles that generate cashflow.  Now, investments do not usually start off by generating enough cashflow to live on, but through hard work and discipline, the cashflow gets better through the years and eventually gets to a point where you can live off it.  Then it is your decision if you want to keep working at your job or not.  This is the true meaning of financial freedom!


Don’t work to live.  Work to build your cashflow towards financial freedom so you can live!

The Freedom Spinner

Welcome to The Freedom Spinner!

Hello and welcome to The Freedom Spinner.  I have created this blog to share my experiences in life, finance, investment, work, and anything else that can help us all in our journey through life.  One of my goals with this blog is to help you understand the difference between the normal mindset that most people have today and the mindset that can lead you to financial freedom.

In my early twenties, I set a goal for myself to retire from my job by the time I was forty.  I am proud to say that not only have I retired from my job, but I have been able to do it at thirty-five years old.  I was able to retire at a young age only because I realized early on that I had to change my mindset from the normal way of life.

Everyone nowadays tries to out-do, or at the very least keep up, with everyone else.  This has created a society of consumers where it is more important to look the part rather than be the part.


Let me paint a picture for you:

Your alarm clock sounds.  It’s early on a Monday morning.  You really don’t feel like getting up but you know you have to get to work (on time).  You stumble out of bed and into the shower and quickly get dressed.  If you have time you’ll have breakfast, if not, like most mornings you take something to eat in the car with your coffee.  You sit in traffic until you get to work.  You spend the next eight hours (sometimes more) at your desk working until it’s time to go home.  You prepare and eat supper and once that’s done you sit on your sofa and relax while watching television until you get tired and go to bed.  The next time you open your eyes it is early on Tuesday morning and the whole cycle repeats itself.  Kind of like groundhog day.

Then, once in while you are able to take some time off and go on a well deserved vacation.  You go somewhere nice with a beach and plenty of sun.  But before you know it, it’s early Monday morning again.  This goes on and on for years and years until hopefully one day you can retire young enough to enjoy the rest of your life.

Deep down the truth is that most likely it will not be possible to retire early due to your financial situation, which has been a struggle during most of your adult and working life.  And you don’t understand why.  You make a good salary working for a good company with good benefits.  You are able to drive around in a nice car, eat out pretty often, go on nice vacations, buy nice things, and so on and so forth.  How can you be continuously struggling financially while you have all this going for you?  How can you not be sure about retiring young enough to enjoy the rest of your life?  You always think about these questions but never can figure out the answers.  And it’s not that you ignore them, because you know they are important, but you go about your everyday life simply the way you know how, hoping that one day it will all figure itself out if you keep working hard and getting raises and promotions.


Does any of this sound familiar?  I am sure you know plenty of people in this exact situation.  You may also be one of these people.  The truth is that this has become the normal way of life.  Working, spending, worrying about having no money (or not enough money) and wondering how the heck you will be able to retire (if you will be able to at all).  This way of going about life is so financially unhealthy and yet people do not realize why they struggle all their lives.

This is why I started this blog.  I want to help make your life better.  I want to help you see things in a different light, to see things from a different mindset.  This is the only way you will be able to help yourself financially and in life in general.  When you are able to change your mindset you will be able to see that struggling financially does not have to be the normal way of life.  When you are able to change your mindset you will be able to figure out what you need to do not only in being financially stable but you will also be able to figure out what you need to do to become financially free and retire as early as you can.  Once in that mindset, you will be able to see how living today’s normal way of life, a society of consumers, makes everyone poorer and poorer, no matter how much money they make and no matter how successful they look.

I hope I will be able to help you in your journey through life, finance, investment, work, and anything else.  I hope that this blog will be able to give you the insight necessary into what kind of mindset you need to have to get you on the right track to being not only financially stable, but one day, financially free.  So keep reading and I will surely try my best to make things as clear and simple to understand as possible.

The Freedom Spinner