We seek to make finance accessible to all! We believe there is an opportunity for many people to gain financial independence. Yet, we also see an alarming amount of people trapped in unfavorable work life balances or struggling to build wealth. Due to this people are inhibited from spending time with family, working on creative pursuits, starting businesses or anything else they aspire to do. We hope to contribute to the solution of this problem by providing educational financial content, easy to use personal finance tools and by curating a supportive online community.
If you have read through our about us page then you know a bit about how we originated. The following describes our philosophy in a more complete fashion.
Why Now?
We believe that technology has enabled an uparalleled expansion of human potential across many areas impacting personal finance in several key ways:
Knowledge & Information is Free
You can learn anything for free via the internet and get credentials at a very low cost when compared to traditional college or university programs. This impacts individuals' personal finances in two main ways:
- You can learn about personal finance, investing and planning. With this knowledge you can then improve your financial situation over time.
- You can learn a new employable skill, thus, enabling you to switch industries, attain a promotion, or find a higher paying job.
In the past it was challenging to learn a new employable skill usually requiring night school, or perhaps quitting your day job to go back to school full-time. That meant more student loans and eliminating your main source of income. Not ideal. Now you can learn at your own convenience & pace online while taking on no debt and keeping your day job until you are ready to make the jump. This flexibility is a huge advantage now easily available to all.
New Income Streams
Even just 15 years ago, if you wanted to make extra money you either had to invest considerable resources into starting a home run business or find a part time job. The issue was that it used to take far more funding to start any type of business and even worse there were gatekeepers.
What's a gatekeeper? A gatekeeper is anyone that has the power to exclude you. A local TV/radio producer that says your video game discussion show will never air, an HR person that won't forward your resume, a hiring manager that wants you to quit your other job and so on. Not good.
Luckily, the internet & mobile age have dampened their power while enabling massive new income streams for individuals. The "gig" economy, remote freelance work, e-commerce, self broadcasting, self publishing and the ability to buy & sell items globally - without ever getting approval from a gatekeeper.
Generating multiple income streams is a key step to becoming financially independent. As such, being able to (at the simplest level) sign on to an app and instantly be connected to thousands of customers is one of the most powerful transformations of the last decade.
Better Financial Products
In Canada (& much of the West), its now possible to do all of your banking online or on your phone. This has enabled much lower fees, $0 trading and made everything more transparent. Additionally, it is easier to set up investment accounts with a wider variety of low cost funds to chose from. These innovations mean that individuals who might have spent thousands of dollars a year on fees, can now put those dollars to better use.
Further, the advent of cryptocurrencies enables individuals to transfer value across borders instantly, at virtually no cost and is accessible from any $40+ smart phone. These innovations did not exist just 10 years ago, yet are now widely accessible.
What is Financial Independence?
Financial independence may have many different definitions depending on where you look or who you ask. A high flying executive or business owner might be well off, BUT, might also be working nearly 24/7. Would they be able to walk away from their day jobs or their business tomorrow and be fine? Usually not. The key is financial independence which brings security and control to your life.
Breaking Finance defines Financial Independence as: A financial state where the passive income (earned from rent, dividends, interest, royalties etc.) is equal to or greater than an individual's annual expenses.
The "4% Rule": Is a general approximation for reaching financial independence. Essentially, if you have assets of roughly 25 times your annual expenses then you will have enough to be financially independent. This is because those assets should earn at least a 4% return that will cover your expenses. A variation is the 5% rule which would require assets of 20 times your annual expenses along with a 5% return.
Who Is Breaking Finance For?
We aim to serve the non-finance professional, engineer, doctor, healthcare worker, manufacturing worker, sales person, mechanic, tradesperson etc. who makes a decent living but doesn't know enough about finance to build up wealth effectively.
Consider the fictional examples following the early financial lives of "Bobby Business" and "Irena Independent" below.
Bobby Business
Bobby is a 25 year old corporate bro. He makes $60,000/year (net) at his day job. He has $30,000 of student loans and $10,000 of credit card debt - only ever making the minimum payments. Throughout the year Bobby spends every dime he makes, thanks to renting out an expensive apartment, leasing a brand new sports car and a taste for luxury brands. In fact, he increases his credit card debt by $5,000 throughout the year.
Bobby owns no significant assets and since he is increasing his debt any investing he does is powered by debt - not his own income. While he doesnt invest much he does buy into 'hot' stocks he finds out about by following online "trading gurus". Bobby never seeks to learn about finance, never does any of his own research, has virtually no diversification and is guided by his emotions. Sadly, Bobby Business is on the path to permanent financial dependency on his day job or worse - bankruptcy.
Irena Independent
Irena is a 25 year old dental hygienist. She earns $60,000/year (net) at her day job. She has about $25,000 of student loans which she pays down every month and maintains credit card balances of $0. Irena is determined to set her own course in life so she uses apps to create side gigs of pet sitting, dog walking & food delivery. Since she only works 37.5 hours per week so she can easily do her side gigs (which she enjoys) for another 20 hours per week. She earns an extra $10,000/year (20 hours per week x $10/hr x 50 weeks) bringing her total income to $70,000/year.
Being the independent women that she is, Irena rents a modest apartment, drives a reliable used car and still has her yearly vacation to an exotic location. Her total annual expenses are only $25,000/year and she is able to save $45,000 per year. With these savings she can quickly pay down her student loans, set up an investment portfolio and prepare to buy her first house. She is well on her way to being her own boss, but still feels lost when it comes to finance. Luckily, she has stumbled upon Breaking Finance!
Irena uses Breaking Finance to educate herself on core financial principles and then uses the tools to estimate her debt repayments, track her expenses, track her wealth & debt levels, make sure her investment portfolio is well diversified, and to learn about new financial topics. Armed with the secrets of finance as well as the tools to apply them to her own situation she is able to accelerate her journey to financial independence!
Fast forward 5 years, Irena has two income properties, a strong investment portfolio, no student loan debt and has built up over $500,000 of total assets. Her investments produce $25,000 (5% per year return on Assets) of passive income while their increase in value can sometimes surpass that. She can easily afford to do anything she wishes, including starting her own business and reducing her working hours at the Dental Clinic. Over the same time, her friend Bobby Business has filed for bankruptcy protection.
Be Like Irena!
Be Your Own Boss! (#BYOB)
What We Hope You Gain
Whether you are starting out like Irena or Bobby, or if you make much less or much more than they do, we aim to help you reach a more independent state of being through sharing our financial education content.
Ultimately the goal isn't necessarily to quit your day job or retire early. The goal is that you have the power to control your own destiny. Whether you want to travel for a few years in your twenties, comfortably afford a yacht, start a business, switch careers, work part time instead of full time, spend time with family, create art, help a charitable cause, or anything else - Breaking Finance will help you get there! The key is having optionality.