2025 Mid Year Financial Independence Journey Review

Over the years, we have done a number of financial independence journey reviews. Many of them were backward-looking looking with us doing some simulated projections to determine where we were on our financial independence journey.

• Financial Independence Journey 2024 Update
• How much do we need to reach financial independence
• Re-examine our financial independence plans
• Dividend Income – October 2022 & Financial Independence Journey Update
• Dividend Income & Financial Independence Journey – July 2021 Update
• Dividend Income & Financial Independence – Dec 2020 Update & 2020 Summary

With 2025 halfway through, I thought it would be a great time to do a mid-year financial independence journey review. Hopefully, this will help us determine how close we are in terms of reaching financial independence and our goal of living off dividends. 

Dividend Income Progress – Mid-2025

After six months, we received a total of $33,199.84 in dividend income. If we simply multiply this number by two, we’d end up at $66,399.68. 

But such simple extrapolation doesn’t work for several reasons:

1. XAW distributions are in January and June so we won’t get distributions in the second half of the year
2. BCE reduced its dividend payout by more than 50%. 
3. We may close out a number of positions and move them to lower-paying index ETFs or individual dividend stocks. 

Having said that, I believe we will probably end the year at between $63,000 and $64,000 in dividends, which would beat our dividend income projection from January 2025.

If we look at the $33,199.84 received in the first half of 2025, the dividend income consisted of:

• My taxable: $10,599.49
• Mrs. T’s taxable: $5,584.52
• My RRSP: $4,658.90
• Mrs. T’s RRSP: $4,360.77
• My TFSA: $4,698.25
• Mrs. T’s TFSA: $3,297.91

The dividend income across the different accounts (taxable, RRSP, and TFSA) would look like this:

Finally, the dividend breakdown between Mrs. T and I are about 40-60.

Some interesting points:

1. The breakdown between Mrs. T and I is 40-60 after six months. This was roughly the same as last year. Ideally, we would like to reach a 50-50 breakdown but that might not be possible given that once we max out our RRSPs and TFSAs, we’re contributing the new capital into my taxable account.
2. Taxable and RRSPs made up 75.9% of the mid-year dividend income or $25,203.68. Although RRSP withdrawals are taxable at the marginal tax rate and dividends are taxable as well, our tax consequences should be minimal (i.e. lowest tax bracket if we don’t have “working income”).
3. Our RRSPs generated more dividend income than TFSAs. This is somewhat expected due to the “lowish” annual TFSA contribution limit.
4. Mrs. T’s RRSP and my RRSP generated roughly the same amount of dividend income after six months. This was mostly due to the fact that my RRSP had a higher mix of US dividend stocks and ETFs, whereas Mrs. T’s RRSP consisted of more Canadian dividend stocks, which have higher yields.
5. My TFSA generated more dividend income than Mrs. T’s, mostly because Mrs. T has a lower max TFSA contribution room. 

Overall, I’m pleased with our dividend income progress for the first half of 2025. In 2024, we received $28,933.12 after six months so that meant an increase of $4,266.72 or 14.75%, which is very solid.

Comparing dividend income with our expenses

Rather than estimating our total annual dividend income and annual expenses and making a series of assumptions, I thought it would be an interesting exercise to compare our dividend income with our expenses from the first half of the year.

As a quick reminder, we have been tracking our income and expenses since 2011 with a spreadsheet so it is relatively easy for us to take a snapshot and determine how we’re doing. In case you’re wondering, we use a budget system that breaks down our after-tax income into five different accounts.

• Necessities – all essential expenses
• Play – a guilt-free spending account for expenses like dining out, massages, hobbies, entertainment, etc. 
• Give – money for gifts and charity donations. We donate to charities every month but we usually make some one-time donations before the end of the year too. 
• Long Term Savings for Spending (LTSS) – this can be considered as our cash reserve. LTSS is money set aside for big item purchases.
• Financial Freedom Account (FFA) – FFA money is used for building our investment portfolio

Some income & expenses details: 

Mid-2025 Income & expenses	Total Amount
Dividend Income	$33,199.84
Necessities	$25,563.44
Give	$1,211.66
Play	$3,448.90
LTSS (Vacations)	$10,431.20
Total Expenses	$43,132.36
Expenses net vacations	$32,701.16

When I first looked at our mid-2025 dividend income vs. expenses, I was a bit upset. We were spending way more than how much our dividend portfolio was generating. Furthermore, we were spending a bit more compared to mid-2024. I had a moment of panic and wondered if we would ever reach financial independence if our expenses just keep increasing every year. 

Our dividend income wasn’t able to cover all the expenses, only about 77% of them. However, since vacation expenses are somewhat discretionary, if we take out the $10,431.20 that we spent on vacations, it would result in our new total expenses being $32,701.16.

To my surprise, if we took out vacation expenses, our mid-year dividend income covered 102% of the expenses net vacations!!!

In other words, if we don’t go on any vacation, we could have lived off our dividend income for the first half of the year… albeit we wouldn’t have much of a buffer!

But vacations are also important. I would not trade the great memories we made on our Taiwan trip earlier this year simply to save money. 

You may argue that we could cut our expenses further by reducing Play expenses. That sounds good in theory, but eating out while on vacation is a treat, so we don’t want to cut back on that completely. What we could do, however, is limit the amount of money we spend on dining out while we’re at home (in fact, we have been dining out less and less when we’re at home. The only dine out we do nowadays is usually sushi because we can’t easily make sushi at home). 

It’s important to remember that we want to enjoy our version of the rich life. It doesn’t make sense to save every single penny just so we can reach financial independence and live off dividends a few years earlier.

After all, the financial independence journey is a fine balancing act! 

Bottom line, after 14 years of our financial independence journey, it is extremely comforting to know that we’re inching closer and closer to our goal of living off dividends one day. 

Not relying on dividend income completely 

Our goal for financial independence has always been to utilize our dividend income to pay 100% of our expenses. The idea is that for the first five years or so, we would rely on dividend income to cover our expenses, which should increase our margin of safety. We would then withdraw from our portfolio later on to supplement our dividend income. 

But what if we don’t rely on dividend income completely? 

What if when we stop working full time and live off our investment portfolio, we utilize both dividend income and portfolio withdrawals? 

Take our mid-2025 numbers for example: what if we use 100% of the $33,199.84 dividend income and withdraw $15,000 from our portfolio? We would have a total of $48,199.84, which would cover 111.8% of our mid-year expenses. 

At the time of writing, $15,000 withdrawal would account for less than 1% of our portfolio value. Even if we were to take out $30,000 for the entire year, it would account for less than 1.5% of our portfolio value. In other words, this should be relatively safe considering the typical withdrawal portfolio rate is between 3 to 4%. 

Some of you may ask, wouldn’t this mean we’d deplete our investment portfolio eventually?

Yes and no. 

Assuming that our investment portfolio grows at the historical market return rate of 8%, withdrawing 1.5% of the portfolio value to supplement dividend income should be relatively safe. In a bull market that’s growing at more than 8% a year, the dividend income and supplementing via withdrawals should be even safer.

This phenomenon has been observed by many early retirees in the community who retired in the last 10 to 15 years. Due to the bull market, their portfolio values have been increasing rather than decreasing despite making portfolio withdrawals.

What’s the catch? Well, the tricky part would be when we’re in a bear market and the portfolio value is decreasing. 

This is why I stated earlier that relying on dividend income only for the first five or so years is considerably safer than withdrawing from the portfolio. Having said that, you can’t plan for everything, so using portfolio withdrawals to supplement dividend income could potentially be one of the options for us. Another option would be generating income via part time jobs or side hustles. 

Although we like dividend income, I think withdrawing from our portfolio at some point will be a prudent move to reduce overall tax liability later on in life. We will need to do some number crunching and planning as we get older. 

Looking forward 

We are extremely grateful and thankful to have started our financial independence journey back in 2011. It is comforting to know that we are inching closer and closer to our goal of living off our portfolio in the near future.

We never rushed on our financial independence journey. We have approached this journey with a balanced mindset – save for the future and enjoy the present moment. More than ever, enjoying the present moment is extremely important, knowing that we are all getting older and pretty soon both kids will be teenagers. 

We know we will reach the cross point in the near future. It’s no longer a matter of if but a matter of when. For now, we are being patient and continue executing the investment strategy that we started in 2011. 

We have come a LONG way in the last 14 years!