EP123: When Can You Quit Your Job?

Everybody dreams of the moment when your day job becomes optional — when your money finally works harder than you do.

In today’s episode, we’re breaking down the crossover point: that powerful milestone where passive income rises, living expenses fall, and financial freedom becomes real.

Whether you’re just starting your dividend journey or already building momentum, this is the roadmap to reclaiming your time and designing the life you truly want.

Speaker 1 (00:00):
Everybody dreams of the moment when your day job becomes optional, when your money finally works harder than you do. I’m Kanwal Sarai, and welcome to the Simply Investing Dividend podcast. In today’s episode, we’re breaking down the crossover point, that powerful milestone where passive income rises, living expenses fall, and financial freedom becomes real. Whether you’re just starting your dividend journey or already building momentum, this is the roadmap to reclaim your time and design the life you truly want. Let’s get started with today’s episode. We’re going to cover the following four topics. We’ll start with the crossover point, then we’ll take a look at living expenses. Then we’ll look at passive income, and then we’ll answer the question of when can you quit your job? Let’s get started with point number one, the crossover point. So what is the crossover point? This term was popularized in the book Your Money or Your Life First published in 1992 by Joe Dominguez and Vicki Robin.

Speaker 1 (01:26):
The crossover point when you reach it means that you have finally achieved financial independence. You reach the crossover point when your passive income is greater than or equal to your living expenses. So what does that look like on a graph? Let’s take a look on the screen right now. This is just a typical graph I put together to give you an idea of what the crossover point is. So here you can take a look at the expenses and that’s in that orange line and over your lifetime expenses tend to go up. Eventually when you hit retirement or later they will kind of fall and lower. But in this example, you start off when you’re young, you’ve got a certain amount of expenses, and over time the expenses continue to grow. And the blue line that you can see on the screen now is your passive income, and it’s not always a straight line.

Speaker 1 (02:31):
It depends on if you get an increase in salary, a job promotion, you’ve got other sources of income that you can then invest. So it may go up and down. Stock markets go up and down, so you may have a few years where you’re getting double digit returns, then you’re back to single digit returns. Nevertheless, the passive income over time, if you’re reinvesting, your dividends should continue to grow, and you’ll notice that over time, hopefully the passive income will exceed your living expenses, and that is the point that we refer to as the crossover point. Now, like I said before, when you hit that crossover point, you are then achieved. You then have achieved financial independence. Now, you may still choose to work if you want to. If you enjoy your work, you can keep doing it, but it becomes optional. So your day job becomes optional at that point.

Speaker 1 (03:34):
Now there’s two numbers here that matter, and that’s going to be the first one is the living expenses and then the passive income. So let’s take a look at the first one, living expenses. Now step one is you need to determine your annual spending, and that’s going to cover everything. So you can see there’s a big list up on the screen here. I’m not going to read everything on the list, but this is housing, so this is going to cover your rent, mortgage, property taxes, home insurance, all of that. So you need to know how much that’s costing you every single year. Then we have food and household supplies. Again, it’s a big list here. You’ve got groceries, eating out, everything gets added in there. Then we have transportation, which may include car payments, fuel insurance, maintenance, parking. Then there’s money that you spend for health and wellness for yourself.

Speaker 1 (04:33):
And you can see there’s a list of things here, health insurance, premiums, dental and vision prescriptions, gym memberships, and then personal lifestyle. Again, we’ve got a list of things here, which includes your hobbies, travel and experiences. So this could be vacations, weekend trips, flights, hotels, all that’s going to be covered in this category. And then financial obligations, debt payments, insurance. We’ve got family independence, so childcare, school expenses, saving for education, and then the miscellaneous, which could be gifts, donations, any charities you want to donate to, unexpected expenses. Now remember, your annual spending is everything you spend in a year, not just the bills that you pay. So many people underestimate this number because they forget to include things like car repair, home maintenance, gifts, vacations, any irregular expenses. So if you want to reach financial independence sooner, there’s two things you need to do. You need to lower your expenses and you need to increase your passive income. So let’s take a look now at the passive income piece. So what is passive income? That’s any income stream that continues without you trading hours for money.

Speaker 1 (06:08):
I’ll just say that again, you don’t have to put in extra hours or additional time where you’re trading in your time for money. So that is going to be passive income. So here are some examples of where passive income can come from. So it could come from your investment returns. That includes stocks, bonds, term deposits, ETFs, index funds and dividends. And that’s a big one for us. I’ve been a dividend investor for over 25 years, and we’re going to talk about, I’m going to give you a quick example of a dividend investment. So dividends are a big one for us as a source of passive income. There’s rental income if you’re not directly involved in the properties themselves. If you’ve got a property manager that works for you, that could be passive income as well. There’s business income that doesn’t require your daily involvement. We have royalties, licensing, again, any income stream that continues to come in and generate income for you without you trading hours for money.

Speaker 1 (07:13):
So dividends are a great source of passive income. And so I want to give you a quick example, just one example, a real life example of a dividend stock and what that looks like. So in this example, I’m going to use the Royal Bank of Canada. This is a bank that trades on the Toronto Stock Exchange and it trades in the US as well. But in this example, I’m going to use the numbers from the Canadian stock that trades on the Toronto Stock Exchange. The Royal Bank of Canada was founded in 1864, has over 96,000 employees and a market cap of over 327 billion. The Royal Bank of Canada is the largest bank in Canada, and they’ve had 15 years of consecutive dividend increases. So I’m going to say that again, that’s really important. 15 years of consecutively increasing their dividends year after year after year.

Speaker 1 (08:17):
And why is that important? Because that puts every time they increase the dividend, that puts more money in your pocket. So let’s take a look at an example of somebody who invested $20,000 15 years ago in the Royal Bank of Canada. What does that look like? Did they make money on the investment? Did they lose money? What was the total return and what was the dividend income that they could expect to continue to receive from this investment 15 years ago? So you can see up on the screen, we’ve got a couple of numbers here. So if we go back 15 years to 2011, you can see that at the time the annual dividend was $2 and 8 cents. That means for every share that you had, if you had a hundred shares, you would get $208 in dividend income every year. Remember that dividend gets deposited directly into your trading account is cash.

Speaker 1 (09:15):
So you can spend that money if you want or you can reinvest it. And fast forward to as of this recording in 2026, that annual dividend is now $6 and 56 cents a share. So again, if you had a hundred shares in Royal Bank today, you would be making $656 a year versus 208 back in 2011. So that is a big jump in the dividends. You can see that the dividend has more than tripled. So that is incredible. If we take a look at the share price back in 2011, it was trading at $51 a share. Today the stock is trading at $234 a share. So now let’s take a look at our example of investing $20,000 back in 2011. So that’s the amount invested. You can see it up on the screen. The total number of dividends received since 2011 in this example would be almost $25,000 in dividends.

Speaker 1 (10:22):
You can see the exact number there. It’s $24,987. So remember in this example, the person invested $20,000 in the stock and they’ve now received over $24,000 in just dividends alone over that time period. The value today and now we’re including the stock price appreciation plus the dividends received over the last 15 years. That investment, the $20,000 investment today would be worth over $115,000. So that is a very good rate of return and certainly you could now take that money if you wanted to, and there’s a couple of things to consider before you do that, but if you wanted to, you could take that money out and reinvest into something that was paying even a much higher dividend. I believe as of this recording, RBC has a dividend yield of about 2.8%. If you took that money and put it into something that was giving you three and a half, 4%, you could also increase your dividend income by quite a bit.

Speaker 1 (11:32):
Let’s continue here and take a look at the annual dividends as of this recording in 2026. In this example, if you held onto your shares, you would expect to receive a little over $2,500 a year in dividend income. Now remember, the stock price can go up and down as you hold on to your shares. The number of shares that you own, you’ll receive in this example, $2,542 every single year as long as you own those shares, and hopefully next year that dividend income will go up even more as the company increases its dividend like they’ve done for the last 15 years. So that is your passive income. Here it is generating $2,542,000 a year in passive dividend income. Now, if we take a look at the dividend yield on cost, that means the dividends I’m receiving today based on the amount I originally invested, this is a return of 12.7% annually just by holding onto those shares, you’re not having to buy more shares or sell those shares, you hold onto your shares.

Speaker 1 (12:50):
And that’s the beauty of dividends is we never have to sell our shares. The dividend income keeps coming in, and in this example, it’s 12.7% return every year just from the dividends. Now if you’re interested, you may want to go back and watch episode seven where I show you some examples of extraordinary returns from dividend stocks. So let’s go back to our graph here. Remember, when the passive income is equal to or exceeds expenses, that is your crossover point and that is the point of financial independence. In this example, and again, this is just an example I put together, the person here, the crossover point is roughly around $85,000 a year in passive income and they’ve now exceeded their annual expenses and they’re financially independent. So what does that look like? Let’s continue with this example and show you some actual numbers. So you can see up on the screen here.

Speaker 1 (13:56):
We’re going to start as of this recording, the year is 2026, the starting balance, where does that come from? So in this example, this is someone who’s been working full-time as a professional for 10, 11, 12 years as a professional, maybe even 14 years, and they’ve accumulated in their 401k or the Roth IRA or in Canada, we have the RSP or A-T-F-S-A account. And so they’ve accumulated $325,000 across those accounts and they will continue to invest $300 a month additional investment every year. So that’s $3,600 a year of additional investments. And so this person can expect to receive around $11,500 in dividends. This, if this money was put into, in this example, we’re talking about dividend stocks. And so you can see the numbers here, the dividend yield I put as 3.5%. Stock price growth is 5.5%. So you’re looking at roughly a 9% increase year over year.

Speaker 1 (15:10):
I’m going to show you in a second how you can try this yourself in scenario in this spreadsheet, and you can change the numbers and put in your own numbers and see what that looks like. Now, if we continue and you can see what the next 30 years look like for this individual, and assuming they’re in their thirties now, this individual could expect by year, it says in 23 years. So by the time they hit 52, 50 years of age, we’re getting very close to the $85,000 a year in dividend income. And you can see by then the portfolio is worth roughly $2.6 million. Now, I encourage you, I’m going to put a link in the description below. You can download this yourself. It’s free. There’s no cost. It’s a Google spreadsheet, and you can put in your own numbers and you can see the cells that are highlighted in green on the screen.

Speaker 1 (16:11):
That’s where you would update yourself. And so you can put in your own numbers in there and try out this Google sheet and see where you could potentially be in your investment journey. And if you want some more details, I cover the Google sheet in more detail with some other scenarios in episode 50 where we talk about how much money can you make with dividend stocks. So now let’s finish up this episode with our last topic. When can you quit your job so you can quit your job when your money makes more money than you do? And that’s going back to our graph here when you reach the cross over point. And if you want to get there sooner, there’s two things you can do. You can lower your expenses, and the other part is you can increase your passive income, and that means invest more or lower your fees or both.

Speaker 1 (17:19):
The more money you invest, the more money you can generate. For example, with dividend stocks, the more money you have to invest, the more shares you can buy, the more shares you own, the more dividends you will receive. Now, the piece about lowering your fees is very important, especially if you have mutual funds, index funds, ETFs, even if you’re paying a management fee of 1% or 0.5% or 0.05%, those fees over your lifetime are going to eat away at your investments. And I talk about those in more detail in episode 38 where we talk about how much are those investment fees really costing you? And you can see the impact over the long term in a large enough portfolio. So you want to lower those fees because that’s going to help increase your passive income. So the key here is to save and invest now today and your future self.

Speaker 1 (18:22):
We’ll, thank you for that. So how do you do that? You start by investing in quality dividend paying stocks when they are priced low, and we help you build, teach you how to build a resilient portfolio that provides you with growing dividend income each year regardless of what happens in the stock market. So how do you do that? Well, we’ve created the 12 rules of simply Investing. These rules are designed to lower your risk, save you time, and help you earn more. You can see the 12 rules up on the screen here. The way it works is a company should pass all the 12 rules before you invest in it. If it fails even one rule, skip it, move on to something else. So I’m going to just go through them very quickly. You can see them up on the screen here. Rule number one, do you understand how a company is making money?

Speaker 1 (19:20):
If not, skip it. Move on to something else. Rule number two, 20 years from now, will people still need its product and services? Rule number three, does the company have a low cost competitive advantage? Rule number four, is it recession proof? Rule number five, is it profitable? Rule number six, does it grow its dividend? Rule number seven, can it afford to pay the dividend? Rule number eight is a debt less than 70%? Rule number nine, avoid any company with a recent dividend cut. Rule number 10, does it buy back its own shares? Rule number 11 is the stock priced low. And we look at three things here. We look at the current dividend yield compared to the average 20 year yield. We look at the PE ratio and the PEB ratio. And if a company satisfies those three conditions, it passes Rule number 11 and rule number 12, keep your emotions out of investing so we have an all in one solution.

Speaker 1 (20:18):
To make this really simple and easy for you to apply the 12 rules, we have the Simply Investing Web application. That’s our stock research platform, and we have the Simply Investing Dividend course, the Simply Investing Web App. You can see a screenshot here up on the screen is going to apply the Simply Investing criteria to over 6,000 companies in Canada and in the US, and show you immediately which companies pass the Simply Investing rules, which ones fail, so you know which companies to avoid and which ones to focus on the application. Our platform is going to save you a lot of time. The Simply Investing Course is a online video course, self-paced module. Number one, we talk about the investing basics. Module two, we cover the 12 rules of simply investing in detail. Module three, you learn how to apply the 12 rules to any stock anywhere in the world.

Speaker 1 (21:17):
Module four, show you how to use the Simply Investing Web Application. Module five, placing your first Stock order step-by-step, module six, building and tracking your portfolio. Module seven went to sell Module eight, how to reduce your fees and risk, especially if you have mutual funds, index funds, and ETFs. Module nine, we give you your action plan to get started right away. And module 10, I answer your most frequently asked questions. If you’re interested in all in one solution, you may want to write down our coupon code, which is save 10 SAVE one zero. It’s going to save you 10% off of our monthly or annual subscription to both the course and the web application. If you enjoy today’s episode, be sure to hit the subscribe button, hit the like button as well. And for more information, take a look at our website, simply investing.com. Thanks for watching.