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One Free Underpants Year


Take an entire year off, use that time to learn about investing, and you can end up with the same amount or more money in the end.

Unhappy with your job and don’t do your own investing? Take a year off and learn about money. You can be in the same position long-term with more money knowledge and less actual money than the other way around. And you get to spend a whole year in your underpants!

Nice. Just still change them every day, okay?

Here's how it works:

  1. Say you’re between 25 and 40 so you have at least 25 years of working to go.
  2. You currently earn the average salary of $50,000 and max your RRSP contributions each year, adding $9,000 to mutual funds with your bank every year.
  3. The average market return rate for the past 25 years is above 6%, so we’ll use 6% to conservatively project forward 25 years. (It doesn’t matter anyway because it factors out for our purposes.)
  4. After the mutual fund fees of about 2%, you’ll get a 4% return every year.
  5. After 25 years of saving, you end up with around $400,000.

Now take a year off and learn how to manage your own investing:

  1. Same as above, except the investment fees will go down to somewhere near 0.2%, so your return will be 5.8%.
  2. You'll spend $30,000 to live for that year. (Your $50k salary minus what you would normally use for savings and taxes.)
  3. So you save $9,000 per year, for 24 years (instead of 25), starting at $30,000 in the hole, at a 5.8% return rate.
  4. After 24 years of saving, you end up with around $400,000.

That’s a free underpants year!

If you save more than $9,000 per year, the numbers turn even more in your favour.

But that’s just the beginning. Learning to invest your own money won’t take the entire year. You can also brush up on your trunk skills. Do some networking. Get a certification. Redo your portfolio and go after those "better" jobs you’ve always wanted. You could even do an MBA in 12 months. Or see if your side business can become a real business. Build a client base. Set up some passive income streams.

Then there’s the expenditure side. If you’ve been working for a while, you may have forgotten how to not spend money. When you have a steady never-ending income, it’s easy to forget the actual cost of things. You become numb to the pain of spending money. Taking a year to live off savings will reinforce better spending habits. “Do I need a new phone? I can wait until I drop my current one in the toilet. It’s bound to happen anyway.”

With all these ways to potentially impact how much you earn and save, frankly, you’d be foolish to go into work tomorrow at all. (Actually, that’s not true, you should quit properly.)

I think a great way to live is to work for five years, then take a year for yourself, then work another five years.

Disclaimer: if you quit your job and take a year off and can never get another job and end up sleeping on the streets giving you-know-whats for you-know-what, that is on you. I'm just thinking out loud here.