Discovering financial independence
I benefit from the privilege of being introduced to many of the pillars of Financial Independence from my dad relatively early in life. Because what I learned aligns with some of my core interests, I’ve also earned a pretty good salary as a Software Engineer throughout my career.
2008 crash and first company
I’ve always been money-conscious. In high school, I ran a landscaping business that cut lawns, spread mulch, and built stone patios for people. I had five employees. Making money was a fun game – like SimCity but real life.
My dad set me up with a Fidelity account and showed me how to invest in low-expense index funds. I think it was VTI or IVV.
During the 2008 financial crisis, I watched my hard-earned income get halved. I was too into “being cool” in college while getting a degree in Information Technology to get too bent out of shape about it.
By the time I entered the job market in 2010, things had started to recover and my Fidelity balance was back up to about what it was before the crash. I had learned a valuable lesson:
Don’t sell in a panic! You’ll miss out on the gains when the market rebounds!
Entering the job market
In 2010 and fresh out of college, I started my first job as a Software Engineer in Richmond, Virginia. I was making good money, but nowhere near the six-figure mark that I heard developers were making in Washington D.C. and San Francisco.
Importantly, Richmond has an extremely low cost of living. I was able to get a room in a nice apartment on Monument Avenue in The Fan (highly desirable location) for $400 per month. I spent weekends backpacking on the nearby Appalachian Trail and going on bike rides. Additionally, I drove a $3k 1998 Honda Civic.
Though I had no vision for Financial Independence at the time, at age 22 I was on my way to FI due to having a reasonable salary and very low spend rate.
It took me five years to discover FI
Over the next few years, I:
- Got a new job in a new location (with a smaller salary),
- Bought a small town house and got two roommates to pay 90% of my mortgage, then kicked those roommates out when I
- Got married to an equally-money-conscious woman,
- Got a second new job with a higher salary.
This new job paid closer, but still shy of, the Silicone Valley ideal of the six-figure salary. Importantly, this company had a bonus program where they would contribute to employee 401k up to the IRS max.
My new wife and I took a position with her job in Germany. Here, the U.S. Government paid for our housing through Rose’s job. I qualified for the Foreign Earned Income Exclusion (FEIE) – a tax situation where a large portion of your active income is tax-exempt.
We were saving money at an astonishing rate, but didn’t know what to do with it.
I checked into my Fidelity account and found that I had 10s of thousands of dollars just sitting in cash. I figured I should do something with it, but had no idea what.
Some internet research led Rose and me to find Mr. Money Mustache’s blog and JL Collins’ Simple Path to Wealth. We promptly moved this money into a new Vanguard account and bought VTSAX – one of the best low-expense index funds.
Path to financial independence
In 2015 and in our mid-20s, we were on our path to Financial Independence! We had:
- A goal of reaching Financial Independence in the next five years,
- A townhouse in the States that was then rented out and producing a small amount of passive income,
- A solid combined income from our jobs, and
- A spectacular savings rate.
Rose and I had always been natural savers, but had figured out what to do with our savings and we had a goal!
For the next several years we continued traveling around Europe, finding bargain flights and accommodations. While our friends were buying Audis and staying in luxury hotels, we were a one-car family driving a cheap Volkswagen and staying in gasthauses in private rooms with bathrooms shared with other guests.
We put aside $2,000 to $4,000 for an emergency fund and to handle our cash flow. We invested everything else into low-expense index funds like IVV and VTSAX. Riding the insane rise the stock market took from 2015 to ~2022, our money made an approximate 60% return.
Declaring (lean) financial independence
Five and a half years later, in 2018 we quit our full time jobs and moved into a van.
We had reached FI. Well, sort of. Our spending rate MINUS about 75% of what we were spending on housing put us within the Safe Withdrawal Rate from our net worth. In other words, living off of 4% of our net worth, we could cover our spending and a portion of our housing. Given the high cost of living in the Front Range, hacking our housing situation would allow us to “retire”.
There certainly was some fat we could trim from our monthly budget (more on this in another article). The big change we decided to make was exchanging our $2,000/month rent in our single-family home for $50 per month for a tiny storage unit for our stuff and a van (paid for with cash – no loan payments) for us!.
We also wanted to be location independent and spend time climbing around the western US!
In short, we had enough money to retire in 2019, but not enough to live super comfortably. Certainly not enough to be able to afford rent or a mortgage in the very competitive housing market that is the Colorado Front Range.
We didn’t want to wait until we had enough to declare full Financial Independence/Retire Early (or fat – FIRE) to quit jobs that we weren’t crazy about and to start living the life we desired.
We leveraged our (already) substantial savings in combination with our willingness to be flexible in our housing situation to make drastic changes early!
(re)Focusing on FIRE
We spent just shy of a year in the van, bouncing around to different destinations in the American west.
Wanting to be a little less mobile, we eventually scored a great deal on a home in Boulder, CO. We also converted our side-hustles (that we LOVE) into extremely flexible full-time jobs to cover our new housing expenses. In short, we took smaller salaries than we could find elsewhere in exchange for a high degree of flexibility
We were still living the life we wanted but still depended on some amount of supplemental income to support our cushy lifestyle.
Enter: Meghan
Having a home base in Boulder made it easier to make friends! This is when Rose and I started spending time with Cal and Meghan. After a few months, Meghan asked us (Rose, I think) about FI and what we did to have the flexible schedule we then had.
The best way to learn is to teach. Getting materials together to share FI principles with friends forced Rose and I to dust off our FI knowledge and re-orient ourselves to the FI mindset. We had to get smart, again!
That brings me to today.
Full- and (eventually) fat- FIRE
I’m excited to be refocusing myself towards Financial Independence. Spending time as a lean-retiree has given me a taste of what is possible. I like my current job, but want to set Rose and myself up for true Financial Independence so that we would not have to change much if our jobs were to go away.
There is much more Rose and I can be doing to better achieve FI. We can trim lots of fat from our spending, use some simple tricks to reduce our tax burden, and put time into our side-hustles to increase passive income.
I’m excited to learn and grow with you during this next FI-focused chapter of my life!!
A Way to FI
I’m starting this blog to share with you specific tips and tricks I’ve used to achieve Financial Independence. Equally, I want to learn from the community your thoughts on Financial Independence. Specifically, I’m looking forward to learning your thoughts on:
- What do you do when you retire?
- Tax optimization,
- Travel hacking,
- Lifestyle design.
