Category: FIRE

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Late Starter to FI series #19 – What The FI?

Welcome to the Late Starter to FI series!

I am a Late Starter – I did not discover FIRE (Financial Independence Retire Early) concept until I was 47. This was way later, I thought than others who seem to have it all together in their 20s and 30s.

Since I started to write about my own journey, I have discovered there are many more Late Starters like me, yay! It is such a relief knowing I am not alone. 

I want to share our stories, our unique perspectives and show that it is absolutely not too late for us.

So in this series, I particularly highlight those of us who start our FI journeys in our 40s, 50s and 60s. And explore questions such as ‘where do we start’, ‘can we still retire early(ish)’, ‘what are the specific challenges for us late starters’. We look at our past, not to castigate ourselves but so that you can learn from us.

Please join in the conversation in the comments below. I encourage you to share your story if you fit the profile of a late starter. You absolutely don’t have to be a blogger or podcaster to share your story. 

Please email me at info@latestarterfire.com or connect with me on Twitter or Facebook or Instagram

And if you’ve missed any previous stories, you can catch up here – Late Starter to FI series

 

Disclosure: Please note that I may benefit from purchases made through my affiliate links below, at no cost to you. Additionally, as an Amazon Associate, I earn from qualifying purchases

Photo by Chait Goli from Pexels

I first heard late starter, Tom speak about his journey on FI After 40’s podcast (Edit – no longer available) and knew I had to invite him to share his story here. Tom writes at What The FI to “help the average person with strategies and tips for saving, investing and achieving larger financial goals.”

Here is Tom in his own words …

 

A little about me

I live just outside Chicago, Illinois and have been an 8th grade language arts public school teacher for 25 years. I just turned 48 years old, happily married with two young boys who keep me busy and laughing non stop. 

We love the outdoors, jumping in the lakes, hiking, exercising and exploring new places. My wife is just as passionate about health and fitness as I am about financial independence. It makes for a healthy dynamic and keeps us motivated and constantly learning.

Lightbulb moment

At one point, my wife and I had a combined income of $140k yet still lived pay check to pay check. Money in, money out. Lifestyle creep set in and it became harder each year to make ends meet. 

Eventually we had children and my wife had to leave her job to stay home with the kids. And due to a lack of financial planning, we started to incur debt. We lacked the financial mindset to budget, so we couldnt’t figure out what was wrong.

I thought of starting a new job that might improve my income but found little opportunities I would enjoy. My frustrations started to show in my work and at home. Thankfully my wife knew I needed a mindset shift.

She showed me a youtube video of a Chicago police officer who had some of the same frustrations and began investing in real estate – Jemal King, the 9-5 Millionaire. For some reason, this was my spark.

I began learning and reading as much as I could about this thing called ‘passive income’. It started with Rich Dad Poor Dad (my spiritual guide) and morphed into 50 books about finance.

I shifted from a scarcity to abundance mindset and saw opportunities all around me that I was never aware of before.

I began eliminating our debt, built our savings rate to 53%, bought a cash flowing rental, got rid of subscriptions, leases and other boneheaded financial decisions (ie moved from actively managed funds to index funds, dropped whole life insurance, ended car leases).

I even started a blog about our journey at whatthefi.com and try to help others understand how they can turn around their financial situation.

Today, we are happier, motivated, and on our way to becoming financially independent.

First steps on the path to FI

Reading, reading, reading. I’ve read so many books on finance that sometimes I dive into a book and forget I already read it! I also listen to tons of financial podcasts and continue to learn from others on blogs and instagram.

At this point, we are building money and strategising for our next move. It’s exciting for us. Two years ago, our only strategy was merely how we were going to make ends meet. New world now.

How far along the path to FI are we now?

I feel like we are FAR beyond where we were two years ago but also in the beginning stages. Probably the hardest thing was saving enough money for a $1k emergency fund. Now that fund is approaching $20-$30k, it opens up a new world of opportunities. 

We will have a choice pretty soon to dive into rentals for extra income, throw it all into retirement funds, or pay down our mortgage. Maybe all 3 options – who knows?

The point is any extra money we get will work for us from now on and buy us our time in the future. AND any unforeseen debt will be more like a bump in the road due to our sinking / emergency funds.

My goal is to not be working by 55 on anything I don’t have a passion for. If it still is with teaching, fine. But I’m starting to feel the burnout.

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Our current financial situation

We have:

– Improved our net worth from 115k to 333k within a few years

– Improved our savings rate from nearly 0% to 53%

– Have a 4.2 month emergency fund (counting sinking funds)

– Developed several sinking funds (birthday/gift fund, Christmas fund, car/house capX fund, summer deferred pay fund, date night fund, and now dog fund)

– Started “flex” pay with our health care that deducts $1k pre tax (basically a health care sinking fund)

– Went from $175 per month contribution to our tax deferred 403b retirement fund to $500 per month

– Opened two Roth IRA and contribute $250 in each and contribute $200 per month into 529 plan and throw in extra $ when we can

– We plan on improving all the retirement/college funds as soon as we reach 6 month emergency fund

– We also purchased our first rental last year that pays us $560 cashflow per month. We plan on buying another rental at the end of this year or next year if we have enough saved

– Had two car payments and are down to one. It was a (dumb) car lease that will not be renewed when it ends next year. We plan on buying a used car in cash when we turn it in. After the cars our only major debt will be our mortgage which we will hopefully start to really attack next year.

I wrote about How We Found $6000 By Cutting Every Day Expenses

Thoughts on early retirement

Obviously I am a bit late getting started and I knew my retirement could be at age 55. At 55, I will have 75% pension but will have extra to pay in health care. Retirement at early age was a major goal of mine but I noticed lifestyle creep was killing this hope.

I needed to start paying down debt, developing a large savings rate and adding as much extra income to support the idea of retiring at 55.

I don’t feel like I will fully retire at 55 but rather, stop the daily 9-5 grind. I may substitute teach, dive into real estate, or even possibly become a realtor. The point is that I will have the CHOICE to do what I want rather than work for W2 income for the rest of my life in order to pay our bills. 

How my relationship with money has changed

Ugh, where to start. When I was single and in my 20s to early 30s, I was trying to keep up with the Joneses so much I couldn’t recognise myself. I definitely was not “acting my wage”. 

In my 20s, I remember building up so much credit card debt I would have to refinance my home just to pay it off.

When I turned 30, I stopped with the credit card debt but mistakenly thought that money would just build if I paid off the balance each month.

I didn’t understand lifestyle creep at the time and it still felt money in , money out. 

When I got married, we continued this behaviour. Instead of settling in one home and paying it down, I’ve moved into THREE homes in the ten years we’ve been married. Each one just wasn’t enough room. 

Basically we played the traditional consumer role. Money was paid by our bosses, and our job was to spend it as soon as possible. 

We now see money as a tool and use it to work for us as much as possible. We track our net worth weekly, have money planning discussions, eat out less and meal plans per month, find joy in exercise and experiences instead of online purchases or gifts, and save for our future.

Specific challenges or advantages of starting late

The biggest challenge is that time is not on your side as let’s say a 20 year old, for compounding interest on investments.

The advantages are we are probably in our biggest earning years right now so we can build up reserves a lot quicker than I did in my 20s.

Will we reach FI?

It’s not if but when for us. I’m hoping by 55, we can reach a level of FI where we can choose if we want to keep working or not. We have most of our money now working for us but need the time to build.

Our bigger goal was to have 2-3 rentals by now but we had to pause due to my wife being temporarily laid off. We may have this by next year.

 

What's next?

Reading, saving and buying assets. I hope to read more of your blog and share the journey 🙂

Back to Latestarterfire

Thank you for sharing your story, Tom!

I love sinking funds too – there is just something about naming an account that makes it really clear what it can be used for and you know exactly what you are saving for. I started with one and at last count, have 8! 

Once again, Tom has demonstrated that we can achieve great results when we have a plan to move forward. You’ve made so much progress in two years!

And finally, your confidence of WHEN you will reach FI (not IF) just shines through!

Looking forward to reading more of your journey in the years ahead.

 

Do you utilise sinking funds? How many do you have?

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Late Starter to FI series #18 – Contrarian Saver

Welcome to the Late Starter to FI series!

I am a Late Starter – I did not discover FIRE (Financial Independence Retire Early) concept until I was 47. This was way later, I thought than others who seem to have it all together in their 20s and 30s.

Since I started to write about my own journey, I have discovered there are many more Late Starters like me, yay! It is such a relief knowing I am not alone. 

I want to share our stories, our unique perspectives and show that it is absolutely not too late for us.

So in this series, I particularly highlight those of us who start our FI journeys in our 40s, 50s and 60s. And explore questions such as ‘where do we start’, ‘can we still retire early(ish)’, ‘what are the specific challenges for us late starters’. We look at our past, not to castigate ourselves but so that you can learn from us.

Please join in the conversation in the comments below. I encourage you to share your story if you fit the profile of a late starter. You absolutely don’t have to be a blogger or podcaster to share your story. 

Please email me at info@latestarterfire.com or connect with me on Twitter or Facebook or Instagram.

And if you’ve missed any previous stories, you can catch up here – Late Starter to FI series

Today, we welcome Late Starter, Contrarian Saver from Hollywood!

He blogs about a different path to financial freedom, hence “contrarian”! And eschews budgets and emergency funds. Pretty controversial, huh?

So, how did he achieve financial independence?

Read on and find out …

 

One of the vacation rentals in Joshua Tree

A little about me

I live in Los Angeles, West Hollywood to be specific. I am in my early 50s, semi retired at 47. I like to write (hence the blog) as a hobby, but my true passion is real estate.

I can be reached via Twitter and blog at contrariansaver.com

I would be happy to hear from anyone reading this interview.

Light bulb moment

I don’t think it was a single ‘light bulb’ moment.

For a number of years, my assets were increasing in value while both my work satisfaction and productivity were decreasing. I had also been laid off and/or fired from many corporate positions, so I was looking for a way out for some time. 

Eventually I hit a point where I realised I no longer needed to work 9-5 (more like 8-8) if I made a few simple changes in my life.

As to the FIRE movement, I stumbled onto Mr Money Mustache  when I was 50 and felt like he was articulating a philosophy that I was largely living. After that I sought out more FI type resources, listening to the Bigger Pockets podcast and following a few bloggers.

getting started checklist

Feeling Overwhelmed?

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My situation then

You know, I don’t track things like net worth quite as obsessively as many other bloggers, but when I leapt off the 9-5 path, I believe my assets were as follows:

– 401k: about $300k

– Deferred income (this was paid out over 10 years, from a prior position): $400k

– Home equity: about $800k

I have never had an emergency fund – I hate the thought of all that money earning 0.1% interest. I have used credit cards, 401k loans etc whenever I’ve gotten into trouble, which has thankfully been rare.

My parents had recently passed so there was no financial burden there. I have an 88 year old aunt who is very close to my sisters and I. We need to plan for additional care such as assisted living for her.

Like many other gay men, I have never had children. Also, I am not married and was single when I decided to leave the 9-5 life (marriage had only recently become legal for folks like me) 

First steps on the path to FI

One big step was selling my primary residence and using it to launch a portfolio of income producing properties. I co-own and live in a four-bed here in West Hollywood, essentially living mortgage free. 

I also own another rental property in West Hollywood, and four vacation rentals up in Joshua Tree. 

I would like to continue to build this portfolio, assuming I continue to discover good opportunities.

My situation now

I currently have enough passive income to cover all my living expenses without working, so that meets my definition of FI.

I have a 2 day a week gig that pays in the low six figures and covers health care. I run business development (new business) and strategy for a company that provides out sourced accounting and financial services to non profits. In many cases we are their entire finance department.

My prior career was in marketing with some business development thrown in, and I started my two day a week gig as head of Marketing / Business Development.

But importantly, I was very much a generalist in my career so it was easy for me to shift roles as the firm’s needs changed. I am now also a profit partner and get involved in anything that helps us grow quickly.

I use the proceeds to further my real estate investments.

My next goal is to be able to buy and cover the expenses associated with a vacation home (about $750k purchase price) without working at this 2 day/week gig.

I hope never to retire. I would like to see my net worth and income increase until the day I die – I even wrote a post about this – The Joys of Dying at Peak Net Worth. 

I think it’s so critical to keep ourselves productive, occupied and growing. It helps us stay out of trouble and increase life satisfaction. I’m also convinced it is much, much better for our physical health.

Most significant step on the path to FI

From a very foundational point of view, I think the turning point was deciding to get my MBA at Wharton (back in my 20s). That tripled my salary and opened vast opportunities to me – after that experience, there really was no going back.

When you have an Ivy League degree, people view you (fairly or unfairly) in a very specific way – and that tends to increase the money coming your way.

In terms of side hustles, I can’t knock them since real estate started out as a side hustle and now it’s my primary source of income. But I do think people pursue them at the expense of focusing on their primary job. 

Most wealthy people, including entrepreneurs, started out as successful “W2-ers” and leveraged the learnings, connections and money earned there to start successful businesses. Some of the wealthiest (Tim Cook, Jamie Dimon, many others) have never strayed from their primary jobs.

So, I just can’t support any decision that involves abandoning a primary career at a young age (say, under 40) to pursue what is often illusory gains from blogging, affiliate sales, flipping etc. Stay focused and you will win in the long run!

More recently, a big final piece in my journey to FI involved selling my primary residence, and using the proceeds to invest in vacation rental properties. That has sort of become my ‘retirement’ gig.

Specific challenges or advantages of starting late

One huge advantage I had was that although I had little savings, I had accumulated significant assets. So for anyone starting late, I would certainly start with a hard look at all your assets. Can you liquidate anything to “jump start” your path to FI?

I realise that many people are starting at 50 or later, with no assets. Their big challenge is that they don’t have the luxury of decades of compounding ahead of them.

Health care is another challenge.

For these folks, I would say:

– Take advantage of every possible opportunity to save. Uncle Sam lets you squirrel away $26k a year in your 401k – you should try to hit the maximum every year

– Consider developing passive income streams. I just helped a friend, aged 53 purchase his first income property and it’s working out great for him.

– Explore part time gigs you can do in ‘retirement’. I have an in law that started teaching part time in her late 50s. She absolutely loves it and when she moved to full time, the benefits became significant.

– Take care of yourself! You need to minimise your health care costs and prevention is the best medicine. If you need to take any daily meds for blood pressure, cholesterol, blood sugar or other lifestyle diseases, I would advise you to try to address these through (dramatic if necessary) changes in diet. Health issues can be devastatingly expensive and we suddenly become more vulnerable after 50.

What's next?

My next major goal is to buy that vacation home. It will be my first real estate purchase in 20 years that will be done for lifestyle (vs investment) reasons.

Aside from that, I plan to continue to carefully and patiently build my real estate investment portfolio, enjoying the rewards and challenges life brings along the way!

Back to Latestarterfire

I am drooling over the vacation rental pictures over here, having a sudden urge to visit California …

Thank you, Contrarian Saver for sharing your story!

And pointing out the importance of keeping healthy in our ‘autumn’ years. Many of us at this stage of our lives are overworked and used to soldiering on, regardless. It is prudent to take care of our health and wellbeing so we can enjoy the next phase of our lives fully and of course, to keep health care costs down.

I too value a 9-5, especially in these uncertain times although there are many challenges right now with not being able to work from home. Nonetheless, I am grateful to still have a job.

How are you building your passive income?

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