Category: Late Starter to FI series

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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.

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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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Late Starter to FI series #17 – Professor FIRE

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

Today’s Late Starter, Peter is from Canada 🙂

Peter writes at Professor FIRE where his motto is learn, study, teach FIRE. He has a wealth of knowledge to share so settle in with a beverage of your choice for a good read.

You may also connect with Peter on Twitter

Without further ado, here’s Peter in his own words …

A little about me

I’m Peter, an early 50 something living in a small town called Kingston, about a 2 hour drive east of Toronto in Canada. I’m married with two kids – a 12 year old daughter who is at Canada’s National Ballet School and a 19 year old son who is studying Computer Engineering at the University of Waterloo. 

My wife and I have 7 university degrees between us, including PhD degrees for each of us. Needless to say, it’s never in the kids’ best interest to bring home a bad report card!

I stopped working full time two years ago to pursue a Coast FI strategy. I teach as an adjunct professor at a business school in Canada, and do the odd bit of consulting and advising of early stage companies. I am passionate about teaching, learning and developing new skills, and am a licensed private pilot.

I am an infrequent boggier at ProfessorFIRE where I write about financial independence (FI) planning, strategy and risk management.

FIRE or not ...

Before the term FIRE was coined, my first exposure to the underlying idea was when I was an entrepreneur running my first start-up. In discussions with other entrepreneurs, we realised that if we were able to successfully scale and possibly sell our businesses, we would have solved the Lifetime Money Problem – eliminating the need to work to earn money, and live off the proceeds of investments instead.

I ran several start-ups – one failed, the other was acquired by a large multi-national, but not at the level that would solve the Lifetime Money Problem.

In a happy coincidence, I ran across Mr Money Mustache blog in 2013 – Pete Adeney – and quickly realised that I had gone to graduate school with one of his sisters, who is also brilliant. I started to pay attention to his writing and realised that I was already on track to FIRE, despite starting late. I just had to build my “stash” a bit more, reduce my expenses and keep moving forward.

But – and this is a big “but” – I didn’t pursue FIRE to avoid working and “retire”. I like working. I am pursuing FIRE to free myself up to do my best work, regardless of how much I am paid for this work. So, I’m a big fan of the “FI” part, but could care less about the “RE” part.

For more on my perspective on FI vs RE, read FI(RE) & Productive: Part 1 – Getting Past the “RE-piece”

First steps on the way to FI

The first step was a false start. I invested a modest amount of money in the early 1990s in technology stocks, including Oracle, Intel, Microsoft and Dell Computer. I used the gains from these investments to start my first company, which ultimately failed, but was a huge learning opportunity.

I then had to start by building up savings, so started carefully tracking expenses and trying to increase the gap between income and expenses. I started teaching part time to increase my income, not aware at the time that this side hustle of teaching would end up being my permanent, part time gig that enabled the CoastFI strategy.

I bought YNAB from Jesse Mecham when it was still a spreadsheet, and use it religiously now as one of my core systems.

I’m also a huge fan of productivity systems – I implemented the Getting Things Done methodology in 2003 shortly after David Allen’s excellent book of the same name came out. Later, I served on David’s business advisory board and was an invited speaker at the first Getting Things Done Summit in 2008 and was fortunate enough to attend the second summit just last summer (2019) in Amsterdam.

GTD has been a game changer for me – and it’s another one of my core systems. I give a series of ‘bonus’ lectures on productivity and self management in a knowledge work environment to encourage my students to spend time in their careers to develop their own ‘personal operating system’.

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Coast FI strategy

I am approximately 50% of my way to “absolute FIRE”, where a 4% safe withdrawal rate would cover all of my expenses. Almost all of my investments are in Registered Retirement Savings Plans (tax deferred) and Tax-Free Savings Accounts.

My kids’ education is largely saved up for in Registered Education Savings plans, and my son is in a co-op program that helps him pay a significant proportion of his education costs.

My daughter’s acceptance into Canada’s National Ballet School was a welcome, though unexpected surprise. She moved to Toronto at age 12 and lives in residence. The costs for this 7 year program make university costs pale by comparison. So I am still working to contribute to this expense as well.

I am 100% invested in the Vanguard S&P 500 Index Fund (the Canadian dollar hedged version). Nothing else. I still have a 15-20 year investment horizon before I would begin to withdraw, because I am pursuing the CoastFI strategy.

CoastFI means that without any additional contributions, I will hit my FI number somewhere around a conventional retirement date. I no longer need to contribute to retirement savings or education savings for my kids.

All I have to do is earn enough to continue to pay my yearly expenses, and I will eventually hit my FI number. However, because I am able to earn efficiently due to my experience and current role, I only have to teach 3 to 4 12-week courses per year to earn enough income for my expense offset.

I can work 1 to 2 days per week teaching and consulting, and not only make my base expenses, but continue to max out contributions to my Retirement plans and to support my daughter at the National Ballet School, which isn’t cheap!

I also still have a mortgage, which I am slowly paying down – which I regard as the ‘anti-bond’ allocation within my overall investment strategy.

Eventually we will move to a lower cost of living area and/or a smaller house, which will free up some of the capital that is currently tied up in a fairly large house (which has been great during COVID-19). The property also has a modest guesthouse which, in normal times, we have started to rent out as an AirBnB.

So I have been fortunate to have been able to free myself up from the need to work full time. Now the big challenge is to identify the next big projects that I want to commit to – likely in 5 year chunks.

Risks of FIRE

I conducted a session at Camp Mustache on “Risks of FIRE” where I encouraged the audience to develop a specific, written risk management plan to protect their FIRE plan.

Kristy Shen and Bryce Leung outlined some key strategies in their excellent book entitled “Quit Like a Millionaire” such as the Cash Cushion and Yield Shield.

Everyone who is pursuing FIRE should, in my opinion, have a written risk management plan and a personal investment policy statement that they can refer to when times are tough.

I was also interviewed about this topic on the FI Garage podcast – Interview #11 – Do You Have a Risk Plan for FIRE?

Where am I at now?

 

I was fortunate to have had a fairly high paying primary job for several years (earning $250 000 per year) and was able to still teach the odd university course as my ‘side hustle’ – which I’ve done for 15 years at the rate of 1 to 2 courses per year.

I was able to save 80+% of my income in the last 3 years before I stopped working full time 2 years ago, which was a major boost on my journey to FI. Along with some reasonable investment returns, this moved me about 10% of the way to FIRE in each of the last 2 to 3 years (of full time work)

I’m 50% to FI, and I feel that this is the most difficult part. Going forward, anticipated returns from the stock market (except for 2020 and perhaps 2021) should make the journey to 100% a lot faster than it was to get to 50%.

My ‘stash’ of investments is enough to handle any emergency, and I do keep a small emergency fund in cash in an interest-bearing account – 2 to 3 months of expenses, but my income is quite secure, so the remainder can be fully deployed in the stock market.

I still worry about money, but more because I like saving and accumulating and miss the high savings rates of the past, but I have a significant amount of free time to think, exercise, pursue hobbies, support my kids, and spend time with my wife. I’m still considering a few ideas for another ‘big entrepreneurial project’.

It’s taken more time than I expected to decompress from full time work, recover my health a bit, and clear the decks both psychologically and physically (getting rid of clutter) to ensure that I have a clear head so I can clearly consider future options.

I’ve also spent a lot of time developing a collection of 10 core Habits and Systems that I am focusing on carefully. Instead of setting specific goals I am letting these habits and systems create the conditions needed for the outcomes to appear.

I wrote about it here – 2020: A Year of Focus on Habits and Systems – The Details, Part 1

Connecting with the FIRE community

I was fortunate to work with Jillian Johnsrud as one of her coaching clients throughout 2019 to help me make the transition from full time work. It was certainly a process, with its ups and downs. What really hit me was two key ideas:

1. Flexible FIRE: a great reminder that FI is not strictly the 4% rule or that you absolutely will never earn another dollar when you ‘retire’. Also, it’s extremely rare (and difficult) for someone to go from a savings rate of 60-70% of their income to drawing 4% to live them. It’s not the most likely scenario, and there are lots of options. Jillian’s article on Flexible FIRE was game changing for me!

2. Building a life I will never retire from: the idea of designing your life in a sustainable way, so that by the time you reach FIRE, you can make a smooth transition to the life that you have designed, and you can begin living a large proportion of that life now, before reaching FIRE!

For anyone considering FIRE or any of the related strategies, such as CoastFI or SlowFI – it’s important to ‘begin where you are’. I wrote a blog post about this – Start Where You Are 

It’s also important to seek out others who are on a similar journey. For many of us, our immediate circle of friends and family may not be comfortable talking about money, and may not understand or appreciate that the FI journey is more about psychology than it is about money. As JD Roth says, “the math is easy, it’s the psychology that is hard.”

Also consider attending a FI retreat to meet like minded people. I attended both Jillian Johnsrud’s excellent Montana retreat (Adventures to FI) and the EconoME conference in Cincinnati in March 2020 – my last trip before COVID.

It’s so important to engage with like minded people as you are developing your own FI plan. Find your community!

 

How my relationship with money has changed

I used to have a practically single minded goal – to have millions – literally millions of dollars in the bank, and would imagine WHAT I could buy with this money (nice house, fast car and an even faster airplane – which is what you dream of when you’re a licensed pilot!)

Now I imagine how much of my own time and life I can buy with this money.

I don’t need a bigger house, a faster car (I have an electric car now that’s 9 years old and runs great), and I share an old plane – a 1984 Cessna 182 with a couple of friends in a loose partnership.

My money also enables a key objective of my life: responsibility. Responsibility is rooted in two words – response and able – that is, being able to respond to what I have committed to in my life and where I have placed my energy and focus.

Right now, that’s my family and supporting them as they continue to learn and grow. My wife has recently also transitioned to part time work and we’re spending significantly more time together and travelling more to the US to visit her family.

Advantages of starting late to FI

Late starters to FIRE have a couple of major advantages – let’s talk about three of them:

1. Motivation and staying power: a shorter timeline to achieve Financial Independence vs the 30 and 40 somethings add a sense of urgency that can be quite motivating!

2. High earning potential: more professional experience and skills translates to higher earning power, so it may be easier to create a large gap between income and expenses, or to pick up a side hustle teaching or consulting to bring in extra income. Frugality is great to help on the FI journey, but it has its limits – so increasing earnings may be a great way to move forward.

3. Existing asset base: mortgages may be low or already paid off, and there may be considerable equity built up in an existing home that a transition to a smaller house or moving to a lower cost of living could unlock and move you quite far down the line toward FI.

 

What's next?

I really like the motto “solve et coagula” – which means that something needs to be broken down before it can be built up.

I needed time to decompress from full time work to recover my health and to ‘clear the decks’. 

And now, I am working through a deliberate process to design the next 5 to10 years of my life, which will include a healthy dose of fun and adventure, skill building, time with family, time alone, deep thought, my ‘next big project’ and yes, even making a little money from time to time!

Of late, I do confess that sometimes I miss the focus, adrenaline and larger income that came from full time work, especially in a CEO/leadership role. And I see myself doing more strategic consulting work in the future to leverage my skills and fill this gap … plus also working on 1 to 2 longer term entrepreneurial projects to satisfy the ‘inner entrepreneur’ in me, that needs to keep creating new things.

Back to Latestarterfire

Wow, there is so much to unpack here!

Thank you, Peter for sharing your story and teaching us great lessons at the same time. It never ceases to amaze me that there are many different paths to achieve FIRE, even if we are starting a little late. 

I always thought of Coast FI as a strategy for the younger folk, as you need to front load your investments then allow it to build over time. But your story has opened my eyes to its possibility for late starters.

I admire your commitment to forming systems and habits to get you to your final goals. This was my focus too for 2020, except mine are not as developed as yours! 

And your commitment to learning new concepts and seeking out a community of like minded individuals is impressive. I love Jillian too – her work has helped me the last two years to think about living my life more intentionally.

Thank you for pointing out the risks of FIRE – that we should all have a management plan to protect our FIRE plan. 

I look forward to following your journey – you have so much energy and I can understand why you don’t want to retire fully. Good luck on all the future projects!

 

 

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