How I Became Financially Independent

How I became financially independent and able to retire at 41 –

Live cheap/below your means + side hustle + no debt + invest what’s left = Freedom

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House Hacking – make your living situation PAY YOU:

1.  Working as a community adviser in my college dormitory for my Junior and Senior years paying all room and board (and a bit of a stipend occasionally).

2.  Working as a property manager and/or cleaner for free rent with salary at the apartments I lived at.  This extra cash I made that I didn’t have to pay in rent was not taxable and I was able to pay off my car loan and learned heavily from that experience while building my resume with management and staff leadership experience.

3.  After buying our 1st house – we rented out the downstairs while we lived there and after 8 years were able to fully pay off the house to be mortgage-free.

4.  We moved in with a parent while renting out the entire house for the last 2 years we owned it.  We were able to sell it for a bit of a profit and roll entire funds into our next house paying cash and maintaining being mortgage-free.

5.  After moving to Corpus Christi with only the things we could fit on our motorcycles on the ride down – we moved to a house that had a separate space that was desirable for tourists.  We studied other vacation home profiles and created a space that was unique and marketable for putting on airbnb and vrbo/homeaway.  We currently make enough money from this to pay almost 100% of our housing, insurance, and food costs.

Minimalism – don’t buy things you don’t need and sell the stuff you don’t:

I cannot stress enough how important it is to get rid of stuff you don’t need or use.  It not only costs money up front to buy but also to maintain.  It also requires room to store requiring a house that is bigger to maintain.  And you might even have monthly payments on them requiring interest paid and higher insurance.  If you need it – charge it for credit card points and then pay it off every month!

  1.  With things – After my father passed away in 2011 and left all his junk it occurred to me that I did not want to die and leave a bunch of useless stuff for someone else to deal with.  We went down to 1 car (we worked different shifts and I used public transit to commute to work), sold off a bunch of toys we barely used – jetskis, snowmobiles, boat, kayaks.  We also trimmed back our garage and basement clutter while trimming back on furniture we didn’t need.  If we did sell something that we ended up needing again we always replaced with something cheaper or free.  We did 90% of our sales through the local Craigslist.  Occasionally we also flipped items we found cheap or free and cleaned them up if needed and sold them.
  2. With traveling – We always grocery shop rather than eating at restaurants, finding hotels with free breakfast/lunch/evening , booking with points through Expedia or our credit cards, and avoided air travel as much as possible by driving.  We also were able to travel concurrently with conferences and trainings  we went to as Board members of a non-profit or as part of our jobs.  Also the vast majority of our excursions tend to be free ones – parks, museum days, no cover live music night at the local bar.  It also helps that I now have a Lifetime Access Pass for the National Park system.
  3. With food/alcohol – we rarely go out to eat and only sometimes during vacation.  Happy hour to catch a band or new bar is the most we do.  We go to Aldi, Walmart (before 10am when a lot of items are marked down for expiration that day), or the local farmers market.  Our grocery costs did go up after my diagnosis (more on that later).

Side Hustles – enjoy a hobby or increase a skill while making money:

While working full-time and most of the time renting out part of our house – we also had side gigs.

  1.   In-home dog-sitting – The vast majority of my clients were regulars found via advertising on Craigslist and stayed with us many times.  I am currently testing out for dog-walking and dog-sitting.
  2. General scrapping and “flipping” –  Believe it or not people give away really great stuff, particularly where we live now but these ads can show up on FB Marketplace or Craigslist.  Here people will put perfectly good furniture, appliances, tools, and other items on the curb for anyone to pick up.  Grab it, clean it up if needed, and sell it!

Investing – put your money to work with compounding and/or passive income:

  1.  Tax rates are the lowest we have seen in a very long time – max out your ROTH IRA ($6,000 in 2019/2020) and invest in low cost index funds.  Open an account with Fidelity or Vanguard and choose “ROTH IRA”.  From there you can easily transfer funds from a bank account or other financial institution.
  2. If you have a High Deductible Health Insurance Plan (HDHP) – max out a Health Savings Account (HSA).  An easy google search will tell you what the contribution limits are for the HSA for the current year and for a self or family plan.  Instead of letting those funds sit in a credit union or high fee plan – see if you can have a fee-free plan with Fidelity and also invest those funds so they can grow TAX FREE.
  3. Max out your 401k (or 403b if you are a non-profit or government employee).  Depending on the plan offered through your employer – look through the mutual funds offered and pay attention to expense ratios!  These funds will grow tax deferred (including any dividends paid within these funds) and reduce your tax liability each year.
  4. If you are a government employee and have access to a 457b plan – max that out as much.  Just like a 401k or 403b it can grow tax deferred and save you on taxes BUT since this type of account is considered a deferred compensation plan you can pull funds out at a later time but not have to wait until retirement age.
  5. Leftover funds and want to try a landlord-less experience investing in real estate?  Try Fundrise.  They sell tiny shares of real estate portfolios that pay dividends quarterly and you don’t need a ton of money to get started.  I got started with just $1,000!
  6. Want to buy stocks?  Try Robinhood which offers free trading.  I use Robinhood to slowly build out my dividend portfolio by focusing on reinvesting dividends paid by the stocks I own to buy more stocks.  It’s fun to research large stable companies that pay increasing dividends year over year (see “Dividends Aristocrats”) and buy shares of their companies!
  7. Not into real estate or individual stock-buying?  Try opening a plain old brokerage account with Vanguard or Fidelity.  Both companies have zero-cost or very low cost index funds.