Common question. Something that is often on our mind. Something that is rarely talked about. Money and finance. How do we do it?
First, this is a topic that I’m really interested in.
Second. It is a topic that we think about and are working on constantly.
Lastly. It is a topic that has great impact on our freedom and the choices we have available to us. So it’s a big deal.
A quick note. Thanks is given to Jeremy at gocurrycracker.com for his direct, transparent, awesome blog about how his family finances their early retirement. They go so far as to publish their tax returns online to show others how they go about saving money. Great resource.
I quit working for Fisher Investments in early 2011, more than five years ago. Julie did the same. I haven’t worked for anyone else since. Julie did two more years in the corporate world leading up to Paavo’s birth. During these past five years, our net worth has grown and our time spent working has been minimal. We have hiked the Appalachian Trail, the Colorado Trail, and the Continental Divide Trail. We’ve ridden bikes down the west coast of the United States. We’ve traveled to different continents and learned a new language. I even became a Registered Nurse! We have done a lot in the past five years, we’ve become wealthier, and we’ve worked less.
The plan has been working.
I started working for Fisher Investments in my early 20s after college. One of the first things I learned as an employee there was a fact that would change my perspective on finance for the rest of my life. A simple story highlighting how people with money can make money with the money they already have was the gist of it. It was something along the lines of “we manage a portfolio worth $1 million dollars on average per client. After fees have been paid, average portfolio values were up 33% for the year.” That meant that the average guy with a million bucks had an extra $330,000 by the end of the year simply because they had the million dollars to start with, and they invested it well. Wow. Mind blown! Now, I just needed a million bucks so I could do the same.
In 2007 I was offered a great job (again at Fisher Investments – I quit and then came back). In taking this job, Julie and I went in with the mindset that I would work hard for a minimum of three years, save as much as possible, and then after three years, I would be free to decide if I wanted to continue working or not. Julie also got a job at Fisher during this time and together we socked away money, investing in the stock market throughout the big downturn of 2008 and throughout the early rise of the current bull market. We made our three year goal, and shortly thereafter, after building up our “Freedom Fund”, we were finished.
To summarize, we worked hard for a relatively short time period, we saved roughly 80% of our earnings – our biggest expense each year was federal income taxes, and this expense was bigger than all our other yearly expenses combined, we invested the money in stocks (exchange traded funds comprised of stocks to be specific), and then we stopped working.
That’s not the end of the story though. First, we didn’t save a million dollars. We didn’t even save half of that. But we had a nest egg. We had retirement accounts, taxable accounts, and we had cash for adventuring.
Fast forward to 2016. We now have a baby, Julie isn’t working, and we’re currently living in the French Alps in an AirBnb apartment. This works because we have some cash inflows (they don’t equal the outflows) and we have a nest egg that keeps growing.
I started a small business. I’ve been a long distance runner my entire life, enough to be considered an expert on the subject. I also like working with people. A running coaching business was a natural fit. I have a good group of runners that I currently work with and I can do this work from anywhere in the world. It’s a decent income and covers most of our bills. It also is not a huge time commitment.
Julie has written books that are sold on Amazon, providing us with a steady stream of passive income. We occasionally look at the reviews and how the books are doing in the Amazon rankings, but for the most part we don’t do anything with this stuff. People read them, most people enjoy them (the ones that don’t will be sure to say something about it!), and we get a monthly deposit from Amazon in our checking account.
The blog doesn’t make much of any money yet, but with the various affiliate programs out there, we earn small amounts that buy dinner here and there! Amazon has a program that pays us whenever someone gets to the Amazon website via our website (clicks one of the links we put up) and then buys something. Traveling Mailbox pays us for any new members that click to their website and sign up via our page. Similar deals are out there for AirBnb, Uber, and Guava.
Our investments are what cause the net worth to keep going up. They also serve as a safety net and as a means of balancing things out when cash outflows are greater than cash inflows. We follow the general rule of not taking more than four percent of our assets from our investments annually to increase the odds that we don’t deplete our portfolio. In reality, we’ve taken minimally from our investments and they’ve benefited. And over time, if we can continue this pattern, the magic of compound interest should hopefully make our portfolio, and hence our array of life choices, all the more varied.
I haven’t written this to brag or boast. I’m trying to be succinct and direct to show that this sort of thing can be done financially. I’m also not giving advice here. We’re happy that we came up with a plan that has been working and we continue to try to find ways to maximize our assets. There are so many rules relating to taxes, and there is plenty to learn about investing and the markets, that we know that we’re not experts on this. We also know that there are ways to play the financial game that work for us and that allow us to spend our time doing the things we value most in life. Like right now, as I write this, our beautiful son Paavo (8 months old) is snoozing at my side. We spend full days with him everyday (this can try our patience at times). Time is valuable and with the balance of lifestyle and investments that we’ve come up with, we have been able to use our time for the things that matter most to us.