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I vividly remember struggling with money at university. My apartment was paid for, but I supported myself otherwise. I had a part-time job at a computer lab that paid $4.25/hour. From this money, I had to buy food and everything else.
My diet suffered the most. I’d buy the cheapest tomato sauce and cook a huge batch of noodles on Sunday evening. Then, I’d eat spaghetti all week. Every week. Lunch was peanut butter and jelly sandwiches. All week. Every week.
My food drought ended when I started working a real job after graduation. The first thing I bought with my first paycheck was a pound of ground beef.
Twenty Years Later
At the time I bought that pound of ground beef 20 years ago, life was a lot different:
- Debt: I had so much debt that if I was in a Harry Potter book, my name would have been Dumbledebt. That was a horrible joke, but I’m tired. Forgive me. Anyway, I was in the hole to the tune of $60,000 (50K in student loans and 10K in credit cards). I felt buried. Now, my net worth sits at $2,300,000. Life is good.
- Sloppy Joe: With that first pound of beef, I made sloppy joes. That was one of my most memorable meals of all time. And, I still love sloppy joes to this day. My debt may be gone, but my shitty tastes still exist.
- $37,000: My first job paid me around $37,000/year. I felt that I was making loads of money. This past weekend I was at a community college and glanced at a job board for students. One part-time student job offered pay of $18/hour or about $36,000/year. Sigh…
Fast forward 20 years and I’m now done with formal work. Despite not having a job, this has been a lucrative month:
- Trailer park (elevated living estates to the politically ultra-correct): $12,867
- Syndication deals: $1,500
- Coworking space: $1,000
- Mortgage notes: $500
- Private loan: $293
That is a lot of money to make in one month. And I’m not even including blog money (it isn’t much) or wife revenue (it’s a bit healthier). Also, the month isn’t even over yet.
And these income streams will continue to grow:
- Trailer park: We still have elevated living units for sale and four lots to develop. The park won’t hit its full money-printing potential until late 2020 or 2021.
- Syndications: I just signed up for my biggest syndication deal yet ($100,000) and it will start paying out shortly. The others will continue to increase payments as the syndicators rehab the properties and raise rents.
- Coworking space: We’re growing memberships and improving the space. Warning! Shameless (and idiotic) plug ahead:
And then there will be new income streams. Mindy and I just bought another home and will rent our current one out. I’ve thought about starting another small business. I have a friend that I may partner with who wants to buy properties for vacation rentals. On and on.
What we’re doing is building momentum. We’re far more interested in making a lot of money long-term than generating short-term cash flow.
And no lifestyle inflation over here either. We’ve spent $3,782 in October. The surplus for the month is over $12,000.
Just when I need money the least, we have more of it than ever.
FIRE Is A Positive Feedback Loop
I first learned about positive feedback systems in university when studying the estrogen cycle in human physiology class. From Wikipedia, a positive feedback system:
Positive feedback (or exacerbating feedback) is a process that occurs in a feedback loop which exacerbates the effects of a small disturbance. That is, the effects of a peturbation on a system include an increase in the magnitude of the perturbation.
What the hell does that mean? I’ll lay it out with a simple example:
Imagine your thermostat breaks and works the opposite of how it should. Instead of the heat coming on when it gets cold, it comes on when it gets warm. So, the hotter it gets, the hotter it gets.
FIRE helps create a positive feedback loop. FIRE gives you the gift of time. Time leads to money which frees up more time which makes more money:
Here are some examples where my freedom has contributed to my bottom line:
- New house: It took a couple of years of diligent work, but Mindy and I just scored a spectacular deal on a home. We expect to make at least $150,000 in tax-free gains when we sell it.
- DIY fun: This new home has a pool that needs repair and a furnace that needs to be replaced. The quotes that I received for the work were $20,000 and $6,000 respectively. One of the guys who gave me a pool estimate flat out told me that ‘the job would be $5,000 if I lived in Florida where there are more pools and less competition for labor.’ I did a load of research and calculated that I could do the pool repairs for about $2,000 and replace the furnace for under $2,000. I’ve never done either job, but I’m confident that I can complete both and not drown or blow myself up.
- Entrepreneurial adventures: I wouldn’t own a coworking space or trailer park with a job.
Not working frees me up to do what I love. It just so happens that some of the things I love to do like building things and farting around with real estate have the side-effect of making more money.
This is why I don’t worry about the 4% Rule, safe withdrawal rates, or running out of money. My income as a software developer was healthy, but I see a time when money from all of my FIREy activities surpasses it.
Of course, this won’t work if you plan to sit on the couch in pajamas and eat Cheetos. However, if that’s your plan, you should just stay at your job anyway. But, if you’ve saved enough to retire early, you’re probably a driven person who would feel miserable living a life of leisure.
The Greatest Luxury
The greatest luxury in life is time. It’s hard to truly appreciate it until you have it. Or have lost it.
The confines of a busy life constrict our time. And when we don’t have time, we don’t have mental bandwidth. When we don’t have mental bandwidth, we don’t come up with ideas or create. Time to sit around (or walk) and just think is highly underrated.
I’ve never considered myself to be a creative type of person but now that I have time, the huge list of things I want to do grows longer every day.
Because of financial independence, I believe that I’ll end up richer by measure of bank account.
However, I’m already richer in personal development and experiences which is far more important.
Life is good.
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