Early FI – My Revised Thoughts (Nine Months Later)

by FI Fighter on March 24, 2017

in Thoughts, Updates

In the beginning of 2012, I first started blogging about my own personal journey to early financial independence. In 2016, I quit my corporate engineering job for good and set sail out to Asia to live out a dream that had been inculcated in my brain as recently as 2011.

Not too long ago at all

So, in a way you could say I went from Inception -> End Game in a span of 5 years.

Throughout the journey, I’ve discovered what works, what kinda works, and what doesn’t really work all that well to help a person turbocharge their progress up the early FI mountain…

Just like with essentially all my articles on this blog, I’m just going to lay it all out there, let it rip, and share some raw thoughts without adhering to any set gameplan or script… I’ll be politically incorrect, as always.

Anyone who has been following along for a few years now, I’m sure that’s just the way you like things…

So, here we go.

Mindset is Everything

When it comes to early FI, I think that probably 99% of the battle is mindset. No, I’m not about to bore you by throwing out some inspiring but all too commonly cited quotes out there to try and motivate you…

Ok, fine, just this one…

I’m certain you all don’t need many more quotes, and from my own personal encounters with readers all this blog, I know for a fact that so many of you are even more hardcore and passionate about early FI than even myself.

 

Motivation is seldom ever the problem…

 

But here’s what I mean by mindset.

 

You have to approach life with an open mind. Anyone who wants to retire before 40, 35, 31 (like I did), or even earlier can only realistically do so if they venture off the beaten path and do things that are drastically different from the masses.

If you keep doing what others do, you’ll just keep on getting what others get…

 

And what’s that?

 

Working 9-5 until 65… or later.

 

Work Mindset is:

  • Realizing that SMART work trumps HARD work all day, everyday… Hard work ALWAYS gets delegated to those who are overworked and underpaid… That’s never the role you want to find yourself playing as an employee.
  • Realizing that your employer will NEVER pay you your fair market value! Accept this upfront and use it as a “chip on your shoulder” or “edge” to get far, far ahead.
  • Realizing that your employer probably doesn’t care about you at all (business is business) and will only pay you enough to keep you content enough from looking for offers elsewhere and leaving.
  • Realizing that it’s far better to operate from a position of strength than one of weakness. So, if you want a big pay raise/bonus/stock options/etc. then go out there and fight for it! Secure as many offers from the competition as you possibly can. It’s NOT what you know! It’s how valuable you’re perceived to be by someone else… It’s human nature to want things (people) who are in high demand from the marketplace; make yourself a highly coveted and sought after commodity. So, get out there and network your ass off! Make as many valuable and important connections in your industry as you possibly can; this is the aforementioned SMART work. Don’t ever be that employee who seems desperate enough to do anything to retain their job… It’s also human nature to not find “clinginess” an attractive and desirable trait. If you seem too desperate and clingy, you’ll most likely be the first person canned when the next round of layoffs commences.
  • Realizing that the sooner in life you can be an entrepreneur and your own boss, the better… You’ll thank yourself later on for taking this step (most likely).

 

Savings Mindset is:

  • Realizing that housing (rent/mortgage) is the greatest expense you’ll ever have to deal with in your life. Saving costs on this MAJOR line item will turbocharge your early FI progress more than ANYTHING else combined! House Hacking is the ABSOLUTE Key to early FI! Rent out a room (or two, or three), or be the one who rents out a room… Live with friends, co-workers, family, strangers, whatever it takes to minimize the housing expense as much as possible!
  • Realizing that compounding is a powerful force and it impacts savings just as much as investing. You can’t invest what you don’t have saved up…
  • Realizing that social status, popularity, and approval by the masses will do jack shit in helping you achieve your goal of early FI. In America, if you live at home, you get the “loser status” label designated to you by society, especially if you’re under the age of 30… How do I know? It happened to me! Big deal. Swallow your pride. Short-term pain for long-term gain! I lived at home with my parents/family until I was 26 years old (before moving out to Newport Beach) and was ridiculed by everyone… This was my own way of “house hacking”. YMMV. With the amount of money that I saved on rent, though, I was able to put together a downpayment for my first rental property in 2012; my leveraged total returns on that property are in excess of 500% now… Yes, that was a total game changer for me which made early FI possible! These days, I travel around the world and seek out adventure. My former critics, naysayers, and haters? They are all still working the good ol’ 9-5, trying to make ends meet… and they are all now telling me how lucky I am!!! WTF!?! Anyway, I’d say my decision to go through my 20s as a “loser” worked out pretty well, all things considered!
  • Realizing that the little things don’t add up to much. Don’t deprive yourself a daily latte if that is what is needed to satiate your mind, body, and spirit. Contrary to popular belief, these little expenses seriously don’t add up to much at all… If they do, you really need to focus on finding ways to boost your earned income. Savings is an inherently defensive part of the gameplan. For early FI, though, it’s not only earned income and savings that matter, but investing, which will become the bulk of the offensive part of your gameplan that matters the most of all (see the much lengthier thoughts below)!

 

Investing Mindset is:

  • Realizing that the markets are grossly inefficient and there are ALWAYS good deals to be found… You’ve just got to be open minded (be an agnostic investor, first and foremost) and know where to look for opportunity. If you’re flocking to assets and investments where everybody else is currently residing, look again, because that ain’t the best place to be to maximize gains (alpha).
  • Realizing that investing/speculating will never be risk-free, 100% certain, or a sure thing. So, if you’re going to play, you better do so at a time when the odds are in your favor as much as possible. From a risk vs. reward perspective:
  1. Risking 20-30% of your principal to chase after overpriced assets that could realistically and conceivably return no more than 5-10% gains in the future is a losing proposition!
  2. Risking 50% of your principal to chase after undervalued assets that could realistically and conceivably return 500% gains in the future is a winning proposition!
  • Realizing that total returns are the name of the game and key to reaching early FI. Dividends/cash flow/passive income ONLY matter when you are already in early FI! If you want to get ahead of most everyone else and actually get to early FI, focus on accelerating and compounding your net worth. Net worth can ALWAYS be converted to cash flow later, but not the other way around!
  • Realizing and accepting that you will never win every trade or investment. No baseball player can consistently bat 1.000 and no investor succeeds with every single one of their investments. You will lose money on lemons many, many, many times, over and over, again and again. It’s all a part of the process. When an investment doesn’t pan out, ask yourself objectively, “If I had more capital available now, would I be buying more of this asset?” If the answer is a definitive “NO“, cut your losses and move on. Don’t get all emotional about it…
  • Realizing that investing success is NOT due to brains, high IQ, intelligence, street smarts, or any of that narcissistic garbage… Check your fucking ego at the door. When it comes down to it, markets move and turn on a dime by macro forces that are beyond our control. The short-term is ruled by noise and the day-to-day price action resembles something out of Quantum Mechanics. The BIG PICTURE, though, is ruled by Macro Investing, which is something I will never pretend that I have any say or influence over.
  • Realizing that the markets are also ruled by FEAR and GREED, and these powerful human emotions will cause markets to undershoot severely and overshoot magnificently. You better have a full grasp of the following concept if you want to succeed with investing long-term: “Buy low and sell high.” All asset classes go up and they all go down. There is no such thing as straight-line perpetual growth (contrary to popular belief)!!! Your job is exploit these peaks and valleys and to get LUCKY! How do you get lucky? Luck is when opportunity meets preparation. I employ Blind Dart Investing myself. People think I’m trying to be “too fancy” and trying too hard to “time the markets”. I’m not. I simply take what the markets give me.
  • Realizing that when you are indeed “buying low”, practically nobody will agree with your investment thesis and the mainstream media, your friends, co-workers, family members, neighbors, bloggers, etc. will all be telling you what a total idiot you are. It happened to me with Bay Area real estate in 2012. And then it happened to me again with mining stocks in 2015. In both cases, I ultimately ended up realizing over 500% plus returns on a few of these investments. If you give a fuck what other people are spitting in your ear, you’re doing it all wrong!
  • Realizing that to bet big on anything, you’ve got to have full conviction in what you’re doing. If you aren’t convinced in your investment thesis, you better do a ton more research before you invest with both feet! Again, check your ego at the door. Most people who presume to know everything about investing don’t really know jack shit about anything… Agnostic investors don’t rip on asset classes (unless they are ridiculously overpriced)! They know that there is a time and place for everything… Education is key. The more you learn about: real estate, stocks, bonds, precious metals, base metals, oil and gas, clean energy, etc. the more humble you will become, and as a consequence, you will learn to shut the fuck up most of the time so that you can learn even more.
  • Realizing that there is no such thing as the “superior” asset class. They all work. It takes a lot of arrogance to suggest otherwise. Think of each asset class as “an arrow in a quiver”, as billionaire Stanley Druckenmiller does. There’s a right time and place for each one. When in doubt, “buy the one that is low/lowest/cheapest/most undervalued“.
  • Realizing that market volatility isn’t always such a bad thing…. Without extreme fluctuations, how the hell are you even supposed to “buy low“? Don’t sweat volatility, sweat fundamentals… If an asset you own is selling off for no good reason, get greedy and buy more on the dips! On the other hand, if an asset you own is selling off because the fundamentals are deteriorating by the day (and you can’t see things improving in the short/medium term), cut your losses and abandon ship!
  • Realizing that holding on to crappy assets that are in the RED, hoping to one day break even can be a losing strategy! If it takes you ten years to break even again, you are shooting yourself in the foot BIG TIME by holding on for dear life! It’s called Opportunity Cost! Too many novice retail investors are too psychologically and emotionally frail to even fathom the thought of taking a realized loss… Pity. Holding on to lemons for too long prevents you from being able to redeploy capital into much better stories/assets that are currently available, or will become available in the future. Again, striking out is all part of the game. Just deal with it and move on. Don’t stay captive on the Titanic if you know the ship is going under! You win some, you lose some… But you can’t win the next round if your capital is trapped in purgatory!
  • Realizing the importance of investing in deep value and/or hyper growth opportunities really only come around “once in a decade/lifetime”. The best time to buy is when everyone else is sitting on the sidelines too paralyzed to make a move and valuations are trading at/near historic lows. In my experience, the absolute most difficult thing to do when it comes to investing is to buy low… Buying high is extremely easy, easy, easy to do… Which is why, right now, I’m avoiding: Dow Jones, S&P 500, Nasdaq, expensive real estate (e.g. Bay Area) like the plague… When everyone you know is keen on buying, the upside is minimal, so what’s the point? You never want to be the sucker holding the bag…
  • Realizing that markets don’t ring bells at the top or bottom… Otherwise, no one would ever be the aforementioned bagholder, right?!? And this also explains why not everyone you know is already filthy rich, retired, and living it up early FI style!
  • Realizing that you can make short-term money through trading, but long-term wealth is built mostly through buying right and sitting tight… The BIG MONEY is made when you feel like this: zzzzzzzzzz. It seems like everybody wants to make HUGE gains but almost nobody possesses even an iota of any patience. Call it the Age of Instant Gratification. Please realize that investing/speculating (especially on macro trends and directions) can take a ton of time… We are talking about years here! Maybe 3, 4, 5 years or even longer than that! If you have to monitor your investments every day (or every other day), you aren’t an investor, you’re a trader. Remember again, MONSTER-SIZED profits are made when you buy right, sit tight and do nothing more! The lack of patience is what dooms most wannabe investors/speculators!
  • Realizing that Buy and Hold Forever is NOT the only strategy and game in town that works! Buy and Hold Rentals can be an appropriate strategy for certain types of investors too!
  • Realizing that you absolutely must invest if you want to get to early FI! Most savings products pay next to nothing in interest and you’ve got to outpace inflation if you want to get ahead. With that said, I’m not one of those loons out there who believes someone needs to be invested in the markets 100% at all times! That’s just straight STUPID! Yes, you need to invest, but NEVER 100% at all times… Don’t underestimate the value of cold hard cash!!! When opportunity comes knocking and you have no cash… you’re powerless… and screwed!
  • Realizing that 100/100, when in doubt, stick to: QUALITY, QUALITY, QUALITY. Gradual, consistent growth provided by assets that sit on the back of strong fundamentals beats chasing after flashy hype stories that can only offer you a short-term rollercoaster spike up before inevitably having to give everything back (and then some) when the momentum fades out because they never possessed any REAL substance to begin with.

 

Life Mindset is:

  • Realizing that life is far too short to feel: miserable, unhappy, unproductive, and unfulfilled. Dream MASSIVE, instead!
  • Realizing that you only get one crack at this Game of Life. It’s not about your friends, family, co-workers, neighbors, peers, etc… It’s YOUR LIFE! Do what makes you happy! One day many years from now, imagine yourself sitting inside a movie theater and you are forced to watch a replay reel of your entire life. Make sure this will be a film you’ll be excited to relive and experience all over again and not one where you’re facking bored out of your mind because EVERY SINGLE DAY/SCENE is, “same shit, different day.
  • Realizing that the world is a BIG ASS PLACE and there are lots and lots of desirable destinations to visit and live in.
  • Realizing that the world has gone global these days… Almost everywhere you go, you will have access to: good food, quality entertainment, wonderful company, gorgeous weather, wi-fi, the internet, and most (if not all) of the trappings/desires you have back home… The rest of the world is more alike than it is different to where you are currently living. Don’t delude yourself into living in a bubble (especially a super expensive one)! You can have an AMAZING time almost anywhere on Planet Earth!
  • Realizing that you don’t have to live in your own primary residence. I own rental properties in the Bay Area, but I would never live in them myself (at least not now)! Why not? I can’t afford the mortgages! But my tenants can… and there’s nothing wrong with that. These days, I live my life out of a suitcase as a digital nomad. And I’m saving a boatload each and every single month on rent by doing that… Am I hurting my future self? Not really… After 30 years, I’ll also own my properties free and clear, like my old co-workers and friends… The only difference is that I’ll have let other people do all the heavy lifting for me… while I was off playing on the beach, or roaming around somewhere fun (and cheap).
  • Realizing that there are subtle differences to the Rules of the Game everywhere you go. As I mentioned earlier, many youth in America are just itching to move away from home ASAP after graduation to prove themselves as independent “adults”. Whereas in Hong Kong, it’s customary and common to find many generations of family living together under the same roof. From my own experience in California, if you’re out of school and still living at home, you are a “loser”. In Asia, that stigma just isn’t there… Further, in America, it’s normal to pay tax and tip, in addition to the bill, for any services rendered. In Asia, almost nobody pays tax and tip… Good service is expected because it’s assumed to already be priced in! What you see is what you pay (well, most of the times, as the fancier restaurants will usually add a small service charge). I remember this one time when I first arrived in HK and tried to tip the hair stylist… She raced outside the store to track me down so that she could hand the tip right back to me… She insisted, and kept accusing me of overpaying… She was mightily confused, to say the least! In America, everyone sweats over the price and affordability of health care… Maybe we even overthink things too? Because in places like Vietnam, everyone fends for themselves, even the elderly and poor… There’s no government assistance… Yet, these folks still find a way to adapt, survive, and even thrive. Adaptability is key… There’s no right or wrong answer. We are talking about REAL LIFE here, not some university course where they give you a grade at the end of the quarter/semester. The more you see, the more you know… and the more you realize you don’t know. But when there’s a will, there’s a way! Find your beach and the environment(s) that works best for you. Don’t “wait your whole damn life to take that flight…” I ain’t ever met anyone who travelled the world and later regretted it… Doubt I ever will either… No guts, no glory!
  • Realizing that the path to early FI can be achieved rapidly if you’re willing to work in an area where the Cost of Living (COL) is expensive (so that you can save up and invest as much money as possible), and then later being open minded enough to relocate to another area where COL is a lot more affordable (so that you can cut expenses as much as possible). My own strategy is to take advantage of “inflation hedges”. For example, the rent increases experienced by my local Bay Area properties easily outpaces the inflation felt in other parts of the world, like the Philippines, so my dollars go a lot farther with every increase. In other words, my cash flow rises much faster than my living expenses do since I’m earning my passive income in an expensive part of the world but I, myself, am living somewhere much cheaper! This is an alternative (and much less tedious) approach that one can use to achieve “lifestyle inflation” as opposed to fighting tooth and nail trying to climb up the corporate ladder in an attempt to earn a higher income so that you can have more spending money.
  • Realizing that the Foreign Currency (FOREX) arbitrage game can be used to your advantage, as a world traveller. For example, when the USD is super strong (like now), go outside the country and live it up to the MAX in countries where the local currency is relatively much weaker. When the USD comes crashing back down again (it’s inevitable, remember market cycles), it’s time to go back home to America for awhile… Again, this is just macro trends at work here (which we have no control over), so just stay aware of the markets, and adapt accordingly. Being open minded is so critical to reaching, sustaining, and maximizing early FI.
  • Realizing that you can achieve early FI at any point in your life… Before/after marriage. Before/after kids. There are no rules! When I reached early FI at the age of 31, I was a single guy with no kids!
  • Realizing that the path to early FI is non-linear! You can’t perfectly plan for everything! So, remember to smile and have fun every step of the way too! 🙂

 

 

Obviously, much of what I outlined above will never resonate with the mainstream or masses… But these are the thoughts and beliefs that have infiltrated into my head, and the ones I carry and think about on a regular basis. In other words, this is how I got to early FI and this is how I plan on sustaining early FI.

 

That’s all for now…

 

Fight On!

{ 16 comments… read them below or add one }

1 KeenanNo Gravatar March 24, 2017 at 7:10 pm

Great post FF!

Loved the positive you can do anything you set your mind to vibe throughout the article.

As a young engineer still in school, you have inspired me to think outside the box and strive for FI before I’m 30. Really appreciate all your posts and looking forward to the many to come!

Reply

2 FI FighterNo Gravatar March 27, 2017 at 9:16 am

Keenan,

Thanks for stopping by! Glad you are inspired and aiming to get to early FI before 30! That’s a huge goal, but you can definitely do it and it does you no harm at all to dream MASSIVE! 🙂

Engineering is a wonderful career and a highly lucrative one that can do wonders for turbocharging the early FI progress.

Best wishes!

Reply

3 CNo Gravatar March 25, 2017 at 1:08 am

Hey, stumbled upon your site just a couple of days ago and I must say thank you!!
You made me think a lot about my own ways and re-thinking my type to invest. I started my route to FI in 2008 and since having a family and a rather low wage after 9 years I own a portfolio worth 210K EUR.
End of 2016 I invested in some gold miners ans guess what – that was first time I noted there might be a style of investing superior to my buy and hold major dividend payers.
So thanks for opening my eyes, looking back, making me think again and looking forward again with a more open view!

From a cyclical perspective how much of move upward you think gold miners still have to go?
And besides miners what other assets you think are currently attractive?

Best from good ole Europe,
C

Reply

4 FI FighterNo Gravatar March 27, 2017 at 9:19 am

C,

In regards to gold miners, it’s anyone’s guess where we are in the cycle, but if I had to speculate, I would say it feels like the 2nd inning again of a 9 inning ballgame… Last September, the equities got really overheated, and I was guessing 3rd inning. We’ve corrected quite a bit since that time…

The thing about macro trends and cycles is that they can take a lot longer to develop and unfold than most investors have patience for… I wouldn’t be surprised if many investors/speculators have dumped gold and gold equities since they’ve been down/flat for over 6 months now…

But that’s why not many investors ever realize the big time gains… It’s not easy to hold on and wait.

I trade around the volatility with the miners, but i have Core Holdings which are Buy and Hold Rentals… I have no problem waiting 3-5 years for my thesis to play out.

Best wishes!

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5 JanNo Gravatar March 25, 2017 at 6:55 am

hi Jay, what are you buying lately, or are you sitting tight waiting patiently?
Thanks for your latest post!!

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6 FI FighterNo Gravatar March 27, 2017 at 9:20 am

Jan,

I haven’t been buying much, but I’m waiting and watching with interest… If we get another juicy pullback, I’ll definitely look to add more shares.

Right now, I’m eying Ivanhoe Mines (IVN.TO/IVPAF) again… If I can add to my position below C$4.00/share (where I sold previously), I’m all in!

Waiting patiently for good opportunities, otherwise I believe I’m well situated enough to play the next leg up.

All the best!

Reply

7 TawcanNo Gravatar March 25, 2017 at 10:30 am

Love it, raw and saying how it is. It’s so true about not deprive yourself on that latte and miss the big picture.

Reply

8 FI FighterNo Gravatar March 27, 2017 at 9:22 am

Tawcan,

Thanks buddy! It’s more fun, straightforward and practical when we keep things RAW right? I much prefer the .RAW format, and I think readers do as well! 😉

Yup, gotta keep the eye on the prize but remember to enjoy the journey and ride there as well.

Best wishes!

Reply

9 AndrewHNo Gravatar March 25, 2017 at 5:08 pm

Hi Jay, Great post! Really wish I would have found your blog back when you started. Great stuff!

Reply

10 FI FighterNo Gravatar March 27, 2017 at 9:23 am

Andrew,

Thanks! Hope you stick around as we venture forward. Should be lots of exciting stuff to write about in the near future!

Cheers!

Reply

11 Midwestern LandlordNo Gravatar March 27, 2017 at 7:43 am

Excellent blog post Jay. Glad you are enjoying the FI life. It is pretty sweet if I say so myself. A lot of great points and the following one certainly resonated with me how I feel about things:

“Realizing that the sooner in life you can be an entrepreneur and your own boss, the better… You’ll thank yourself later on for taking this step (most likely).”

Being an employee to me is a dog eat dog kind of existence unless you are lucky enough to be in the executive class. You can start with taxes. Why does Warren Buffet’s secretary pay a higher income tax rate then he does? He is the billionaire. Real estate is a great hedge for taxes as well. The bottom line is to really get ahead one needs to acquire ownership and all of the advantages that come with it.

Reply

12 FI FighterNo Gravatar March 27, 2017 at 9:27 am

Midwestern Landlord,

Thanks! Yup, absolutely, there’s nothing better than flipping the script 180 degrees and having all the power as opposed to being the employee who feels like someone is holding a gun to their head (come layoff and yearly review season). When you are a landlord, and you’re operating your business efficiently, your tenants are more afraid of you then you are of them… As someone who once spent a decade working for Corporate America, I gotta say it’s quite a liberating experience to not feel the pressure, fear, anxiety, stress, etc. for a change!

And your point on taxes can’t go overstated… Unfortunately, many who have never invested in real estate just don’t get it… Real estate investing is one of (if not the best) ways to minimize/eliminate taxes… The rules definitely aren’t fair and they favor the wealthy… If you can’t beat the system (or change it), why not use those very same rules to your own advantage?

Take care!

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13 alNo Gravatar March 27, 2017 at 10:13 am

You are FI at 30 if you manage to stay away from your expensive living area in CA, as you said. Why didn’t you toil 5 years more in your cubicle in CA, to be able to be FI in your expensive living CA area too ?

You are 31 years old, and now a rich man. Plan to start a family down the road ? Or simply wander around for the rest of your life? What goals have you now, besides smartly managing your pile of money, making more of it while seeing the world, world that is more and more looking alike everywhere you go ?

I love reading what you write. It is a breeze compared to the stale stuff out there.

Reply

14 ChingjuNo Gravatar March 27, 2017 at 6:44 pm

hi FI fighter! I really love your lifestyle and working on my ways to achieve it too. Some questions for you: (if you have already posted the answers please point me to the post)
1. Looking back, which investment was the best and the worst?
2. Would you buy a property that doesn’t cash flow much but likely appreciate or good cash flow but little to no appreciatation?
3. How much percentage of cash do you recommend to reserve at a time, say 80% real estate 20% cash?
Thanks!!

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15 Dividend DiplomatsNo Gravatar April 1, 2017 at 3:12 pm

The section about being an employee resonates with me. The lessons you wrote about are realizations I have had over the last year or so. No matter what, at the end of the day, you are an employee. Nobody is irreplaceable. You aren’t the first high perform to leave, it is stuff that is going to happen and the business will keep on moving with or without you there. It sucks, especially if you have a high motor. You want to feel like you are irreplaceable and that by working hard, you are separating yourself from the pack and showing why you are the best. But unless you are an owner or your hard work puts more skin in the game now or in the foreseeable future, chances are that you will be just viewed as an employee. Man, thanks for the great read today! Hopefully that makes sense.

Bert

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16 SundeepNo Gravatar October 7, 2017 at 12:02 pm

Super late to this post as I, currently catching up on almost a year of back posts, but had to comment on how incredibly valuable this post is to anyone on the path to FI…good work and I can’t wait to finally catch up in the posts to see where you’re at today!

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