In my last article, I wrote about how the journey to early financial independence involves a lot more effort than most realize. Having energy, motivation, and big dreams is great for getting started, but it won’t be enough to get you to the finish line. The reality is, investing for early FI takes quite a bit of work, and it requires even more time before you start seeing noticeable results.
I’m on Year 3 of the journey to early FI, and I’m slowly approaching the finish line. On a good month, my semi-passive income easily exceeds my monthly expenses, with ample room to spare. I’m getting closer, and it’s a wonderfully liberating feeling. However, I’ll be the first to admit that things didn’t always come so easy. There was a stretch of time, when I first got started, where I felt like I was making almost ZERO progress…
Early FI… What’s it Feel Like?
Do you want to know what investing for early FI feels like? In my mind, watching your investments grow from ZERO to SOMETHING is a lot like watching grass grow…
Sure, investing can be extremely fun and exciting the moment when you decide to take that first step… But just like with starting a new hobby, or running a marathon, the initial surge of energy soon gets dissipated and gives way to monotony. For most people, I would estimate that buying stocks is fun… for the first 5 minutes or so. Afterwards, it”ll feel more like a routine than anything else.
But maybe you get excited about the little things? Perhaps you have the right personality for investing? If you enjoy seeing small dividend deposits being made to your brokerage account (a few dollars here and there when starting out), you’re PLENTY cut out for the investing game.
For myself, when I first got started in dividend growth investing (DGI), I’ll admit that progress came pretty slow at first. However, seeing increasing income being routinely routed into my brokerage account each month NEVER got old. I LOVED seeing the dividend distributions on a regular basis, and the incremental progress made got me super excited.
Dividend Milestone: First $200/month Payout: September 2012
Unfortunately, not everyone will have the same viewpoint when it comes to investing. Some people are less patient, and don’t like taking the tortoise approach to wealth building. For these folks, investing in growth stocks almost seems like a better idea since the inherent volatility of these investments can potentially get you there so much faster…
Growth stocks can help you become wealthy… and you can get there quickly if you keep hitting home runs with your stock picks. But unless you later transfer your capital gains into investments that pay you back actual income, you’ll never be financially independent. Growth stocks themselves will never actually put any food on the table (without you having to sell the underlying asset).
And this is how it goes… for awhile, or a very long while. You keep on investing and re-investing your capital into buying more and more income producing assets. Month after month, year after year. There really are no shortcuts to building wealth. Again, like running a marathon, or climbing a mountain, most of your journey will be spent simply covering more ground.
These days, I invest my capital into buying rental property. In a good year, I might be able to purchase 3 homes (2013). Since it typically takes one month to close a property, you could say that investing is only “exciting” for me three months out of a given year. So, 25% of my year is fun and the other 75% is nose-to-the-grindstone hard work… 3/4 of the time, I’m simply saving up more funds for the next investment.
How exciting, right? 75% of the time I’m just watching grass grow… And any fruit that springs up from my garden, I’m not even allowed to eat! Nope, I can’t touch it until the time is right…
Like I mentioned in the last article, getting to early FI requires a lot of consistency and patience. You have to keep on investing, rain or shine. It can take years before you start to notice any substantial returns, so it’s no wonder why so many aspiring investors quit prematurely.
If you can’t learn to become a disciplined investor, you’ll never make it to the finish line. But if you can even get just half way to your endgame, it’ll be totally worth it.
Trust me, once the compounding has been given enough time to season, investing can become a total addiction — it becomes THAT much fun!
Today, I own five rental properties and seven units. I always look forward to the first of the month because I know that I will be receiving two deposits from my Bay Area properties (2 units) that total $4,280 in gross rents. Not to mention, I’m still working the 9-5 gig, so I also get those bi-weekly paychecks. Towards the end of the month, I receive two additional paychecks — one for my Chicago properties (4 units), and one for my Indianapolis investment (one unit).
Here’s Chicago for April 2014:
For April 2014, I’m expecting $3,939.20 in semi-passive income from Chicago. This net income doesn’t account for PITI (principal, interest, taxes, insurance), but to me, it’s still a large chunk of change coming in.
The above statement is provided to the reader purely as a visual aid. This is the EXACT statement I monitor on a monthly basis, and what gets me excited near the end of the month. As mentioned above, if you stay consistent and patient with your investing, the numbers start to add up over time… If you keep on acquiring and stacking more assets, the cash flow just gets larger and larger… What better feeling can you experience as an investor, than to have your bank account constantly being bombarded with income checks coming in throughout each month?!?
Indianapolis should bring in $967.50 before PITI. Adding up the five rental properties, this is over $9,000 in gross income. On a good month, after all expenses, the cash flow should total over $3,000.
As someone who’s getting closer to becoming financially independent, I am simply sharing my own datapoints to give readers an idea of what’s possible if you stick to your gameplan. I don’t claim to have all the answers… I most certainty don’t. However, I do know that real, tangible results do start to manifest themselves into something more substantial if you just keep on investing…
Before long, investing will no longer feel like watching individual blades of grass sprouting from the ground up. Instead, you’ll have a garden full of fruit trees at your disposal; each one giving off more fruit than you know what to do with each month. That’s a wonderful problem to have, and one that I hope to run into myself someday.
So, just keep at it! Stick to your investment plan and know that better days are just around the corner. Success breeds more success. Like a positive feedback loop, the amplitude of your gains will just keep magnifying themselves until your results are off the charts.
Lately, I’ve been networking with other more successful investors who have goals of acquiring a new rental property each month… For some investors, the goals are even loftier, and these people want to buy one new property each week! I know I have a long ways to go before I can reach that level of success, but even my mild victories are encouraging me to keep on investing.
Like most things worth accomplishing in life, progress always starts SLOW. Financial freedom is no different, and it’s because the initial results come so agonizingly slow that most people end up quitting prematurely. In today’s instant gratification society, everyone wants results YESTERDAY! It takes a whole different type of mindset to succeed as an investor; you must learn to be patient! Good things come to those who wait. If you can train your mind to enjoy the small, individual victories (those initial dividend payouts coming in each month, for instance), you’ll have a much better chance of enduring the grind and reaping all the BIG rewards later. Yes, investing is slow and boring at first… but keep at it, and you’ll become wealthy and financially free. Then, the real fun will begin!