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Early FI: An Alternative to the Marathon Approach

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Everyone likes to say that the path to early FI is a lot like running a marathon… You know — Long, boring, arduous, and challenging. To succeed, you’ve got to have a lot of: persistence, determination, resolve, dedication, etc. etc…

As the mainstream media likes to tell us — You can’t time the markets, so don’t bother to try! Pick a boring index fund out and just keep dollar cost averaging (DCA) into it and stop trying to be all fancy! Just stick it out for 30+ years and you will make PROGRESS and reach your long-term financial goals!

Sounds pretty good on the surface, right?

Sure, I think conventional thinking will work out just fine for your Average Joe…

But what if you are hard-headed like me and desire a little bit more? What if you don’t want to retire at age 65+, but actually want to get there a lot sooner? Like say before 35… Or in my case, in the very near future…

Well, to achieve what others don’t, sometimes you gotta do what others won’t!

I’m not saying I’ve got all the answers, but so far in life, I’ve succeeded because I’ve been willing to think outside of the box.

Think Different

Nobody on CNBC is going to tell you to “back up the truck” at the bottom of the market… They aren’t going to encourage you to house hack your way to financial freedom… You aren’t gonna hear anyone lecturing you about the importance of being a total tightwad well into your 30’s and embracing lifestyle deflation.

And even now, they will never tell you to get out of the markets and focus on preserving capital first and foremost…

Never in a million years…

You know, once I started hanging out and listening to people who were actually “living the good life”, I experienced my own lightbulb moment and things got a whole lot easier.

Like, the first time I actually paid attention to my brother and experienced travel hacking for myself… For instance, flying around the globe for just $132.40 really can’t help but to blow open your mind…

A whole new world of infinite possibilities…

Living_Proof

Enjoying lobster and caviar, the finest meats, drinking champagne, relaxing in a nice, comfy bed, and taking a shower? While everyone else who is flying economy is utterly miserable…

thaia380 (8 of 14) LH 747-8i (13 of 16) LH Terminal (34 of 39) thaia380 (1 of 9) LH 747-8i (1 of 17) Travel_LP1

Mind blown!

Thanks a lot, Living Proof.

Hey, don’t get me wrong, of course I wish everyone could enjoy the good life! And my brother and I have helped many people travel hack over the years… But the majority of people who miss out on these wonderful experiences are the ones who are closed-minded and can’t imagine such possibilities…

There’s this whole archaic notion that we’ve all got to “pay our dues” before we can get to the good stuff in life…

Again, I’m a really frugal guy, but I ain’t turning down first-class if I can get it! 🙂

A New Script

So, if you’re going to buy into the mainstream way of thinking, well, then you probably will just end up working until 65+

Some of the things that I’ve done will never resonate with the masses…

  • I love real estate but I refuse to take out a mortgage to pay for my own personal residence (this has to due with the fact that I live in a very expensive city. In other regions like the Midwest, housing is affordable and its cheaper to own than to rent; house hacking wouldn’t be as necessary. Always adapt to your own situation the best you can!) .
  • I think 30 year fixed low interest rate loans are a gift from God. So I don’t believe in stopping at just 1…
  • I don’t swear allegiance to a single asset class. I love them all (index funds, hyper-growth momentum stocks, dividend stocks, real estate, commodities, trading options, etc.) but feel like there’s a time and place for each one.
  • I believe appreciation and capital gains are the key to early FI; passive income isn’t necessary until later, to sustain early FI. So, focus on cash flow, of course, but you don’t have to overindulge in it, if you get my drift… As it pertains to getting to early FI, net worth can be potently converted to cash flow, but it isn’t effective the other way around..
  • When it comes to investing and getting to early FI, deep value trumps all. Period. If I can’t find it, I’ve learned not to play… I don’t mind taking my chips off the table and going home.
  • I’m not a binary thinker. I can wrap my head around being simultaneously both a bull and a bear. It’s NEVER all or nothing, 0’s and 1’s with me… I was previously long on TSLA (2013), and now I’m short TSLA…

 

Another thing, right now, I’m totally calling for a market crash/correction in the near future, which is why I’m essentially checked out of the casino stock market (gold mining stocks really shouldn’t count).

Again, not a popular thing to do!!!

For whatever the reason, everyone likes to believe that the path to early FI can ONLY be achieved through a non-stop, constant struggle up to the top of the mountain.

We view early FI like we would a marathon.

Keep chugging along! Don’t stop! Never slow down and rest! You just gotta keep at it… Even if you want to slow down, you better at least keep walking forward.

 

No, you don’t…

 

I’d rather focus on short-cuts…

The Lazy Way to Win

No doubt, I’m the type of guy who’s going to give it my best efforts, but I ain’t going to run myself into the ground either… On this “marathon” that is early FI, if I see thunderclouds fast approaching, I’m gonna check out of the race, into a nice hotel, and I’m gonna: massage away the pain, take a hot shower, eat a nice supper, enjoy a warm cup of tea, take in the view, and get some shut eye…

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If other people want to keep marching along to “make more and more incremental progress”, so be it…

Once dawn breaks, I will re-emerge from my wonderful slumber: rested, recharged, and good to go!

On the way out of the hotel, I’ll probably notice a few early FI enthusiasts who were too stubborn to call it a day, despite the heavy rainfall, and kept right on jogging through the freezing night…

Many of these runners now have: severe aches and pains, limited energy, are outright miserable, and just barely hanging on…

Sure, I may have lost lots of ground because I was being complacent for a good 8-10 hours, resting away… But again, if you know how to think outside of the box, then what’s the problem?

As expected, there will be a taxi cab fast approaching from the distance… There always is! 🙂

While most everyone else will keep on insisting to “work harder, keep pushing onward”,  “lazy” early financial freedom fighters like myself will say, “Screw that! Someone go holler at that cab!

We will hop aboard and instruct the driver to make haste!

No, he probably won’t be able to take us all the way to the finish line, but probably somewhere close enough, within striking distance…

While most everyone else is still focused on “slow and steady”, we will finally exit the cab just within an arm’s reach of the mountain top.

Regardless of whatever preconceived notions of early FI you may have, the reality is this — It is very possible to reach the top of the summit in just 1-2 market cycles.

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Some of my mentors did exactly just that.

 

Shortcuts to early FI do indeed exist!

 

But if you are forever stuck in your ways and refuse to open up your eyes to the many possibilities out there, you will never notice them.

As for the slow and steady approach? My belief is this — Again, there is a time and place for everything. But sacrificing 30%+ of your principal to try and eke out 3% returns in the late innings is a fool’s game. If you see a storm fast approaching, why are you not seeking out shelter?!?

No one says you have to liquidate all your assets…

Again, we don’t live in a binary world; this doesn’t have to be an all or nothing proposition!!

Just don’t underestimate what strong defense can do for you either… Cash gets a bad rap for earning 0% interest… But how can you pay the cab driver if you have no funds?

And if you miss the early morning cab? No worries, there’s always another one just around the corner!

Patience will be rewarded… 🙂

 

Fight On!

{ 9 comments… add one }
  • Financial SamuraiNo Gravatar February 7, 2016, 11:18 pm

    Sounds like you will finally be leaving your job and enjoying the early retirement life with the rest of us!

    It’s worth it!

    • FI FighterNo Gravatar February 8, 2016, 10:39 am

      Sam,

      Yup, soon enough, hopefully…

      Sorry to keep you all waiting, but I still got some loose ends to tie up first, which will take some time…

      Take care!

  • Midwestern LandlordNo Gravatar February 8, 2016, 10:31 am

    A lot of really nice points. The traditional method to retirement to me just takes too long. Time is a finite resource and I really did not want to wait until 65 to quit the rat race. So we have to be unconventional. That is the only way. Being a landlord is unconventional. A small amount of people actually do it and a lot of people do not want to do it. And I understand because it is a business and you have to deal with people which can sometimes be unpleasant. But working at a job with no control to me is extremely unpleasant so I accept the challenges that can arise from being a landlord. I always found it odd that my coworkers would put in a lot of time at the office, deal with the politics, etc but did not want to touch rental property with a 10 foot pole because it might interrupt their weekend.

    I also agree with you that you need to be flexible based upon your geographic location. House hacking and not buying a personal residence for you makes complete financial sense due to the prices in your area. Not so much for me. I can see why you subscribe to appreciation and capital gains being the key to early FI and not necessarily immediate CF. Again, you living in the Bay area plays a major role in this. I became FI early strictly from CF and not appreciation or capital gains. I essentially replaced my job income from rental income. But I recognize that the reason why this occurred has a lot to do with my market area. I see very little appreciation in my market but the cost of living is relatively low and the CF is relatively high on rental properties when you take advantage of low rate 30 year fixed interest rates on Class A rental properties.

    • FI FighterNo Gravatar February 8, 2016, 10:47 am

      Midwestern Landlord,

      Very nicely stated — The path to early FI is all kinds of unconventional.

      I’ve felt the same way with my co-workers, and when I step back, I do realize that once upon a time, I thought much the same way they did. I really truly believed that my path to salvation was through working harder at the 9-5… It wasn’t until I really became a landlord that I realized how flawed traditional thinking really is… The reality is, unless you are FI, you are a wage slave.

      You will never beat the system by playing the role of model employee…

      As for cash flow/appreciation, yup, my take is obviously very slanted towards appreciation since I live and operate in such a market… It’s very tough to generalize things… But for the most part, I think the bridge between the two is through deep value.

      If you buy during a downturn in the Bay Area, deep value gives you a ton of appreciation upside potential. You can later do cash out refis like I did to access equity.

      In a cash flow market, it’s not much different… Appreciation won’t be as intense because the correction downward also wasn’t as steep… Nevertheless, the best cash flow deals out in the Midwest also occur during periods of market liquidation (REOs, short-sales, etc.). Unlike in say California, you won’t need to do a cash out refi later to access equity b/c your cash flow is already so good on Day 1 (although you very well could and many do to scale quickly… in that sense we are agin talking about appreciation; through value add sweat equity)… However, unlike CA, much of the gains are also returned to you immediately through the form or 20%, 30%+ cash on cash returns, or 15%+ cap rates (which we would absolutely kill for here in CA). It may be debatable that Midwest properties are even more lucrative during a downturn!

      So, yes, I am generalizing a bit, but in both markets, if you buy deep discount, it’s easy to really pull away from the pack. In the Midwest, you’ll either supercharge cash flow or use the forced appreciation to grow your business/scale to unlock more cash flow (which is the best method to early FI). Out in expensive markets, you will make a ton of capital gains that you can convert into cash flow later.

      In the end (to accomplish FI), ultimately, it’s all about cash flow!

      Take care!

      • Midwestern LandlordNo Gravatar February 8, 2016, 11:02 am

        “I realized how flawed traditional thinking really is… The reality is, unless you are FI, you are a wage slave”.

        This comment is so good I think it needs to go up on my wall on a plaque.

        Really good point on getting extreme value. Extreme value in RE for me meant substantial CF returns, for you a combination with extreme appreciation. Either way, we substantially changed our financial futures by taking action. It allows me to do what I want, when I want. I am analytical so I enjoy the commentary on financial blogs (particularly yours). I can easily do this during the day as I please. That is what FI buys, time and choices. It is not the money we are addicted to, it is what it buys for us.

  • Rental MindsetNo Gravatar February 8, 2016, 1:28 pm

    “30 year fixed low interest rate loans are a gift from God” … hilarious and accurate. They are an amazing deal that apparently unique to the United States. Add in the tax savings and someone else paying down the mortgage for you, why limit to just 1!

  • No Nonsense LandlordNo Gravatar February 8, 2016, 5:55 pm

    Congrats if you are going to set out on you own! FI is really a mindset, not a destination. Being self employed is FI for some. Having a guaranteed pension is FI for others.

    Just make sure you look both ways before crossing the street to the other side.

  • Jeff BarberNo Gravatar February 8, 2016, 6:24 pm

    My bankers here in Arkansas don’t want to give 30 year money. I recently got a 3/2/2 for 63,001 at a courthouse auction and am giving a 4% fixed 5 year balloon on 15 year amortization. The banker is loaning me 85k to allow for a few repairs. 22k tax free cash out will be nice too. It will cost me about 630/month and I will rent the house for 1000/month. As a physician, I don’t need the cash flow as income so I will be happy to have it paid off in 15 years. Also, I am a buy and hold guy for the most part. There are thankfully many good paths in this business.

  • TawcanNo Gravatar February 9, 2016, 10:24 am

    Got any tips when it comes to travel hack? 😀

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