In my last post I fessed up to some of my bigger financial mistakes. Painful, all. Some more than others.
Happily, the ship eventually was righted. And, later, motorized.
FIRE appealed to me not just because of the concept in and of itself. Although that certainly was a major factor. But also, because it’s a get rich slowly scheme. More to the point, get rich soundly and methodically. Not a get-rich-quickly scheme that’s either hairbrained, not (easily) replicable, or a sham.
Nope, FIRE makes complete sense. Intellectually and mathematically.
What got me even more excited were all the levers to pull that were so contrarian, but so, so simple. More times than I care to admit did I slap my forehead after learning about some easy-to-implement strategy or tactic that I’d never have been clever enough to have thought of on my own.
Here are a few examples.
25 sense
The first revelations were the most mind blowing and life transforming: (1) passive income is a thing; (2) FI is a thing; (3) one can take active measures to massively ramp up passive income; (4) reaching FI therefore can be just a simple math equation based on one’s expenses and passive (and other) income streams; (5) FI isn’t based (solely) on one’s employment income, or on reaching some random age, or, in and of itself, having $X in assets; and (6) so-called “experts” making a sweeping statements as to how much money it takes to be financially independent and/or retire (early) and who don’t know you and your current and future financial picture are useless at best and counterproductive at worst.
Once having learned of and bought into the 4% Rule (having also considered the merits of lower and higher safe withdrawal rates) and the magic of reaching one’s FIRE number (25 times (expected) annual expenses), I slapped my head at not having been bright enough to have figured all this out earlier.
Before discovering FIRE we were randomly saving and, I guess, investing (in random investment funds). But post-discovery of FIRE, we not only had a North Star, but oriented our financial lives firmly toward it.
A gapping hole
A simple and intuitive corollary to the 4%/25x Rule is that the larger the gap between expenses and the money funding them, the faster FIRE is to reach. When I realized this, I went full-on detective and exterminator as to where we could lower our expenses. I found much low-hanging fruit.
Big pieces, like, as detailed below, travel hacking (at least thousands of dollars in yearly savings) and car insurance coverage (a few hundred dollars/year). Renting vs. owning (thousands of dollars/year). Discontinuing monthly 529 account contributions for Thing One (The Elder) and Thing Two (The Younger) (thousands of dollars/year). Entertaining at home more often rather than always reflexively going out for an expensive meal (more than $1,000 dollars/year).
And smaller ones. Like air drying laundry instead of using the dryer (tens of dollars/year). And unplugging electric items not in use (tens of dollars/year). And dropping our satellite TV subscription that we found less and less value in (over $1,000/year). And biking or walking instead of driving or paying for public transportation (a few hundred dollars/year). And paying off our car loan immediately rather than continuing monthly payments that included interest (a few hundred dollars).
In time, I’d also work the other side of the ledger: income. I started side gigs. And began using easy-money-generating apps. And started selling unused items in our house on online selling platforms. And profited from bank account sign-up bonuses. In the aggregate, this all generates thousands of dollars of easy income every year.
Again, so simple and intuitive. But nothing I’d ever thought of on my own. Much less acted on.
Indexspensible
In the process of learning about FI and the 4%/25x Rule, I learned of the merits of low-cost, broad market, passive index funds. Before this, I’d never heard of the investing terms “indexing” or “index funds.” I for sure knew nothing of low-cost, broad market, passive funds. Or the difference between passive and actively managed funds for that matter.
Once educated, we were off to the races. Retirement account investments were switched up and much of our (then far-too-high, idling) cash reserves were moved into similar funds in newly opened taxable brokerage accounts. Later, we’d sell our condo and move into a rental, and move the payout from the sale into those taxable brokerage accounts. (But, pro tip: don’t try to time the market like I did as to those funds; I lost mucho dinero by doing so.)
So simple. So immediately effective. So profitable.
The point is
The FIRE community also introducrd me to travel hacking. Only a few blogs at that time addressed it, and the ROI seemed shadily high. Put another way, if FIRE appealed to me for reasons described above, travel hacking seemed akin to one of those get rich quick schemes that I was so reflexively against.
In time, I read more on the subject and began thinking that maybe it not only really was on the up and up, but easy, too. It just so happened that I was then beginning to plan a major travel event for The Family. If ever there was a perfect time to give travel hacking a whirl, this was it.
Tl:dr: we hit the jackpot. To this day, it’s still far and away my best ever travel hack. Depending upon how you measure it, the savings were a few thousand dollars at the least and a few tens of thousands of dollars at most (because the trip replaced an expensive event we’d otherwise have hosted).
Having pulled this off, I was sold on travel hacking. We’ve since saved tens of thousands of dollars.
An insure thing
Last, but not least, there were lotsa “necessary” expenses I never even thought to drive down the cost of, much less question altogether. It was the brilliant and simple FIRE community idea of questioning everything . . . everything . . . that enabled me to drive down or eliminate these expenses.
Here’s but one example.
Like, I suspect, a lot of folks, insurance seemed to me not just a dry and boring subject, but a necessary evil. As for what level of coverage to carry, it too seemed to me dry and boring. And not altogether easy to understand at first blush.
I all but made a beeline to find a copy of our car insurance statement to review our coverage and was aghast by what I found. I first realized that we’d taken our insurer’s advice as to coverage levels. By this point, I’d long become red faced about not having realized that companies have their own financial interests in mind all but all the time. Not the customer’s. Our insurer clearly prioritized itself.
Finding that our coverage exceeded our needs, and in some cases, wasn’t necessary, I called my insurance agent. And just like that I saved us hundreds of dollars that year, and thousands of dollars in the aggregate over time.
Simple. Easy. Fast. Effective.
And in the end . . .
Dear Reader, on the one hand, I know that I’m immensely better for having learned of these ideas, strategies, and tactics. But because they’re so, so simple and, once you think about it, obvious, there’s no small part of me that makes me want to do a massive facepalm at my ignorance.
No facepalming! Hindsight doesn’t count when deciding something is simple and obvious. It can’t be that obvious or we’d all be FIREd. We don’t know what we don’t know, and there’s no shame in that (sometimes regret and wishful thinking, but no shame). In fact is the opposite – once you became aware of all this, you acted on it. That’s what counts.
And I still feel surprised that passive income is a thing. I can see it happening, we are benefitting from it, but it doesn’t seem quite fair. I feel guilty that I’m part of “the rich get richer” simply from the magic of compounding.
As to the facepalming, I agree with you. I learned about things and acted on them. But, man, so many of those things were so obvious that I can’t believe I hadn’t thought of them myself. Heck, just this morning I learned of another super simple (and comppletely above-board) hack that I can’t believe I hadn’t thought of before.
As for “And I still feel surprised that passive income is a thing. I can see it happening, we are benefitting from it, but it doesn’t seem quite fair. I feel guilty that I’m part of ‘the rich get richer’ simply from the magic of compounding.”, I completely agree.