Seriously. I mean it. There is no better time to become financially independent (which is my definition of rich) with the stock market than today. I’m not speaking about market timing (I do not believe in it). I’am referring to the information, the product options, and the technology available.
How to become rich? Follow this journey, and you will reduce your stress and boost your career.
Have you heard about the F.I.R.E movement?
Based on Wikipedia, “The objective is to accumulate assets until the resulting passive income provides enough money for living expenses in perpetuity.” This community started to grow in 2010 and quickly become accessible through online communities, blogs, podcasts.
But long before knowing about F.I.R.E, I remember myself thinking about retiring at 40. And every year, often around summer, I saw the financial money magazines publishing summer headlines with titles such as “stop working at 40” or “Retire at 40, is it possible?” (update check here: Financial Independence. I’m Retiring From Corporate Life At 46.)
So F.I.R.E. is not new. The big difference is that thanks to a combination of the new millennial working mindset and technology, the information and financial products have become more accessible.
Retiring early has become a real option for pretty much anyone who puts his/her mind to it.
As leaders, who earn a decent salary (often 6 figure paycheck), you cannot afford to not become financially independent today.
And the method is deceptively easy on paper:
1. Earn: The more, the better;
2. Save: Live under what you can afford;
3. Invest: As soon as possible to benefit from the compound effect.
Earn.
As a reader of this blog, I assume you are interested in growing your career. By doing so, you regularly increase your income.
Under the pressure of the old advice, “Follow your passion.” Many people come to build the following argument “my job is not interesting, there are no opportunities to grow”, and sometimes it’s true.
At the same time, your work might not be fascinating now, but with a “growth mindset,” you can make it enjoyable and build your next opportunity. Whatever you do, there are ways to improve it and bring value to your employer. You then increase your knowledge, skills, and often new, more exciting options arise. What Rubik’s cube can teach you in business (and in life)?
If not, use your new stack of skills and check your value on the market. I’ve been working for the same company for more than 20 years. I had the chance to get 8 promotions without asking once. That moved me from a low-level salary to a very comfortable 6 figure paycheck.
So I’m a big believer in developing yourself in your company. But when you feel the context is not there, check outside. Just remember that most of the time, it won’t be easier outside.
Save.
Marketers are great. They create needs that we do not have. Bigger cars, houses, garden materials, sports outfits, furniture, luxury travel. You name it.
Most of the time, we adapt our expenses to our earnings, know as “lifestyle inflation”. That’s why so many people have debt on a low or high salary. You can make less and be richer than a higher wage person who spends too much.
I approach this point intentionally. I believe in infinite growth in everything, which is not material: my emotions, my spirituality, my intellect, my health. Earn more, spend less, live more. Don’t live on a budget, live on your frame.
For the material part, I notice that, apart from a short boost of excitement, materials do not make me happier in the long run.
I feel close to the minimalism model, trying to make my life as decluttered as possible. This philosophy allows my family to live very comfortably. We do not feel like we’re missing anything, and at the same time, it helps us save and invest more than 60% of our gain.
Despite the three main investment mistakes you will read below, we became financially independent when I was 43 years old on one salary. Our earnings grew consistently, and intentionally. Not adapting our expenses is a critical element of our success.
Invest.
The threatening part. The financial industry tries to make it as complicated as possible to have a chance to advise and sell us financial products. The truth: investments can be simple.
My 3 main mistakes.
I made three main mistakes while investing in the market. I’ve lost a lot of productive years. The encouraging part is that you do not need to make everything right to succeed.
“You only have to do a very few things right in your life so long as you don’t do too many things wrong.- Warren Buffett
- I first invested in stock picking during the internet bubble time. Guess what? I lost money.
- I then switched to fund management until I found out that I was covering all the risks on my side. In the good years, when the stocks were up, the fund was earning money. In the bad years, when the shares were down, they were still making money. I was losing. I concluded that (quite) no one was able to beat the market sustainably. So, there were no reasons for me to pay high fees.
Investment fees hidden in many investment products are killing any financial independence target. - I kept too much un-invested cash. As I hadn’t found the right methodology, I was afraid and played it securely.
My solution : Exchange Trade Fund
I finally discovered the indexing path through Exchange Trade Fund (ETF) in 2017; a passive investment methodology in which you do not try to beat or time the market, but just to follow it. You buy and hold. It’s easy and efficient in the long term. The fees are low, so you optimize your earnings.
As I’m working, I still consider myself to be in the accumulation phase. I don’t need the money I’m investing in, so I invest as much and as fast as I can to take advantage of the compound interest.
I invest mostly in one ETF. The Vanguard FTSE All-World UCITS ETF Distributing. It tracks stocks from developed and emerging countries worldwide.
If you want to learn more, I encourage you to read the “Stock Series” of J.L. Collins or his book, “The simple path to wealth.” (my summary here) His philosophy and experience gave me much confidence to pursue my path to wealth.
I started to save and invest my money intentionally 20 years ago. As of today, I own real estate and ETF. With this simple (lazy) investment strategy and despite my financial mistakes, my family has become financially independent.
Not being obliged to work is a great feeling, but is also an option that has boosted my career and can accelerate yours for at least three reasons :
- Build new options: The intellectual path to financial independence broadens your perspective. You don’t only rely on your job alone.
- Take more risks: It helps you to take more risks when opportunities arise. People often overthink opportunities. They try to secure every aspect. It’s not possible. You need to be willing to accept the unknown linked to the change. Throughout my career, I quite always say yes, even to the most difficult challenges. I approach them with a mindset of “at worst, I failed, and what? I can still provide for my family “. I’ve learned a lot, developed new skills, and increased my earning dramatically.
- Lead with integrity: we often hear people being very frustrated in the corporate world. They have to execute strategy they do not believe or feel awkward about a situation that does not fit their value. However, they execute. The frustration grows, and they develop health issues and more. “The 7 Habits of Highly Effective People”. How it has transformed my life, and why it can change yours
When you build a safety net, you can fight for what you believe. We need it in the corporate world, and bosses like people who tell them the truth. Doing it with respect and determination helps a company make better decisions, and it aids you to stay aligned with your values.
Have you started your journey to financial independence? If not, today is the right day to start. Enjoy the path.
Mr. OTG
Disclaimer: I’m not a financial advisor. All information posted is merely for informational purposes. It is not intended as a substitute for professional advice. Should you decide to act upon any information on this website, you do so at your own risk.
Alex says
Thank you for sharing your experience!
I am curious about one technical detail: what criterion did you use to decide that you had reached financial independence?
As you say, reaching that milestone is beneficial in many different ways, so it can pay off to not set the bar too high and reach it sooner rather than later. But on the flip side, declaring victory too early and making risky career choices right after that can be dangerous.
Personally I use the definition of “net worth > 33 * current yearly expenses”, but because that’s conservative, I also find it rewarding to consider easier to reach milestones (e.g. replacing current expenses with a reasonable minimum, or assuming some active income until retirement age).
Mr OTG says
Thank you for reading and for your question.
After having read around this topic.
I try to go out of the technical debate.
Even the experts (as often) seem to disagree.
So as someone needs to do an assumption at the end, I’m taking the 4% rule at this stage. (*25 your expenses).
It’s a complex problem with too many unknown variables.
Inflation, market return, and lifetime of a person…
So I don’t really stick on a definition at this stage for a few reasons.
-I’m still in an earning phase
-I consider in the FI/RE much more the Financial Independence than the Retire Early. Whatever I’ll do, I trust I’ll still bring income.
-Our minimalist lifestyle leads us to live on a reasonable expense level.
I trust your approach is a good one, cautious (*33) and with flexibility (e.g. replacing current expenses with a reasonable minimum, or assuming some active income until retirement age).
Enjoy the journey.