The Fat Lady That Changed My Life

Famous last words of a start-up company: “Well folks, the fat lady has sung. We had a good go, but we’ll be closing up shop over the next couple of months. We will do our best to place people wherever we can and help others find new jobs.”

At age 25 it was pretty depressing to say that I was being laid off. The more depressing part was it wasn’t even a job I particularly liked or was passionate about. It felt like I was being dumped by a boyfriend that I was already planning on breaking up with, but he beat me to the punch. “It’s not you, it’s me.” In this case it was a “competitive market” and “bad timing”, but I digress.

The Wake Up Call

Laid off….being laid off isn’t unique, however, the perspective I gained from that experience is. It kicked me off the hamster wheel of corporate life and forced me to figure out what I’m doing with my time here on Earth and more importantly begged the question of why was I doing it. As I started applying for new jobs, I found myself continuing to question my path like never before.

Is this IT? Is this my future? Working 9-5 in a cubicle until I am 67? Missing the best hours of the day – the sun, the liveliness, the freedom? Getting judged for taking abnormally long vacations (who decided a 1 week vacation was the norm anyway??)? Trying to stay out of office politics while making the ‘right’ friends? Living in a location I’m not a big fan of just because I have a job there? Did the Verve have it right with their Bittersweet Symphony lyrics?

I wanted more. In fact, I am demanding more from life. This is when the concept of financial independence entered the room.

The Goal

Financial Independence

Noun | fi·nan·cial in·de·pen·dence | fə-ˈnan(t)-shəl, fī- ˌin-də-ˈpen-dən(t)s

1: the state of having sufficient personal wealth to live, without having to work actively for basic necessities [1]

2: commonly abbreviated as FI

FI sounds great, right? Well the best part is that it’s actually doable. After perusing the web and creating my own independence plan, I am proudly expecting to be financially independent in 2025. That’s 10 years. I can totally go to work every day knowing that in 10 years’ time I will retire early and be able to choose to do whatever I want when I want: travel, raise my currently non-existent kids, learn a new language, etc. My plan is to do this through dividend investing. The goal is to grow your investment portfolio until you have a large enough stockpile to live off of the dividends.

The Plan

Over the past month I have developed my own FI plan and want to share in hopes of inspiring others. Just because retiring when you’re old is what most people do, doesn’t mean it has to be that way. There is another option than retiring at 67.

Initially I was looking for a quick way out: that one big idea that I could build a company around, work hard for 10 years, and then get out and enjoy the rest of my days sipping margaritas on Copacabana beach in Brazil (for the record Ipanema is better…). Problem was I didn’t have “that one big idea” so it always deterred me from going further. With this concept of financial independence you don’t need “that one big idea”. You need the motivation to set a goal and the determination to make it happen.

Here are the basic steps I have taken thus far to get on the path to financial independence:

• Knowledge is power.
  • The more you understand about investing, taxes, 401K’s, IRA’s, HSA’s, etc. the more you can make the rules bend to your benefit.
  • Full disclosure: I have no degree in finance or formal schooling related to business. My background is in engineering. I was brand new to all of this when I started down this journey and have learned so much in a little bit of time with the help of books, videos, and blogs. Don’t let the fear of the unknown scare you away!
  • Helpful link for getting starting: Bogleheads
• Planning is key.
  • Failing to plan is planning to fail. Create a detailed financial plan that holds you accountable. Set monthly micro-goals that you can track to that helps you meet your macro-goal of financial independence.
  • Do it right. Take the time to really dig into and understand your current financial situation including how much money you actually need to live on for now and when you retire, taxes, contribution limits, etc. Now is the time to see how you can successfully get from point A to point B.
  • I’ll be detailing my FI plan in future posts so keep your eyes peeled!
• Save & invest your dough.
  • First build an emergency fund. This is different for each person depending on their situation. My emergency fund is $10,000 that I keep readily accessible in Ally bank.
  • Calculate the percentage of net income you need to save each month to hit your goals. Then ask yourself: is this feasible? Where can I cut out spending while still enjoying life now?
  • Max out (or come as close as you can) your 401K, IRA, and HSA. Compounding is powerful so the sooner you can do this, the better off you’ll be.
  • Diversify your investments and use an investment bank with low expense ratios. I use Vanguard for their low expense ratios and Personal Capital to help track my investments and insure I am diversifying appropriately.
• Live your life now.
  • Enjoy your now! You have set up a detailed plan for your early retirement plan so save hard, invest all you can, and just enjoy your current life.
  • Explore new hobbies like hiking, running, cooking, gardening, etc.
  • Find your core values. Through all of this it has made me stop and think about my values and how they are expressed. Do I value going to the bar spending $100 on food and drinks? No, it is more that I value spending time with friends who happen to go to the bar and spend $100 on food and drinks. This could be done in a healthier & cheaper fashion by going hiking or hosting a potluck dinner. Getting creative in expressing my values is a great start to my journey to financial freedom.
  • Set a reminder to check in with your FI plan each month to track and see how you are doing compared to your goals. Make adjustments as necessary and stay the path.

I am still tweaking my plan and readjusting as I learn more. This will be a way for me to share my journey with the hopes that others can learn from my successes and failures. My biggest piece of advice is don’t be intimidated. There are many terms, definitions, and acronyms surrounding the financial world, but don’t let that scare you away. The concepts can be easily broken down into action items for your financial independence plan and the learning curve is steep. Don’t let visions from The Wolf of Wall Street scare you away from a potential future full of freedom. These ideas are easier to learn than you may have been led to believe.

I for one am glad that fat lady finally sang and closed the door. With that lay-off nightmare has come a web of new experiences and ‘ah-ha’ moments. Now that I have had this revolution, I’m not going back anytime soon. My future is looking brighter than ever and I feel more in control of my fate even though it is a bit alternative to what my parents and peers are doing. In the words of Ke$ha “We R Who We R” and this girl is just starting to spread her financial wings.

Peace out.

 

Music References:

The Verve – Bittersweet Symphony

Ke$ha – We R Who We R

Quick links to helpful websites:

• Learning investment basics: Bogleheads
• Financial tracking: Personal Capital
• My investment bank with low expense ratios: Vanguard
• My online bank: Ally

Citations:

[1]  Cummuta, John. “The Myths & Realities of Achieving Financial Independence”. Nightingale Conant.