The Journey: The Beginning of the End

road to retirementOver the past month, I went “house hunting” for my next rental property, which is why I have not posted recently. Five bidding wars later, I have nothing to show for my time spent; and thats ok. Some of the winning offers were all-cash offers lower than my bid. Other bids were five-figures higher than my offer. I will write more on my real estate endeavors in the future. Digressing, I would like to discuss my current journey to achieving FIRE (Financial Independence, Retire Early).

The best place to start is the final destination. This is the “why” and the reason for this blog. I do not want to work my life away or spend countless hours stuck in an office with people I do not like. Time is a precious and finite commodity; I do not want to waste unnecessary time being held prisoner by Corporate America. I rather spend time exploring the world, growing friendships, spending time with family and focusing my energy on things I am actually passionate about. As a result, the goal is to retire in my early or mid thirties; I am currently 26.

I plan to ditch the alarm clock, wake up naturally most mornings and enjoy a cup of coffee while reading the news. Not having a typical 9-5 job will allow me the flexibility to travel whenever I want and for as long as I want. I will be able to allocate my time to volunteer work that I am passionate about. I will be able to train and compete for the various activities that I long to cross off my bucket list (full iron-man triathlon, climbing various mountains, hike the Appalachian trail, and biking across the United States and Europe, etc.). Complete freedom! And hey, if I feel like working or freelancing, I will have that luxury as well.

If you are new to FIRE, you might be wondering how is this possible. The plan is rather simple; I will spend less than I earn and aggressively save the difference. Saving a large portion of my income (over 50%) will not be enough to fund several decades of retirement. The cash will be invested into dividend growth stocks and income producing rental properties. Dividends and rents will provide a (mostly) passive income stream that is capable of comfortably funding my retirement needs in perpetuity.

Now, where did the journey begin?

Flash back to 2013, I was a recent college graduate, full of energy and ready to take on the (corporate) world. After applying to almost 100 jobs, I was fortunate enough to land an entry level analyst position at a larger company. Full of ambition, the dream was climbing the corporate ladder for the next 40-50 years, making tens or hundreds of millions of dollars along the way and living a luxurious life-style. I would have an expensive car, an awesome house and all the other toys associated with the “baller life style”.

I have always been a fairly frugal person and came from very humble beginnings. Quickly, I realized material luxuries were not for me; thankfully, without making any regrettable or sizable purchases.

I was fortunate enough to live in my parents basement for a few months rent free after graduating. My only expenses at the time were food, transportation, my cell phone bill and discretionary fun. After receiving my (very modest) first paycheck, I squirreled as much of it as possible into savings. During this time, I focused on building up an emergency fund and saving as much as possible. As a Finance/Economics major, I had a firm understanding of the 8th wonder of the world, compound interest.

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

– Albert Einstein

Additionally, I took on part-time work to further increase my savings. It was shocking to see how much money I saved after a few months. My father recommended that I buy a house and rent out the additional rooms to subsidize my cost of living. Full disclosure, I did not save enough for a traditional 20% downpayment. Rather, I utilized leverage and put 3.5% down on a move-in ready starter home. There was nothing luxurious about this quaint (read SMALL or TINY) 3 bedroom/2 bathroom home (it was actually a duplex). However, it was a great place to live in my early 20’s.

I rented out the two spare rooms for $750 each which covered a majority of my mortgage (For those of you with sticker shock, I live in the Washington, D.C. area, which is very expensive. $750 for a room is a bargain. Especially when the alternative for a studio or one bedroom apartment is $1,700-$2,300/month). While keeping my cost of living low, I continued to save as much as possible, grow my emergency fund and invest. Having an emergency fund proved to be very useful. Within a month of each other I had my appendix removed and fractured my elbow (biking accident).

About a year later, I switched jobs and received a sizable pay increase. However, you would have never known based on my lifestyle. I did not run out and lease a new car or take a fancy vacation. Rather, I increased my savings rate and found ways to save more. Once spring hit, I began biking to work 4-5 days a week and gave up my gym membership (~$20/month). The bike ride to work was 18-miles round trip (9 miles each way), a more predictable commute than driving (traffic sucks), and saved me $18/day on parking. I would like to thank Mr. Money Mustache and Go Curry Cracker! for writing about the cost savings of biking to work. I was already a biker but their posts influenced my actions.    

The new job was fairly demanding and I often worked nights and weekends. In fact, ~80 hour work weeks were becoming the new norm. My boss loved me or at least the work I was doing. Based on my performance review you would have thought I was a rockstar. However, I realized that hard work often goes unrewarded in the work place. Despite my prodigious annual performance reviews, my employer has yet to even provide a cost of living wage increase for almost three years. This is even after I asked. Naturally, this is one of the many reasons why I hate Corporate America and favor entrepreneurship.

Ahhh yes, entrepreneurship, my first true love since the age of 5 (Hello lemonade stand).  As I just mentioned, hard work often goes unrewarded in the work place. I have never liked the idea of someone else controlling how much you are going to earn or if you will even be employed tomorrow. After noticing I no longer need to work ~80 hour weeks at my day job (I still get paid the same either way), I focused my energy on entrepreneurial endeavors outside of work place. As a result, I now manage a few dozen properties in the city for other people. I also have two properties of my own. Both properties are cash flow positive and I am looking to acquire a few more properties. Rental cash flow will subsidize my retirement and help me permanently leave Corporate America.

In a nut shell, this is the short version of why I want to retire early and leave the work place. I am very excited to see how this journey evolves and look forward to sharing my progress with all of you. In future post, I will talk in more detail about dividend income, rental income, what my life in retirement will look like and steps that I will be taking to get across the finish line. I hope that you will continue to follow my journey.