Tag: FIPE

  • Happy that I Delayed Financial Independence

    Happy that I Delayed Financial Independence

    I’m further away from financial independence today than I was five years ago.

    You know what’s funny?

    I couldn’t be happier about where I am today.

    Let me explain.

    In 2020, my wife and I had very minimal expenses.

    At the start of 2020, my wife and I were both working as lawyers in Chicago. We lived in an apartment in a 4-flat that we had purchased in 2018. We had no kids at the start of the year, but were about to welcome our first.

    This was a good apartment in a popular part of town. It had 3 bedrooms and 2.5 bathrooms. That was plenty of space for my wife and I, and eventually the two babies we brought home there.

    We purchased this 4-flat from a real estate investor who had done a decent job on the renovation. It had in-unit washer/dryer, modern finishes, and plenty of storage.

    We had a small outdoor patio with enough room for a grill and little table. We also had a garage parking space but ended up parking our 20-year-old car on the street most days.

    When we purchased the building, it was the most expensive 4-flat that had ever been sold in that part of town. It was a bit of a risk to set the high-water mark in the area.

    In the end, the risk was more than worth it.

    Even though the building was expensive for the area, this was not a fancy apartment. This part of town was still up-and-coming. Some people probably thought it was not a nice part of town.

    I doubt many people came over and thought, “Wow, look at this amazing apartment!”

    The more likely reaction was probably something like, “What the heck are they doing?”

    To be fair, I asked myself that question plenty of times.

    So, what were we doing?

    We were paying ourselves to live there.

    Say that again?

    My wife and I paid ourselves to live in that apartment.

    We lived for free. And made a profit at the same time.

    See, the rental income from the other three units covered the entire mortgage plus all expenses for the property.

    But, that’s not all. On top of covering all the expenses, the rental units generated a profit of $1,000 per month on average.

    So, not only did we spend zero dollars each month on housing, we profited $1,000 per month.

    Looking back, getting paid to live in a decent apartment was maybe the best decision we ever made.

    Landlord working outside the office checking his balance and earnings. Getting paid concept. Internet money income. Showing the power of house hacking even if it means delaying financial independence.

    What happens to your finances when you live for free?

    Let’s take a look at how living for free can be a major advantage on your way to financial freedom.

    The common wisdom is for people to spend no more than 30% of their gross income on housing. Regardless of how much you make, that usually means thousands of dollars.

    Because our tenants were paying our living expenses for us, we did not have that expense for the five years we lived in that apartment.

    In other words, we didn’t have to worry about budgeting for housing.

    We also drove a nearly 20-year-old car and could walk to the “L” (Chicago’s subway). We lived in a neighborhood with plenty of nearby restaurants and shops. That meant our transportation costs were next to nothing.

    Because we weren’t paying for housing and had very minimal transportation costs, we could supercharge our savings.

    How much were we able to save?

    Let’s take a look.

    Between 2018 and 2023, my wife and I acquired three buildings and ten apartments in that same neighborhood. We’re very familiar with market rents in the area.

    We rent our apartments for anywhere from $2,300 to $3,600 per month. Our usual tenants are professionals like engineers, lawyers, doctors, consultants, and pilots.

    The unit we were living in from 2018 to 2022 was one of our larger units. At the time, it would have rented for $3,500 per month on average. That equals $42,000 per year to rent that apartment.

    Keep in mind, if someone was paying rent to live there, that would be $42,000 of after-tax money.

    Since we owned the building, we lived there for free. We could save that $42,000 we would have otherwise paid in rent. Instead of spending that savings on things we didn’t need, we were able to save that money for our next real estate investment.

    Plus, we earned $1,000 on average per month while we lived there. That’s an additional $12,000 per year in profit.

    We lived in that unit for almost five years.

    Add it all up and we saved $270,000 by living in that apartment for five years.

    • $42,000 saved rent x 5 years =$210,000.
    • $12,000 profits x 5 years = $60,000.
    • Total savings = $270,000

    We used that $270,000 for a downpayment on a rental condo in Colorado ski country.

    It took five years of living in a decent, but not-awesome, apartment to have a ski condo that will hopefully be in our family for decades.

    Choosing to live in our 4-flat to save $270,000 over five years was one of the best financial decisions we’ve ever made.

    Snowboarders breath on a cold day illustrating the power of financial independence earned through house hacking.
    Photo by Alain Wong on Unsplash

    I highly recommend you consider house hacking if you’d like to start investing in real estate.

    Many of you are familiar with the strategy of living in a building (or home) you own while tenants (or roommates) pay for it. Brandon Turner, of BiggerPockets fame, popularized the concept he dubbed “House Hacking”.

    You can read all about house hacking on BiggerPockets here.

    For even more information on house hacking, Craig Curelop wrote a book for BiggerPockets called The House Hacking Strategy: How to Use Your Home to Achieve Financial Freedom.

    Without a doubt, there is no better strategy for entry level real estate investors than house hacking. I gave you a glimpse of the financial upside earlier in this post.

    Besides the financial upside, it’s like landlording with training wheels. Since you live on site, you can more easily learn how to manage a rental property, including responding to tenants and handling routine maintenance.

    The naysayers will say something like, “I don’t want to live with my tenants. They’re going to stress me out. I don’t want to be bothered at 2 a.m.”

    Ignore them.

    My wife and I lived with our tenants for five years at this property and two more years at a subsequent property. We did this while working full-time jobs as lawyers and raising two kids.

    Because we didn’t listen to the naysayers, we now have four income-generating properties and our “forever home” just outside Chicago.

    Even though we’re no longer living for free, the income from our rental properties is enough to cover the expenses of our home.

    So, why am I further away from financial independence today?

    I’m further away from financial independence today because my expenses have gone up since 2020. I’ve already alluded to those increased expenses throughout the post.

    In 2020, we had our first child. Now, we have three children.

    Also, after seven years of house hacking, we decided it was time to purchase a long-term home for our growing family just outside the city in a terrific area.

    We also finally traded in our 21-year-old car for our first new car ever.

    How’s this for easy math:

    Three Children + Nice House + New Car = Further Away from Financial Independence

    While that combination means I’m further away from reaching financial independence, I now have everything that I could possibly ever want.

    That’s why I couldn’t be happier with where I’m at today.

    My end game is finally in sight. Five years ago, I didn’t know where I’d be living or what car I’d be driving or what my family situation might be.

    Now, the picture is clear.

    I can calculate with reasonable certainty how much money I need to be truly financially independent. I can use that number as a target and make every financial decision with that target in mind.

    That’s why in 2025, I’m focused on paying down HELOC debt. Each time I make a debt payment, I move closer to financial independence.

    Besides, my goal is FIPE not FIRE.

    My goal is to reach FIPE not FIRE.

    FIPE means Financial Independence, Pivot Early.

    I have no intentions of retiring any time soon. Retiring early is not, and has never been, my goal.

    My goal is to become financially independent to create as many options as possible to protect myself and my family. I want to be financially independent so I can pivot no matter what life throws at me.

    If my goal was to retire early, I may have skipped the single family home in a great neighborhood. I could have continued house hacking, minimized my expenses, and lived off of the rest of the rental income.

    But, I want more for me and my family. I don’t want to just survive.

    Have you delayed financial independence to craft the life you really want?

    My life has certainly changed in the past five years, but all that change has been for the better.

    That meant house hacking at first to keep expenses as low as possible. Now it means enjoying the wealth I created by making those earlier sacrifices.

    In order to have the life I want, I needed to temporarily move further away from financial independence.

    Still, I’m confident that I’ve taken the right steps to not just reach financial independence, but to reach it while living the life I want.

    The tradeoff is that it will take me longer to be truly financially independent. I’m perfectly happy with that.

    Financial independence has never been more clearly in sight. It’s just delayed a little bit.

    • Is your goal to reach FIPE and pivot as quickly as possible?
    • Or, are you OK with delaying FIPE temporarily for the life you truly want?

    Let us know in the comments below.

  • Financial Independence Pivot Early (FIPE)

    Financial Independence Pivot Early (FIPE)

    We focus a lot on financial independence here at Think and Talk Money. That’s because achieving financial independence is the ultimate goal for most of us.

    To me, financial independence does not mean retiring.

    That’s why I don’t like the popular acronym, FIRE: Financial Independence, Retire Early.

    Instead, I I like to view my financial freedom journey as FIPE: Financial Independence, Pivot Early.

    Let me explain why I believe in FIPE not FIRE.

    FIPE = Financial Independence, Pivot Early

    Whatever it is that you truly want to do in life, financial independence makes it possible.

    When you have financial independence, you have options. You can make decisions based on your core values instead of making decisions based on money. You can pivot, if necessary.

    Financial independence is for people who want to be empowered to take more control of what they do with their working hours.

    It’s not about quitting work. It’s about the freedom to pivot to other work, if you want. I’m convinced that humans are meant to be productive. We are social creatures who at our core want to be contributing.

    That doesn’t mean we have to be or want to be employees. But, it does mean that we want to do something meaningful with our working hours every week.

    That’s why I believe in the power of pivoting, not retiring.

    Why I don’t like the name FIRE.

    Part of the misconception about financial independence may stem from the name of the popular personal finance concept known as FIRE: Financial Independence, Retire Early.

    It’s not uncommon for people to hear financial independence and immediately think that’s only for people who want to quit their jobs and retire. That’s how widespread FIRE has become in the personal finance space.

    I agree with so many of the principles of FIRE. I just don’t agree with the name.

    Financial independence is about much more than retiring early.

    FIRE emphasizes saving more and spending less until you reach the point where your passive investments generate enough income to allow you to quit your job.

    I love this part of FIRE: the idea of creating enough income streams so that you have the freedom to do what you want with your time. I share the primary goal of saving more money and spending less to achieve more life freedom.

    I call this Parachute Money. I like to view each income stream as a separate parachute string. The more parachute strings you have, the safer it is to make a big change in life.

    The problem for me is that the FIRE end game is suggested right there in the name: become financially independent so you can retire.

    I don’t like that part. I don’t like what the word “retire” implies.

    If you look it up, you’ll see that the word “retire“means to withdraw, to retreat, to recede.

    None of those things sound appealing to me at all.

    Each word implies moving backwards. I’m not working so hard to achieve financial freedom so I can move backwards in life.

    Fire burning on beach, depicting the FIRE movement: Financial Independence, Retire Early instead of FIPE: Financial Independence, Pivot Early.
    Photo by Benjamin DeYoung on Unsplash

    I prefer to think of financial independence in terms of creating options. I prefer to think of financial independence as a way to move forward in life.

    I think “pivot” better reflects that mission.

    Pivot means to adapt or improve through modifications and adjustments.

    That sounds so much more appealing to me.

    With FIPE, financial independence is still the primary goal. But, the endgame is not to withdraw or retreat. The endgame is to adapt and improve how you spend your working hours.

    FIPE = Financial Independence, Pivot Early.

    Granted, the name “FIPE” is not as catchy as FIRE.

    But, I think it actually better encapsulates the entire purpose of financial independence in the first place.

    To explain, let’s look back at the modern day origin of FIRE for a minute.

    Vicki Robin and Joe Dominguez are often credited for laying the groundwork for the modern day FIRE movement. Robin and Dominguez wrote an incredible book called Your Money or Your Life.

    It’s one of my favorite personal finance books. You should definitely read it if financial independence is important to you.

    In their book, Robin and Dominguez have a lot to say about the relationship between money, work, and time. 

    Guess what?

    Most of us are doing it all wrong.

    Most of us make the mistake of chasing money at the cost of our precious time. When you read Your Money or Your Life, you will start to value your time for what it’s really worth.

    By making good choices about how to earn money- and as importantly what to do with that money- you can get the most out of your money and your life.

    That’s what FIRE is really all about. It’s about choosing to use your working hours in a way that is more meaningful to you than clocking in-and-out as an employee each day.

    It’s not about retiring from meaningful work. It’s about pivoting to work that is more meaningful to you.

    FIRE proponents would likely agree that the goal is not to withdraw or retreat.

    I think proponents of FIRE would actually agree with me that the end game is really not about withdrawing or retreating. The mission is always about moving forward, not backwards.

    My belief is that people who are disciplined and skilled enough to reach financial independence in the first place are the type of people who don’t retreat or withdraw.

    They may opt for periods of temporary retirement, as they should. But, I don’t think financially independent people are truly wired for full-time retirement.

    That’s why you see so many people who have obtained financial independence continue to pursue income streams.

    That might mean managing real estate investments, teaching others, or even starting a financial freedom blog.

    So, technically speaking, most people who have obtained financial independence have not actually retired. They haven’t withdrawn or retreated. Instead, they have pivoted.

    They are now spending their working hours doing other things. They may not be working full-time for an employer, but they’re still working.

    They’ve achieved financial independence and have earned the right to pivot.

    Financial Independence, Pivot Early.

    Even FIRE leaders would likely agree that the end game is not to completely retire.

    FIRE is not about retiring or quitting. It’s about pivoting to more meaningful life pursuits.

    I don’t want to speak for Robin, but I think this is what she was getting at.

    I also think this is what modern day FIRE leaders like Mr. Money Mustache and the Financial Samurai believe in. Not long ago, Financial Samurai actually wrote an excellent post called “Why Early Retirement / FIRE is Becoming Obsolete.”

    I just think the name FIRE doesn’t accurately portray the mission. Pivoting early seems more appropriate to me than retiring early.

    We all have the same goals in mind: financial independence. And, I believe we have the same end game in mind: pivoting to more meaningful work.

    That’s why I like FIPE instead of FIRE.

    Are you looking to retire early or simply to pivot?

    What is it that you’re aiming for by getting your personal finances in order? If you want to retire early, there’s nothing at all wrong with that. You may be at the point in your career and life where that makes sense.

    Personally, I’m not looking to retire early. That’s why I like to view financial independence as a chance to pivot.

    Pivoting doesn’t mean you have to switch jobs or change things up just for the sake of change. It just means that you have that option if you want it or need it.

    By the way, I’m not alone in viewing financial independence as a chance to pivot instead of retire.

    Scott Trench, CEO and President of BiggerPockets has been beating this drum for a while. He’s also talked about it on the BiggerPockets Money podcast.

    I’m in complete alignment with Trench. I like almost everything about FIRE, just not what the name implies. 

    With FIPE, the goal is not to retire. The goal is to give yourself the freedom to choose what to do next.

    Whether you want to retire early or just pivot to a new chapter in your life, being good with money is key.

    Do you like the name FIRE or FIPE?

    At the end of the day, whether you like to view it as FIRE or FIPE, the mission is the same. We are all looking for the freedom to choose what to do next.

    When striving for financial independence, the goal is to create options. Those options likely include pivoting to more meaningful work, rather than withdrawing or retreating.

    Personally, I think the name FIPE better encapsulates that mission.

    • Do you agree?
    • What name resonates more with you on your financial freedom journey?
    • Are you interested in retiring early or pivoting early?

    Let us know in the comments below.