I Reached Financial Independence Before 40 (Everything You Know is Wrong)

0:00Everything you've been taught about financial independence is wrong. I started pursuing financial independence two decades ago, but I didn't follow the usual path of effort maxing and extreme delayed gratification. But I hit every number I set out to achieve. So from the other side, I can tell you there is a better way. There are entire books and communities based on the idea that you have a magical net worth number. And if you reach it, you'll be set free from having to work. You'll have no problems and you can retire early. But I think that entire concept is misguided. So today you are getting a rant.

0:40This is my approach to financial independence, how I bought the stuff I wanted, prioritized happiness and unique life experiences, and still achieve financial freedom faster than I ever expected. This is how you get the financial future you want while enjoying the life you have right now.

1:03Hey, everyone. Welcome to the BiggerPockets podcast. I'm Dave Meyer. Today on the show, we're going to talk about, and frankly, I'm going to challenge one of the core beliefs of the real estate investing and financial independence communities. I have a bone to pick with the way financial independence is talked about and pursued, and I want to share it with you. Don't get me wrong. I am all about financial independence. I've been pursuing it for a long time. But having pursued it for so long and having accomplished a lot, I see the faults in the approach that is taught. And frankly, I think I have a better framework to help you achieve the financial stability you want while still enjoying your life right now.

1:49Financial independence has been a really big part of my life for a long time. And if you're not familiar with this term, financial independence just means having the money to comfortably and confidently live life on your own terms. Basically, you have a little bit more of control and more say over how you spend your time and your money. And although I'm going to challenge some foundational assumptions about the financial independence movement today, I love the idea of financial independence. Because who doesn't want to live life on their own terms? I think everyone does. And my belief in the need for and the importance of financial independence has not changed.

2:33I just think the way people pursue it should change. I started my financial freedom, I'd say at least 16 years ago when I bought my first rental property. But really, I probably started more like 25 or so years ago when I was pretty young. Because my dad, who's a smart, hardworking guy, he lost his job in the dot-com bust. And that came pretty quickly after my parents got divorced. And it just put our family in a tough financial spot. And that experience gave me a drive for most of my life to have more control over my financial well-being than my parents did, who relied solely on W-2 income. Right after college, I was already looking for ways to invest.

3:19I found real estate and I did what everyone pursuing financial independence does. I came up with a FI number, a financial independence number, FI. A FI number is this concept in financial independence that is basically having enough money where you don't have to work or where you have complete control over your time. Some people would call this FU money, whatever you want to call it. Most people in the financial independence community call it your FI number. but it's an idea that you reach a certain net worth and then you are magically financially free. It makes sense in many ways, right? And I actually did it.

3:58I personally have always thought about it more in terms of income than net worth, but I still had a number in my head that I wanted to get to. I wanted$10 ,000 per month in passive cashflow and I set my sights on that from the beginning of my working life. and it worked for a while until it didn't really work anymore. Eventually, I realized this idea of a FI number or a magical net worth number is wrong. It's actually just kind of a myth. This idea that you hit some number, become free, your problems dissolve, it's not real. It wasn't real for me and it hasn't been real for pretty much any other investor I know.

4:42And I talked to a lot of investors and no one has had that experience. And here's why. Financial independence is actually a moving target. The number that you need to get to, your sense of security, what you want out of life, it changes. And that's OK. I think there's an orthodoxy in the financial independence movement that you need to get to some number and have the discipline to stick to that number. I don't think that is true because it has to change for a couple of reasons. First and foremost, as we've all seen over the last couple of years, inflation raises the bar every year. Your spending power goes down.

5:25So having a fixed number for your FI target doesn't really make sense because I imagine a lot of people. In fact, I know a lot of people who retired early in the 2010s or the early 2020s probably need to change their FI number right now because everything has gotten more expensive. The second reason your FI number is going to change and I think should change is because of lifestyle creep. Now, I know I'm going to get a lot of comments about this, and this is one of the things that I want to challenge about the financial independence movement is that lifestyle creep, which if you haven't heard that term, it basically just means as you make more money, your lifestyle becomes more expensive.

6:07You want a nicer car. You want nicer things. And in the conventional thinking about financial independence, people say you can't have lifestyle creep because that goes against the idea of having this fixed number. But I am going to defend the idea of lifestyle creep. I know no personal finance person would say this, but I think some amount of reasonable lifestyle creep is okay. And I would actually argue that some amount of lifestyle creep is kind of the point. A reasonable amount of upgrading your life as you grow is not a failure of discipline. It's the reward for working hard. Just think about it.

6:51When I started investing, I was living with roommates. I lived in my friend's grandma's basement for three years. I drove a dangerously beat up car that had a bent frame and I was one accident away from a catastrophe and I was living paycheck to paycheck. The number I thought at that point in my life that would equal what I wanted and the lifestyle wanted was just straight up wrong. And it's not because I live some lavish lifestyle now. I don't. It's just that my standards went up in what I believe is an appropriate way. I wanted a nice house for my wife and my family. I still do drive an old beat-up car, but we have a nice one for my wife.

7:36We take expensive vacations. I'll be honest about that. I take very expensive vacations very frequently because travel is my passion, and that's what I want to do with my money. So yeah, my number went up, And that may have delayed the amount of time it took me to get to that magical number I set out at the beginning, but I have really gotten to enjoy my life. And we'll get back to that in just a minute, but I just wanna give you the third reason why I think financial independence is not a fixed number, but a moving target, is because even if you do no lifestyle creep, you set a number, you go out and hit it, I'm gonna tell you something that most people won't like.

8:20Hitting that number is not going to fulfill you. It is not gonna make your problems go away. You're not all of a sudden gonna feel some sense of purpose and satisfaction and contentment. Retiring or not working rarely is fulfilling to people. And I know this is hard for people to believe and people are going to argue with me, but look around you. People who become financially free, they often go back to work. The people on social media who claim they are financially free are working. All of them, right? Look at every real estate influencer who says they're financially free. They're all working in some way.

8:57Look at seniors, right? They lack meaning. I see this with people in my community. Once they stop working, they lack some purpose. And it's because hitting a goal sometimes has the opposite effect people think it will. And this isn't just my experience. This is real. It's actually been studied. There's something you can look it up. It's called the arrival fallacy. It was coined by a psychologist called Tal Ben-Shahar. And basically, it's the false belief that achieving a specific goal is going to bring some lasting satisfaction. And while reaching goals does provide a temporary sense of accomplishment, the anticipated happiness, it fades quickly, leaving people discouraged and frustrated.

9:42And that's the third reason, along with inflation and lifestyle creep, that I think the idea in general of having a quote unquote fine number is wrong. And I'll just tell you from my personal experience, I have been very fortunate in my career and in my investing and have reached a level of wealth that I honestly did not ever think I would get to. My net worth is well above what I ever expected to be. But I still think about money. Like, I don't feel entirely free. I continue to work. I continue to challenge myself and to work on things, not because I want to be some tycoon, but because that's just the reality of life.

10:25You don't escape your problems by hitting some magical number. And the lesson for me, because I've thought about this quite a lot, being in this industry and having gone through this process, is that if your outcome, your five number or whatever it is, if the outcome is the source of your meaning and that is the only thing that you are pursuing, the meaning evaporates the moment you arrive, right? You hit that number and all of a sudden you're sort of left with this void. And instead, what I have tried to do and what I encourage you all to do on this journey, because remember, I'm not knocking financial independence.

11:04I think it is so important. What I am encouraging you to do is not always focus on this end goal. You can have a goal, but you need to learn to love the process. Becoming someone who enjoys investing, becoming the type of person who likes thinking about finance, who takes pride in making good financial decisions, that will give you more meaning than accomplishing some magical number that is probably going to change. All right, everyone, we do have to take a quick break, but I'll be back with more of my rant right after this.

12:07Brandon Turner:and lowered headache. Stop searching for tenants and start choosing them. Start today at avail.co slash biggerpockets. That's A-V-A-I-L dot C-O slash biggerpockets. You know what's interesting? Most real estate entrepreneurs have dozens of little problems they'd love software to solve, but building custom tools has always been too expensive or complicated. That's why I've been checking out Bolt.new. Bolt lets you build websites, apps, and custom business tools just by describing what you want in plain English. No coding required. Need a custom listing site? A tenant screening portal? A lead nurture system?

12:45Just tell Bolt what you need and it builds it. And because you're part of the BiggerPockets community, Bolt is offering you a 30-day free trial to test it out for yourself with code BP26. Visit Bolt.new slash BiggerPockets today and see what you can build. Investing in real estate has always been smart, but it hasn't always been simple. Now it's both, thanks to the Fundrise Flagship Fund. The Fundrise Flagship Fund launched more than five years ago with a mission of delivering low-fee access to blue-chip private market real estate. Today, the Fundrise Flagship Fund has grown to manage more than a billion dollars of real estate on behalf of hundreds of thousands of investors, making it one of the largest funds of its kind.

13:31For those who believe real estate has an important role to play in their portfolio strategy, the Fundrise flagship fund has positioned itself as both a simple and a smart option. Whether you're starting with$10 or$10 ,000, the Fundrise flagship fund makes adding real estate's unique potential for both passive income and consistent growth. Just visit fundrise.com slash pockets to make your first investment today. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the fund's prospectus at fundrise.com slash flagship.

14:09This is a paid advertisement. Summer bookings sound great until someone slips by the pool, gets hurt on your dock, or damages your property during a long holiday weekend. A lot of short-term rental investors don't realize their standard policy may leave gaps when it comes to short-term rental activity. That's why investors use Steadily. They offer landlord insurance built for real estate investors, including short-term rentals. And if you're a BiggerPockets Pro member, you'll also get 5 % off your landlord insurance premiums. Visit biggerpockets.com slash landlord insurance to learn more.

14:47Welcome back to the BiggerPockets podcast. Today, we're talking about financial independence and how to think about it in a more productive way than is conventionally taught. Let's get back into it. To underscore the story, I actually wanna tell you all a story. It has nothing to do with investing and financing. Never really talked about this publicly, but it's something that's shaped my opinion on financial dependence and goal setting in general. About 20 years ago, I found myself pretty out of shape and I was not happy about it. I always like sports, but for reasons I won't bore you with, I saw my weight get to a number I was not happy with at all.

15:25And I sincerely wanted something different. So I spent years, many, many, many years working to bring down my weight and be in shape. And I had set my goal. I set a goal for myself at the beginning of that process. I wanted to lose 50 pounds. And I did by eating really healthfully. And yeah, I know you probably hear me talk about eating a lot of sandwiches and going out to eat. I still love to eat, but the majority of the time I am very disciplined about it. And I exercise pretty much every day. And eventually by following that process of being disciplined and thinking and enjoying eating healthfully and enjoying exercise, I reached my goal and then some.

16:08I actually lost over 60 pounds. And you know what I did when I hit my goal? I kept eating a healthy diet. I kept exercising every day. And I still do because I learned to love the process. The results still do matter to me. I still want to have a certain weight. But hitting my number for my weight was not some big event in my life, to be honest, because I wasn't on a diet. I just became the kind of person who wants to be healthy and active. The process is what gives me joy and a sense of accomplishment, not some number on a scale. And the same thing is true with your finances and financial independence.

16:50I didn't stop investing or thinking about money once I hit my number. I continue to practice the habits that got me there because the practice and the process is the thing that I actually enjoy. So what I'm encouraging you all to do is to learn to love the process. Don't invest in real estate with one foot out the door, wanting to quit. There are a million ways to succeed in this business. Find one that you enjoy. And not only will that make the process more enjoyable, but I promise you, it will give you the longevity and the perseverance and the staying power to actually hit your goal. So that's the big picture lesson I want to impart today.

17:33But here are just a couple of other thoughts on how you can actually go about doing this because it is tempting to just set a goal and pursue it. It's easy, right? It is super easy to say, I wanna make$5 million and just go after that. But I encourage you not to just think about the destination and instead to treat financial independence as a journey. And instead of marking every single success against this far off goal that may be five or 10 or 20 years down the line, Just focus on getting better every day. Financial independence is a spectrum, right? Because if the goal is going to change, the only thing you can do is become more financially independent, right?

18:18So a way to think about it, or the way I try to think about it is, does this deal, does this real estate deal make me more financially independent? If I'm weighing two deals against each other, does one make me more financially independent than the other? Then that's the one I'm going to hit. I am not focused on some magical number in the future anymore. I am just trying to get better every day because financial independence is a spectrum. Now, I am saying try and get better every day, but you also kind of have to hold both of these ideas in your head at the same time. You also need to recognize that it is a journey and it is not a linear one.

18:56It is a bumpy, curvy road. And that's OK, right? That is just how goals work. Sometimes you're going to be becoming more financially independent rapidly. Other times it's going to stall out. Sometimes you might take a couple steps back. And that's fine because it is a journey, right? The goal is to try to keep moving forward and to keep getting better. And honestly, I actually think this is one of the most freeing ideas in financial independence. Well, it's not really in the mainstream financial independence thought. But for me, it has been one of the most freeing ideas in my own pursuit of financial independence, because financial independence is not the sum of my life.

19:40It is not everything that I am trying to do. There are other things that I care about. And I have to not just be a steward of my own finances, but I have to be a good steward of my own satisfaction. And if you just start pursuing financial dependence in the way a lot of people propose, which is, you know, extreme effort maxing and spending all of your time working and real significant budget cuts and not spending your money on anything. If you do that for a long period of time, aren't you missing the entire point? Like the point is to enjoy and gain control of your life. And if you just become beholden to your FI number, doesn't that miss the mark?

20:30No, I'm not saying you should go out and spend recklessly. There have absolutely been times in my life where I have buckled down. I told you I lived in my friend's grandma's basement for three years to save money. I have buckled down. I have scrimped and saved and invested my money at times. But there are also times when I thought, now's not the time for that. I'm gonna enjoy myself a little bit. For a lot of my financial independence journey, I was in my 20s and my early 30s. That's some prime living right there. And I didn't want to miss it, right? There are times where I've deliberately taken my foot off the gas and they were pretty much always been worth it, probably more worth it than most of the real estate deals that I've done.

21:11Just as examples, right? I decided instead of investing in a new property around 2015 to go back to grad school. And I used my money that I had saved up to pay for my tuition. and that was well worth it. I really enjoyed it. It raised my salary and it helped me a lot down the road. I spent a good deal of money on a wedding with my wife because we wanted to prioritize that. And although I think everyone who has planned a wedding knows that bill gets really big, really quick, I have not regretted spending that money for one minute in my life. It was absolutely worth it. Could I buy a duplex with that money?

21:49Sure. But I had a wonderful wedding and it was one of the best days of my entire life. And I think about it all the time and I wouldn't trade it for anything. I like to travel. I told you, I go on expensive vacations. Sometimes that delays my next property, but I'm not gonna just keep acquiring properties and missing the things that I want to do with my money. Sometimes if you have the money to go do the thing you're hoping to do in the distance, sometime in the future, just go do it right now, right? It is okay to sometimes take your foot off the gas as long as you are being deliberate about it.

22:24Don't go out and spend money on nonsense. But if this is something you care about and you prioritize in your life, it is okay for your financial independence journey to not be linear and for it to plateau sometimes and even go backwards a little bit. That's okay, right? Just go back to my fitness example. Do I ever go off track? Yeah, all the time. Absolutely. Ask Henry how much I eat when I let loose. But I do it when it's my choice, when it's something that I prioritize, because I'm in it for the long run. I'm not sprinting to this and I need to make it sustainable. And I don't think that you should see this as a failure.

23:04I think that's what gets me so riled up about this. When people say, oh, you know, instead of buying a car or a vacation or whatever is important to you, that you are somehow lacking discipline. But I think that by becoming more financially independent, by doing those times when you scrimp and save and work really hard, you are earning those experiences, right? Optimizing purely for your FI number means missing the life, that number you designed to fund in the first place, right? So you don't have to sacrifice your entire 20s or 30s or any decade on the altar of some number. Sometimes you go hard, you save and invest aggressively, and sometimes you ease off and enjoy the fruits of your labor.

23:52Both are correct at different times. It is not black and white. And although I am passionate about this, I will say that it is a skill. You have to sort of work on this, this ongoing calibration, this balancing act between building wealth and living well. But I encourage you all, if you have bought a couple of deals and you have gotten more financially independent, if you wanna take some time off, if you wanna celebrate, if you wanna enjoy your life, go do it. You got one of them. Okay, so we gotta take one more quick break, but I'll be back in just a minute and share with you some thoughts on how you can reframe your own thinking of financial independence.

24:33Stick with us. If I had to hire someone to join the BiggerPockets team, I wouldn't just be looking for someone who checks a few boxes on a resume. I'd want someone who understands real estate, can move fast, communicates well, and can jump into a fast-paced environment without missing a beat. When you need that kind of person, this is a job for sponsored jobs. Sponsored jobs posted directly on Indeed are 95 % more likely to report a hire than non-sponsored jobs. That makes sense to me. In fact, people are finding quality hires on Indeed right now. In the minute I've been talking to you, companies like yours made 27 hires on Indeed, according to Indeed data worldwide.

25:13Join the 3.3 million employers worldwide that use Indeed to connect with quality talent that fits their needs. Spend less time searching and more time actually interviewing candidates who check all your boxes. Less stress, less time, more results. When you need the right person to cut through the chaos, this is a job for Indeed-sponsored jobs. And listeners of this show will get a$75 sponsored job credit to help get your job the premium status it deserves at Indeed.com slash podcast. Go to Indeed.com slash podcast right now and support our show by saying you heard about Indeed on this podcast.

25:50Indeed.com slash podcast. Terms and conditions apply. Need the right hire fast? And this is a job for Indeed sponsored jobs. Tax season reminder for all the real estate investors listening. If you own rental properties, short-term rentals, commercial buildings, basically anything that's not your primary residence, you need to know about cost segregation. It's an IRS-compliant strategy that lets you accelerate depreciation on your properties, which means you're paying less in taxes this year and keeping more cash in your pocket for your next deal. Cost segregation, guys, is the go-to firm, having done over 12 ,000 of these studies with$500 million in total depreciation identified.

26:31Head to costsegregationguys.com slash BP to get a free proposal and see your potential tax savings.

26:42Welcome back to the BiggerPockets podcast. Let's get back into our conversation about financial independence being a process and not an event. So remember, financial independence is a spectrum. And the question you should be asking yourself is how financially independent I am. It is a relative assessment. It is not, this number is gonna make me financial independent. How financially independent are you should be the question. And please celebrate your wins, right? I think that's the last thing that drives me nuts is that if you were planning 10, 15 years into the future and that's the only thing you're looking for, you miss all the amazing stuff that you're doing right now.