5 things I have done to reach Financial Independence at 35
1. Start a side hustle (hell I had 2!)
The cynic in me has never trusted a job to take care of me for life and I was always brimming with random business ideas to reach financial independence in a shorter time.
When my third job started to go south, I decided being an entrepreneur was the way to go in order to save the most money in the shortest time possible. I started a business with two of my friends, and for extra measure, I also started an e-Commerce site selling accessories on my own.
A new and exciting career opportunity came calling in the same year and I took that on as well. Yes, I ended up with one full time job and two side hustles! It was hell of a lot of work and took up all my free time, but in my 20s, I had so much energy and time that all of it amounted to such an incredible learning journey.
Luckily, we managed to do a decent job growing the business in a booming market. After 1 year, we managed to sell it at a tidy profit. After 7 long years of growing the e-Commerce business on the side, I sold that too and made another bucket of gold. All throughout this time, I held down a full time job and worked my ass off. Although I was doing it for the money, I was also living the dream and feeling incredibly fulfilled and productive every day.
As long as you keep the end goal of getting to financial independence in mind, you will be able to go the extra mile. In the grand scheme of things, you are fighting for yourself, to achieve your dreams and that is far more motivating than working for someone else.
2. Go where the future growth is
I graduated with a business degree. While most of my friends headed to the finance sector to make their fortunes (this was before the financial crisis of 2009), I had to work with the company that provided me with my college scholarship.
I won’t go into much details here, but after a few months I knew it wasn’t right for me. I started planning an exit, and while looking around, I saw the meteoric rise in social media and digital marketing and decided this was going to be my career instead.
At that time, most people thought I was crazy to make the switch from a cushy, well paid job into social media (which was ‘free’ and for kids). However, being one of the earliest adventurers in this space that I believed in, I started to carve out such a competitive edge in digital skills that became incredibly valuable when social media became a money printing machine. This calculated risk got me hired at a tech company and accelerated my earnings by multiples as the industry grew. By the time people acknowledged the power of the tech sector and started flocking to it, I was years ahead in terms of experience and thus earning power.
This is going to be the same for new and emerging sectors today, which could range from machine learning, fintech, meatless meats or climate-changing products. Find what you are most interested in, evaluate the potential and start learning before everybody else does. With some luck, this could catapult you towards your financial finishing line much faster.
3. Invest in property
Property is still an age-old asset class that is profitable in many geographies. Even though in some places, it is starting to make more financial sense to rent than to own, if you live in a place with high rental yield, you should really look into owning a property.
Luck often plays a factor but if you do extensive homework and leverage your bets, you can turn one property into two, two into five and five into ten. After all, you only have to put down a small downpayment each time. Once you accumulate enough rental income, you can invest in your next property. Alternatively, you can choose to sell the original one and use the capital gains to invest in two smaller properties.
Somewhere along my property flipping path, I got derailed, but my first five property investments still made me between US$100k-US$200K each. The current ones I am holding now have appreciated considerably and are still bringing in decent rental yields. Once you have enough capital, definitely look into property ownership as an asset class. Very often, real estate forms a big part of the financial independence journey.
Recently, I’ve started looking into real estate crowdfunding platforms like Fundrise and will report back on how they perform for me.
4. Work your money hard
Money sitting in the bank earning 0% interest is a depreciating asset. Why? Because inflation diminishes the value of your money every year.
Don’t just leave cash in the bank, find the best interest you can get on your checking or savings account (currently around 2%) and put your money in there. A 2% annual interest on a balance of $20,000 gives you extra $33 a month - that adds up to $400 a year! Find the best account promotions, do the work of applying for it and make every dollar work harder for you!
The same goes for spending - every dollar you spend should be on a credit card that earns you miles or cashback. Apply for the cards which gives you the best value according to your needs - it’s not necessarily always going to be the same credit card everyone goes for. I currently use the AMEX gold and AMEX cashback preferred for my spending needs as most of my spending goes towards groceries and travel. Layer on rebate apps like Ebates or Drop and pretty sure you will start to see significant savings. Case in point - I cashed out almost $200 in my first six months of using Ebates!
Once every quarter, tally your investments and see if you need to reallocate them across different types of assets to maximise your yield. As a general rule, you should be investing in higher growth, riskier assets (e.g. equity) when you are younger, and redistributing them into lower growth, safer assets (e.g. bonds) as you near your planned retirement age.
5. Plan before you spend
As income rises, the risk of lifestyle inflation is real. While I had to think long and hard about going on that weekend diving trip in my college years, it was now easy to book a 5 star hotel instead of a 3 star room on my holidays. I grew up naturally frugal, but before I discovered FIRE and the concept of financial independence, I was headed the same way as all of my peers. With every promotion or raise, we started upgrading our cars, buying luxury bags, or flying full fare instead of budget airlines.
It felt real good to be able to live like a baller. But when I put things into perspective, and realised how my spending was going to set me back years in my financial independence journey, I changed my spending habits entirely.
I tracked every cent I spent using Mint for a couple of months and ensured I could account for every dollar I spent. After calculating a reasonable savings rate for my income level, I adjusted my spending based on my lifestyle. I seriously evaluated how many additional years I was willing to stay on in corporate life to continue indulging in fancy holidays and meals. Once I realised that cutting back expenses by a couple thousand dollars a month was going to shave years off my goal, my perspective on material wants became much clearer.
True story: I once interviewed a senior hire who was in his late 40s, with 2 kids, a fancy house and a fancy car. He was great for the role but he told us that he needed an absolute minimum of $25k cash per month in order to maintain his current lifestyle and he could not accept any package below that. Wow. Just wow. This is why you have crazy yet totally realistic articles like ‘earning 300k in SF but living paycheck to paycheck’. If you let your spending habits get out of hand, no matter how much you earn, it will never be enough to get you off the corporate treadmill.
What about you? What steps are you taking towards retiring early and achieving your financial independence goals? I would love to hear your story in the comments below.