The Cheat Code

CaptureHave you ever found yourself in position where you have achieved what you had worked for only to find that it wasn’t what it was cracked up to be? After achieving some goal you felt a short burst of positive emotion only to subsequently be left with the feeling of wanting more.

I think most of western society has ingrained this feeling in a lot of us. We are inundated with advertising, social scripts, and our peers to constantly consume more, and to sacrifice our souls doing so. The media also constantly screams at us that wages are stagnant that all hope is lost and that we need to empower the government to provide for more of our needs. There’s a broad emphasis on this ever growing circle of concern on subjects that have little impact on our lives.

Yes, it’s important to care about your country’s policies, but does it make sense to get offended by some dumb remark a politician says that’s politically incorrect? Yes, it can be rewarding to consume a really amazing thought provoking movie, but is it really important to keep up with what celebrities sexually assaulted their staff? It makes for a tantalizing voyeuristic peek into the toxic environment that Hollywood pretends doesn’t exist, but is it really IMPORTANT?

The point I’m trying to make, is that none of that stuff matters. When you’re on your death bed none of that comes into play. There is no product that you can buy that will make you happy long term. There is no politician that’s going to solve all of your problems. The most valuable commodity you have access to is your time. You will never be able to regenerate it. You have a finite life. What better thing to spend your money on than buying your time from necessity of work? You have the ability to shape your life as you wish.

What if I told you that this Global Capitalist system had mechanisms that you could use to effectively generate infinite free time? With this free time you can decide whether you want to continue working, start a business, write a book, play video games everyday, be the best mom or dad ever, travel the world, etc. You can essentially build a money machine that will cover your expenses for the lifestyle you choose. I know, I know….this sounds like a shitty infomercial. However this isn’t new knowledge.

Google: “Financial Independence”

There is a movement of people who learned this cheat code early. The code, at its simplest is this.

  1. Get the highest paying job that you’re capable of.
  2. Commit to spending less than you earn.
  3. Contribute to your 401k (deductible retirement account in the US) until you maximize your employer’s match.(if your company does that) (buy index funds with low expense ratios)
  4. Pay off debt generated from the pursuit of that job, if you have any.
  5. Max out your 401k (buy index funds with low expense ratios)
  6. Max out your Roth(After Tax retirement account, earnings are tax free in the US) or deductible IRA if you income allows it. (buy index funds with low expense ratios)
  7. Invest what’s left in a taxable account. (buy index funds with low expense ratios)

You basically do this until you have 25 times your desired annual expenses, or if you’re worried about rising healthcare costs maybe 33.3 times your desired annual expenses. Once you have this magic number in index funds you can take 4% or 3% of this value as a “salary” per year and not have to worry about it running out. This website breaks down where this 4% rule is derived from: FIRECALC. I can break down my logic as to why index funds are the only asset class I invest in in a future post.

The key takeaway from this should be that the lower your annual expenses are the lower this “magic number” is. You don’t have to be a multimillionaire to never “have” to work again. I challenge you to really examine your spending, how happy does each expenditure really make you? In my next blog post I plan to elaborate on a way I’ve developed that helps me prioritize my spending.

That’s literally it. You can be cute and try to do some real estate investing, speculate in cryptocurrencies, or start side hustles to speed it up, but it’s not necessary. If your household income is over $80K it is very possible to achieve all of these steps. It’s even easier if you have two spouses working. Even if you don’t make that amount of money, you can still use the principles of financial independence to take ownership of your future.

The goal of this site is not to educate you on advanced tax strategies, or motivate you to start your own businesses and deal with the complexities of identifying what your target demographic is or where business/technology trends are going. My focus is to simply spread the word on how simple it can be. In fact this whole exercise can be completely automated while you focus on the present moment.

Once you’ve built this money machine, what you do with the rest of your life is up to you.

Listening to: