> I'd love to see a Financial Independence plan around growing [a] business(es) and retiring early but not crazy early (40-55) and living on a substantial middle/upper-middle income for several decades.
That's roughly my plan. My goal is to achieve financial independence, but my wife and I will continue working even after that. FI just gives us the freedom to do work the way we want.
My current projections put us at retiring roughly when we hit 40.
I just started my own business, which I hope to grow into a indiehacker/lifestyle type business; not a rapid growth startup. Just something I like working at and that earns a reasonable income.
All that said, I'm not sure why you think $24k/yr is a pauper lifestyle. In fact that's roughly our yearly expenses once we achieve "initial FI" * . That's in Southern California, and we hardly live like paupers.
By the way, I never got involved in the FI "crowd". I read through /r/personalfinance in the past, and check it occasionally. It's definitely very heavily expense management. Makes sense, since most people are really bad at expense management. And there is definitely not a lot of discussion about where to draw the line between cutting expenses and having fun. I can imagine that FI specific communities would be much worse in that regard.
But I think all of that is driven by the fact that these communities are composed of, well, everybody. And most everybody can only dream of maxing their IRA. For people in the HN crowd financial management is quite a bit different. We need advice on what to do after we max our 401k! (HINT: Start your own company and do a solo 401k). I think a lot of us are also very privileged already in what work we do. If you're a programmer, you can generally find a programming job you life that pays very well. For most everybody else, finding a job you life is either rare, or would mean taking a massive pay-cut. So while most people dream of FI being an escape from work, I think a lot of the HN crowd is like me; dreaming of FI as just ... freedom. Freedom to take a year off and work on a startup. Freedom to work for a local company for $150k/yr instead of working for Google to earn that fat $300k/yr.
EDIT: * Forgot to clarify that "Initial FI", for us, occurs after our house is paid off so $24k/yr is without a mortage. I editted out long-winded sections of my original comment and forgot to clarify :P
Yeah, same here, mortgage is huge in these expensive areas. But having the house paid off is part of our FI plan. That's probably not true of the more hardcore FI crowd. They believe, rightly so, that stocks are better investments than a house and that a mortgage is basically just free investment money. I don't disagree, but I want to own a home ... just cause. So our investment portfolio is definitely real estate heavy :P I sort of balance it out by having less in bonds and more in stocks compared to the Boglehead's advised ratios (I don't see the value in having bonds for an FI plan anyway, but perhaps I'm just misunderstanding something?).
EDIT: See my edit above; I realized I forgot to clarify that my $24k/yr figure was excluding mortgage.
Borrowing on your home to invest is just a terrible idea. You may see higher returns on the aggregate in the market but doing so is a good way to lose your home. Too much risk and like you, I think the small spread (and it is very small) between your mortgage and market returns doesn't even cover the risk premium of the potential to lose your home.
The idea isn't to borrowing against your home to invest.
Rather, the idea is that after you have your mortgage, you put your extra money towards your stock/bond investments rather than putting extra money into the mortgage to pay it off early.
This is because the interest on your mortgage is quite low compared to the long-term stock market returns (7-8% after taxes/inflation). So your dollars are more valuable there than spent paying off your mortgage.
In other words, if you take two people, each buys the same home, but one pours all their extra money into their home and the other pours it into the stock market, in 20-30 years the one who poured all the extra money into the stock market would have a much higher net worth.
I don't think real estate/paying into your mortgage is risk-free. I'd say it's about as risky as long term investments into the stock market.
Over all of recorded history, the stock market has gone up 10%/year on average (not accounting for taxes/inflation).
The common rebuttal to that is that past performance is not an indicator of future performance.
Sure, but then you have to apply the same logic to the supposedly "risk-free" real estate. I think it's just as likely that your house becomes worthless as the stock market no longer giving 10% returns.
My more general argument is that for all intents and purposes the stock market is a gauge of the overall economy. If suddenly the stock market stopped returning 10%/yr the economy as a whole would be in serious trouble. No investments, real estate or otherwise, would be safe. Your stocks would be as worthless as money stashed under a mattress.
That's my logic, at least. Of course, as I said, I don't follow that logic personally. Not that I don't agree with it, just that I'm willing to sacrifice financially in exchange for the satisfaction of owning our home.
I'm afraid your logic is a bit flawed here. The home value increase or decrease does not factor in when considering your mortgage. Your mortgage continues to exist no matter where your home value goes.
You have to pay that same mortgage even if the market tanks and your home becomes worthless. Even in the case of just "letting it go" the bank will take your worthless house and will still come after you for what remains on the mortgage.
That is why putting money into your mortgage is a "risk free" investment at 4% (or whatever your rate is).
If you borrow against your home to invest you don't lose your home if the investments tank, you only lose your home if you can't make the loan payments.
Yes, but lets hope your income is not based on investment success and that your job is still safe even in a market crash. Of course, if you have a steady, locked in income from a very safe pension or trust fund, then go ahead and borrow on your home. You don't have to worry about losing it in that case.
But you only have to go back to 2008-2009 to see how well that worked out for a very large swatch of the American populous.
Where are you "multiple hours" away from work (presumably in a place that doesn't have salaries close to what you make now) and still paying $2k/mo+ in housing?
That's roughly my plan. My goal is to achieve financial independence, but my wife and I will continue working even after that. FI just gives us the freedom to do work the way we want.
My current projections put us at retiring roughly when we hit 40.
I just started my own business, which I hope to grow into a indiehacker/lifestyle type business; not a rapid growth startup. Just something I like working at and that earns a reasonable income.
All that said, I'm not sure why you think $24k/yr is a pauper lifestyle. In fact that's roughly our yearly expenses once we achieve "initial FI" * . That's in Southern California, and we hardly live like paupers.
By the way, I never got involved in the FI "crowd". I read through /r/personalfinance in the past, and check it occasionally. It's definitely very heavily expense management. Makes sense, since most people are really bad at expense management. And there is definitely not a lot of discussion about where to draw the line between cutting expenses and having fun. I can imagine that FI specific communities would be much worse in that regard.
But I think all of that is driven by the fact that these communities are composed of, well, everybody. And most everybody can only dream of maxing their IRA. For people in the HN crowd financial management is quite a bit different. We need advice on what to do after we max our 401k! (HINT: Start your own company and do a solo 401k). I think a lot of us are also very privileged already in what work we do. If you're a programmer, you can generally find a programming job you life that pays very well. For most everybody else, finding a job you life is either rare, or would mean taking a massive pay-cut. So while most people dream of FI being an escape from work, I think a lot of the HN crowd is like me; dreaming of FI as just ... freedom. Freedom to take a year off and work on a startup. Freedom to work for a local company for $150k/yr instead of working for Google to earn that fat $300k/yr.
EDIT: * Forgot to clarify that "Initial FI", for us, occurs after our house is paid off so $24k/yr is without a mortage. I editted out long-winded sections of my original comment and forgot to clarify :P