
Ask HN: How have you achieved financial independence? - tsaprailis
I know this is a niche question, but have you reached a point where you have enough passive income to not to have to work for a living?
If so how did you accomplish it?
======
mikekchar
I'm only responding because nobody else has replied to your thread. Feel free
to ignore me if you think it is irrelevant.

My favourite Dr. Who quote: "Work for? I don't work for anyone. I'm just
having fun."

Describes me, even though I receive money every month. My expenditures are
considerably less than the money I receive every month by having fun. If I
didn't receive money, then I would be in trouble, so I don't really qualify
for your question, but I'm having fun so I'll answer anyway.

Step #1. Reduce my expenditures below what most people consider reasonable. I
lived for more than 5 years on less than $10K a year. It was much easier than
I thought. I discovered that spending more than this amount of money, I was no
happier. Who knew? What really counted was having so much more income than
outgo that money became completely irrelevant to me.

After I did that, I stopped worrying about working. There isn't a job in the
1st world that pays less money than I'm comfortable with. I started taking
jobs that interested me instead of jobs that paid me money.

Then I got married. _That_ threw a monkey wrench into the works! But I'm
slowly working thought that ;-)

Honestly, people tie themselves to a grindstone to make as much money as
possible because they think it will _remove_ stress and give them a nice life.
I don't think that works most of the time.

~~~
siscia
The married part is the one I am more interested in.

I too live extremely cheaply, but my girlfriend has way more expense than me
(still reasonable, but too high in my book).

We are not married, but we spend a lot of time together and I am a little
afraid that this difference in how we spend money will be a problem.

How did you manage it?

My very first step was to have her create a save account where she deposit
each month a little bit of money, after I explained her the why she need one
she started to accumulate money pretty quickly and in a very disciplinate way,
all those money however disappeared when she bought a new house (but I believe
it is fair).

~~~
charlesdm
Living extremely cheaply isn't always that great.. you can be frugal, but at a
certain point, people take it too far.

I.e., if you spend hours (or days!) comparing prices when purchasing lower
value items, you value your time at exactly zero, and it might actually be
easier to make (!) money vs spending less. Maybe your girlfriend actually
prefers living a little?

I'm not saying to throw your money away on useless stuff (I don't), but at a
certain point, it gets tiresome. I've known a guy who, when he was thirsty,
refused to purchase a small bottle of water for like €1.5 because he
considered it a ripoff, after which he promptly asked a friend if he could
drink from his bottle. Honest to god, I hope you don't mean living cheaply in
that way.

In the end, it's about finding a balance. Too much spending, and you won't
have enough to invest. Too little, and life won't be much fun, 'cause frankly
a lot of fun things cost money. I spend about the same (probably a bit more)
as some of my friends in terms of monthly burn, yet I make 10x their salary. I
consider that frugal, but I live well.

Also, there's no point living cheaply if you don't know what to do with the
extra money. Know where you're headed, i.e. financial independence, buying a
house, etc

~~~
cmdrfred
I agree. My advice is focus on growth. Willpower is a finite resource, you can
use it to save 2 bucks on a bottle of water or spend a few minutes learning a
new skill. One saves money once, one pays dividends forever. If you have
unlimited willpower go ahead and do both, I know I don't.

~~~
charlesdm
I like this one: negotiate hard on every big purchase you make in life,
whether it's a new car / house / new couch worth $2k / bank fees / financing /
etc. Make it a habit of negotiating on everything that is negotiable (which is
doable on a lot more things than you thought). It's a valuable skill.

The gains you make from that will save you a ton of money during a lifetime.
Don't ignore large potential savings by penny-pinching on the small stuff.
Heck, if you do this, you can ignore the small stuff.

~~~
pastullo
wow, you are totally right. That's quite mind-changing for me since i never
bargain.

If you sum up all the bargains of a lifetime, it will be huge.

------
zen_boy
Just turned 30. Invested most of my savings (20k€) into Bitcoin several years
ago, and then converted everything to Ethereum in the pre-sale. Those 20k€ are
worth roughly 1M€ pre-tax at the current rates.

Started a fintech startup three years ago and we are close to a liquidation
event that would net ~1.5M€ pre-tax.

Right now, though, I have less than 10k€ in my bank account. Would be also
really curious to hear how to convert that money into sustainable passive
income.

Spending 3k€ per month for the next 30 years would be about 1M€. Seems like
having <5M€ is far from the "go bananas" type of wealth, but it can definitely
be enough to achieve FI.

Achieving ~4% annualized ROI after tax and inflation seems plausible in the
long term:
[https://www.reddit.com/r/financialindependence/wiki/faq](https://www.reddit.com/r/financialindependence/wiki/faq)

~~~
UweSchmidt
I had the opportunity to hear major german bank disappoint affluent customers
by telling them that, in stark contrast to the past, there is no risk-free 4%
in the stock market any more (when using the basic strategies available retail
like investment funds etc). If true, you might have to play a more active role
and "run a business" instead of "invest some".

~~~
pc86
What's the "risk-free" amount then? 2%? 1%? 0.25%?

2% just means you need more money saved, not that you need to actively run a
business into your 80's to continue feeding yourself.

~~~
UweSchmidt
They said risk-free would be -0.4% or something. I suppose they would have
been biased to say "buy our funds", and they didn't really push any other
products except maybe real estate. Everyone was bummed out.

Curious to hear other opinions.

------
repomies691
A mix of consulting, products and bitcoin. Happened to just be in a right
place at the right time, and took (mostly) the right risks. Basically I went
from zero net worth to 2-3 million liquid, within about 7 years. Also have
some other illiquid assets which could be worth more or less.

First I started with consulting, then slowly started developing different
apps/products/services, and funded the development from consulting/contracting
income. Soon the products themselves gave me 2-3k/month, and I didn't need to
do that much consulting any more. As Bitcoin came, I already had some money to
invest. I lived very frugally, and invested heavily in Bitcoin when it was
around $10 or something. Also I have invested in stocks/ETF:s/etc all the time
but those play pretty minor role. Mostly got one thing right.

~~~
zen_boy
Are you also from Finland? Would love to share stories and insights! You can
find my contact info on alexhanh.com, if you are interested to talk. :)

------
maaaats
I haven't achieved it, but I'm taking the safe route: Avoid lifestyle creep.
Invest as much as I can for long-term gains (index funds, bonds etc.). Then
live off slowly selling it off. So no passive income from a business. (I feel
most people claiming "passive income" from those are actually working on them
anyway, though)

By living off 50% of my paycheck, I can invest 50%. This roughly means for
each year I work, I have one year saved up. However, after saving up many
years, interest of interests have accumulated, so the first year I saved gives
me more free years when I choose to "spend it". That's how I think about it,
for the math, safe withdrawal rate etc. reddits r/financialindependence has a
lot of resources. Most can achieve FI on modest income, so as a developer it
should be double-doable.

------
malcolmocean
I described this in pretty great detail over on IndieHackers
([https://indiehackers.com/businesses/complice](https://indiehackers.com/businesses/complice))
and also answered a bunch of related questions on this HN thread:
[https://news.ycombinator.com/item?id=12269425](https://news.ycombinator.com/item?id=12269425)

TL;DR = spent 20h/week for 2 years building a product that people wanted. But
there are a lot of juicy insights etc in those links.

~~~
tsaprailis
Thanks for the links, I will take a look. Your story seems like what I have in
mind trying to replicate.

------
rizn
I consider myself as financially independent. I worked for a number of years
in London as IT contractor (£400-500pd). Then I moved back to my home country
and my hometown in Poland (reasonably affordable, not a capital). I don't have
a car and I try to keep my spending to minimum (no fancy holidays, which I
don't need. I cook, etc). I try to ensure my spending doesn't exceed
equivalent of €500 a month.

I still spend most of the day in front of the computer. The only difference is
that I wake up and finish when I want. I work on my personal projects (without
aim to make money), which I find more interesting than doing commercial CRUD
apps.

My decision was largely influenced by a Danish guy living in the USA, who
wrote this blog: www.earlyretirementextreme.com

------
anonu
In the USA the surest and safest way to do this is to follow the American
Dream... ie: buy a house. Specifically, buy a multi-family in a constantly in-
demand area / big city. The devil is in the details on the economics of all
this... how much you put down vs how much you borrow, etc.. etc... But within
30 years (assuming you get a 30-year mortgage) you will certainly be
financially independent. The key is to manage this wisely and ensure you are
in a location where you can get near 0% vacancy. Why am I so sure this will
work? Because the US economy is designed for this... it's designed to
massively leverage yourself up against the collateral of the home. The tax
code is designed to basically writeoff your expenses - and even more so if it
is your primary residence.

~~~
vegasje
Any areas specifically come to mind?

~~~
anonu
Austin, Portland. anywhere near a large university. university enrollment is
counter-cyclical to the economy.

------
Swizec
As others have mentioned, financial independence isn't hard. The hard part is
financial independence without lifestyle compromises.

I'm making roughly $2k/month with books and workshops. The marketing and
content producing takes about 2h/day on average. It makes my life a lot easier
and less stressful.

But rent alone is $3500 in this stupid city (San Francisco). So I still need a
day job for now.

~~~
erikb
> The hard part is financial independence without lifestyle compromises.

My point exactly.

But I also think you don't need to live in one of the most expensive cities of
this planet. A few lifestyle changes should be acceptable, though. I would say
if you spend more than $50k/year it should be possible to have quite a good
life with some modifications.

~~~
sotojuan
Until remote working becomes more common, living in a big city has a lot of
benefits for a tech worker. Even with the higher living cost, I make a lot
more than back home in Texas. Sadly just not enough to become independent :-)

~~~
erikb
Agreed. But there are many many cities that are big and a lot cheaper than SF,
NYC etc.

------
coverclock
1\. Started working full time at 19. 2\. Still alive at 60. 3\. Worked hard in
every job. 4\. Maximized retirement contributions. 5\. Only owned two houses.
6\. Paid off current home as quickly as possible. 7\. No debt other than
credit card paid off monthly. 8\. Only married once (and still) 32 years ago.
9\. Spousal unit has same fiscal strategy as me. 10\. We never had kids. We
can both afford not to work, although we both choose to. I can't say we're
especially frugal. I own four Swiss mechanical watches, a brand new Subaru WRX
Limited, and lots of other toys, and have traveled all over the world, all of
which I paid cash for (or paid card off each month).

------
samsonradu
Doing pretty well from consulting these days, however I can't manage to
generate any passive income. Having saved about 30k in the past years doesn't
seem to help either, interest rates are ridiculously low. Stocks and bonds are
not really my area of expertise so I decided to stick to cash. Investment
funds might be an option in the nearby future.

~~~
maaaats
Just buy index funds. They have low fees, and beat most (if not all) managed
funds long term anyway. Find a fond tracking S&P 500, one global and maybe
some other markets, and you should be set.

~~~
aminorex
Keep in mind that index funds will probably decline by about 3-4x over the
next 10 years on the demographic cycle.

~~~
cylinder
How can something "decline 3x?" Lol.

~~~
aminorex
Invert the multiplier silly.

------
ekr
Obligatory link to ERE Journals :
[http://forum.earlyretirementextreme.com/viewforum.php?f=9&si...](http://forum.earlyretirementextreme.com/viewforum.php?f=9&sid=8c02ee36bb6309086a0184db619cfe9b)

You can read tens of life stories centered around early retirement/ financial
independence there.

------
doc_holliday
Related, I am wondering if any of you have any tips on securing financial
independence / passive income that will hopefully be Tech recession proof.

I.e, best way to see yourself through a Tech downturn without taking a severe
hit to your wealth.

I say this because I've had recent experience with people losing huge amounts
of their wealth, and almost going bankrupt during the Oil price crash.

For instance I know Oil workers who had most of their wealth in oil company
shares, a house in an oil related city and lose their oil industry job.

I'd imagine their are lots in tech that are the same, large amount of Tech
shares, a house in the Bay area and a job in Tech.

Anyone got any tips on diversifying for a downturn? What shares (if any???)
are likely to do well if Tech has a bad patch.

~~~
SmellTheGlove
Well, it doesn't help me at all in the tech job market, but my primary
residence is 0.75 miles from the beach in the Northeast (Maine). At some point
I'm pretty sure we'll move one more time for a career opportunity, at which
point this becomes the 2nd home and an investment. We weren't really part of
the housing bubble or the collapse here - things just kind of kept moving
along at reasonable rates of appreciation. As a result, there aren't any
bargains here, but I know a few people with similarly located homes renting
them by the week in the summer to tourists and keeping them completely vacant
from October-April. I'd like to get another property up here. Now, if you're
talking about market investments, do yourself a favor and diversify. Just hold
indexes and keep your expenses low if you don't quite know what you're doing.

That said, disclaimer, I'm not financially independent. I very much need my
job, as I have a mortgage and student debt from law school, plus a child and
probably having 1 more in the next couple of years. I'm nearly certain I'll
never be financially independent, since I'm really trying to set that up for
my children instead. I have no idea what college will cost in 15-20 years, but
I see the direction it's headed and my financial plans are more around making
sure they come out of school debt free. My folks did that for me, but then I
was dumb enough to go to law school in 2005. I really can't complain, I have a
pretty solid career doing fintech and data for a large company, but it's one
major expense I could have avoided and been okay - although it does check the
"advanced degree" box. I have some side projects and more coming, but if I
make a few dollars there, it goes directly to my kids' savings. I do have US
and EU passports, so there's potentially that option for retirement with
affordable healthcare and housing, but that's projecting years down the road.

------
Dragon256
Forces pension, various websites, P2P lending (ZOPA, Funding Circle, Lend
Invest, etc) and soon (hopefully) Bonds & shares via CrowdCube.

~~~
tsaprailis
Thanks, do these provide a passive income or just capital gains?

------
mark_l_watson
I worked for a very large company for over 20 years, and the stock I received,
bonus and standard issue, made my wife and I fairly much independently wealthy
given our frugal life style. We spend a fortune on travel, otherwise we live
on very little money.

The other thing that helped was buying some income property when I was
younger. Getting rent money from tenants every month is wonderful.

------
EliRivers
I can pay my rent and bills from investment income and capital gain on
investments. This is, of course, not remotely guaranteed, but over the last
few years it's worked out. I do still work, though.

I did it by putting large amounts of my income into low cost index funds
focussing on various sectors, and some specific shares that I thought would do
well.

~~~
tsaprailis
Thanks for the feedback. Could you clarify if you only use the capital gains?
I have read that dividend stocks are also a good way to have a passive income.
Additionally have you thought about what you would do in case of a market
downturn?

~~~
n72
Dividend stocks are not a good way to have passive income. The benefit of the
dividend is already priced into the stock, so they are no better than any
other stock. Prefer, rather, to just go for good stocks and not worry about
the dividend. If you need income, sell some stocks.

Also, the % that you're pulling out of stocks should be determined by looking
at, say, a 30 year window, not a very recent one. That is, if your savings can
sustain a 2% withdraw every year, taking into account inflation, then take out
2% every year. Some years this will be less that your cap gains and some years
more. The key is making a long term outlook.

FWIW, these are some very brief thoughts of mine on investment:
[https://github.com/nickgieschen/investingguidelines](https://github.com/nickgieschen/investingguidelines)

~~~
EliRivers
"The benefit of the dividend is already priced into the stock, so they are no
better than any other stock."

I hear this sort of thing a lot, and in my experience, everything already
being priced in isn't true (both of dividend stocks, and stocks not paying
dividends). This relies on the efficient market hypothesis being broadly
correct, and based purely on my own experience, it isn't.

My findings are very much based on my own experience, but I have had no small
success simply reading the news and seeing that a company is doing well or is
looking at a brighter future, and buying shares in them and making a nice
profit on it out of both increased share price and increasing dividends. The
EMH suggests that it shouldn't work; that by the time I get round to buying
the shares, the efficient market has priced all that in. But it just doesn't
seem to be true, in my experience.

~~~
forgetsusername
> _My findings are very much based on my own experience_

In my experience, people think they're far better at stock-picking and
investing than they really are. Have you calculated your actual, after-all-
expense returns? Because if you are consistently beating the market, risk-
adjusted, start a hedge fund. I'm only half joking.

It's important to interpret EMH "realistically", in that prices, on average,
will reflect all relevant information. But it obviously doesn't occur
instantaneously or perfectly. Everyone who has traded stocks has a few wins.
The question is whether you can garner an advantage _consistently_.

~~~
EliRivers
"Have you calculated your actual, after-all-expense returns?"

Yes. I very rarely sell, so I can see it clearly, and the purchase costs
listed in the interface include the purchase commission (I buy in lumps of
1000 GBP, so take a hit of about 1% on initial purchase). Holding charges
comes out to a couple of hundred a year, which comes out of dividends.

In one account, I invested gradually over three years, from April 2012 to
March 2015. That's up on the order of 50% as I look at it today - looking at
it this very second (it's a little rough as I reinvest the dividends, which
count as fresh purchases in the accounting - it's up exactly 46% if reinvested
dividends are considered to be fresh money). Some of the early purchases are
up 100 to 200 percent, later purchases less so. There are some losers in there
as well. I have sold only once at a loss in that lot; some BP shares that I
changed my mind on. All other losers are still in the mix, and I leave my
worthless shares in KAZ there to remind me of my losses. Big winners - ARM,
Nokia, a global smaller companies fund. Big losers - KAZ, Bonmarche Holdings,
Tesco.

Another account that I opened (because I didn't want to exceed the government
insurance limit) and placed money into for the last 15 months or so is
currently up 20%. I've never sold anything from that. That is principally US
and Japanese index funds, although some ARM in there is up 70% thanks to
Softbank buying ARM.

An earlier investment from about 2009 (which was nothing but safety) is up a
little over 50% today, but that really was safety. Likewise never sold
anything.

I have done this by doing absolutely nothing special. Absolutely nothing. I
simply took the common advice; low-cost index funds. I also read the news and
sometimes buy into companies with brighter futures. A couple of years ago I
read many articles about how GSK and AZN had been through tough times and were
coming out of it. Bought some shares. Worked out well. That's all I do. For as
long as I can remember, ARM has had nothing but growth in the news. Bought
into them repeatedly.

I have significant advantages over hedge funds; they have to trade. I can sit
and do nothing for month after month, and when I suffer a 20% drop, I can
continue to sit still and do nothing. If anyone wants to pay me to tell them
when I buy something, knock yourself out :)

~~~
n72
This is not nearly enough evidence to conclude that EMH is invalid. Yes, it's
not perfect, but to conclude from this evidence that dividends are not priced
into the price of a stock is... well, it's not sound reasoning.

~~~
EliRivers
To quote myself, from earlier:

"The reason I believe this is not related to stock picking working for me."

So it seems we agree that my stock picking success is not evidence for my
beliefs on dividends and stock pricing.

------
timwaagh
I'm trying to get closer to this goal by renting out rooms in my house. It's
not something that a lot of people do and there are legal issues. however it
does get me a nice amount of passive income. this is about 1k EUR per month.
I'm hoping to get it up to the level of my salary (1700 EUR) within the next
year.

------
pauljaworski
Not me, but the last time I talked to the CTO of my last company, he was
making ~$120k/year passively via LendingClub with ~$1M invested (which he
acquired via our exit).

~~~
rufius
Has he reevaluated his investment at all with them since some of their sketchy
business? I've been trying to decide with the chunk of money I have invested
there.

~~~
pauljaworski
I don't know the full details of how they inflated the creditworthiness of
their lendees, but I do know that he wrote his own software to determine that
and offer loans based on his own criteria. I'm not sure if he was actually
affected by what they did.

------
stevenmays
I'm not yet. 31 years old and working on it. I have a good chunk of money
invested, but my magic number is 1 million and a paid off rental (maybe 2) + 1
primary residence. I have 12 years left on my mortgage. This house will
eventually become one of my rentals.

The idea is just to reduce expenses a ridiculous amount and invest everything
in the stock market + rentals. I should reach my goal by 40 - 45.

------
aminorex
Income is superfluous if you have enough to burn for a hundred years or more.
For me, it was as simple as buying some monero and relocating to a lake home:
No city burn rates, and my stash rose 12x so far, with another 50x foreseeable
in the baseline scenario, 10000x in extremely low-probability tail scenarios.

------
alecco
Watch out for Survivor Bias. Ask how people aimed to FI and failed, too.

------
known
Wall street programmer :)

~~~
aminorex
Super high burn rate. 200k is a slave wage in Manhattan, or in SFO bay for
that matter.

~~~
whamlastxmas
#shitHNsays

~~~
aminorex
It's just true. You live like a galley slave at that rate. It takes about 300k
to approximate the lifestyle that 40k can get you in Omaha.

~~~
mywittyname
What? No dude.

$300k is still $16,000/mo net, worst case scenario. $40k is like $3k net, best
case.

So, unless it's impossible to live in SF for less than $13,000/mo, SF wins.

~~~
aminorex
You can live like a king on 40k in Omaha. You can have a yard, a garage, drive
a car, eat at restaraunts, shop at Walmart. In Manhattan some of that is
inaccessible even to the very rich. There are no walmarts. Parking your car
may cost 40k.

~~~
cmaher
That's assuming all people want to live like that. I wouldn't know what do do
with that much space, and I hate having to drive anywhere. Give me decent
public transportation and access to world-class restaurants over a house and a
yard and a car any day.

