I’ve been exploring the idea of financial independence(FI) for the past few weeks. It all started with a book Unscripted. It’s a book about entrepreneurship. I’ve read many books on starting a business, but what is unique about this book is that it introduces the idea that once you have enough money, you can live off the investment return. Let’s say the annual return on your investment is 5%. Then $400,000 will produce $20,000 a year, or about $1,600 per month. So if you can live with $1,600 a month, $400,000 will allow you to retire and not have to work again, forever. That’s a really powerful concept. When I learned it, it brew my mind. It changed my perspective so radically.
While MJ, the author of the book, suggests we should start a company to make money for investment, I had a different idea. I thought, Wait a minute. I didn’t have to start a company to do that! I searched for information on personal finance, and sure enough, I found Mr. Money Mustache, Early Retirement Extreme, and other blogs and books that talk about early retirement. This is real.
Up until then, I thought that starting a business is the only way to achieve a financial freedom. If you don’t find a way to earn passive income, you will never be able to retire. The possibility of having to work until I am 50 scares the hell out of me. Do you want to work until you are 50? How about 80?
There is a decent chance that millennials will live for 120 or even 150+ years. When I tell this to people, most of them don’t believe it. But who knows. We didn’t have smartphones 12 years ago. The rate of progress is just mind boggling. The future is so far away and so uncertain that nothing seems crazy. Anyway, this is a topic that deserves an entire blog post.
Working for someone else will not be too bad as long as the working environment is similar to my current one. I don’t particularly enjoy my job as a software engineer. But it pays well and my boss and colleague respect me. Oh, and my boss is older than me! I don’t think I can have a job like that when I’m 80. Companies doesn’t want to hire old people, especially if the CEO is young. Young people are brighter and willing to work for lower salary. There is just no room for old people. Even if they hired me, working under a 32 year old boss would be a challenge.
If you are a business owner, you will have a much bigger leverage. Once you create a system, it works for you. So I tried to start a tech company right out of college. I studied computer science in college and knew how to build a web app. But as you know, starting a business is really hard. I read tons of books about entrepreneurship and applied to my business. But no matter what I did, it didn't work. It was very frustrating. I started to doubt my ability.
Then I stumbled upon the concept called “lifestyle business”. Unlike tech startups. A lifestyle business does not try to scale as much as possible. Instead, it focuses on generating enough revenue to support the founder. Also it tends to require less capital to start. Probably the most influential book on lifestyle business is “$100 startup” by Chris Guillebeau. I don’t need much money to be happy, so the idea of a lifestyle business is very appealing.
So I started an English teaching business because I loved English. But I quit a year later. I explained why I quit in another post, but the long story short, I could not imagine doing it for the next 10 years. I also started a catering business 7 months ago, but it didn’t go well either.
After quitting the catering business at the end of 2017, I was completely lost. I had no idea what to do with my life. I did not want to go back to engineering, but since the rent for my apartment/party space is $1,500, I was quickly running out of my saving. I reluctantly searched for a job and got a contract work that allowed me to work from home.
So that’s where I am now - working in a tech startup, just like before. But now that I found a goal to retire early, I feel less lost.