Dear Christie, I just want to say you have truly changed my life…
News like this makes my ears prick up. Even though the last time I heard from this particular reader was ten years ago, I still remember them. At the time, they had just discovered FIRE and asked us questions about saving, investing, taxes, etc. Her biggest concern is that she earns $60,000 a year and lives in an expensive city in the United States. Is this possible for her?
What now?
Thank you for taking the time to reply to my email 10 years ago. At the time, I knew virtually nothing (I still know nothing), but the math behind your methodology convinced me. So, even though I procrastinated a lot on my FIRE journey, even though I never contacted you, even though I wasn’t active in your community and just stalked silently, I was able to follow the simple steps you laid out in your workshop. I’m happy and excited to report that this year I finally reached and exceeded my own $1 million FIRE goal.
Wow. Amazing.
To someone just starting out, a million dollars may seem like an insurmountable number, but every millionaire starts out with an empty bank account. Assuming they don’t inherit their wealth, each millionaire accumulates wealth one dollar at a time, but I understand why the process is mysterious to so many. That’s why we created this blog and investment seminar. In an effort to demystify this process and democratize wealth, I’ve realized over the years that this has a greater impact on more people than anything I’ve done in my engineering job.
I couldn’t have done this without you. I can’t even believe this is my reality, I even reread the letters you wrote to me with tears in my eyes – “In 10-15 years you might be where we are now :)” and “I think your salary is pretty good, definitely enough to achieve FI”. Thank you for your affirmation. It means a lot to me, just having someone believe in me. I’m a college dropout. I wasn’t even making $60,000, it was actually $40,000 a year (I was so insecure that I lied). But I’m confident that if I could live on the pre-tax amount, I could make 4% work.
Two years into my career, I ended up with a job at a top tech company and was saving aggressively, but not much had changed in my lifestyle. I allocate a stock/bond ratio of 80/20. I rebalance my portfolio every month. Compound interest does the rest.
I admire you and Bryce so much for continuing to post, continue to share, and continue to do what you do all these years later. Thank you so much for being the big sister and brother I never had and teaching me in a way that didn’t make me feel like an idiot for not knowing. If you are in my area I would love to take your family of three out to dinner.
We would love for our readers to take this up!
This is a really nice email and comes during a particularly tough week as our kids have had stomach bugs…which have been a lot.
Dealing with a sick child is a special circle of hell that gave FIRECracker and me a new appreciation for the invisible work parents do. We are also very grateful that the money-making machine we built years ago continues to generate passive interest and dividends while we sleep. It’s one thing to quit our jobs and travel the world, but knowing that we don’t have to wake up at 7:30 and trudge to work the next day after a particularly rough night cleaning the crap out of our kids’ sheets makes all the work we put in decades ago worth it.
So for those Gen Zers out there who are just starting their careers and are thinking, “This isn’t going to work on my meager salary,” here are some tips to remember.
Setting up a money-making machine is the hardest part
The money making machine is not a physical machine or anything like that. It is a series of accounts at a bank or brokerage firm that are set up based on your designed investment allocation. It’s all virtual and anyone with a laptop and an internet connection can set it up.
The reason why it can’t simply be done for you is because everyone’s risk tolerance is different. Some people need investments that are less volatile and require more bonds than stocks, while others require longer investment horizons and can tolerate more volatility. However, I think that for most people in their 20s and pursuing FIRE, a 75% equity/25% fixed income allocation is sufficient.
After that, you have to select your ETFs, link your checking account, and set up tools to help you rebalance and get your investing on track, so it’s a bunch of logistics and digital forms that require electronic signatures, but there’s no calculus involved. Again, if you can install the app and create a TikTok account, that’s pretty much all the skills you need to do it.
Our investing seminars are designed to serve as step-by-step guides to building your money-making machine. It’s also free, so if you’re confused, start here.
Money feeding machine
Most people make peanuts when they start working. My first job was minimum wage (I worked as a ride operator at Carnival). It doesn’t matter. To paraphrase an old saying, it’s not how much you get paid, but what you do with it.
Most people spend their last dime because they don’t know what else to do. Building your money machine gives you another option, which is a powerful tool because it makes you question every purchase and compare its relative value. Do I really want this fancy Louis Vuitton bag? Or is this money better spent investing and growing?
I am a strong supporter of financial ergonomics. Make it easy to do the right thing and you’ll be more likely to do it. So if you set up your life to make investing as easy as pressing a button, or even completely automated so you don’t have to do a thing, you’ll be surprised how easy it is to build wealth.
As our readers can attest, achieving FIRE doesn’t mean being smarter or working harder than everyone else. It’s about getting into the habit of avoiding fires.
Let time do the rest
Once you’ve set up your money-making machine and made it as easy as possible for you to contribute, the final ingredient is time.
For someone just starting their career, a relatively small salary may seem like a barrier, but they also have a huge advantage behind them, as they have a lot of time in the market.
The power of compound growth is no joke. The US dollar has a compound annual growth rate of 7% and will double in 10 years. On top of that, your income is likely to increase as your career progresses, meaning the amount you’re able to contribute increases every year, grows, compounds, and so on until it becomes an unstoppable money snowball.
10 years may seem like a long time, but remember: time will pass anyway. Setting up your money-making machine and investing early means that your money will compound over time until one day, like our readers, you’ll be surprised by how much it grows.
This is why I like FIRE. Play the game right and you might become a millionaire one day.
I was recently on a podcast called “2 Dads 1 Car” and it was so much fun. I met host Steven Ngo in a random parking lot, so I figured I might be kidnapped or we were going to record the podcast while driving. Fortunately, the result is the latter. Check us out here
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