Escape the 9 to 5 (E.03): What am I going to do with money?

Mao and Then: Escape 9 to 5

Escape the 9 to 5 is a series where I talk about why and how I am leaving corporate America. Previously I talked about my education and career background, as well as the reasons why I am escaping the 9 to 5. This brings us to the ultimate question, what am I going to do with money?

If it weren’t for the paycheck, I highly doubt that many of us would still roll out of bed and go to work tomorrow. At one of my jobs, I loved the classic team-building question: What’s the first thing you would do if you won the lottery? Quit my job of course, hasta la vista baby! But the funny thing is that few people would actually say it.

Over the past several years, I have thought about various ways and options on how to potentially have enough money so I can escape the rat race. After all, it is not that easy to walk away from the comfort of our paychecks.

Below are the some thoughts on how I am preparing to leave my 9 to 5 from a financial standpoint.

 

The FIRE Spirit

FIRE stands for Financial Independence Retire Early. There are a growing number of personal finance experts, bloggers and communities across the globe that are pursuing and achieving FIRE. Like many of them, we are fed up with the typical 9 to 5 jobs and wanted to focus our energy on something that we are more passionate about.

I only came across this online FIRE community not too long ago, and they definitely resonate with my believes. Some bloggers I look up to are Mr.MoneyMustache, GoCurryCracker, MillennialRevolution, MillennialBoss, MadFientist and more.

Everyone is pursuing and achieving FIRE differently. But for the most part, people are saving aggressively, anywhere from 50% to 80% of their income while living way below their means. At the same time, they are putting those saved dollars to work through various investments. Typical investments are stock markets via retirement and brokerage accounts, real estate, and other passive businesses.

A lot of people achieved FIRE by saving aggressively in their 20s and 30s and were able to quit their jobs in their 30s with over $1M net worth. With the 4% withdrawal rate, that $1M portfolio can theoretically last them forever so they wouldn’t have to ever work again.

 

My Take on FIRE

As for me, I had been saving and investing aggressively while living below my means. Based on this projection, I would be able to achieve FIRE in the next 5 to 10 years. It is nice that I would be able to achieve financial independence and leave the rat race in 5 to 10 years. But the fact that I would have to stick around for another 5 to 10 years, I would probably drive myself crazy first before I see lights at the end of the tunnel.

I practice the FIRE philosophy, but I believe that I don’t have to achieve financial independence first in order to live the life I want to live. 

In a sense, I am choosing to embrace the unknowns and just dive right in. Even though I am nowhere near financial independence, the cushion I built up is providing me the comfort of actually leaving my 9 to 5.

 

Mao and then: Escape 9 to 5: Embrace the unknowns. In San Francisco
Embrace the unknowns. In San Francisco.

 

 

Retirement Accounts

Go to college, get a job, and work till you are 65 then you can retire. This is how most of us were taught. Americans are typically spenders and the average savings rate is only at about 5%. Which means that there’s a large chunk of the population that lives pay check to pay check and would need to work till 65 or beyond in order to support themselves. But on the bright side, there have been more focus nowadays on saving rather than spending all your money. Programs such as the 401(k) or IRAs are exactly designed to help people save more money.

Programs like the 401(k) are great to help people save money, especially with tax benefits. However, the 401(k) calculator which guides you on how much you should save from your program sponsor such as Fidelity or Transamerica, is designed for people who wants to work till 65. And that is the way we were taught. We already went through that I already am anxious to leave corporate America in my late 20s. Work till 65 at a job that I am not truly passionate about is simply not an option.

 

Oh thanks, 401(k) calculator!

 

In the first few years of my careers, I only put in the recommended amount (like 6% of my salary) into my 401(k). Because that’s what those calculators told me to do! Since my goal is to leave corporate America in my late 20s rather than 65, I had to do things differently. For the past few years, I had been maxing out my 401(k). The tax savings as well as the overall market performance has been able to super charge my retirement account.

I do not intend to use any money from my 401(k) when I leave my 9 to 5. But I could potentially convert it to an IRA and invest in other types of investments that could provide me income.

 

 

Real Estate

In addition to finance, my main background is in real estate, both commercial and residential. Real estate is a true time-tested vehicle proven to build and preserve wealth. Of course real estate has its own cycles and there are certainly risks involved. Such as the financial crisis that happened in 2008, that put a lot of people under water. However, if invest wisely, real estate is a great diversification tool as part of one’s financial planning.

When I bought my primary home a few years ago, I didn’t really see it as an investment. I bought it because I got fed out living at apartments where I had to deal with crazy neighbor below us. The town home I bought has great location with rising real estate prices and rents. After I escape the 9 to 5, I intend to rent this town home out. I should be able to generate some income after mortgage, insurance, taxes and other expenses. Even though it would not be a lot of money, but enough to cover some of my living expenses.

Recently I completed my first house flip. I actually bought the house with the intention of renting it out long term. But due to the fact that I got a good offer, I sold it for a profit. Before I escape the 9 to 5, I may look into investing in a few more properties.

AffordAnything is a blog sharing their experience on using rental properties to achieve financial independence. The blog has great resources for those of you that are interested to see what it is like.

 

 

I could do some side hustles to earn some extra cash after I escaped 9 to 5

The above investments are most likely not enough to cover my expenses, even though I already live below my means. However, I wouldn’t mind doing some side hustles to make ends meet. There are actually many different ways that I could earn extra cash while achieving my ideal lifestyle. From freelancing to part-time jobs, the options are endless.

Freelancing. I have already started to do some freelancing on the side. Mainly to build up my resume and gain more experience. But at the same time, I am actually able to charge more per hour than my current job. The best part is that all I need is my laptop and internet, thus giving me the location-free flexibility I am looking. Since my background is in finance, my freelancing jobs are in the financial and real estate consulting space.

Sharing-economy. This is an industry that is rapidly growing, and it is allowing many people to earn some meaningful side income. Airbnb and Dogvacay are some of my favorites, and I could easily do these while I am not traveling after I leave my 9 to 5. Dogvacay is especially fun for a dog lover like me.

 

Mao and Then: Escape 9 to 5, dogvacay
The corgi I babysat via dogvacay and my pup Buddy napping.

 

Working Holiday Visa with Australia. Have you heard of the Working Holiday Visa? It actually lets work legally in Australia for up to two years! Typically people would find work in the service industry or more labor-intensive jobs such as farm works. Australia has a high cost of living but it also has high minimum wages. With Australia being on the top of my list, Working Holiday Visa could be a good way for me to experience the country while making some money.

 

 

Conclusion

By saving aggressively in the past couple of years, I have build up a cushion that’s providing me the comfort to actually take the leap and leave my 9 to 5.

Even though I am not financial independent yet, I am no longer afraid to take the plunge and leave my 9 to 5. Plus, I could always do some side hustles to supplement my income.

Most importantly, by pursuing my passions, I believe it could potentially lead me to bigger and better things.

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