My pursuit of financial freedom started in my 20’s (30 years ago). I did not know anything back then about FI or FIRE, or one of the original books on all of this… “Your Money or Your Life”. I simply didn’t want to have to work and be controlled like my father was at his jobs. My father served in Vietnam in the 101st Airborne in his early 20’s. After that, with his jobs, he pretty much got up to an alarm at 5am for almost 50 years until he died. While I deeply respected my father’s hard work and sacrifices (I’ve never known anyone who worked harder), I wanted more, and I wanted to not be a slave to an alarm clock for the rest of my life.
Fast-forward to 2012, I was finally making some good money after 20+ years of hustle (200+K of profit). I was technically a millionaire on paper by then due to my software subscription business model (X multiplier of net profit with recurring revenue), but I certainly didn’t feel like it. Just a few years prior I was paying off IRS debt (that’s another long story), and I had zero savings. Yes, you read that correct, zero.
$200,000 of Motivation To Save
Once I was going to hit that 200K mark for the first time, I knew I had to find a way to start saving money. So I reached out to my tax CPA who I had hired the year prior about savings options and wondering if there was a way to reduce my taxes. I had also hired a different CPA the prior year to do my bookkeeping, too. No more IRS issues for me — I was hiring two people to keep me straight and in line.
My CPA recommended I start an SEP (Simplified Employee Pension – https://en.wikipedia.org/wiki/SEP-IRA). It allows you to save up to 25% of your net profit, but you can’t exceed $50,000 no matter what your profit is. The $50,000 was the limit in 2012; the limit for 2019 is $56,000. The limit increases about $1000 per year. So, back to 2012, ~$200,000 in profit meant I could save $50,000 and only pay taxes on $150,000 — that’s a pretty good deal.
Now, while I was starting to save money, obviously still spending $150,000 is not a good plan for achieving FIRE, but remember, I wasn’t even aware of the FIRE concept in 2012. There was more tweaking in the future, but this post is about me finding my why.
More Motivation (and Finding My Why)
One other key motivator for me to save around that time was being unsure of how long my software business might last. Let me explain further. I created what’s called “add-on software” for an existing market. If that existing market were to go away, I’d be in trouble. Well, from about 2010 to 2013, it appeared that existing market might go away in a few years, and even if it stuck around, it was going to face some stiff competition (the competition was from Microsoft). I got really concerned that I’m making $200,000+ a year now (2012), but how long will it last? What if I only have 5 good years and then it starts going away? I’ve gotta save something. I’ve gotta have something to show for all my years of work!
My WHY was found (more on this WHY topic shortly). I simply had to figure out a way to save and invest as much as my income as possible before it all went away. That’s a great motivator. I woke up every day wondering when will it end… I gotta save. I became obsessed with money. Not like a rich person being a miser… but obsessed in how quickly can I save enough that I don’t have to worry anymore. Every day. How can I save? Where can I cut back? Should I pay off my house? I eventually did about 3 years later. Can I save more? Where do I put my money once SEP is funded for the year?
A FIRE Was Lit…
That being scared that my business might end in a few years lit a fire under me (a big FIRE). I started Googling topics of “saving money” and the likes… I don’t really remember my exact searches anymore. I don’t remember exactly who I read blog posts from first. I think I came across Financial Samurai first, which led to some others like Mr. Money Mustache, and then J.L. Collins, and a number of random others. As I learned the terms (like FIRE), that led to better search terms and other blogs, and I started learning about safe Vanguard index investing with VTSAX/VTI, 4% withdrawal rates, John C. Bogle, Bogleheads, and all the other FIRE topics.
What Is This WHY Stuff? Have Your Heard Of Simon Sinek?
Simon Sinek is a fantastic author and speaker, and in recent years he has been focused on this “WHY” topic. He’s written two books on the subject. “Start With Why” (2009) and “Finding Your Why” (2017). I read both books last year. I absolutely loved “Start With Why”, but I did not care for “Finding Your Why”. I think it had more to do with “Start With Why” being an almost perfect book — I highly recommend it.
“Start With Why” helped me understand some of the past choices I had made. And it was a good teacher about “WHY”. This one word drives all that we do. It drives what I do on a daily basis, and it drives what you do, even if you don’t know it.
Your beliefs drive everything you do (so be careful what you believe in and question everything). If you believe you’ll “be fine”, you’re probably not going to take major steps to ensure it. From a young age, I wanted to ensure I was going to be all right. I was going to do everything possible to achieve it.
I highly recommend checking out Simon Sinek. You can also find lots of free, live speeches on YouTube. He’s an exceptional speaker. I don’t believe in everything he espouses (I disagree with some of his thoughts on rights vs privileges and some of his negative views on business, but these are small issues).
Finding YOUR OWN WHY Is Key To Achieving FIRE
I have a passion for sharing FIRE concepts with others. I have quickly found though, that unless someone finds their OWN WHY for FIRE, they won’t make the necessary changes in life to achieve it (or any savings for that matter). I have friends and relatives I’ve tried to encourage to save, and they just don’t get it. People/the world live their lives like they will always have their job, debt is OK, and I’ll save later. And if I run out of money, the government (or my family) will take care of me. I have a widowed relative, in her late 60’s, who has little to no savings (about 25K), that I THOUGHT understood her desperate need to save, recently ask if she could/should use money from IRS refund, which was earmarked for savings, to use it to take a short vacation.
Can you imagine having no savings, in your late 60’s, and STILL looking to spend money on a vacation? It’s crazy. But the problem is she hasn’t found her own WHY. She feels like she’s being forced to save against her will. I guess she is, but it’s for her own good.
You must find your own WHY. You must wake up with the single purpose every day to save until you reach financial independence. No, it’s not easy, but it’s worth it. Once you find your WHY (for FI), it does get a little easier though. Wanting to spend money on frivolous things is reduced. Oh, and if you’re married, it’s imperative that your spouse’s WHY is the same. You must both be on the same page. It won’t work any other way.
SteveArk.Com – The Average Retiree Is A Millionaire
A fellow blogger I enjoy reading is SteveArk.Com. He pointed out some interesting facts/numbers in a recent blog post. I recommend reading the whole post, but the gist of it was if retirees have ~$2,000/month in social security and another ~$200,000 in savings, that should be enough to live, and that retirees aren’t in that bad of shape. You’ll find my comments at the end of his post. In short though, my point was these folks who ONLY saved $200,000 over a lifetime probably never found their WHY, and they probably won’t be able to make that kind of retirement income last. I never used the term “WHY” in my comments to Steve, but it really is at the heart of the comment.
The widow’s story above is a good example of this. We are trying desperately to encourage her to get to 100K+ in a few years by the time she turns 70, and she simply doesn’t get it. She does not wake up every day thinking how much can I save today, this week, this month. Instead she still spends on frivolous items, and as mentioned, wanted to use $1000 from savings to go on a trip. People like this will never be able to live on the budget that Steve outlines in his blog post. If they didn’t practice living on a budget for their first 65 years… what makes you think they can do it now?
People don’t buy what you do; they buy why you do it. And what you do simply proves what you believe.Simon Sinek
To achieve FI, find your WHY.Mr. Hobo Millionaire
So Did The Add-On Market Go Away?
No, it did not. The competition that I was concerned about settled a bit, and people stuck with the older/legacy product. It only ended up taking like 10% of the market instead of 90%. So the good news is my software business, while still small compared to the likes of Microsoft, Oracle, and Apple, has grown quite a bit since 2012. My yearly net is a high six figures per year, and 85% of that is recurring software subscriptions. I have a high 70% savings/investment rate. I’m still saving like it might end some day, but I’m in great shape at this point. It could all go away tomorrow, and I’d be just fine. It’s a great feeling, and my hope is that all can get to this point. My path to get here was an extreme path. Most could get here a lot easier by making good choices and starting to save $100/month in your 20’s.
Note: I am purposely vague about my software business and the market I’m involved in, and I blog as MHM, because I’m still serving many customers (~1000 companies) with this software. The truth is, though, I’m semi-retired, because it only takes and hour or two per day on average, working from home, to maintain this business. I don’t want to offend any of my customers talking about how much money I’ve made and how good my life is now. This semi-retirement has only come about the last couple of years. Of course, they probably can’t comprehend the many years of 16 hour days, including weekends, it took to get here, but regardless, I don’t want to come across the wrong way. I truly am thankful for our customers — they changed my life and my family tree forever.
Now find your WHY for FI, and get to work…