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7 Ingredients That Helped Me Achieve Financial Independence


7 ingredients that helped me achieve financial independence FIAchieving financial independence is kind of like cooking. If you’re lucky enough to find a good recipe, it will be much easier. However, the stake is much higher with financial independence. A terrific meal will make you happy for a few hours, but financial independence can last a lifetime. Of course, the execution phase is much longer for financial independence. Cooking a nice meal doesn’t take that much time. Achieving financial independence can take 10, 20, 30 years, or even longer.

Today, I’d like to share the ingredients that helped me achieve financial independence. It’s the recipe for my success. But it’s not 100% like cooking. Life is different for everyone. Your experience is vastly different from mine. Some of these ingredients are unique to me, but some are universal too. Some of these are applicable to everyone. Anyway, let’s go through my list and figure out a conclusion at the end.

*Financial independence – basically you don’t have to work if you don’t want to. You can read more about what financial independence means here.

1. Some childhood adversity

My childhood was pretty good, but I experienced some adversity too. My family immigrated to the U.S. when I was 12. It was a tough few years for us. In Thailand, my dad was an entrepreneur and my mom was a professor. After we moved here, they had to work minimum wage jobs with no security and no benefits. I remember taking care of my 2 younger brothers while they worked late. Sometimes, they were both unemployed. It was a tough transition.

Once, my dad was delivering a pizza and the guy refused to pay. He hit my dad with a bat and broke his arm. Going to the hospital was expensive and my dad couldn’t work for a while. That was probably the low point in my childhood. Getting hurt is a big deal when you don’t have a safety net.

We always had enough to eat, but saving money was a struggle. (That’s the side benefit of working in the food industry in those days. The staff got free/cheap food.) Eventually, my parent purchased a small Thai restaurant and our finance improved. Entrepreneurship is the ticket out of the lower class. You can’t get far on minimum wage jobs.

Anyway, the adversity was good for me. It toughened me up to deal with the real world. My current problems pale in comparison to what my parent went through. That’s one big worry I have for our son. Life has been very cushy for him. How will he deal with adversity in the future? I guess most middle-class kids are like that. He’ll just have to toughen up on his own later.

 2. No debt

It’s really sad so many young adults start their lives with such huge student loan debts today. Higher education was much more affordable in the early 90s. My parent paid for most of my college education. They were doing better financially by then. I worked part-time in college but didn’t really make that much.

Starting with no debt was really helpful. It means I could start saving right away without having to worry about debt. We plan to do the same for our son. He should work part-time to have some skin in the game, but I don’t want him to start off in a big hole. That’s why we’re investing in the 529 college savings plan. I don’t expect any inheritance from my parent and our son shouldn’t either. A good start is all a kid need.

3. Good stable income

I was an engineer at Intel for 16 years. I made a good income and my job was relatively stable. It seems like a different world now. People change job every few years and most jobs aren’t very secure anymore. Intel had a few layoffs when I was there, but I was in the core business (CPU) so I was pretty safe. The stable income enabled me to invest consistently and power through the stock market crashes. I kept investing during the bear markets and it paid off handsomely. If my job wasn’t stable, I would be a lot more hesitant to invest aggressively in my 20s and 30s.

 4. Start investing early

When I started working full-time, I didn’t want to invest in my 401k. Like any young new grads, I thought retirement is 40 years away. Why save now? I lived in a cheap apartment and drove an old Toyota. I wanted to spend some money after being poor for so long. However, my dad convinced me to start investing in my retirement fund right away. He knew you need to save first before spending. The 401k deduction took the money out of my paycheck before I saw it. So I had to live with whatever was left. It was still plenty of money compare to being a poor college student. I had enough to go out and have fun.

The artificial constraint on spending was good. It helped me learn to live with less. Investing early is essential for wealth building. Compound interest is huge when you start early. Those early investments work the hardest for you. I also learned a lot from investing early. Like many people, I lost a lot of money in the dot com bubble. But it taught me to keep investing when the market is down. When the financial crisis came around in 2008, I knew I needed to invest as much as I could. You learn best from experience. Lots of young people never went through a big stock market crash. The next one is going to be rough for those folks.

5. Minimize lifestyle inflation

Start investing early really helped. It took me a few years to start maxing out my 401k. I didn’t keep good record back then so I don’t have the exact number. Let’s just look at a hypothetical new engineering grad today.

An entry level engineer can expect to make about $60,000 per year. If she maxes out her 401k contribution, then her pre-tax income would be $41,000 per year. After taxes and deduction, she probably will have about $2,400/month to spend. That’s not a lot, but it’s enough for a comfortable lifestyle.

The hard part will be minimizing lifestyle inflation. The more you make, the more you tend to spend. Even people in the FIRE community can’t escape that. For example, doctors spend quite a lot. They’ll need to save more to achieve financial independence. To many physicians, spending $100,000 is very frugal. Our new grad will have to do her best to minimize lifestyle inflation as she gets promotions and earns more money.

Lifestyle inflation is unavoidable, though. Today, I drive a nicer car (2010 Mazda5) and live in a more comfortable home (our duplex) than 20 years ago. But I think I did a pretty good job overall. Most of my friends from college drive much nicer cars and live in more expensive homes. They are still working full-time so it’s a tradeoff. The more you can minimize lifestyle inflation the easier it’ll be to achieve financial independence.

6. The right partner

This one is probably the most important ingredient. Achieving financial independence is much easier when you work as a team. I met Mrs. RB40 in college and we’ve been together for over 25 years (married for 20.) She was very frugal so we got along quite well. We’re pretty much perfect for each other. Our journey wasn’t always smooth, but when one of us was down, the other one was there to pick up the slack. Having the right partner helps tremendously.

7. Luck

Luck also plays a huge role. I’m a very lucky guy. My parent immigrated to the U.S. and gave me an opportunity to thrive in the best economy in the world. I graduated at the right time and was able to make a good income for many years. College wasn’t that expensive back then either. The stock market crashed when I was young, but it taught me a great lesson. I kept investing and it worked out incredibly well. Mrs. RB40 went off to Uzbekistan for Peace Corp for a few years after college, but she came back. I retired in 2012 and the stock market has been doing very well ever since. Life has been quite good to me.

It seems to me like the Millennial is having a much more difficult time. Higher education became a lot more expensive and many owe a ton of money. The job market has been fickle and it’s hard to find a stable job. The housing market is already expensive by the time they are ready to buy. It just seems like the timing wasn’t good for them. I suspect wealth building will be more difficult for my son too, but who really knows?

Cooking up financial independence

So that’s my ingredients to achieving financial independence. I know this is highly individualized. Nobody has the same experience I did. That’s what makes us human. Everyone is an individual. But some of these ingredients are quite common. You’re halfway there if you can get a stable job with a good income, start investing young, minimize lifestyle inflation, and marry the right person. The rest is execution and a little luck. I hope to pass some of these lessons on to RB40Jr. He’ll need a lot of luck in the future, but the right ingredients would help a lot.

What’s your secret ingredient to achieving financial independence? What would you teach your children?

Wealth Building Recommendation

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Image by Calum Lewis

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he couldn't stomach the corporate BS.

Joe left his engineering career behind to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle. See how he generates Passive Income here.

Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.
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{ 32 comments… add one }
  • Dave @ Accidental FIRE May 16, 2019, 2:32 am

    I think you should add discipline in here Joe. I know it’s implied in some of these, but discipline is essential to do the things you’ve done. Kudos!

    • retirebyforty May 16, 2019, 10:29 am

      I knew I missed something. Discipline is essential, but I didn’t really notice it. It’s just part of the routine.
      That’s probably the way it should be.

  • Xrayvsn May 16, 2019, 3:33 am

    Very nice breakdown Joe of things that helped you get to where you are now.

    The most important on that list is that you found the right partner. You can score high on every other part of that list but if you have the wrong partner it will be an incredible uphill struggle (I’m speaking from personal experience).

    I too wonder what the economy/world has in store for my daughter. She’s had some adversity from the issues with divorce but now leads a very cushy life. So many unknowns in the future (she wants to go into medicine and that field is rapidly changing (and majority of time not for the better for the physician, particularly educational costs and reimbursement decreases).

    It is funny but you are right, a doc living on $100k/yr would be the Mister Money Mustache of the physician community. Physicians are subject to lifestyle inflation the most after years of delayed gratification (kind of go buck wild when the salary jumps).

    • retirebyforty May 16, 2019, 10:31 am

      I think so too. Having the right partner made everything so much easier. I guess I could have done the same without Mrs. RB40, but the journey would have been much lonelier.
      Good luck to your daughter our my son. It’s going to be tough in the future. They’ll have to be flexible.

  • Jonathan May 16, 2019, 4:26 am

    Of all of those “ingredients,” luck probably has been the biggest factor of all, considering how spectacular the stock market has performed over the last 10 years.

    • Jon May 16, 2019, 6:04 am

      Luck in the stock market is a relative term. A young person who started aggressively saving in 1992 experienced a ton of “luck” in the stock run-up of the 90s, but if he chose to retire in the summer of 2001, there’d be plenty of people saying he was “unlucky”.

      MMM was able to retire early despite weathering the dot com crash, doing most of his saving and investing during the relatively flat-gaining Bush years, and retiring right before The Big One in 2008. Was he “unlucky”? Sure the last 10 years have been super easy in terms of racking up big gains. I was lucky enough to start a career-track job and 401k right before the market took off in 2013 (Dow was at 12,000 when I started), but investment returns in the last 6 years have only accounted for about 10% of my overall net-worth gains in that time. The other 6 ingredients are still far more important, even if the market had been flat like during the 00s (or crashing out like in the late 00s) I’d still be well on my way to FIRE just because my savings rate far exceeds the gains/loses from the swings.

      • retirebyforty May 16, 2019, 10:38 am

        Your saving rate is a lot more important when you’re starting out. It’s only later that investment gains will outpace your savings. Nice job!

  • Lazy Man and Money May 16, 2019, 4:40 am

    As luck would have it, I was working on a similar article last night about how to start our kids on a financial independence path.

    The short list of ingredients are financial literacy, kid Roth IRAs (earned through work), life skills (cooking and fixing stuff), real estate management, and old fashioned education. I’m sure I missed a bunch of ingredients, but I think they could make a good wealth meal.

    • retirebyforty May 16, 2019, 10:32 am

      I missed some too. It’s too tedious to make a huge list. Education and financial literacy are very important to me too.

  • Tom @ Dividends Diversify May 16, 2019, 4:42 am

    I would throw in a strong desire, or “want to”, Joe. Once I had that, the other things that you mention (which are right on) seemed to fall into place with a good dash of hard work and perseverance. Tom

    • retirebyforty May 16, 2019, 10:33 am

      That’s a good one. I don’t think desire is an essential ingredient for me. I didn’t know about financial independence until my 30s. I already saved and invested for a long time before that. Financial security was important to us when we were young so that gave us a huge headstart toward FI.

  • freddy smidlap May 16, 2019, 5:41 am

    i think consistency is a really big deal. keep doing the right thing over and over. even if the degree to which you do it changes. i was there too when i got my first job and wanted to spend some bucks after being poor for so long and i did and that’s why i’m still working and you’re not! i think it was very lucky to start careers when we did. i talked to an engineer from another site yesterday and she graduated in the late 70’s from college. as a chemical engineer in those days you could just pick a stable job and stay for 25-30 years if you wanted. on the other hand her son is on the cusp of a computer science degree for a good school and working already. he’s already whining about the work and only wants a passion project or to start flipping houses instead of putting in some of the hard work FIRST to be in a position to do that later. seems like there’s a combination of tough work environment and soft attitude for today’s new grads.

    • retirebyforty May 16, 2019, 10:36 am

      You’re right. Every small step count. You just have to put one foot ahead of another and try not to go backward too often.
      Kids these days. That’s what I worry about the most. Our son is soft like putty. He’ll need to toughen up a lot more to get ahead.

  • Ani May 16, 2019, 6:21 am

    During all these years of working towards financial independence, have you converted any of your friends to follow the FI path? I would be interested in hearing more about your wife and how she currently got the role she is in now. I believe she works for a not-for-profit, correct? I’m 24 and looking to move up the ranks in a non-profit, but it’s hard to imagine that I can achieve financial independence with the typical not-for-profit accounting salary. I’d like to add meaning/purpose to my work instead of delaying it until I reach FI, and I believe I can do that by moving to a not-for-profit, but the income issue is worrisome.

    • retirebyforty May 16, 2019, 10:42 am

      I’m not sure. I’ll check with them when I see them next. Most of them are pretty good with money so I think they’re on the way. They aren’t in a big hurry like I was.
      My wife actually works for the government. She went back to school to get a Public Administration degree and found the right job. I don’t know much about non-profit. It’ll be tougher to achieve FI with lower pay. You’ll have to really control your spending. A good partner would help a lot.
      Of course, if you love the job, you can work longer. That’s a good way to go too.

  • Tawcan May 16, 2019, 9:40 am

    You should add discipline as well, without discipline you wouldn’t be able to do any of these 7 ingredients IMO.

    • retirebyforty May 16, 2019, 10:43 am

      You’re right. I missed that. Discipline wasn’t noticeable.

  • Life Outside The Maze May 16, 2019, 9:47 am

    Thanks Joe, I haven’t seen your #1 about childhood adversity being talked about much before but I agree. I know that I had a little of this from exposure to the community that I grew up in as well as some real and much more perceived hardship as a kid. One thing that I am thinking about in financial independence is how to instill some of the benefits in my kids of tough times even though we are financially fortunate. I am still working on this one and hope I don’t have to hit hard times to solve it

    • retirebyforty May 16, 2019, 10:44 am

      I don’t know how to do this either. I need to do some research on this. Our son needs a lot more grits.

      • Life Outside The Maze May 16, 2019, 3:04 pm

        Speaking of grits, shame on you for using a cooking metaphor and not including more pics of tasty looking food. I know you can cook…I remember some amazing looking chickpea curry from a previous post…why you holding out on us….it’s not too late to add them haha

  • David Michael May 16, 2019, 10:45 am

    Thanks Joe. A great article. And, yes…having a vision and discipline are added ingredients.

    I only wish I had started out with Dividend Growth Stocks in my 20’s. Lots of adversity during my early years but trading in stocks rather than investing has cost me millions. From four years of Latin and two years of Ancient Greek in high school, to three advanced degrees still didn’t prepare me for a healthy investing future. All one needs is a good Home Ec Course or Life Investing Course in high school or community college that is mandatory. And, one on Relationships.

    Amazing that much of our early schooling is worthless no matter what the school or social class. Even one year of high school devoted to building a house from ground up would have been better than most of my early education in private, college prep schools. Fortunately, we all go through adversity as we grow older and learn what life is really about. Just about the time we master life, we die! Fun and games, no matter the age. As a shortcut, it pays to listen to one’s elders!

    • retirebyforty May 17, 2019, 9:39 am

      I heard some schools have personal finance classes now. That’s a great development. I hope our son’s high school will have one by the time he gets there.

  • Dr. McFrugal May 16, 2019, 11:16 am

    These are all great ingredients for a financial independence recipe. Luck is often under appreciated. I am extremely lucky to have been born in the United States, to be a multi-generational American, to have both parents who were both successful and loving at the same time, and the list goes on. None of this was in my control and I don’t take any of this for granted. And I realize that some people are just unlucky.

    Childhood adversity can definitely be an ingredient, but it could work both ways. The way in which a person responds to adversity in a resilient manner is what makes the difference.

    • retirebyforty May 17, 2019, 9:41 am

      You’re right about adversity. I think some adversity is good. Too much can be traumatic. Of course, everyone handles it differently too.

  • Jim @ Route To Retire May 16, 2019, 5:08 pm

    I see these as being on par in my life as well, Joe. Ironically, though, actually having debt was part of the adversity I needed later in life to get on the right track. Realizing that I was about $30k in credit card debt put me in a make it or break it situation. I put my nose to the grind over the next few years to get out of it and on the right track. FIRE took a little longer, but I’d say 43 wasn’t too shabby! 😉

    — Jim

    • retirebyforty May 17, 2019, 9:43 am

      That’s a good point. Sometimes you need a wakeup call. Nice job turning it around.

  • Dividend Diplomats May 16, 2019, 6:19 pm

    RB40 –

    A nice, simplistic, but true article. The community needs these. Here were the takeaways, in short, be consistent with investing – time will get you through any downturn and it should be automatic/emotionless. Don’t want more things that don’t add value to your life, thus keeping your lifestyle inflation in check. Be happy where you are, enjoy the present and know the troubles/strugges of the past that brought you here.

    Loving it RB40!


    • retirebyforty May 17, 2019, 9:44 am

      That’s what experience taught me. Keep investing and you’ll be fine. It’s more difficult when you have less income, though. Thanks!

  • Cubert May 17, 2019, 4:10 am

    Hi Joe. Excellent list. In addition to Dave’s “Discipline”, I’d add “Hatred of Day Job”. There are some (a small percentage) who love or like their work enough that they freak about the idea of retiring. It’s rarified cult, but they’re out there.

    You might also reconsider “Debt” based on the individual’s circumstance. I think debt in and of itself prompts many of us to ultimately pursue FI. But to achieve, I’d agree, you gotta stick a fork in that [email protected]$.

  • jim May 17, 2019, 10:10 am

    I think this is a pretty good list Joe.

    I share a lot of the same items. Can’t say I didn’t have debt when I started out myself but I worked on paying it off as step 1. (not including mortgages)

    I would say that this shouldn’t be considered as a ‘checklist’. If someone looks at this list and only has 1-2 of these traits then that doesn’t mean they can’t succeed in life. e.g. a single woman who grew up in a upper-middle class sheltered lifestyle who’s had some bad luck in her career and now has a mediocre job isn’t doomed to financial failure. But someone in that situation might look at this list and get discouraged.

  • Little Seeds of Wealth May 17, 2019, 7:12 pm

    You’re right about the challenges Millennials face. However, I like to tell myself (perhaps to make me feel better about my prospects!) that they also have a lot more resources available on the Internet about financial independence and more side hustles and investment opportunities. Real estate crowdfunding and the gig economy both started in the 2000s. None of these were available to previous generations when they started out.

  • GYM May 17, 2019, 9:19 pm

    Not all doctors spend a lot 🙂 but yeah, I guess as a generalization it can be true.

    Great checklist and ingredients. Discipline is a huge one and I agree that luck is improtant- depending on where in the financial boom cycle you invest.

    Being born into a middle class family is huge- as Warren Buffett says, it’s like winning the ovarian lottery

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