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Ask HN: How have you achieved financial independence?

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Re: Ask HN: How have you achieved financial independence?

#11

Post by EliRivers »

tsaprailis wrote: post #8
EliRivers wrote: post #2

I can pay my rent and bills from investment income and capital gain on investments. This is, of course, not remotely guaranteed, but over the last few years it's worked out. I do still work, though. I did it by putting large amounts of my income into low cost index funds focussing on various sectors, and some specific shares that I thought would do well.

Thanks for the feedback. Could you clarify if you only use the capital gains? I have read that dividend stocks are also a good way to have a passive income. Additionally have you thought about what you would do in case of a market downturn?

Currently, I don't use any of it. I keep track of the gains (which is how I know they outweigh my rent and bills), but because I still work, I pay the rent and bills out of wages and leave the investments alone.

All my dividends get reinvested. I'm in the UK, and I've taken full advantage of the tax free savings scheme, currently allowing about 15000 GBP a year to be put into stocks and funds with no tax to pay on dividends or gains.

There have been market downturns during the time I've done this (started around 2005). Generally, during a downturn, I scrape together as much spare cash as I can and invest it in things that seem cheap. April 2015 to April 2016 was something of a downturn, for example, and I ploughed extra money into the markets while prices were low.

Re: Ask HN: How have you achieved financial independence?

#12

Post by [deleted] »

EliRivers wrote: post #2

I can pay my rent and bills from investment income and capital gain on investments. This is, of course, not remotely guaranteed, but over the last few years it's worked out. I do still work, though. I did it by putting large amounts of my income into low cost index funds focussing on various sectors, and some specific shares that I thought would do well.

[deleted]

Re: Ask HN: How have you achieved financial independence?

#13

Post by Swizec »

As others have mentioned, financial independence isn't hard. The hard part is financial independence without lifestyle compromises.

I'm making roughly $2k/month with books and workshops. The marketing and content producing takes about 2h/day on average. It makes my life a lot easier and less stressful.

But rent alone is $3500 in this stupid city (San Francisco). So I still need a day job for now.

Re: Ask HN: How have you achieved financial independence?

#14

Post by n72 »

tsaprailis wrote: post #8
EliRivers wrote: post #2

I can pay my rent and bills from investment income and capital gain on investments. This is, of course, not remotely guaranteed, but over the last few years it's worked out. I do still work, though. I did it by putting large amounts of my income into low cost index funds focussing on various sectors, and some specific shares that I thought would do well.

Thanks for the feedback. Could you clarify if you only use the capital gains? I have read that dividend stocks are also a good way to have a passive income. Additionally have you thought about what you would do in case of a market downturn?

Dividend stocks are not a good way to have passive income. The benefit of the dividend is already priced into the stock, so they are no better than any other stock. Prefer, rather, to just go for good stocks and not worry about the dividend. If you need income, sell some stocks.

Also, the % that you're pulling out of stocks should be determined by looking at, say, a 30 year window, not a very recent one. That is, if your savings can sustain a 2% withdraw every year, taking into account inflation, then take out 2% every year. Some years this will be less that your cap gains and some years more. The key is making a long term outlook.

FWIW, these are some very brief thoughts of mine on investment: https://github.com/nickgieschen/investingguidelines

Re: Ask HN: How have you achieved financial independence?

#15

Post by UweSchmidt »

zen_boy wrote: post #10

Just turned 30. Invested most of my savings (20k€) into Bitcoin several years ago, and then converted everything to Ethereum in the pre-sale. Those 20k€ are worth roughly 1M€ pre-tax at the current rates. Started a fintech startup three years ago and we are close to a liquidation event that would net ~1.5M€ pre-tax. Right now, though, I have less than 10k€ in my bank account. Would be also really curious to hear how…

I had the opportunity to hear major german bank disappoint affluent customers by telling them that, in stark contrast to the past, there is no risk-free 4% in the stock market any more (when using the basic strategies available retail like investment funds etc). If true, you might have to play a more active role and "run a business" instead of "invest some".

Re: Ask HN: How have you achieved financial independence?

#16

Post by mikekchar »

tsaprailis wrote: post #6
mikekchar wrote: post #3

I'm only responding because nobody else has replied to your thread. Feel free to ignore me if you think it is irrelevant. My favourite Dr. Who quote: "Work for? I don't work for anyone. I'm just having fun." Describes me, even though I receive money every month. My expenditures are considerably less than the money I receive every month by having fun. If I didn't receive money, then I would be in trouble, so I don't r…

Thanks for your reply. I was thinking about the same, while I make more than I spend, and for the time being I can save money, this indeed requires working. The "problem" would start when you have depended family members and you cannot calculate, or rather plan for all expenses in advance, what have you done to plan for this?

Yes, this is a problem. I think the biggest thing I fear is poor health. I live in Japan which has a health care system, but it can still be quite expensive to be ill. Also, my wife and I won't have children probably, so while that saves money up front, I have nobody to look after me when I get old.

Insurance is my main hedge against these risks. I try to follow a healthy lifestyle as well. I used to keep fish and it's amazing how much longer fish live when they aren't stressed. I try to replicate that. Finally I try to buy long term, low risk investments (like government bonds) with my excess cash. However, I keep a few years worth of money available in liquid assets for things like disability.

Probably the biggest risk is getting a mental illness that isn't covered by long term disability insurance. I have no idea how to deal with that one :-( All of my skills to live simply may be useless if I lose the mental ability to use them.

Re: Ask HN: How have you achieved financial independence?

#17

Post by EliRivers »

n72 wrote: post #14
tsaprailis wrote: post #8

Earlier quoted context omitted.

Thanks for the feedback. Could you clarify if you only use the capital gains? I have read that dividend stocks are also a good way to have a passive income. Additionally have you thought about what you would do in case of a market downturn?

Dividend stocks are not a good way to have passive income. The benefit of the dividend is already priced into the stock, so they are no better than any other stock. Prefer, rather, to just go for good stocks and not worry about the dividend. If you need income, sell some stocks. Also, the % that you're pulling out of stocks should be determined by looking at, say, a 30 year window, not a very recent one. That is, if…

"The benefit of the dividend is already priced into the stock, so they are no better than any other stock."

I hear this sort of thing a lot, and in my experience, everything already being priced in isn't true (both of dividend stocks, and stocks not paying dividends). This relies on the efficient market hypothesis being broadly correct, and based purely on my own experience, it isn't.

My findings are very much based on my own experience, but I have had no small success simply reading the news and seeing that a company is doing well or is looking at a brighter future, and buying shares in them and making a nice profit on it out of both increased share price and increasing dividends. The EMH suggests that it shouldn't work; that by the time I get round to buying the shares, the efficient market has priced all that in. But it just doesn't seem to be true, in my experience.

Re: Ask HN: How have you achieved financial independence?

#18

Post by embwbam »

zen_boy wrote: post #10

Just turned 30. Invested most of my savings (20k€) into Bitcoin several years ago, and then converted everything to Ethereum in the pre-sale. Those 20k€ are worth roughly 1M€ pre-tax at the current rates. Started a fintech startup three years ago and we are close to a liquidation event that would net ~1.5M€ pre-tax. Right now, though, I have less than 10k€ in my bank account. Would be also really curious to hear how…

I just switched from Wealthfront to Betterment, because their software does a good job of helping you with this. It asks you what you're using the money for, when you'll need it, and about your tax situation. It'll automatically provide different investment options based on what you answer. So, for your situation you could put some of it into an income producing "goal", and put the rest into something more growth oriented.

Definitely worth checking out: http://betterment.com/invite/seanhess

(disclosure: that is my invite link which gets me free months without fees. I do love the service a lot).

Re: Ask HN: How have you achieved financial independence?

#19

Post by mailshanx »

mikekchar wrote: post #3

I'm only responding because nobody else has replied to your thread. Feel free to ignore me if you think it is irrelevant. My favourite Dr. Who quote: "Work for? I don't work for anyone. I'm just having fun." Describes me, even though I receive money every month. My expenditures are considerably less than the money I receive every month by having fun. If I didn't receive money, then I would be in trouble, so I don't r…

10K is indeed unreasonably low. Could you describe where in Japan you live, what kind of work you do now, and the transformation you possibly experienced when you decided to work for curiosity / interest rather than money?

I have had a reverse path - I spent my early career working for a research lab, where the the work was immensely intellectually satisfying and fun for the most part. However, the pay was so ridiculously low that my industry salary was a few integer multiples of my researcher pay.

Re: Ask HN: How have you achieved financial independence?

#20

Post by siscia »

mikekchar wrote: post #3

I'm only responding because nobody else has replied to your thread. Feel free to ignore me if you think it is irrelevant. My favourite Dr. Who quote: "Work for? I don't work for anyone. I'm just having fun." Describes me, even though I receive money every month. My expenditures are considerably less than the money I receive every month by having fun. If I didn't receive money, then I would be in trouble, so I don't r…

The married part is the one I am more interested in.

I too live extremely cheaply, but my girlfriend has way more expense than me (still reasonable, but too high in my book).

We are not married, but we spend a lot of time together and I am a little afraid that this difference in how we spend money will be a problem.

How did you manage it?

My very first step was to have her create a save account where she deposit each month a little bit of money, after I explained her the why she need one she started to accumulate money pretty quickly and in a very disciplinate way, all those money however disappeared when she bought a new house (but I believe it is fair).

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