The Key to Making Work Optional: Fast FI
Are you tired of feeling burned out from work, never having enough time, and having to squeeze in your personal life on evenings and weekends? Do you long for the freedom to prioritize your time and focus on what truly matters to you? Fast FI offers a path to escape the daily grind and regain ownership of your time.
Imagine waking up every day with the freedom to choose how you spend your time. No more rushing through life, instead, you can have a life where you can relax, explore, and be present. Fast FI gives you the financial freedom to live life on your terms, without being shackled to a job for a paycheck.
I was looking for a way to stop working when I discovered the FIRE (Financial Independence Retire Early) movement. It had the math figured out, savings tactics, and investment strategies needed to retire while still relatively young. The traditional route to FIRE is:
You figure out how much money you need to live annually
Multiply that by 25 to get your goal number
Aim to have that amount in index funds and
Do everything you can to save up that amount
The dream of FIRE was very appealing, but two things turned me off: the focus on extreme savings and long time horizons. Don’t get me wrong, I liked saving money where I could, but I had a certain level of comfort I was used to. And I had some bougie tastes. I wasn’t about to go backward and downgrade my life to get ahead. But, the promise of never working again was too appealing to walk away from.
I think frugal is an ugly F-word.
So I searched for another way to get to financial freedom. One of my mottos in life is “Have your cake and eat it too” (I have a powerful sweet tooth.) The math formulas that the FIRE movement advocated made sense, it was the tactics of scrimping and saving I didn’t like. I think frugal is an ugly F-word. And I wasn’t interested in waiting decades for my money to grow in index funds. I knew I couldn’t keep working 40 hours a week and putting my dream life on hold. Every day I didn’t do something was another day stuck in the daily grind. I needed to take action to get off the hamster wheel AND wanted a solution to freedom that would give me a short timeline so I could hold on to hope.
I was already involved in real estate investing and saw the power of using leverage to grow your net worth and create cash flow. Maybe there was a way I could accelerate FIRE by investing in real estate and other assets that created passive income instead of just investing in index funds. I started taking wealth management courses to learn what tactics financial planners recommend to wealthy people. I talked to successful investors to learn as much as I could about passive income. When I combined everything I learned with the mathematical concepts of FIRE, I saw a path that would allow me to reach my goals faster than the traditional FIRE path. That was how Fast FI was born, an expedited approach to early retirement designed specifically for high-earning professionals.
What is Fast FI?
Fast FI stands for Fast Financial Independence. It's a strategy that combines two key elements: investing for the traditional retirement age by relying on compound interest and market appreciation to grow your balance (Coast FI) while simultaneously building passive income streams. Coast FI is the point at which you have saved enough in your retirement accounts that compound interest will grow the amount to the remainder needed by the time you reach the traditional retirement age. Once you reach Coast FI, you no longer need to make any further contributions to your retirement portfolio. You could stop saving altogether, and, as long as you don't touch your investments, your portfolio will generate enough income at traditional retirement age (65+).
The second element of Fast FI is building multiple passive income streams. This involves setting up sources of income that continue to pay you even when you're no longer actively working. Examples of passive income streams include real estate syndications, private lending, book royalties, digital products, oil contracts, and managed online businesses. By building these streams of passive income, you can supplement your income until the traditional retirement age and ensure a comfortable lifestyle in early retirement and beyond.
Why Fast FI?
Traditional retirement planning puts everyone on the same conveyor belt of retiring after 62 and won’t advise you on how to reach early retirement. The regular FIRE approach offers a path to early retirement but often requires extreme savings and a frugal lifestyle. What good is reaching your destination if you are miserable on the journey and give up? Fast FI takes a different approach. It respects that you don’t want to sacrifice your current comfort and happiness to secure your future. With Fast FI, you can maintain your lifestyle while building a path to financial freedom and early retirement.
First and foremost, it allows you to retire much earlier than you would be able to with a traditional retirement plan. This means you can:
Choose to do work you find meaningful
Prioritize time with your loved ones
Gain time to pursue your passions, hobbies and self-care
Have space to become the best version of yourself
Second, Fast FI doesn't require you to live an extremely frugal lifestyle or save excessively. Traditional FIRE strategies often advocate for extreme savings rates and rely upon time and compound interest to do the heavy lifting. Fast FI recognizes that hard-working professionals may not want to sacrifice their current lifestyle to achieve financial independence. Instead, Fast FI focuses on optimizing your investments and building passive income streams to accelerate your path to retirement.
How to Achieve Fast FI
Achieving Fast FI requires planning and strategic decision-making. Here are some key steps to help you on your Fast FI journey:
1. Set Clear Goals: Define your financial freedom number and determine how much money you'll need to retire early. ( Keep in mind that you will need less than your W2 salary as active income (W2, 1099) is taxed at the highest tax brackets. Passive income is much more taxed advantaged). Consider factors such as the mental bandwidth available to generate passive income, necessary expenses versus luxuries, and future lifestyle.
2. Maximize Your Investing: Fast FI doesn't require extreme savings rates for long periods of time like many other FI paths. However, it's still important to save as much as you can in order to invest for your first few years until you build momentum. You will be making contributions to retirement accounts such as 401(k)s and IRAs, while simultaneously still saving up for investing in income-generating assets.
3. Create a Plan: You will need an actionable plan that has target dates and milestones to keep you on track. This plan should use a long-term goal to give you direction but also have a clear one-year plan laid out so you know what steps you are taking. You don't need to know the steps from year one to year eight. Focus on one year at a time, the rest will reveal itself as you make progress.
4. Build Passive Income Streams: Identify opportunities to generate passive income, and determine which type is most appealing to you. Usually, they fall into one of three buckets: Entrepreneurship (digital products, ad sponsorship, book royalties), Real Estate (REITs, Syndications, private lending), and sophisticated investment vehicles (options trading, timber contracts. These streams of income can supplement your savings and provide financial security to make work optional.
(To get started, sign up for our free mini-course on building a passive income strategy.)
5. Monitor Your Progress: Regularly review your financial situation and adjust your strategy as you evolve on your journey. Have defined milestones to achieve at certain points along your timeline. Track your progress towards your Fast FI goals and adjust your savings and investment strategy to ensure you will achieve your milestones. Regularly assessing your progress and evaluating the success of your strategy will help you achieve your goals by your timeline.
Conclusion
Fast FI offers a compelling alternative to traditional retirement planning for professionals who want to retire early without sacrificing their current lifestyle. By targeting the Coast FI milestone and building passive income streams, you can achieve financial independence and retire on your own terms. If you want to accelerate reaching your goals and get clarity on the best path for you, sign up for a free consultation on a personalized Fast FI strategy. Your journey to early retirement can start as soon as today!