I’ve been doing a bit of coaching for friends and referrals from friends in the financial independence space and a common trend keeps coming up. What stage of the financial independence journey are they on? We’ve been financially independent now for two years and I experienced that crescendo moment of delivering an early retirement notice a few days shy of my 37th birthday. The hustle was done, I never had to earn another dollar again!
When I was working towards FIRE, I only viewed two stages of the journey: The pre-FIRE stage where I worked as hard as possible to optimize everything, and the post-FIRE journey where it was time to enjoy forever freedom. Now that I’m approaching two years removed from work, I view this a little differently:
The Three Phases of the FIRE Journey:
Phase 1: The Hustle Phase
This is the starting point of the financial independence journey. The goal is to build skills, generate income, keep spending low, and start building the net worth. This is the foundation to financial independence. At some point, most of the people out there who are financially independent made choices different from their peers.
The first $100,000 saved is probably the hardest, while the first $250,000 saved individually ($500,000 combined) is what I view as the minimum before one should dial back the hustle.
Maybe you get there faster by changing your housing situation. House hacking anyone? Maybe you decide to ride a bicycle instead of using a car. What about food? Perhaps you should consider only shopping/eating food from Aldi/Walmart until you’re out of debt. Try delivering food on your way home from work to pickup an extra $150/week.
Critics of this stage will use terms like “hustle porn” and “sacrifice”. My belief is simple: Do what others won’t do today, so you can do what others can’t do in the future. It sounds insensitive, but every expense matters. Life is about choices and choices have consequences. The hustle phase sets you up to enjoy the rest of your life in ways others can’t. Many parts of financial independence are a choice, but that choice includes if you’re willing to pay the price. There will be critics at this stage, people who’ve chosen comfort over hustle. It’s your choice to either listen to or ignore those voices.
Phase 2: The Coast Phase
What is the coast phase? This is when someone on the path to financial independence should optimize for happiness/lifestyle while still earning enough money to cover living expenses and still have a comfortable normal retirement guaranteed. What does the profile of a CoastFI candidate look like?
$250,000 in Invested Assets per Adult
Two Years of Living Expenses Accessible – Financial Runway as coined by Scott Trench
Debt outside of a mortgage and business investments resolved.
In this phase, the invested assets are doing the work to grow the net worth. The math of the first $500,000 saved makes financial independence inevitable. I’m proud to have one of the earlier posts around CoastFI, which was eventually usurped by the Fioneers great work on the topic.
Phase 3: Financially Independent / Retire Early
So you finally made it: Twenty five times expenses have been saved, there’s an adequate runway in your taxable accounts, and the Roth IRA conversion ladder is ready to go! Financial independence is here! Are you comfortable actually quitting? It’s difficult to turn off the firehose of cash coming in from employment. Can you actually get over the idea of buying your own (crummy) health insurance on the healthcare exchange? One More Year Syndrome becomes real.
Freedom and control of my time is priceless, but it required getting over the fear and taking the plunge.
So what’s the advice in all of this?
#1: It’s very difficult to achieve Financial Independence without the hustle. Earning more than your peers and/or spending less is part of the game. It can be a grind during the process. Things start to feel comfortable: Your employer isn’t challenging anymore, your meals out creep up, family and expense pressures of living alone and a house start. Debt makes this even tougher. Instead of compound interest working in your favor, it is working against you. Your debt is an emergency! Hustle is required if you want different results.
#2: Don’t skip the Coast phase. There’s a point where I knew the career ladder wasn’t for me. Why did I continue at that rate? All I needed was to let time push my investments and not keep stressing at a “prominent” job. I find myself giving this advice out more and more as I see professionals who’ve sacrificed and hustled for years unable to dial it back and just let their money work. I admit bypassing the coast phase was my biggest regret in our Financial Independence journey
#3: You have to take the plunge. Quitting a career is difficult, but early retirement doesn’t have to be forever. Consider taking a sabbatical first to test out the lifestyle. Be confident in your ability to gain employment again if it doesn’t work out. Businesses always need smart people to help them solve problems. If you’ve built your skill set up along the way, job opportunities will continue to come to you even though you’re retired.
Financial independence (and early retirement) is a different result compared to the “normal” middle class narrative of working for nearly five decades of your life. To achieve a different result, it requires different choices. Is financial independence for you? It’s up for you to decide and take action.
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10 Replies to “Financial Independence Requires Hustle, Then You Can Coast”
This is a great post and timely for my family. We have the invested assets piece covered for phase 2. I’m curious on what accounts you consider accessible in the two years of financial runway? Only savings accounts? What about taxable brokerage, 457 (pre tax but no early withdrawal penalty), Roth contributions?
Taxable brokerage is 100% part of your financial runway. The same for 457 depending on how withdrawals would be structured
Makes sense! I assume you consider the runway to be in addition to 500k invested, right?
Nice post. I feel I’m in that in-between phase right now where I should really consider coasting. We have a substantial runway built, and I’m not really enjoying my job at the moment, but it’s hard to just pull the trigger and quit. I think somebody needs to do a case study on us, and then tell me to quit haha.
I think you get to this point where you feel sort of stuck between the high income and the not enjoying your job, but willing to sacrifice for your family. I would just say, if you can afford to do it and you aren’t learning/or enjoying life overall then quit. It’s not worth it. You have to listen to your heart and take the plunge.
For me, I was struggling with enjoying my job for two years. I loved my company, but I disliked working for corporate america and the restrictions that came with it. I had a shot to buy the company back and made a run at it. It failed and ultimately a minor contract snafu led to me having the courage to exit. After I made the decision, I felt an immense sense of relief. I knew it was the right call.
Taking a slightly different route by choice:
– After working a few years, we invested in advanced degrees and career changes to double our salary upon graduation. So rather than hustle as soon as we could, we invested in ourselves for future earnings.
– Had kids, so the economics of FIRE changed. And our lifestyle changed such that we couldn’t take full advantage of FIRE and still raise kids the way we think is “right” for them.
– Rounding the curve where the kids are soon graduating HS. But due to the longer time horizon to FIRE, didn’t need to hustle as hard. Still working but with multiple millions in NW, we don’t worry about getting fired or promoted so are both coasting as much as we can in our jobs and enjoying life as much as we can along the way to FIRE.
Coasting is tough after hustling. Not sure that is an easy transition.
I am working my way toward coasting, but the hustler in me has a hard time taking a back seat. I am kicking the can down the road a bit but still enjoying what I’m doing, so I’ll just keep winging it.
This is a great post, thanks for the info. A couple of questions:
1. Was wondering for the 25X expenses saved, is this talking about 25 months, or 25 years?
2. Was also wondering about the merit of coasting if there’s $500K saved in an account by 30? In the other blog post, it seems like it’ll eventually compound to 5.5 million by the time I’m 65, but that would imply there’s still 35 years of expenses that I’ll need to earn/account for?
Mostly asking because at 32, I currently have around $800K saved up but TBH I’m still very anxious about not being able to FIRE any time soon. Thus, was wondering if I’m missing something here?
Don’t get me wrong – I’d love to coast, but it’s just very hard to do it mentally knowing how far away I am from my goals currently.