With multiple remote jobs, you can achieve early financial independence by saving half your paychecks while splurging on $8 vanilla lattes and dream vacations. No need to pinch pennies; work and live anywhere in the world. Just beware of tax consequences and plan accordingly. Too good to be true? Let’s deep dive into how you can be financially free in ten years or less as well as other options.
Halving time to early financial independence with double paychecks – Isaac’s $18,429 take-home each month
Seriously, this is not a humble brag but a wake-up call. The only person stopping you is well…you. And yes, it is legal to have multiple remote jobs. But you’re here to learn how you can be financially independent early. So let’s get on with it!
Bare minimum, zero effort base case
Let’s play out a few scenarios. For the base case, I’ve already contributed +10% to Company 1’s ESPP (employee stock purchase program) and maxed Company 2’s 401(k) before taking home $18K. So, even before living expenses, I’ve already socked away ~$50K per year. If I don’t save a single penny over the next 20 years, or invest the savings, I’d have saved $1M. With investing and compounding, it’s $2.1M. This assumes a conservative 7.2% rate of return, or a doubling of my savings every 10 years. Here’s the calculation.
Not good enough, you say. After all, I promised you would become financially independent early in ten years or less! Ok, not a problem boss. I wanted you to know you can still reach a pretty amazing outcome in 20 years with zero effort. Along the way, you can spend all your take-home income on lattes, vacations, and Teslas.
Try just a little bit medium case
If you live in California, you probably need more than two million to achieve financial independence. So, let’s turn up the save and invest machine. With a double income, we save and invest half of our paychecks. I’ll pick saving my paychecks from Company 2, the bi-weekly $4,980. For simplicity, I’ll say we’re saving $10K a month. In addition to the $50K from the base case (401K plus ESPP), we’re now looking at $120K saved per year! An incredible savings throughput. Now, within only 10 years, you’d have $2.37M sitting in your piggie bank using the assumptions from the base case.
Remember, we went from 20 years down to 10 years in our investing time horizon. If you can sustainably work two jobs for over 20 years, then you’re looking at a whopping $7.1M! Ok, still not good enough you say. $2.37M is nothing in California. I need a bigger number and in ten years or less. Then you need to save more because compounding takes time.
RSUs, ISOs, and IPOs – early financial independence case
If you work in tech, then you know base salary is what pays the bills and equity is what makes you rich. For this example, we’ll set aside IPOs and look at RSUs and cash-like stocks granted by public companies. Let’s assume I get roughly $50K each year in after-tax company stocks from both Company 1 and Company 2 – an additional $100K in after-tax savings on top of the base and medium cases. Wow! Now you’re talking – $270K in annual savings. And when invested conservatively (say no to meme stocks and bitcoins), you’re looking at a pre-tax and after-tax mixed portfolio of $3.76M in 10 years. See the calculation here.
Note: if you looked closely at the calculation, I was using annual compounding. By switching to a quarterly compounding (a closer match to your bi-weekly paychecks and quarterly or annually RSU vesting), you get another $35K added totaling $3.80M!
Finally, how about annual bonuses from Company 1 and Company 2? For simplicity, we kept that FU money aside so you can spend it however you want. That’s another $40-100K since I get ~10-25% of my base salaries in bonuses each year depending on performances.
What if you’re already working? A running start with changing assumptions for early financial freedom
Let’s say you’re 29 years old and already a seasoned working professional. Here we’ll assume a running start of $100K saved – a likely scenario from seven years of working in tech. We also changed the compounding to quarterly to match when you get paid. Now you’re looking at $4.01M by age 39. Now if you keep playing with the variables, the math becomes apparent that you can achieve financial independence early while working multiple remote jobs. The Overemployed playbook literally cuts the time to financial independence in half. All the while, you’re working maybe 40-50 hours a week and enjoying life with your annual bonuses. That’s a lot of nice vacations and lattes.
Alternatively, if you enjoy your work, why not keep at it for 20 years? Assuming a fixed $270K annual savings and using the same return rate, we’re now looking at $11.7M at the end of a 20-year run. In another word, by doing what you enjoy and letting time compound your savings, you’re delaying the need to dip into your savings to pay for living expenses. But if you need to stop working to live your best life, you do so after 10 years of grinding. Next, we’ll show how with “just” $4M.
Note: we’re oversimplifying in this post since your nest eggs will have a mix of post-tax and pre-tax dollars. As you know from tax surprises with multiple jobs, taxes are just plain-o complicated. More to follow on how to live off your investment returns in a more tax-optimized way once you’ve stopped working. Hint: you might want to live in Vancouver, WA.
As my Papa used to say, it’s not how much you make but how much you spend – a bottom-up approach to early financial independence
First, you need to make more money, like a lot more. This is obvious to the Overemployed. Second, you’ve got to watch out for lifestyle creep – that’s to say, once you make more money, you might be tempted to spend more money on stuff. Third, if you’re serious of achieve financial freedom early, then it all comes down to how much do you need to spend each year to keep yourself and your loved ones happy. Now let’s work backward.
The rule of 4% popularized over the last three decades is no longer valid. That means, in reality, even with $11.7M in nest eggs, you’ll need to be conservative in how much of your returns you can spend and how much you’ll need to reinvest to maintain your portfolio’s purchasing power. The best hedge is to keep working in what you love while enjoying life, like a 25-hour workweek (or whatever is right for you). That said, if you’re hell-bent on retiring early, do take the conservative approach of 80% of today’s (6/26/2021) bond yield of 1.54% times your savings. That means you’ll need to live within 1.232% of $11.7M, e.g. your expenses cannot exceed $144,144 per year or $12,012 per month. Not a lot in the grander scheme of being “rich” after 20 years of multiple remote jobs. Blame the Fed. Maybe interest rates will change. I won’t count on it though.
What about retiring at age 39 with $4.01M? With the above assumption, you’d need to live below $49,403 per year or $4,117 per month. Are you willing or could realistically live within your means? Some FIRE (financially independent, retire early) adherents believe so. I’d disagree, not unless you’re living in Wyoming (no state taxes) and no kids. Note: these are pre-tax investment income, we’ll touch on taxes and retirement strategy in another post. Maybe you can do it, at least until you get married and have kids. After that, you’ll need to work again for subsidized health insurance because paying for healthcare out of pocket is expensive.
Back to square one, should you try to be financially independent in your 30’s?
Yes and no. It really depends on your priorities. With the Overemployed playbook, you can accumulate wealth at double speed. However, you need time to compound that accumulated wealth into a giant snowball while watching out for lifestyle creep. My recommendation is to strike a balance between living your life now and achieving financial freedom. Focus on following a system that works for you and your loved ones. Before you know it, you’ll have arrived at your destination without over sacrificing the present for the future. Financial independence is not measured by dollars and cents. Rather, it is measured by how many love ones and friends are around you when you’re old. Don’t sacrifice your life for money.
Stay happily Overemployed, use capitalism against itself, and live your life to the fullest. Unless, of course, you hit that IPO and become a deca-millionaire. If so, then a hefty congratulation. C’est la vie!