March 19, 2023
7 min read
I'm 25 years old and just reached my first retirement goal of covering basic living expenses with a semi-passive income. I live with my fiance in an apartment we own, and for a frugal lifestyle, we need around 1000$ per month. An expected return from the real estate we rent out is also around that figure. I don't have a successful business or anything like that. Most of the income to make it happen came from regular work, doing software development as a contractor for six years while living a frugal life.
We'll discuss the various variables involved in achieving financial independence and retiring early (FIRE), including investing and taxes. However, let's start with what I believe to be the most crucial aspect: your earning vehicle. The more money you make, the faster you can retire. While you can become financially independent through a safe investing strategy with a barber or barista paycheck, it will take decades of frugal living. If you don't have a valuable skill, it's better to put attention and time toward education to get a high-paying job sooner.
I've been lucky to pick a lucrative profession by applying to a computer science university after high school. This post-soviet institution was a disaster, but it made me realize the value of freedom and discipline. No one taught me at the university. I had to learn software development through free online resources to complete projects before deadlines. After two years of university, a boot camp, and self-study, I landed my first local programming job.
I've tracked where I spend more work time throughout my career, and it ended up being almost an equal split between the job and side projects. While I didn't make significant money from these endeavors, they allowed me to stand out when applying for remote positions. I don't regret dedicating so much of my time to entrepreneurial activities, and I still believe that starting a business could be an effective way to achieve FIRE. I just happened to pick the wrong problem to solve.
Working as a remote contractor from Eastern Europe has enabled me to earn the same compensation as a Western European engineer while benefiting from low taxes and living expenses. For example, a German company has €60,000 to spend on an employee. A Berlin-based worker will pay 38% in taxes, while a contractor in Estonia will spend 20%, in Poland 12%, in Ukraine 5%, and in Georgia just 1%. Of course, it's crucial to remember that you won't receive many social benefits when paying low single-digit taxes.
I've invested almost all my income in rental real estate without using a mortgage. It might not be the best strategy to build a large real estate business, but I didn't want to take unnecessary risks, especially considering the immaturity of the Georgian market. While my apartments have problems, I believe there are good enough assets. If you are curious about investing in rental real estate, check out my video about the principles for sound long-term units. It's not a passive investment vehicle since I have to find the deal, fix or renovate things, and find tenants myself.
Before committing to real estate, I learned through experience that investing in crypto and stocks requires knowledge of its mechanics. I lost a significant sum during the Terra crash and can now only allocate 3% of my net worth between Bitcoin and Ethereum. While I like having some money secured on the blockchain and accessible from anywhere in case of an emergency, I don't want to hold a significant amount of speculative assets.
While the stock market has performed well in recent history, and since WW2 S&P 500 has a 7% adjusted for inflation return, I'm not confident it will continue to be that way. I've lost money in every position I hold, and while the market can turn around, I don't know when and why. In light of recent bank crashes, I don't believe in brokerages' safety. You deposit money into a black box and hope your money is safe. However, I might be biased because of the ban from the brokerage I've used due to my Belarus citizenship. Overall, I found investing in real estate more rewarding than seeing the number go up and down on a screen. It allows me to experience tangible assets that I can see and touch.
So far, income and taxes were the most impactful variables in my FIRE journey, but reducing spending also played a role. Instead of renting a fancy apartment, I've been living in my parents' small apartment on the outskirts of Mink and later in my small place in Tbilisi. By avoiding expensive rentals, I've saved tens of thousands of dollars.
I've also tried to minimize my travel, which can consume significant resources. Traveling means spending money on airfare, accommodations, and eating out while sacrificing valuable work time due to a lack of routine. While I still enjoy an occasional meal at a restaurant, I am mindful of my habits and their impact on my finances. For example, in Tbilisi, we preferred to do one work session in a coffee shop, so instead of going at lunchtime and spending money on food, we would go to a fancy place before breakfast and order regular black coffee. This way, we could get in a morning walk, benefit from the natural light exposure, extend our fasting period, and get some work done, all while saving money.
Maintaining good health is another essential aspect of the FIRE journey, especially in a country without free healthcare. I've already spent thousands of dollars on medical procedures in Georgia, and unfortunately, my experiences with the local healthcare system have been pretty bad. For example, I got this enormous scar for life because they accidentally put a wire burning a significant part of my leg during surgery on another part of my body. While there are some health problems we can't prevent, doing our best to take care of our health is crucial to succeeding in the FIRE journey. Our physical health is critical to both earning money and enjoying life.
Lots of people say money doesn't buy happiness but buffers stress. Speaking for myself, when I have less stress, I feel happier. I can sleep peacefully without worrying about losing my job and wake up without the pressure of having to rush and do extra work in the morning. While recording this video, I still have a contract job and will most likely apply for another one when the current gig is gone. However, having financial stability also allows me to explore my interests, start my own business, or even take a sabbatical without worrying about burn rate.
At the same time, my semi-passive income can disappear any moment, the government can take away my apartments, there could be an earthquake, or people I love might need an expensive medical procedure. That's why having skills demanded by society is good insurance, knowing you can find a way to make money even after you've lost everything. Still, this doesn't necessarily mean a traditional job is the only option. I can continue being a good software developer by building projects myself.
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