My Four Phases of Financial Independence

If you were to split up your financial life into phases, what would they be? Here are the four phases that have made up my life (so far) and a look at what might be next.
Adam

Written by Adam on June 24, 2019.
19 min read. Investing, Personal. 5 comments.

Minafi's finances are an open book. Find out how I make money.

Inspired by Gwen from Fiery Millennials and Stop Ironing Shirts, I thought I’d share my route to financial independence – split up by the four phases that got me here.

As a primer on this – I retired at age 36, just 6 months ago. I was extremely fortunate to have a life that enabled that kind of lifestyle transition at such an early age. This post details how it was possible.

4 in front of a lake

Phase 1: My Financial Privilege (0 – 23 Years Old)

Starting net worth: $0, ending net worth: $0.

I had a normal, middle class upbringing. When I was born we lived in a 1-bedroom apartment, later on upgrading to renting a 2-bedroom house, before moving into a surprisingly large duplex by the time I was four.

My parents were OG house hackers. They took newspaper routes at night to save up money for a down payment knowing that they could rent out the other unit to help pay for rent. We’d end up living in that house in St. Petersburg, FL from when I was 4 until 23 years old – the longest I’ve ever called anywhere home.

We weren’t rich, but we weren’t lacking for the essentials either. We always had food, I’d always get the big gift I asked for around Christmas time, and we went on vacations yearly (which usually involved road trips and camping).

When college came around my parents had nothing saved up for me to go. My mom had just gone back and graduated law school in her 40s, and was still paying down her student loan bills, while my dad had helped put two other kids through college.

I wish I could say I saw how expensive college was and made an informed decision to avoid student debt, but that’s not the case at all. Since I loved computer science and building websites, I applied at Carnegie Mellon where I knew a handful of CS students from online communities. One of my luckiest breaks in life is that I only had a 2.9 high school GPA & a 1280 SAT so I didn’t get in. If I had gotten in I would have been saddled with a $30k+ a year tuition!

Instead, I went to the University of Central Florida (UCF) in Orlando – a city I would call home from when I was 18 to 35. Florida had (has? I’m not sure) an amazing scholarship program where if you have a 3.0+ weighted GPA you can get 75% off in-state tuition. If you have a 3.5+ and do some community service, then tuition is free and they give you money for books. The Bright Futures Scholarship is amazing, seriously.

With this scholarship, tuition was about $250 a semester for classes plus that much in books. Yes, that’s $1,000 a year for a university. I’m still amazed by that price. At the time, it was the most I’d every paid for anything, but looking at college prices now it seems quant.

Outside of a mostly financially stable childhood, my parents banded together to pay for everything during my time at college. I didn’t have to pay a cent until I got a job my senior year. This included:

  • $1,000 a year for tuition and books.
  • $200/month for a car (my dad got me a Mazda Protege when I was 19).
  • $1,000/month for rent, food, gas and whatever else.

Over 5 years, this worked out to a financial bonus of about $80,000 – or around $15,000 a year in financial aid from them. To think that my total expenses in college were $15,000/yr still seems low, but at the time that was way more than I could have easily come up with through working part-time jobs.

I didn’t do well in college. I was the same lazy student I was in high school, doing the minimum amount of work needed to pass my classes. Aside from meeting Mrs. Minafi in a computer networking class, I didn’t feel very connected to the school.

That was until I started building websites in my free time. I created a fan site for the game Dance Dance Revolution (which is listed in my failure resume) which took off – generating more than 2,000 visits a day with a thriving forum. That helped me decide what I wanted to do with my life – make websites!

I wouldn’t have had the opportunity to have that time to discover that if my parents hadn’t financially supported me during that time at college. I was able to find jobs making websites during my last years in college, eventually getting an internship where I was able to learn and grow my skills more.

When I graduated college I immediately transitioned from part-time to full time making the outrageous salary of $37,000 ($48,517 adjusted for inflation in 2019) a year programming in ColdFusion!

tl;dr: From age 0 – 23 I was financially supported by my parents, learned what I wanted to do in life and graduated from college with a degree and no debt.

What would I change? Honestly, not much. Aside from a messy divorce and money troubles when my parents were unemployed, it was financially secure childhood. It would have helped to understand the cost of college and to learn about how to invest from someone who knew.

Phase 2: Shit, I Have to Learn About Money Now (Age 24 – 28)

Starting net worth: $0, ending net worth: $60,000.

One thing lacking from Phase 1 was any kind of education at all about what to do with money. My parents taught me self control well but left out how to invest and grow your wealth.

Suddenly I had a job that paid well and my living expenses were roughly $1,250 a month. After taxes, I had an extra $1,250 each month! Without knowing it, I could save half my income! I didn’t drink (at the time), hated any loud places, made all my own food and my most expensive hobbies were upgrading my computer, playing arcade games and watching movies.

Around this time my mom passed away. I’ll spare the details, but financially she left me $100,000 (after a prolonged estate settlement) and the house I grew up in. I fixed it up and sold it for $250,000, netting about $200k after taxes.

All the sudden I was a 24 year old with a 50% savings rate and $300,000 saved up! Knowing what I know now, with living expenses of $15,000 a year, it’s possible I could have been financially independent by 26 if I continued saving, markets went up and I kept my spending the same.

But none of those things happened.

Instead, I fell out of a tree hitting every almost single financial mistake on the way down – some outside of my control, but most of my own making due to ignorance.

  • I bought a new house in 2008 at the height of the housing crisis, putting $60k down (the house would lose half of what it’s value, and sell for a loss 11 years later).
  • I invested the money with a financial advisor who took a 1%/yr fee and also invested the money into a number of high fee funds including American Funds which had a 5% front-load (a 5% fee just to invest).
  • I let my spending rise a TON with the new house. The mortgage value alone was 54% of my income. Seriously, 54%[email protected]!
  • My savings rate went from 50% to 0% overnight as Mrs. Minafi and I moved in together, furnished a house, and starting our lives together.
  • Oh, and the markets dropped 50% due to the great recession.

In the span of 2 years, my net worth went from $300,000 in cash to $150,000 in investments and -$90,000 in equity (after our mortgage) for a net worth of $60,000.

Life comes at you fast. All it took was buying more house than I needed at the wrong time and putting money into investments I didn’t understand.

Mrs. Minafi and I were in our honeymoon phase, which was great for not fretting about the financial collapse. We had jobs, and worst case still had investments to tap into, so we weren’t worried – even if on paper our financials had dwindled. (we hadn’t combined financials yet, so it was technically my financials that dwindled).

That was when I started reading more about investing. I don’t know how I found it, but I was fortunate enough to read The Bogleheads Guide to Investing back in 2010 (when I was 27). I joined the Bogleheads Forums and started to understand the basics of investing in well-diversified, low-fee, index funds.

I constantly was asking my financial advisor questions about the funds I was in, trying to reverse engineer the strategy he put me in. I realized they were alright funds – well diversified index funds even – but with high fees that he was getting a cut from.

That was when I opened a Vanguard Account (specifically a Roth IRA) and began to learn how to purchase mutual funds. I still recommend this as the best way to learn! Roth IRAs can be opened without any association with your job and you won’t pay taxes on them until you withdraw money. This makes them the absolute best test-bed for investing!

Through the rest of that year (2010, when I was 28) I gained more confidence in investing at Vanguard. I wasn’t doing anything complicated – just picking $VTSAX and putting all my money into it, but it was my decision, not a financial advisor. If things when sideways it was my mistake!

By the end of 2010, I had enough confidence to ditch my financial advisor and invest on my own. I transferred everything over to Vanguard and never looked back.

Vanguard over time

I didn’t learn about financial independence at this time, but I did learn about investing and how to manage my money.

tl;dr: From age 24-28 I made a lot of mistakes. Those mistakes caused me to look back and find ways to do better. That led me to manage my own investments on Vanguard from then on out.

What would I change? Obviously not losing my mom. Not buying too large a house. Selling my house during one of the TARP programs. Not investing with a financial advisor. Not following the advice that “real estate always goes up in value”. Buying a condo/townhome rather than a house (less work).

Phase 3: Career and Earnings Focus (Age 28-36)

Starting net worth: $60,000, ending net worth: $2,200,000.

With our investments now set on autopilot, I landed a job at a local startup called Envy Labs which had just launched a site called Code School a few months before. I knew most of the people from Envy Labs from local Ruby Meetups (Ruby is a programming language that powers this site). I jumped in and did my best to help out.

I was fortunate to work with loads of extremely talented, driven and smart people in my time there. That only drove me to up my game and find ways to improve and provide value. While many coworkers were more skilled at the technical side, I did what I could to learn areas that the company could use more help at – creating great content, growing engineering teams and looking into data for insights on how we could improve.

During this time my work-life balance shifted heavily towards work. When I wasn’t at work, I was home thinking about work, or hacking away at an idea to use it at work. Since I was paid hourly, whenever I was working on something at home, or on a weekend, I was still getting paid, so why not? I started socking away even more money each month now that my pay was higher than my spending.

I was making under $100k/year, so it wasn’t Silicon Valley salary, but Orlando is a cheap place to live and we were able to save at least 20% of our income again. In 2012 I learned about this “Financial Independence” idea from this weird guy with a Mustache and realized that was it. That was the connection I was waiting for that gave me a financial goal to get to. I become wiser with my spending and increased my savings rate as much as I could.

It even became a running joke at work that if you wanted to get something done just get Adam excited about it and it’ll be done by the following Monday. Others on the team were equally driven, which only motivated me more.

The best thing that I did during this phase was to learn how to be invaluable to the place I worked. I did my best to help out everyone all the time. Not on my team but need help? Sure. Need another set of eyes on a problem? How can I help? A project I’m not even on is falling behind? Yeah, I’ll work nights and weekends to help get it back on track.

Even though it was a lot of work, it was easily the most fulfilling time in my career. It helps to work closely with others who are as motivated and excited as I was.

During that time I transitioned from my role as a Software Engineer up to an Engineering Manager (who still coded 75% of the time), to an Engineering/Technology Director (also still coding 75% of the time) to a Course Director (yep, still coding), to a Product Director (no more coding 😭).

My equity in the startup increased with the new responsibilities, but I wasn’t counting on that to equate much (it had no value until the company sold). I was happy with the recognition from it by people I respected.

After about 4 years of this, Code School was approached and eventually sold to Pluralsight for $36,000,000 (!). Code School had taken $0 in investments, which meant that everyone who had equity was going to get some kind of a windfall from this financial event.

I received something crazy like $400,000 nearly right away from the sale. My investments from 2008 had recovered and I’d tacked on more money as well – things were going great! By 2015 my net worth had spiked up to $800k – blowing any calculations I previously made out of the water.

It’s important to point out that this entire phase, from 2010 – 2018 was during the biggest bull market since the 1920s. I seriously hope I don’t look back at this post one day and think “Oh, Adam, if only you’d known.”.

After the acquisition, I transitioned to working for Pluralsight. Moving from a 50 person company to 300 person company is quite the transition. Pluralsight was also growing and would surpass 1,000 employees within another 3 years.

I had no golden handcuffs to stay, which meant I could leave at anytime. This was somewhat surprising in the acquisition world, but I wasn’t going to complain. I was happy that I finally had a 401k (Code School never had one) and promptly started maxing it out.

Working for a large company is very different – especially going from a director in a small company to an individual contributor in a large one. I struggled to find a place there. I still believe Pluralsight is an amazing place to work with solid financials and it’s why I still have 5% of my portfolio in PS stock. There’s an analogy I like for this: commandos, military, and police:

Companies need commandos, military, and police during various times in their growth. Commandos jump in, get shit done, build a proof of concept and leave trash (or bad code) everywhere. The military starts to iterate, plan and find product-market fit. Police set up the systems, structures, and organization required to make it last long-term. (read the above link – it’s a really good article).

I’ve alway considered myself a commando. I love exploring concepts, producing prototypes, and just getting that initial reaction to iterate on. At Code School we’d do this every month when we launched a new course. At larger companies, there’s more need for military and police, which left me sometimes looking for new things to do.

In May 2018, on the day before my birthday, Pluralsight had their IPO. As part of the Code School acquisition, I had some Pluralsight stock and it was worth a LOT more than just 3 years prior during the acquisition. I ended up selling a lot of that stock 6 months later for nearly $750,000.

By the end of this phase, between the acquisition, the IPO, the market run-up, having a higher salary and saving more of it I ended up with about $2,200,000 saved up by when I was 36. In 10 years my net worth had transformed from $60k to $2,200,00! This is not a reproducible path, but it was a roller coaster I was fortunate enough to be on.

tl;dr: I worked as hard as I possibly could for years at Code School, helping to grow the company up before it eventually sold. I continued working at Pluralsight for another 4 years.

What would I change? Things worked out much better than I ever expected, but with a few tweaks I could have done much better. Instead of being an individual contributor I could have sought out leadership roles for more equity, or even negotiated for more up front. Rather than moving to Utah, which as a state tax, we could have stayed in Florida – which would have saved about $90k in taxes.

Phase 4: Retirement? (Age 36-?)

It’s now been 6 months since I left my job and entered phase 4. I’m still figuring out what this phase will be. We’re riiiight on the edge of financial independence now – with a withdrawal rate of 2% while Mrs. Minafi is working, but likely closer to 4.25% if she wasn’t (assuming absolutely no changes to our lifestyle). In other words, it’s likely that we’ll need to make more money or spend less money for the math to work out long-term.

For now, I’m calling it “retirement”, but it’s still to be determined if that’ll be the actual designation. I doubt that when I look back and update this post in 50 years it will say “Retirement (Age 36-86)”.

There are many options on what it could actually say! I’m playing with a few of these now:

  • A short break before going back to work at another company (unlikely, but possible if the market takes a sudden dive).
  • Figuring out the next major side project I want to jump into before throwing myself fully at it (always possible).
  • Continually finding a balance between productivity and relaxation – never going too far to either side (current state ideal).

One of my favorite quotes comes from Vicki Robbins’ Your Money or Your Life (note: I’m excited to say I’ll be on a panel with her later this month at an event for financial teachers here in Utah!). The quote is:

The world needs you to show up and follow your dreams.

Vicky Robins, Your Money or Your Life.

That’s what I plan to do next. Just show up and follow my dreams and passions. Those passions include many goals that will span from personal improvement to community uplift. Where that takes me next is still unknown, but I’m excited to see where I end up!

What are the phases of your financial life? Do you feel you have clear distinctions between them like I did? Or do they blur together more?

Adam

About Adam

Hi, I'm Adam! I help millennials invest to reach financial independence sooner than they ever thought possible. Want to see what you could do to reach FI sooner? You're in the right place!

5 Comments

Why not add to the conversation below? Your voice is welcome!

Thank you for sharing. It details a really compelling journey.

It is interesting to see the role “good-fortune” plays in life. You could have worked every bit as hard and have not seen as good results financially.

Code School might not have survived to obtain Round C funding or had the cash-flow to qualify for debit funding. There are some 900 lb gorillas in the space: Coursera, Udemy. Investors, being a fickle bunch could have taken their money elsewhere.

Plurasight might not have found Code School enough of a competitor (or found enough synergy with) to be worth buying out.

Plurasight might have not have chosen to go public either due to the gorillas, or the investors could have continued run the company as a private concern.

I know a colleague who worked for a company for 10+ yrs he joined when it was a startup. The company was reasonably successful and he made decent coin. However, since the company remained investor-held, he could not monetize his options and eventually left out of frustration.

It’s nice to “have the wind at your back” so to speak. It doesn’t happen all the time.

It is interesting to see the role “good-fortune” plays in life. You could have worked every bit as hard and have not seen as good results financially.

For sure. Part of it is the hard work. Another part is the hard work to find a place to work hard. I scoured through jobs, met everyone in my local city and found the place that had the most talented team to join – then worked hard there. Finding that team was another key point for sure.

Code School might not have survived to obtain Round C funding or had the cash-flow to qualify for debit funding.

We wouldn’t have needed it either – which is nice. Code School never took any funding whatsoever, so it was 100% owned by the ~50 employees. It was profitable on top of that (revenue exceeded expenses). If we had wanted to pour gasoline on the fire and really grow huge though, we would have needed to take some funding to add more headcount.

It’s nice to “have the wind at your back” so to speak. It doesn’t happen all the time.

So so true. I wouldn’t be surprised if only 1 out of 1,000 startup employees gets any kind of payout. Of those, only 1 out of 100 might get any significant payout.

To me the biggest draws of a startup aren’t the money, but the chance to learn a ton, wear many hats, have more more autonomy, less middle management and above all – learn how to run a startup in case you want to work in others later. Joining for the money is like buying a lotto ticket.

I don’t know about 1 out of 1000. I worked in Silicon Valley and I know a ton of people who got significant payouts, and at much higher rates than 1 or 2 million…

That’s awesome! I wouldn’t be surprised if more people in Silicon Valley working at startups get that kind of exit compared to startups everywhere else in the world. In Orlando, where I lived, over the course of a decade in the tech space I know of only a handful of people who benefited from an exit despite hundreds of startups – and those were only the higher ups or early employees at those startups. I do wonder what the % of startup employees is that receive some kind of $1m+ windfall – especially if it’s in addition to a competitive salary.

Sorry about the misfire on Code School funding. The page I was looking at had sample data rather than the actual funding rounds. Probably a fascinating story how Code School operated without financing. I remember reading stories of company founders running their companies on stacks of credit cards. From $0 to $36M is one heck of a payday.