I remember when I first discovered the idea financial independence 3-4 years ago. I was immediately consumed, started looking for ways to optimize, set goals and upped our 401K contributions every quarter as our income grew. Our net worth was rising, mostly due to our growing contributions and the progress was very motivating. This went on for a while, everything was great, I thought our progress would never be stifled and BOOM. Our list of things to optimize shrunk, our careers are more established and the initial FI-HIGH wore off. Welcome to the accumulation phase of FI.
What is the Accumulation Phase of Financial Independence?
The easiest way I can explain it is that long-middle part on the way to financial independence.
You are waiting for your money to grow while stoking the fire with more money every paycheck. For us, it is going to last 8-10 years and that is a long time to hold the course. It is not as fun as the first year and a half where we were slashing, earning and saving more every month. Eventually, you run out of things to do.
The Accumulation Phase – After the FI-HIGH Wears Off
After about 2.5 years of grinding out promotions, cutting unnecessary costs and negotiating with every company that charges us on a re-occurring basis (kill me) we are kind of in cruise control. The most excitement we experience is the market bumping your money up and down at a faster rate than our contributions.
It has felt boring at times. The bulk of our day to day money decisions are automated. With the initial high wearing off, here are some ideas to stay motivated during the accumulation phase.
Look for Passive Income Opportunities
Finding new ways to generate income is a challenging and motivating endeavor. It can be used to speed up your FI progress, pay for travel, or give you an added layer of security when you decide to pull the full-time plug.
Outside of dividends from our holdings in the stock market, we don’t have much for passive income. The money I make off this site is far from passive (and nothing to brag about).
We have been looking at rental real-estate or other low time overhead ideas that can generate some cash. It’s not easy without a lit of capital and is time intensive up front. With two young kids, time is something we don’t have a lot of. Definetely in the idea generation phase of this plan.
What are you going to do with all that free time?
A common question that comes up when any early retirement talk creeps into the mainstream media world. It’s never too early to find a new passion or dedicate more time to the one you already have.
If you always wanted to start a business or give the entrepreneur track a try now is a great time to start thinking of ideas or laying the foundation. Mrs. AE and I have been looking at different side hustle ideas for the past few weeks and highlighting ones we think are interesting (I’m not going to be driving for Uber for 20 hours a day anytime
soon ever, I’m sticking to my Hierarchy of Hustle).
We are looking for something that we could grow to enjoy instead of a pure cash grab. Learning a new skill or starting a for-profit business that doesn’t feel like work would be a welcome change. If we outgrow it, we can always shift it to a passively ran company or sell it.
Another option is to volunteer. There are thousands of organizations that would love you expertise, skill or labor.
Have Kids (If you want them)
Not advocating for kids just for the sake of kids, but if you plan on having them and want some excitement (with touches of stress, anger, and poop) then the accumulation phase is the perfect time for it. Your finances are on track, your career is more established and if you are up for a new money saving challenge they bring plenty (seriously, too many).
They are definetely a bordem killer and can take up all the passion you burned on optimizing your finances.
I am not telling people to wait or not wait, it worked out for us having them during this time period. Do what you makes sense for your family 🙂
Don’t Cruise Into Bad Habits
Processes left unchecked tend to drift over time
It took a lot of effort and time to change our habits into a wealth building machine that runs with minimal intervention. The last thing we want is to drift back into our old habits and lose sight of the accomplishments we have made to date. Here are a few things to keep tabs on/update during the accumulation phase.
- Periodically check in on spending – I have caught us drifting on the spending front a few times. Nothing major but it’s a quick way to verify if your food or entertainment budget started to run rampant
- Saving salary increases – Keep lifestyle inflation at bay during the accumulation phase by saving/investing your raises (Shoot for 50% or higher)
- Track your Net Worth – The market has a lot more control than you do so I wouldn’t set goals around it. Check in on the long-term trends to ensure you aren’t straying.
Most Importantly – Enjoy the Accumulation Phase
Goal setting is important. Hitting goals is important. Having control of your finances is important. Securing your future freedom is damn important.
Losing sight of today because you are too focused on what is coming tomorrow is dangerous.
This is something I have struggled with. I think most people who are motivated enough to take control of their money and pursue this path struggle as well.
When you are pursuing a massive multi-year goal you can’t get consumed by it. Even if it is going to define 20 or 30 years of your life.
Enjoy that you put yourself (and your family) in a position to not worry about money. Having FU Money or simply a 3-4 month emergency fund is a huge weight to life off your shoulders and mind.
You could call the accumulation phase boring. Boring usually sucks, but in this case, I say embrace the boring.
Are you in the accumulation phase? Did your FI-HIGH wear off? How are you staying motivated during the accumulation phase?