Reader Q&A #2: Your Financial Independence Questions Answered
Real Questions from Real People
Here are questions that came in this week. I apologize in advance for limiting posts to five questions, but I’ll keep the extras for future Q&A posts.
Question 6: I'm making $45k as a teacher and I can’t make the math work. Is this even possible on a modest income or is FI only for high earners?
My Answer: This is a really common question and arguably the most important of all. So many people (including me) used high incomes coupled with low expenses. These stories attract all the attention because of our relative youth. However, FI is absolutely possible on a modest income and sometimes it’s easier than on a high income.
Here's why: FI isn't about the dollars you earn. It's about the gap between earning and spending. A teacher making $45k who spends $30k (33% savings rate) will reach FI faster than a software engineer making $150k who spends $130k (13% savings rate).
The teacher needs $750k invested (25x $30k). The engineer needs $3.25 million. Guess who gets there first?
You also may have a few advantages as a teacher. Many states still offer pensions, something nearly extinct in the private sector. You likely have summers off (time for side income), job security, and better-than-average benefits.
Let’s also recongize the challenges. You have a lower income ceiling and limited advancement opportunities.
Here’s are some options:
Geographic arbitrage (teach in a higher-paying, lower-cost area)
Summer side hustles (summer school, tutoring, seasonal work) - I was paid $100/hour for test preparation services while I was in college.
Related businesses (develop lesson plans, proctor tests, deliver online courses)
Now, let me mention one other option. You can switch careers to make more money. If you love your job, I wouldn’t give it up. However, if you’re not in love with the profession anyway, nothing is forcing you to stick with it.
There are teachers who have reached FI and while it takes longer than someone making $200k, it's absolutely doable. Don't let income level become an excuse to avoid saving. Let it become motivation to optimize everything else.
Question 7: You keep mentioning the 4% rule, but what if the market crashes right when I retire? Won't I run out of money if I'm selling stock during a downturn?
My Answer: This is called "sequence of returns risk" and it's a legitimate concern that has several solutions.
The 4% rule is based on historical back-testing that includes major market crashes. Even if you had retired right before the Great Depression or 2008 financial crisis, a 4% withdrawal rate succeeded about 87% of the time over 30-year periods.
If 87% is too low for you, you don't have to rely purely on the 4% rule. Here are common strategies people use:
Flexible withdrawal rates: For example, start at 3.5% and increase to 4.5% in good years, decrease back to 3.5% in bad years. This dramatically improves success rates. (This is also normal human behavior. We cut back when times are tough.)
Bond tent/ladder: Don’t retire until you have 1-2 years of expenses in bonds or cash. During market crashes, spend from bonds while letting stocks recover. (This answers your question about selling stock in a downturn.)
Part-time work: Having the ability to earn even $10k-15k annually provides an enormous buffer against sequence risk.
Geographic flexibility: This is essentially the same as the flexible withdrawal rate, but have a backup plan. Many people retire in-place, but you can move to a lower-cost area if your portfolio takes a hit early in retirement. (And if it goes the other direction, you can move back.)
FI doesn't require never working again. (I “retired” in 2022 and picked up a short-term consulting project in 2023 because it sounded fun.) If you need to do some consulting for a few years during a bad market, you're still infinitely better off than someone trapped in a full-time job.
The 4% rule is a handy guide, but maintaining a static withdrawal rate is less important than having options.
Question 8: I want to start investing but there are too many choices. How do I avoid investing in the wrong thing?
My Answer: You're overthinking this, which is exactly what the financial industry wants. Complexity sells products; simplicity builds wealth.
Here's everything you need to know: buy a total stock market index fund and add money to it consistently. That's it. You can build wealth for decades with this one decision. I personally use FSKAX because I’m with Fidelity. VTSAX or SWTSX are fine too. The ETF version of VTSAX is VTI and that works too.
If you want slightly more sophistication, use a "three-fund portfolio":
70% Total Stock Market Index (like VTSAX, FSKAX, or SWTSX)
20% International Stock Index (like VTIAX, FTIHX, SWISX)
10% Bond Index (like VBTLX, FXNAX, SWAGX)
That's still incredibly simple and gives you global diversification across asset classes.
What about target-date funds? I don’t use them, but they’re fine. Pick the year closest to when you'll retire and invest everything there. The fees are slightly higher, but it’s maximum simplicity.
What about individual stocks? No. You're not smarter than the market. Even professional fund managers can't beat index funds consistently.
What about crypto/gold/REITs/sector funds? No. Maybe 5% total if you just can’t stand index-only, but not as your core strategy.
The paradox of choice is real: the more options you consider, the less likely you are to actually start investing. Simple beats complex every time.
Open a brokerage account this week, pick one fund, and set up automatic investing. You can always get fancier later, but you can't get back the compound interest you miss while researching all the options.
Question 9: I live in San Francisco and spend $4,000/month on rent alone. You said I should but housing costs, but I can't find anything cheaper here. What do I do?
My Answer: Hello from a former SF resident! You have three options:
Option 1: Geographic arbitrage. Move to a lower cost area. (This is what I did.) If you can work remotely, you could cut your housing costs in half and dramatically accelerate your FI timeline. A $2,000/month savings on housing reduces your FI number by $600,000 using the 25x rule.
Option 2: Optimize within SF. Get roommates, move slightly further out, or find creative housing solutions. Even cutting $500/month saves you $150,000 toward your FI number.
Option 3: Earn more to offset the costs. SF salaries are high for a reason. If you're making $150k+ in San Francisco, maybe the high housing cost is worth it for the income potential. Stay put and work on increasing your salary.
Don't use expensive housing as an excuse to give up on FI entirely. Instead, run the numbers on all three options and see what makes sense for your specific situation.
Remember: The goal isn’t to find a way to live live on $40k/year in SF. If you need $100k/year to live in SF, then build toward a $2.5M FI number. It'll take longer, but it's still achievable and still better than working until 65.
High-cost areas require adjusted strategies, not abandoned dreams.
Question 10: I'm 28 and got my first real job making good money ($90k). I have been broke for the last 7 years since college. I want to be FI, but I don’t want to miss out on my remaining 20s. When do I have to get serious about FI?"
My Answer: This is a really dangerous question because "living a little" has a way of becoming "living a lot" and then "living paycheck to paycheck on a high salary."
Here's what I wish someone had told me in my 20s: The lifestyle you create in your first few high-earning years becomes your baseline. If you immediately upgrade to a luxury apartment, nice car, and expensive habits, that becomes your new normal. Later, saving money feels like deprivation because you're scaling back from what you're used to.
Instead, give yourself a modest lifestyle upgrade and save the rest. Maybe move from a studio to a one-bedroom. Don’t move to a luxury high-rise. Buy a reliable used car, not a luxury SUV. Go out to dinner once a week instead of twice a week. Don’t go out seven times a week.
You can enjoy your higher income, but be intentional about it. Set your savings rate first, maybe 25-40%, and spend the rest guilt-free.
The compound interest you miss in your 20s and early 30s is impossible to make up later. A dollar invested at 28 at 10% is worth ~$30.91 at 65. A dollar invested at 38 at 10% is only worth $11.92.
You don't have to choose between enjoying life and building wealth. You just have to choose between enjoying everything right now and enjoying freedom later.
Most people regret spending too much in their 20s. I’ve never met anyone who regretted saving too much.
The Common Thread
Notice the pattern in these questions? They're mostly about finding reasons why FI won't work: too low-income, too expensive location, deserve to spend money, market might crash, etc.
Here's the truth: FI works for people who decide it will work and then make the necessary changes. It doesn't work for people who look for excuses.
Every successful FI story involves overcoming obstacles, not avoiding them. The question isn't whether you have challenges because everyone does. The question is whether you'll let those challenges stop you or motivate you to find solutions.
Until then, your homework: Stop looking for reasons why FI won't work for you and start looking for ways it could work. The obstacles are real, but they're not insurmountable.
Here's to answering your doubts with action,
Max
Remember: The people who achieve FI aren't the ones without problems. They're the ones who solve their problems instead of using them as excuses.