by The year was 2006. The iPhone didn’t exist, Twitter had just launched, and I was taking my first tentative steps into the world of investing through my company’s retirement plan at Vanguard. Little did I know that those modest initial contributions would set me on a path to achieving something remarkable: financial independence and early retirement by age 44.
Looking back from 2024, the journey feels almost surreal. What started as small, automatic paycheck deductions has blossomed into a portfolio that now sustains our family’s lifestyle, allows us to raise our children on our own terms, and gives us the freedom to pursue our passions. But this isn’t just a story about numbers in a retirement account—it’s a testament to the power of consistency, patience, and learning from both triumphs and setbacks.
Since retiring in 2019, I’ve had time to reflect on the wisdom gained through bull markets, bear markets, the 2008 financial crisis, the pandemic crash, and countless smaller market swings in between. Each challenge and victory has taught me something valuable about building lasting wealth. While the path hasn’t always been smooth—there were plenty of moments of doubt and some costly mistakes along the way—these lessons have shaped not just our financial future but our entire approach to life.
Today, I want to share the 17 most valuable insights I’ve gathered from my journey from novice investor to financial independence. Whether you’re just starting out or well along your own path to financial freedom, I hope these hard-won lessons will help illuminate your way forward and perhaps help you avoid some of the pitfalls I encountered.
From the fundamental importance of starting early to the nuanced understanding of market cycles, from the power of automation to the wisdom of simplicity, these lessons represent the distilled essence of what really matters in building long-term wealth. Let’s dive in.
1. Start Early and Be Consistent
The power of compound interest cannot be overstated. Starting early, even with small amounts, allowed our investments to grow significantly over time. When I began investing through my company’s retirement plan, these contributions felt like tiny drops dripping into a bucket. They didn’t seem to be doing much, but each pay cycle added a little more. After nearly two decades, this bucket, along with my partner’s equally sized bucket, has provided us with the freedom to stay home, pursue our passions, and raise our children the way we want to.
After we retired in 2019, we stopped contributing to all accounts, and today, our portfolio continues to grow on its own.
Investment Growth Over Time
2. Pay Yourself First
Prioritizing savings is the cornerstone of financial independence. I started by contributing just enough to get my employer’s 4% 401(k) match, but quickly realized this wasn’t enough. Even though my company wouldn’t begin matching until a year after my hire date, I began contributing immediately. Why? I didn’t want to get used to the extra money in my paycheck. I expected it to be much more difficult to adjust to a lower take-home pay later.
Our Journey to Financial Independence
Annual Savings Rate (2012-2019)
As I paid off debt, we increased our savings rate. By August 2019, we were no longer working, and our savings rate dipped. Even though we’re no longer working, we had a few years with a positive savings rate in early retirement. How can that be? Well, we don’t spend all the income that we get, including from the tax-sheltered accounts. We’re still making money, just not from a job.
3. Invest, Don’t Speculate
One of my earliest mistakes was confusing investing with speculation. In late 2008, I purchased a few stocks and traded them back and forth in the hopes of making a quick profit. By early 2009, as the market continued to fall, I became impatient, gave up on that game, and took my losses (about a couple of thousand dollars). After that, I decided to focus on my 401(k) investments and invest for the long term.
I continue to invest for the long term in valuable companies, knowing that these companies have a much better chance of being around 10 years from now versus the hot pick of the day.
4. Understand What You’re Buying
A stock isn’t just a ticker symbol; it represents ownership in a real business. As Warren Buffett says, “Price is what you pay. Value is what you get.” When I invest in a fund now, I look at the fund’s stocks and bonds because they all represent businesses. I’ve learned to think like a business owner rather than a stock trader. For example, when investing in VTI (Vanguard Total Stock Market ETF), I’m not just buying “the market”—I’m becoming a partial owner of over 4,000 U.S. companies, from Tesla’s revolutionary electric vehicles to small emerging businesses that could be tomorrow’s leaders.
This mindset shift has helped me stay calm during market volatility because I focus on the underlying businesses rather than daily price movements. It also prevents me from making impulsive decisions based on market hype or fear. When you understand that you’re buying actual companies with real employees, products, and customers, you start thinking in terms of decades rather than days. This perspective has been particularly valuable during major market downturns, where remembering that I own pieces of resilient businesses helped me resist the urge to sell at the worst possible times.
5. Asset Allocation is Key
Proper asset allocation is crucial for managing risk and achieving your financial goals. I learned this lesson after making the mistake of trying to time the market by moving a large portion of my 401(k) investments to cash, believing that the market would correct after a long bull run. The market then performed admirably the following year! After that, I decided to simply reinvest the funds in the market and let it work its magic.
I now work our asset allocation according to our long- and short-term goals. If we need the money soon, then it stays in cash. If we don’t need it for longer than 5 years, then it stays invested in the market.
6. Time in the Market Beats Timing the Market
Attempting to time the market is a fool’s errand. Consistent, regular investing regardless of market conditions has proven to be the most reliable path to long-term wealth. The issue with trying to time the market is that you must be correct twice: when you sell and when you buy. I’ve learned that it’s about time in the market rather than market timing.
When we were working, we continued to invest every time we had extra cash, regardless of what the market was doing. It didn’t matter if the market was up or down on that day. We viewed every investment as a step towards our long-term goals. On days when the market was down, we saw it as an opportunity to buy more shares at a discount. On days when the market was up, we were glad to see our existing investments grow.
The S&P 500 Performance Since We Started Investing
Think of investing like planting a tree. You don’t expect it to grow overnight, right? Over 30 years, that little sapling can become a mighty oak, weathering storms and reaching for the sky. The same goes for your money in the market. Sure, there’ll be some windy days and dry spells, but overall, economies grow, technology advances, and human creativity keeps pushing forward.
If you stick with it and spread your seeds (aka diversify), chances are your financial forest will flourish over time. It’s not about watching every leaf fall or obsessing over daily growth—it’s about trusting in the natural upward trend and letting time work its magic. Just remember, while history gives us hope, the future’s never set in stone. But understanding these long-term patterns can help you stay cool when the market gets a bit wild.
That consistent investing strategy is what got us here today. Stocks might have seemed expensive back then, but the best time to invest was back then and then today. The second-best time is always now.
7. Automate Your Investments
Setting a specific day for investing removes emotion from the equation and ensures consistent contributions. We invested on payday, had a certain amount go directly to our retirement accounts, and went about our business regardless of market conditions. This automation proved to be one of our smartest moves—it essentially put our wealth-building on autopilot. I never had to agonize over whether it was the “right time” to invest, and more importantly, I never saw the money in my checking account, so I was never tempted to spend it.
When market downturns came, our automated system kept buying shares at lower prices, which turned out to be fantastic opportunities in hindsight. Think of it like brushing your teeth—you don’t debate whether to do it each morning; you just do it because it’s part of your routine. That’s how investing should be.
8. Fees Matter
Investment fees can significantly impact your returns over time. We are wary of investment fees and understand that what one can pay in fees can have a significant impact on returns. We’ve always been and will continue to be do-it-yourself investors to minimize these costs.
I’m confident we’ve saved a substantial amount over the years by managing our investments independently. However, I understand that not everyone feels comfortable or has the time to handle their own investments. If you find yourself in this position, it’s worth considering professional assistance. There are reputable firms like Vanguard that offer low-cost investment management services, as well as individual financial advisors who can provide personalized guidance.
When considering an advisor, always ask about their fee structure and make sure you understand all costs involved. Remember, even a 1% annual fee can significantly impact your long-term returns, so weigh the cost against the value you’re receiving. The key is to find a fiduciary advisor who is legally obligated to act in your best interest.
In fact, I can personally recommend my friend Leo Marte, who is an excellent financial advisor. I’ve seen firsthand how his knowledge and ethical approach have helped investors stay on track and avoid costly mistakes. Having a trusted advisor like Leo can be invaluable, especially if you’re not confident in managing investments on your own.
9. Diversify Your Income Streams
While our ETF portfolio is the cornerstone of our investment strategy, we’ve learned the importance of having multiple income streams. In addition to investing in equities, we had a rental property that generated monthly cash flow. We’ll continue to build our real estate assets to diversify our income streams and reduce stress on our portfolio.
In the past, our real estate income has funded about 20% of our spending. This diversification not only provides additional income but also acts as a hedge against stock market volatility. Real estate can offer steady cash flow through rent and potential appreciation over time, complementing the growth potential of our stock investments.
10. Take Advantage of Tax Strategies
Tax-loss harvesting and strategic asset location can significantly boost your after-tax returns. We still keep bonds in retirement accounts so that the interest is not taxed as ordinary income. That’s just one of several ways we’ve learned to save money on taxes.
Last year, when we sold our rental property, we found ourselves with more income on our tax return than we wished we had. To mitigate and lower our tax bracket, we exchanged some ETFs in our taxable brokerage account between VOO (Vanguard S&P 500 ETF) and VTI (Vanguard Total Stock Market ETF) to show a loss. These are very similar funds, tracking broad market indexes with significant overlap.
This strategy, known as tax-loss harvesting, allows us to realize a capital loss for tax purposes without significantly changing our investment position. The loss can offset capital gains or up to $3,000 of ordinary income. It’s important to be aware of the wash sale rule, which prohibits buying a “substantially identical” security within 30 days before or after the sale. By switching between VOO and VTI, we maintain similar market exposure while still realizing the tax loss.
11. Look at the Big Picture
While it’s easy to focus on individual investments, I’ve learned the importance of looking at my entire financial picture. I track our net worth asset allocation to get a bird’s-eye view of the entire scene. As our stock market investments grew, we’ve transferred some of the gains into real estate. This helps us rebalance our accounts as well.
My goal is to make stocks about 35% of our net worth. I think we’re almost there with the purchasing of land and the new construction project that will enter phase one soon.
I use the Empower dashboard to check our stocks portfolio. But I go old school with a spreadsheet to see the entire net worth allocation. This comprehensive view helps us make informed decisions about our overall financial strategy, ensuring that we’re not overexposed in any one area.
12. Keep It Simple
Complexity doesn’t equal better returns. I’ve learned that greater complexity does not imply greater returns. At times, I found myself overcomplicating things and realized that investing should be kept simple. Just because an idea sounds sophisticated doesn’t mean it will be profitable.
Our stocks, bonds, and cash portfolio only has a few ETFs and a couple of mutual funds. We have about 3-5 individual stocks that make up a small percentage of the portfolio, and that’s it. As the saying goes: if it ain’t broken, don’t fix it.
The simpler we keep our investments, the more time that we can spend enjoying our lives. This approach not only reduces stress but also minimizes the chances of making costly mistakes. It’s easier to understand and manage a simple portfolio, which in turn makes it easier to stick to our long-term investment plan.
13. Be Prepared for Market Cycles
Having invested through the 2008 financial crisis and the 2020 pandemic crash, I’ve learned the importance of staying calm during market turbulence. The market crashed two years after I began investing, wiping out half of my 401(k) balance. Fortunately, it was a small sum of money at the time; otherwise, I would have been terrified and unsure of what to do next.
The news of markets crashing whenever I inevitably hear about it doesn’t faze me. I’m not losing my shirt. Because we invest according to our goals, the money invested is doing what it’s supposed to be doing. Understanding market cycles helps us maintain perspective during downturns and avoid making emotional decisions that could harm our long-term financial health.
14. Rebalance Accordingly
Regular rebalancing helps maintain your desired asset allocation and can improve returns over time. When we first started investing, I used to rebalance quarterly. Now that we’re retired and living off our investments, we don’t reinvest the dividends and capital gains throughout the year. By the beginning of the year, we look at how much cash we need to pay for the upcoming annual expenses. If we have enough in cash from dividends and capital gains, we leave what we need in cash and reinvest the rest.
We rebalance according to our needs and goals, and that evolves depending on what life stage we are in. In our working years, rebalancing meant selling high-performing assets and buying underperforming ones to maintain our target allocation. Now, in retirement, it’s more about ensuring we have enough cash for our near-term needs while keeping the rest invested for long-term growth. This flexibility in our rebalancing strategy allows us to adapt to changing life circumstances while still maintaining a well-diversified portfolio.
15. Enjoy the Journey
While reaching financial independence has always been the goal, I’ve learned to appreciate the journey. The discipline, knowledge, and perspective we’ve gained through investing have enriched our lives in ways that go far beyond money.
Being in control of your finances is one of the most empowering things you can do in life because money determines how we live in many aspects. It’s not just about the end goal of financial independence, but about the growth, learning, and personal development that occur along the way. The journey has taught us patience, discipline, and the value of long-term thinking—skills that benefit us in all areas of life, not just finances.
16. Continuous Learning
The world of finance and investing is always evolving, and I’ve found that continuous learning is key to staying on top of our financial game. Whether it’s staying informed about new investment vehicles, understanding changes in tax laws, or learning about emerging economic trends, there’s always something new to learn. The rise of ETFs and the emergence of cryptocurrencies are just a few examples of how the investment landscape has changed since I started my journey. But it’s not just about keeping up with trends–it’s about developing a deeper understanding of fundamental principles and how they apply in changing market conditions.
17. Embrace the Spectrum of Investment Outcomes
Like a baseball player who doesn’t need to hit a home run every time at bat to be successful, you don’t need every investment to be a winner. The key is staying in the game and knowing that a few solid hits can easily make up for your strikeouts.
Our own experience with real estate investments perfectly illustrates this principle. We initially purchased a 1/4-acre plot of land as part of our diversification strategy and planned to build a rental there. While this investment didn’t appreciate significantly and we might end up selling it at a small loss, as we continued to buy more land, it led us to an incredible opportunity. Just a few months later, we were able to acquire 5.6 acres at half their market value—a true jackpot in our investment journey.
This sequence of events taught us several valuable lessons:
- Flexibility is crucial. Be prepared to adjust your strategy when better opportunities arise. Our willingness to consider selling the 1/4-acre plot might open the door for a much more substantial investment.
- Learn from each investment. Even investments that don’t perform as expected can provide valuable insights. Our experience with the smaller plot sounded like a good long-term investment, but as we switch strategies and don’t plan to build there, it’s no longer a feasible strategy to hold it long term.
- Don’t let fear of failure paralyze you. If we had been too afraid of potential losses, we might have missed out on both land purchases, including the highly successful one.
- Consider the broader context: While the 1/4-acre investment might result in a small loss if sold, the overall outcome of our real estate investments is overwhelmingly positive due to the 5.6-acre purchase.
- Reevaluate regularly: As our investment goals evolved, we realized the smaller plot no longer fit into our plans. Regular portfolio review allows you to make informed decisions about when to hold and when to sell.
Keep in mind that the path to financial independence isn’t always straightforward. It’s filled with decisions, some of which will be better than others. The important thing is to keep learning, stay diversified, and be ready to capitalize on great opportunities when they present themselves.
This lesson reinforces the importance of maintaining a long-term perspective and not getting discouraged by individual investment outcomes. It also highlights the dynamic nature of investing, where strategies and goals can evolve based on new opportunities and changing circumstances.
Final Thoughts
The Journey in Retrospect
Looking back on nearly two decades of investing, I’m grateful for both the successes and the setbacks. Each experience, whether it resulted in gains or losses, has been a stepping stone towards financial wisdom. Our journey has taught us that not every investment will be a winner, but it’s the overall trajectory that matters most.
Our path to financial independence wasn’t always smooth, but it was the challenges that taught us the most valuable lessons. We’ve learned that financial independence isn’t just about having enough money to retire early; it’s about having the freedom to make choices that align with our values and desires and the flexibility to adapt when circumstances change.
The diversity of our experiences—from the steady growth of our ETF portfolio to the varying outcomes in our real estate investments—has reinforced the importance of diversification, continuous learning, and maintaining a long-term perspective. We’ve come to understand that it’s not about avoiding all mistakes but about ensuring that our successes outweigh our failures over time.
Today, as we reflect on the rewards of our disciplined investing approach, we recognize that success brings both privilege and responsibility. We’ve channeled this sense of purpose into meaningful action—from informally mentoring friends navigating their first investments to sharing our insights through this blog. Our philanthropic focus has crystallized around causes close to our hearts, particularly organizations working to eradicate man-made diseases and those dedicated to preserving our Constitution’s principles.
These experiences—the victories and the setbacks alike—have shaped insights too valuable to keep to ourselves, insights that we hope will illuminate the path for others on their own financial journeys.
Lessons for the Future
Everyone’s financial journey is unique. What worked for us may not be the perfect strategy for everyone. The key is to start, stay consistent, keep learning, and adjust your approach as needed. Be prepared for a mix of outcomes—some investments may underperform, others may be average, and a few might exceed all expectations. It’s this variety that makes the journey exciting and rewarding.
Financial independence is achievable, and the journey towards it can be incredibly rewarding in itself. It’s not just about the destination, but about the growth, learning, and personal development that occur along the way. The skills we’ve developed—patience, discipline, adaptability, and long-term thinking—have benefited us in all areas of life, not just finances.
As we look forward to the future, we’re excited to continue learning, growing, and sharing our journey with others. We remain open to new opportunities and challenges, knowing that each experience, whether a success or a setback, contributes to our overall financial wisdom.
