For those of you following along, you know I've been a bit busy lately. In addition to my own music, podcast, and software projects, I've also been popping up on other people's podcasts. A few weeks back I sang a few bars of Michael Bublé on The FI Show with Justin and Cody, and I just appeared on the What's Up Next podcast with Paul and Doc G as well. But being away from the blog has given me some time to reflect on FI, and the length of the journey itself.
It took The Wife and I roughly 5 years to reach financial independence. For others, it can easily take 10, 15, and even 20+ years. We know that the only variable that actually matters in terms of the math is your savings rate, but there are a ton of factors that influence this figure. How much debt are you starting off with? What career do you have? What's your income? How big is your family? Where do you live? How hard are you willing to work?
We all have individual preferences and constraints that guide our decisions. Some people want to go slower, easing their way into the financial independence journey. Others want to go faster. Some have the resources to go VERY fast but choose to go slowly out of comfort or family priorities. Others really DON'T have the resources to go as fast, but work like crazy and make it happen anyway!
But what, dear reader, if you want to get to FI as quickly as possible, throwing all caution to the wind? What if you could somehow apply a few ‘cheat codes' to your life and really jump ahead in the game? The truth is, such codes actually exist! There are five heavy-hitting areas of your life you can optimize to radically increase your income and decrease your spending, giving you the most bang for the proverbial buck.
The Cheat Codes of FI
Allow me to introduce the “cheat codes” of financial independence. I didn't coin the phrase; other bloggers in the FI space have written about cheat codes before. The problem is most of these posts are too short, vague, click-baity, or philosophical to be helpful.
I wanted something concrete and actionable, just as when I wrote my Milestones of FI post. When you Google video game codes, you don't want someone describing something obvious like “avoid taking damage.” You want to learn that you need to press A-B-A-C-A-B-B during the opening credits, or hold down on a white block for five seconds to find the next whistle. This is what this post attempts to achieve.
But first, a word of caution: just as in video games, cheat codes aren't for everyone. Some folks are completionists and want to explore and collect every item along the way. Others want to take it slow and enjoy the journey, and I'd argue that this is the healthier option. But for those of you who want to reach the end credits of your traditional working career as fast as possible, this is the post for you!
There is a catch, however. When people ask me if there's a sure-fire (FIRE?) way to ‘get rich quick', I usually hesitate and respond with “yes, but… you're not going to like what you have to do!” No, I don't mean robbing a bank or anything like that. It's just that the cheat codes we're going to discuss here are hard to execute, and absolutely not right for everyone.
But boy, can they skip you ahead in the game! If any of these seem too extreme, simply ignore and move on to the next cheat code, until you find one that works for you and your family. Are you ready to level up?
DIFFICULTY: Moderate to Advanced SAVINGS POWER: 5/5 DATE JOEL UNLOCKED: March 2014 ABILITIES ACHIEVED: Transformed housing from the most expensive budget line item into a source of income TOTAL VALUE SINCE CODE UNLOCKED: > $100,000.00
Housing is usually the largest line item in most people's budget. For many, it can make up 30% to even 50% or more of their total expenses. House hacking attempts to flip this convention on its head, and take those expenses down towards zero. Or, better yet, earn you money instead of costing you each month!
The Cheat Codes
- The Family Man: move in with parents, siblings, or extended family to reduce or eliminate housing costs.
- The Roomie: Move in with multiple roommates to reduce housing costs.
- The ‘Be Our Guest': Rent out a room (or two) of your house and make enough money to cover your housing expenses. (Airbnb and VRBO are perfect for this)
- The Multi-Family Man: Purchasing a duplex, triplex, or quadplex, living in one of the units, and renting out the others for a profit. (Your tenants pay the mortgage for you!)
- The Live-n-Flip: Move into a home that needs some TLC, stay a year or two fixing it up, and move out, selling for a sizable profit.
- The Landlord: Manage one or more traditional rental properties to increase your passive income. (Just be sure not to rely too much on leverage, as it can come back to bite you!)
- The Small & Mighty: Downsize into a small apartment or tiny home to reduce housing expenses.
- The Road Warrior: Ditch the traditional house concept completely and live in an RV like my friends recently did!
What Cheat Code(s) Did WE Activate?
The Wife and I lived with family for free for a few years while we rented out our own home (The Family Man). Some friends thought we were crazy, and it did test our sanity a bit, but it was well worth it in the end. This hack shaved YEARS off of our time to FI, allowing us to live rent-free AND pay off our (then underwater) mortgage at the same time.
Our property made for a pretty terrible rental, missing the 1% rule by a mile, but this hack was still effective (The Landlord). On most properties, this strategy should bring your cost down to zero, or even earn you a monthly profit. Figuring out how to live for free, even for just a few years, can really speed up your savings! Anything to reduce living expenses goes a long way.
Years later, we sold our rental and used the profits to pay off our primary residence. We now pay an ‘equivalent rent' of only $300 per month, covering taxes, maintenance, and insurance. Our latest cheat code? Serendipitously, a friend we met at CampFI years ago recently moved to town for work and needed a place to live. We happily rented out our guest room for a few months, making a small profit to live in our own house (The ‘Be Our Guest')!
Housing costs before cheat codes: $1600 per month.
Housing costs after cheat codes: $300 per month (we actually profit $200 per month when renting out our guest room).
Interested in-house hacking? Here are some links to get you started:
- Zeona McIntyre is a friend of mine who specializes in AirBnb rentals
- Coach Chad Carson is another friend who blogs about traditional real estate, rentals, and flips
- Set For Life – a book by my friend Scott Trench of Bigger Pockets covers house hacking in all of its forms
- How To Sell Your Home – a book by my friend Mindy Jensen, also of Bigger Pockets fame, on everything you need to do to sell your current house and move on to your next house hack.
- The Bigger Pockets Podcast, discussing all things real estate related
- The Frugally Reckless blog where a friend uses AirBnb to house hack her half million dollar home
- JL Collins compares the math between renting and owning a home
- Mr. Money Mustache discusses the right way to buy a house
- Get Rich Slowly discusses how to get started with real estate investing
- Fiology lesson discussing renting vs. owning and special considerations for FI
A word of caution, however. Getting into real estate can be a very effective way to house hack, but it's not always a cake-walk. I've posted here on the blog about our adventures in real estate and our house purchase fails, so I'm not here to sugar coat anything. Was it an effective cheat code? Yes. Was it a pain in the ass? Also, yes.
DIFFICULTY: Moderate SAVINGS POWER: 4/5 DATE JOEL UNLOCKED: December 2014 ABILITIES ACHIEVED: Reduced automobile, fuel, and related costs by over 50% while simultaneously reducing commute time TOTAL VALUE SINCE CODE UNLOCKED: ~ $30,000.00
Most people severely underestimate what they spend on transportation. As I lamented in my post The Car Problem, the average car costs $10k per year just to own, not even counting the cost of the car itself. It's not just cars, either: if you live many miles from where you work, other public and private transportation options can be just as expensive. Most Americans pay between 20 and 35% of their take-home pay on transportation, making it second only to housing in terms of opportunity for hacking. It’s no wonder finding money to save for investing is hard!
The Cheat Codes
- The 5K: Move as close to where you work and play as possible. Aim for a morning commute of 3 miles or less!
- The ‘Every Day is Leg Day': Walk or bike to work instead of driving. MMM is a big proponent of the magic life-changing habit of bicycling.
- The Carpool: Consider carpooling with friends and family, and reducing the number of cars in your household down to one, or even zero!
- The Uber Cool: Consider up and coming private options, such as Uber and Lyft's new monthly subscription plans that could save you money over traditional car ownership.
- The Man With The Plan: Plan and consolidate your trips into weekly or monthly outings when possible.
- The Home Body: Negotiate with your employer to work some (or all!) days from home, or a closer location to home. Depending on your job, this could save significant money!
- The Smart Car: If you must buy a car, be smart and research car buying on Fiology before you buy.
What Cheat Code(s) Did WE Activate?
After the car accident, The Wife and I decided not to buy a replacement vehicle and instead became a one car household (The Carpool). Reducing down to one car eliminated the insurance, registration, and maintenance costs associated with the second car. Carpooling also helped reduce our fuel consumption as well, as at least 5 miles of our commute was in the exact same direction every day.
A few years later, we moved much closer to work, reducing our commute to less than 15 minutes and shaving even more off of our fuel and maintenance costs (The 5K). We also found significantly cheaper auto insurance, dropped collision and comprehensive coverage, and raised our deductibles to the maximum allowed. Here's how we did:
Transportation costs before cheat codes: $600 per month
Transportation costs after cheat codes: $160 per month
We discuss these cost savings in more detail in our Savings Snowball post. Transportation and fuel costs are significantly larger than most people realize. I'm convinced the assumption that middle-class households ‘deserve' two new cars in the driveway is the very thing preventing the average American from accumulating significant wealth.
If you drive a car to commute to work, take a look at the sprinkling of fuel and car-related costs on your monthly statements. Is there any other expense category with so many transactions, each so expensive? The only one that even comes close is perhaps… food.
DIFFICULTY: Advanced SAVINGS POWER: 3/5 DATE JOEL UNLOCKED: October 2015 ABILITIES ACHIEVED: Learned to cook restaurant quality meals; cut grocery budget in half, and total monthly food costs by a factor of five TOTAL VALUE SINCE CODE UNLOCKED: ~ $35,000.00
Food is usually the third most expensive category, after housing and transportation (in our case it happened to be even more expensive than transportation, but we'll get to that in a minute).
The Cheat Codes
- The Special: Limit eating out at restaurants and fast food to once per week, or even once per month, primarily on special occasions.
- The Chef: Learn to cook food you actually enjoy. This took us quite a while to learn…
- The Day of Cooking: Make Sunday a “cooking” day, and prepare lunches and dinners for the entire week. The 8-quart InstaPot has helped us with this significantly!
- The Potluck Master: Don't use eating out as a way to curb boredom! Opt for potlucks at home with friends instead of nights out at bars and restaurants.
- The Part-Time Vegan: Consider reducing your meat consumption. Meatless Mondays are a great way to start!
- The Smart Foodie: Switch grocery stores to cut your food bill in half! Check out this Fiology lesson on food for even more hacks.
What Cheat Code(s) Did WE Activate?
Before our turnaround, we spent a ton of money on food- well over $1000 a month! Coffee shops, bars with friends, eating at restaurants twice a day, convenience foods from luxury supermarkets… if the game was spending money, we were winning. But, this just meant we had a TON of low hanging fruit to work with.
When we turned things around, we switched from Publix to Aldi for our grocery shopping and cut our bill literally in half (The Smart Foodie). We stopped eating out at restaurants every day, and learned to meal plan for lunches and dinners throughout the week (The Day of Cooking). We started keeping emergency pizzas in the freezer for days with low motivation, and carefully tracked our food waste to try and become more efficient.
We also started hosting weekly potlucks, brunches, and game nights with friends at our house, with our own food (The Chef), which was significantly cheaper than frequent nights out on the town (The Potluck Master). In addition, we reduced our meat consumption (The Part-Time Vegan), which was a significant win for our wallets as well as our waistlines. So, how'd we do?
Food costs before cheat codes: $1000 per month
Food costs after cheat codes: $400 per month
We discuss these cost savings in more detail in our Food Savings post.
Let me clarify something here. This process was NOT easy. Of all the habits we’ve changed over the years to become more financially fit, this was the hardest. As a couple who didn't know how to cook well, it took a significant amount of practice, patience, and teamwork. The rewards, however, speak for themselves.
DIFFICULTY: Moderate SAVINGS POWER: 3/5 DATE JOEL UNLOCKED: March 2016 ABILITIES ACHIEVED: Reduced travel costs by more than 50%, BOGO flights, more free hotel stays than we can use TOTAL VALUE SINCE CODE UNLOCKED: ~ $50,000.00
Of all the cheat codes on the way to FI, travel hacking gets the most coverage in the blogosphere. This is likely because many bloggers receive payment for recommending certain credit cards, but travel hacking is a legitimate way for you to save tons of cash on travel every year.
The Cheat Codes
The Giant Wallet Dude(tte): Take advantage of sign-on bonuses. Many credit card companies offer generous bonuses to get you to sign up, sometimes offering between $500 and $1000 in incentive when you meet certain sign on conditions. Most commonly, you need to spend a few thousand dollars on the card within a few months of opening the account. Depending on the type of account, rewards can be applied to airfare, transportation, hotels, parking, and more.
The BOGO Flyer: The Southwest “Companion Pass” – lets you bring a designated companion along on every flight, for free! For couples, this effectively cuts your airfare costs IN HALF, and if done correctly, you can alternate earning the pass with your spouse every two years so the pass can last essentially forever!
The Slow Ride: The concept of ‘slow travel' – where you wander the world slowly, living like a local in exciting new locales. Depending on the country, your cost of living during slow travel can be considerably cheaper than where you currently call home. Even better – often times you can rent out your home while away, potentially paying for the entire trip!
What Cheat Code(s) Did WE Activate?
Before we knew about travel hacking, our plane tickets were often purchased at full price, on a whim a few days before traveling. This is not an affordable way to travel! These past few years, The Wife and I have gradually reduced our frequency of travel, and started credit card hacking to travel smarter (The Giant Wallet Dude). We also plan trips at least a few weeks in advance to help avoid the premium that often accompanies short notice travel.
I was initially pretty skeptical about signing up for a bunch of credit cards, but I decided to get into the game slowly by adding one card every few months. The Mad FIentist actually has a travel hacking email course that does exactly this, and I get an email every few months telling me which card to get, and when. It's pretty fantastic, and reduces decision fatigue on my part. You can sign up for this email list in the 'email series' section of this post.
I've also started opening new cards a few weeks before large expenses occur, when I can predict them. A perfect example: property taxes are due every November here in Florida, and are usually a few thousand dollars. This is the ideal time to search for those outstanding sign-on bonuses! And I recently found that American Express now gives a ‘temporary line of credit' for the 1 to 2 week period where your card is in the mail, so you could theoretically use this tactic even for unexpected large expenses.
One of the best cheat codes in this space is the Southwest Companion Pass, which gives us buy-one-get-one-free airfare for almost two entire years. And if we time it right, when my two years are up, The Wife can earn another companion pass and we can keep the process going indefinitely (The BOGO Flyer)! With just a little expense planning, you can cut your airfare expenses IN HALF. How's that for a cheat code?
Just make sure you are responsible and PAY THESE CREDIT CARD BILLS IN FULL at the end of every month. If you can't, or worry you won't be able to, skip this cheat code completely. The second you pay interest on this stuff, you lose the big boss battle to the credit card companies. GAME OVER. (You remember my rant on debt, don't you?)
So how effective were these cheat codes for us? Let's look at the savings:
Travel costs before cheat codes: $1000 per month (average)
Travel costs after cheat codes: $150 per month (average)
Because these savings are dependent on specific deals available at the time, as well as the frequency that you travel, your mileage (pun intended) may vary. We discuss these cost savings in even more detail in our Savings Snowball post, so check that out if you want to dive deeper.
Ready to give travel hacking a try? Here's everything you need to get started:
- The Mad Fientist has numerous blog posts, podcast episodes, and online tools to help you start travel hacking.
- ChooseFI has a great series of posts and podcast episodes on travel hacking as well.
- Fiology also has a great lesson covering everything you need to know to get started with travel hacking.
- Noah discusses credit card hacking on Money Metagame, as well as his recent gap year travel experiment, which turned out cheaper than traditional Seattle living.
- Seonwoo Lee discusses advanced travel hacking tips on his blog.
- Michael from Uncommon Dream discusses how he and his family slow traveled through Costa Rica for a year on the Fire Drill Podcast.
- Million Mile Secrets and The Points Guy discuss how to earn the coveted Southwest Companion Pass in great detail.
DIFFICULTY: Moderate to Advanced SAVINGS POWER: 4/5 DATE JOEL UNLOCKED: September 2014 ABILITIES ACHIEVED: An 18% raise, two free graduate degrees, a (brief) stint in the six-figure club TOTAL VALUE SINCE CODE UNLOCKED: > $100,000.00
On this blog, I tend to focus more on lowering expenses than increasing income, and that's what this post has focused on as well. I usually tell people: if you have an annual household income above $50k, lowering your expenses is usually more effective than hustling for more income. The four big cheat codes we've discussed so far (housing, transportation, food, and travel) can theoretically cut your expenses in half in only a month or two… it would be hard to find a side hustle that can double your income in a similar amount of time.
If you have a household income on the lower end of the spectrum, however, it could certainly be worth the energy to hack the income side of the equation.
The Cheat Codes
- The Horizontal Tango: What do you do for work? Can you shift into a parallel field that has higher earning potential? Is there a related industry you could shift into? Have you browsed the jobs section of your local newspaper, Craigslist, career fair, etc? MMM has some great tips on how to stand out compared to others when interviewing for something new.
- The Side Hustler: Can you add a side hustle to increase your income? Preferably something you're good at and enjoy doing.
- The Social Butterfly: Can you network with others who have careers with higher growth potential? Can you become a more essential member of your team?
- The Hopper: Can you switch to a competing company in the same field? It's been shown that switching companies every two to four years can have a dramatic impact on salary growth (and your résumé).
- The Smarty Pants: Could you go back to school (perhaps night school) or get a certification that could make you more valuable? If you already have a low income, continued education might be completely free thanks to need-based grants, such as the Pell grant. With the right degree or certification, you could potentially double or triple your income. Is there any way to get your current employer to pay for your continued education?
- The Tax Ninja: One straightforward way to give yourself an effective raise is to max out all available pre-tax investment accounts, lowering your taxable income and therefore letting you keep more of your gross income
- The Ramblin' Man: Could you move somewhere new? Geographic arbitrage, both domestic and international, can significantly improve your income. Are there lower cost of living areas you'd be willing to work? Moving to a LCOL area is a quick way to give yourself an “effective raise”, even if your salary doesn't actually increase.
- The Money Chaser: Another variation of ‘The Rambling Man', but this time with the strategy of following the highest salary instead of the lowest cost of living. Are you willing to move somewhere new to grow your paycheck? I have a family member who was a bank teller and decided to move wherever there was a need, as long as there was a pay premium. He lived in interesting places: New Orleans, Miami, North Carolina… After a decade of this strategy, he was making six figures.
A Note on Cost of Living
I have friends and family who live in very high cost of living areas like the DC Metro Area, LA, the Bay Area of CA, and Manhattan. I understand the appeal, but the cost to live in these areas is really high! If I wanted to live in California, I'd have to work many additional years, because I just wouldn't be FI there.
This isn't necessarily a bad thing if you love your job and working a few extra years doesn't bother you. But if you're trying to reduce the number of years to FI, moving to a lower cost of living area is a GAME CHANGER. As a point of reference: I live in central Florida. My ~2000 square foot house cost ~$200k, and it's paid off. Gas here costs ~$2.40 per gallon. Eggs are about 60 cents. And there's no state income tax.
What Cheat Code(s) Did WE Activate?
Income hacking is an area The Wife and I excelled at even before our Financial 180. We both worked really hard in high school to earn scholarships for our undergraduate degrees. We also chose to attend state schools, so our scholarship money went much further. (This, combined with the fact that we are extremely lucky to have parents who pre-paid our college meant we had no student loans after graduation).
We decided to pursue degrees in software, as it is currently in extremely high demand, and the pay is competitive. After graduation, we moved to a low cost of living city within a few hours drive of family (The Ramblin' Man), and got software jobs with great benefits, including company paid graduate education. I ended up completing two graduate degrees (Industrial and Systems Engineering, and an M.B.A.), all on the company's dime (The Smarty Pants).
I've also hopped between companies a few times in my career, on average once every five years (The Hopper). Not only is this beneficial from an income hacking perspective (each hop netted me a ~18% raise), but it also helps build a stronger résumé and gives you fresh new experiences along the way. You can see the effect two job hops had on my salary in the figure above. And remember: if you find yourself with an offer from a competing company, negotiate!
Additionally, I've kept my eyes open for opportunities to grow my salary whenever possible. During my working career, I'd work hard and do a good job, rating myself highly at review time. I'd network, and then solve problems for people to make their lives easier, making myself a more valuable, and subsequently well paid, employee (The Social Butterfly). And I took the opportunity to max out my 401k, IRA, and HSA in order to reduce my taxable income and give myself more of my own gross income (The Tax Ninja), effectively letting Uncle Sam give me a raise.
TOTAL YEARS WITH CHEAT CODES ENABLED: 5 AREAS UNLOCKED: HOUSING, TRANSPORTATION, FOOD, TRAVEL, INCOME CHEATS ENABLED: The Family Man, The 'Be Our Guest', The Landlord, The 5K, The Carpool, The Man With The Plan, The Special, The Chef, The Day of Cooking, The Potluck Master, The Part-Time Vegan, The Smart Foodie, The Giant Wallet Dude, The BOGO Flyer, The Side Hustler, The Social Butterfly, The Hopper, The Smarty Pants, The Tax Ninja, The Ramblin' Man TOTAL VALUE OF CODES SO FAR: > $500,000.00 (WITH COMPOUNDING)
Housing, Transportation, Food, Travel, and Income. These are the five heavy hitters, and with the proper cheat codes applied, they can potentially double or even triple your savings rate in one fell swoop, getting you to that magic 50% savings rate, or higher. The thought process behind every one of these cheat codes is essentially the same: How can I take something expensive that I need or want and flip it around so that I somehow MAKE money instead?
Remember that none of these are easy. They are simple, but hard. Most of these strategies will require you to sacrifice something you don't want to sacrifice. But they will help you get rid of your debt and start saving money quickly. These strategies, while hard, are very effective. These cheat codes have saved The Wife and I over half a million dollars on our journey!
Note that you don't need to leave these cheat codes enabled forever if you don't want to. Some of them can be turned on temporarily to help you get out of debt quick, or skip ahead a few levels early on in the game. For example, after five years with all the codes enabled, we started eating out at restaurants once a weekend instead of once a month, and The Wife got a second car. Don't worry – we know the codes well and can turn them back on if we ever need to.
As I said at the beginning, this is all optional! If you like your job and your work life balance, you don't have to change a thing. I recently sat down with a couple at Camp FI who felt stuck at a 40% savings rate and wanted to ‘breakthrough' to something higher. After reviewing all of these cheat codes with them, they looked at each other and realized they weren't willing to try any of them. They had a pretty sweet work-life balance already, and didn't need to raise their savings rate any higher! They left understanding that a 40% savings rate was right for them, and that they didn't need to raise it just for the sake of racing others to the finish line.
I hope these codes are helpful for those of you on your journey who do want to speed things up, however. It's taken me years to curate all the info packed into this post. If you know other major cheat codes that I've missed, let me know in the comments and I'll add them in. That way, this post becomes the go-to resource for people who say they want to “get rich quick”.
Good luck playing the game. Let me know which boss battles you get stuck at, and which of these codes have worked for you in the comments.