Achieving Financial Freedom One Income Slice At A Time

Experiencing Financial Freedom Dream House In Kahala, Oahu, Hawaii - Achieving Financial Freedom One Income Slice At A Time
Experiencing Financial Freedom

Achieving financial freedom is the ultimate goal in personal finance land. Once you achieve financial freedom you can do anything you want, whenever you want. You can also say anything you want without fear of getting fired.

In 2009, when I launched Financial Samurai, I helped kickstart the modern-day FIRE movement of retiring early and living a different path. I was a struggling banker who disliked my job and wanted out. Three years later in 2012, I made it happen and left. Today, the movement has taken on a life of its own.

To be absolutely free, you need to develop multiple income streams so that when the inevitable change happens, you'll be covered. I've been trying to build a good amount of passive income since I first graduated college in 1999. Back then, I had to get into the office by 5:30 am and stay until & 7 pm. I knew I couldn't last in the finance industry for decades.

To achieve financial freedom, I first recommend you start with the end in mind. What makes you happy? What do you want to do with your life? From these questions, now you can derive how much money you honestly think will allow you to be happy and free.

Finding Financial Freedom By Answering Key Questions

Once you've dug deep to answer these two important questions about financial freedom, you can then start building your income goals.

What makes me happy?

Family, friends, experiences, travel, freedom to say and do what I want, sports, relationships, the online community, hot tubbing with drinks, food and enough money to not have to worry. Good old nostalgia really makes me happy too.

There's also a happiness conundrum that plagues many of us. Even though you could have it all, you might not still be fully happy. Part of the reason has to do with being able to constantly do something fulfilling.

What makes me unhappy?

Racists, bigots, haters, lying politicians, bad bosses, cronyism, inequality, people who say one thing and do another, thieves, and zealots who impose their will on others. I knew that if achieved financial independence I wouldn't have to associate with these types of people any longer.

What do I want to do with my life?

I want to spend my life doing purposeful work that helps others achieve financial freedom as well. There is nothing professionally more gratifying to me than seeing some get their financial lives in order. Thank you comments and e-mails has kept my motivation to write alive since 2009.

Writing on Financial Samurai all these years has given me tremendous fulfillment and purpose. Financial Samurai is my ikigai, as the Japanese call it. It is my reason for being.

I plan to continue writing until my kids are old enough to understand what they want. In fact, I've branched out from writing online and publishing ebooks to writing a traditionally publishing a book.

How much money do I need to achieve what makes me happy?

In order to be happy, I used to need anywhere from $8,000 – $15,000 a month after taxes for just me and my wife. Now that we have two young children to care for in 2024+, we likely need between $25,000 – $30,000 a month to feel comfortable financially. We will be living our remaining years in San Francisco or Honolulu, two of the most expensive cities in America.

Thanks to inflation, I've calculated that a family of four needs to earn about $300,000 a year to live a middle class lifestyle in a big city. Therefore, my goal is to consistently generate around $300,000 a year in passive-to-semi-passive income to take care of my family.

With $25,000 a month, I can afford private grade school tuition for two if necessary. Our family can go travel for 8-10 weeks a year no problem. I could also get huge and eat whatever I want. $300,000 provides a good lifestyle practically anywhere in the world.

I suggest you think about an after-tax monthly income number you'd like to achieve as well. Once you've got that number in mind, strategically plan on how to get there.

For now, it's time to open up the kimono and see what can be produced after over a decade of saving and investing. This is a long post, so make sure you go to the bathroom first!

Constructing The Financial Freedom Portfolio

The first step to financial freedom is to save aggressively. If the amount of money you're saving each month doesn't hurt, you're not saving enough!

I've been saving 50%-75% of my after tax income every year since 2009. Even after retiring in 2012, I continue to save at least 50% of my retirement and online income out of habit.

I try not to be a miser and have done my best to try and spend money on things I enjoy e.g. vacations, food, a home, and tennis.

Where I did “sacrifice” was not buying higher-end new cars (all but one were second hand and under $20K) and going on less exotic vacations. Amanpulo I'm coming for you eventually!

Below is the composition of my financial freedom portfolio in 2012, the year I left work behind for good. I share some thoughts at the time on what I was doing to help you make better decisions today. I'll then share my latest 2021 passive income portfolio.

Financial Freedom Portfolio When I Retired In 2012

Here was the portfolio that helped me achieve financial freedom at 34 in 2012. I accumulated a net worth of about $3 million that produced about $80,000 a year in passive income.

CD Interest Income

~$2,800/month. My CD interest income can almost fulfill my lower end of my target income range if I were a single guy. This is income that will keep coming automatically for another 5-6 years and I don't have to do anything except renew come expiration.

Back in 2012, the CD interest rate was between 3.75% – 4% versus my primary mortgage at under 3%. This negative spread was wonderful. Ben Bernanke allowed homeowners to live for free.

Online Interest Income

I had about $25,000 in a high yielding online interest income account at 2%. Although that's only $500 a year in interest, that's still 100X better than the national 0.1% average money markets provided. 

It's easy to withdraw and deposit money in an online savings account like CIT Bank. Don't let your liquid cash sit in a bank that pays you nothing!

Stock Dividend Income

I generated about $1,200/month in stock dividend income. I should have invested more in stocks, but I was already leverage to the stock market through my career.

Companies have been cutting their dividends aggressively since 2008 to preserve cash. Only now in 2012 are we seeing signs of companies raising their dividends eg Wal-Mart and American Express.

To be clear, my dividend income all comes from active investments. None of my dividend income comes from my 401K because they can't be touched until 59.5.

Rental Property Income

~$1,500-$3,500/month after expenses e.g. net operating income. The range in income property has to do with a vacation rental which swings huge during the summer and winter months, and fades during the months of May, October, and November.  

I'm basically averaging about $2,500/month per year total. The income is very reliable, since everything is well maintained. One of my rentals was bought 10 years ago, and the rent is over 4X the mortgage interest now. The mortgage can be paid off, but the rate is only 3.125%, and the interest is an expense deduction so I'd rather have the liquidity.

Once the rental property mortgages get paid off, then rental income will increase further. Thanks to amortization and operating expenses, the taxes I have to pay on my rental income is next to nothing. I plan to start paying taxes on my rental income after I retire and get into a lower income tax bracket.

If you haven't refinanced your mortgage recently, check the latest rates with Credible. Credible is my favorite lending marketplace where qualified lenders compete for your business. It's free to get a real quote.

Refinance your mortgage rate to help you achieve financial freedom

P2P Lending

I've been investing with Prosper since 11/2012 and have earned a consistent 7-8% return each year. As my CD interest income declines as they come due in 207, I plan to invest more and more of my 4% yielding CDs in P2P lending. My goal is to create an additional $500-$1,000 in income through social lending.

Various Passive Income Sources Reviewed 2012

Base Case Passive Income Chart Financial Samurai

The total passive income generated in 2012 for financial freedom was $6,500. The blue sky column is achievable if it's a bull market and all my rental property mortgages are paid off in about 5 years.

After 30% tax, my base case passive income is around $4,550 a month. The irony is, if I didn't work for a living, my after tax income would probably be over $5,000 a month due to a lower effective tax rate of 20%!

Another solution is to just move to one of the seven no income tax states upon retirement. Base after tax income will therefore rise to about $5,500/month and $8,800/month for blue sky. California's 10% income tax is a killer! $4,550 is not bad, but still far short of my goal of generating up to $15,000 a month in after tax income.

At the rate I'm going, I'll have to probably work another 10 years, so screw that! Instead, I've been cultivating other income streams that will allow me to work 2-4 hours a day on my own terms.

Savings As A Buffer To Passive Income

In 2012, I saved up 17 years of living expenses. The 17 years of savings excludes the use of all passive income. In other words, I could just live off my passive income and never touch my savings if I really started being more frugal.

I'm sure I could cut expenses such as my credit card bill, and sell my primary residence and downsize to make my savings last forever. However, that's too disruptive and decreases the quality of my life, which is the wrong direction. The plan is to stay conservative, not touch savings, and build passive income to survive.

Remember, the thesis of “How To Retire Early And Never Have To Work Again” is that all one has to do is save 55%+ of their after tax income for 18 years from ages 22-40, and s/he will have 20 years of living expenses covered to not have to work until government assistance kicks in.

This is a very conservative assumption since most people will work from ages 40-60 after retirement, and will have various side income streams. Plenty of folks will also find a partner to pitch in and share the expenses.

I'm not including my 401K savings/investments as part of passive income. I treat all government tax deferred programs as write-offs since the Evil Empire can easily take all our money away to fund their egregious spending.

The 401K and IRA, if you are so fortunate to not get discriminated by the government to contribute, should be a buffer against your savings.  Max out your 401K and shoot to save at least 20% of your after tax income a month. Here's how much I believe everyone should have in their 401Ks at different ages.

Active Income Streams As A Buffer To Savings And Passive Income

When I was deciding to retire in 2012, I also thought a lot about potential active income streams just in case things didn't work out. Before you achieve financial freedom and leave your job, you must also account for all your active income opportunities.

My active income streams in retirement included:

Tennis Teacher

I can teach tennis for about $40 – $60 / hour. In fact, I've often toyed with starting my own tennis instruction website and supplement my passive income with 80 hours of teaching a month ($3,200).  

I've also fantasized about being a tennis instructor at the Four Seasons Resort in Bora Bora. Teaching tennis on occasion is nice spending money, but something I do more to have fun, exercise, and meet cool people. Tennis lessons at private clubs are around $80-100 an hour, so in a way, I feel like I'm doing a public service.

I also ended up becoming an assistant high school coach for three years. It only paid $1,100 a month, but we ended up winning back-to-back Northern California Sectional Titles. Before I arrived, the school had never won even one NCS title! That was quite a fulfilling experience that went beyond money.

Trading Portfolio

I have a trading portfolio which I like to play around with on Fidelity to keep me engaged with the markets. Investing is in my blood, and I've been doing so for the past 15 years when Ameritrade and Charles Schwab first went online.  

There were some major successes and epic failures in the beginning. Nowadays, I'm more conservative, but I can still easily lose money as I can make money.  

The reason why I don't talk about specific growth stocks too much and investment strategies is because I don't want you crazy kids to follow everything I do and sue me for giving you bad stock advice.

Instead, I highlight my market predictions and give you some overarching thoughts as to why I am buying and selling the markets.

Online Income

I can always better monetize Financial Samurai if I really focused on more business partnerships. When I left work in 2012, Financial Samurai was generating around $2,000 a month or so. It was a nice amount of supplemental income for retirement with the potential to grow.

In 2023, Financial Samurai now generates enough income to provide for my family of four in San Francisco. However, the income is anything but passive. This post, for example, has taken over 20 hours to write!

If you enjoy writing, creating, connecting with people online, and enjoying more freedom, see how you can set up a WordPress blog in 15 minutes like mine. Everybody should at least brand themselves online.

Why should LinkedIn, Facebook,or Medium own your name when someone searches for you? Own you and parlay your platform into consulting gigs and new work opportunities at the very lease. You never know where the journey will take you. Hard work is worth it because it takes no skill.

Blogging For A Living Income Example: $300,000+
A real income statement example from a blogger. Look at all the income possibilities!

Personal Consulting (no longer)

I launched Financial Samurai Consulting Services. The main service is offering personal finance consulting, career advice, severance negotiation, and resume analysis. After writing over 2,200 personal finance articles, and reaching financial independence myself, I believe there is demand for financial consultation.

In fact, there's actually too much demand. I've limited my consulting to just one client a month. I don't want to raise prices further as it's already relatively high.

Financial Tech Consulting

In January, 2014, I began consulting for a digital wealth management firm called Personal Capital (now Empower) based here in San Francisco and Redwood City.

I love how they are disrupting the traditional wealth management industry with their free, DIY financial dashboard where everybody can management their net worth, track their expenses, and examine their investment portfolios for excessive fees. I highly recommend signing up for their free financial tools to manage your wealth.

They've got a great portfolio fee analyzer that highlighted I was paying $1,700 a year in fees I had no idea I was paying. Their Retirement Planner is also the best i've seen given it uses your real expenses and income you've linked up to calculate how your financial life will be in the future. I've been helping build their content and brand online 25 hours a week. It's been a blast learning about the Silicon Valley world.

Starting in 2024, I plan to do more part-time consulting given my daughter will be attending school full-time. After 10 years of early retirement, and five years of being a SAHD, I decided to give up on early retirement to help fill the void.

Personal Capital Dashboard
Leverage free financial tools to grow your wealth

Bonus Income To Help Achieve Financial Freedom

Rich Spouse

One of the secrets to early retirement is having a working spouse. This is sometimes called “WiFi” or Wife Financial Independence. You can do jack doo doo and claim to the world how you retired early, so long as your spouse continues to work and provides you with goodies and healthcare.  It's no joke that many people make it a mission to look for a wealthy spouse.

Private Equity

I've currently got one private company investment totaling close to six figures. I've written it off to zero because so rarely do these private equity companies exit for a nice profit. However, the company has been around for 6 years and survived the financial crisis. Hence, perhaps there is a chance I will not only get my money back, but also get a solid internal rate of return down the road.

I've also invested heavily in venture capital. I want to find promising private growth companies that could turn into the next Google or Apple. With artificial intelligence booming, I particularly like to invest in venture capital funds investing in AI.

Check out the Innovation Fund, which invests in the following five sectors:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Roughly 35% of the Innovation Fund is invested in artificial intelligence In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. You can see what the Innovation Fund is holding before deciding to invest and how much.

Private Real Estate

During the financial vomiting period of 2008-2009, I invested $50,000 into a distressed global real estate fund which was buying property at 15-30 cents on the dollar. The fund was a private offering to a certain group of accredited investors. The fund is up about 120% in three years and spits out a reasonable 4-7% dividend yield.

Once the fund is liquidated in several years, I calculate a roughly 25% IRR. Looking back, of course I wish I had invested more. It's just hard to drop dimes when things are blowing up left and right.

Today, I've invested $954,000 in real estate crowdfunding. It is a more efficient and easier way to invest in real estate across the country. With mass migration trends towards lower cost areas of the country due to technology and the coronavirus, I want to invest in this long-term trend.

My favorite platforms are Fundrise for non-accredited investors and CrowdStreet for accredited investors. Fundrise offers diversified funds where you can dollar-cost average into. CrowdStreet mainly offers individual deals where you can build your own select real estate portfolio. Both are free to sign up and explore.

The Federal Reserve

Post pandemic, the Federal Reserve has helped accelerate the path to financial independence. First, the Fed cut rates to near zero and boosted our real estate, stocks, and other investments. Then starting in 2022, the Fed aggressively increased rates. As a result, everyone can now earn a risk-free 5%+ in money market funds and Treasury bonds.

It's much easier generating more passive income thanks to the Fed. However, the key is for the Fed to start cutting before a bad recession wipes out a lot of gains in the stock market and real estate market.

Primary House Rental

I've been wondering whether I should sell my house or rent out my house due to the social media craze which has formed in the SF Bay Area. If I decide to rent out my house and downgrade to a normal 2/2 apartment, I would probably generate an additional $3,000-$4,000 in monthly income after paying rent for my new place.

Rents have gone bonkers, especially for single family homes in good areas in San Francisco. The problem is, I love the house and the location. Life is about living in the moment, and I don't want to live in a crappy rental just to save or make more money.

The latest as of 2024 is that I rented out my primary residence of 10 years for $8,300 a month for several years, sold it for $2,740,000 in mid-2017 and bought houses in Golden Gate Heights, San Francisco in 2014, 2019, and 2020.

Buying panoramic ocean view properties in San Francisco is one of my top investment buys for the next 30 years. Two of these houses are now rented. The reality is, the best duration to hold real estate is for as long as possible.

Severance Negotiation Book income

Since retirement, I've released several updated editions of my ebook How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye. It's recently updated and now over 200 pages long with new case studies, resources, and more.

The book helps employees profitably quit their jobs by providing a framework to negotiate a healthy severance package. I managed to negotiate roughly six years worth of living expenses after engineering my layoff in 2012. Never quit, always get laid off!

Pn July 19, 2022, I published a traditional book with Penguin Random House called, Buy This, Not That: How to spend your way to wealth and freedom. It became an instant WSJ bestseller and may one day generate royalties.

Total Combined Income Streams For Financial Freedom

Financial Samurai Total Passive Income Streams

With multiple income streams you not only develop financial independence, you also achieve as well! You don't have to worry about pissing anybody off anymore, or feeling guilty about doing things for money you otherwise wouldn't do.

You've gone from being someone who is second guessing everything, to someone who does what feels right. Nobody can ever take away your passive income you've spent years building.

You can now enjoy fake retirement to its fullest now! I’ve recently been reflecting on 10 years of fake retirement and I think it’s been a wonderful experience so far. Partially things to a bull market and the growth of Financial Samurai, I’ve been able to consistently earn over $300,000 a year and passive income for the past three years.

Experiencing Financial Freedom And Eradicating Fear

With multiple income streams you not only develop financial independence, you also achieve mental independence as well! You don't have to worry about pissing anybody off anymore. Nor do you have to feel guilty about doing things for money you otherwise wouldn't do.

You will have enough F-YOU money to say what you want and do as you please!

You've gone from being someone who is second guessing everything, to someone who does what feels right.  Nobody can ever take away your passive income you've spent years building.

It takes a damn long time to build a livable passive income stream nowadays thanks to Ben Bernanke's monetary benevolence.  As a result, CD interest income is not good enough and my focus will be more towards online income, rental properties and creating a larger dividend portfolio.

Time To Boost All Your Passive And Active Income Streams!

It's important to not co-mingle your funds if you want to build significant multiple income streams. With passive income, you've got to pretend you've got no other income. That way, you stay focused and don't start getting lazy with your mission to achieve freedom.

If you make $100,000 a year at your day job, pretend you make ZERO. This will help you give everything you've got to find other income sources.

If you make $2,000 a month from your online properties, ignore it completely. This way, you can really develop your day job income, rental income, dividend income, interest income and so forth. Compartmentalize!  

You must compare apples to apples eg not passive income to online income. Everyday I wake up, I pretend I have next to nothing in my bank accounts, trading accounts, 401K, and Paypal. As a result, I'm super motivated and find the journey incredibly rewarding and fun.

I recommend all of you to start saving aggressively. Build a CD ladder. Invest in rental properties so your kids don't hate that you didn't 30 years from now. Look into dividend yielding stocks. Work harder at your job. Leverage your skills to teach others. Finally, start a small business.

You've got to do your due diligence and pounce on investments you like with focus. Build buffer after buffer of income streams.

I can promise you that if you do all these things, in 10-15 years, you'll be set for life. And if you can't figure it out and need guidance, let me know!

Achieving Financial Freedom With A Family Is Hard

Here's my latest passive income streams for 2024. My main move was diversifying into real estate crowdfunding as I was overly concentrated in SF property. Ultimately, I'd like to generate between $350,000+ in passive income to live the life we want.

Given both my wife and I want to be stay at home parents, I am very focused on saving and investing as much money as possible to generate passive income. Unfortunately or fortunately, in 4Q2023, we bought a true forever home. As a result, our estimated passive income will decline by ~$150,000 to $230,000.

Given our expenses are over $265,000 a year, we are technically no longer financially independent. Given the gap, I plan to do some part-time consulting. My hope is that by 2039, I will once again be financially independent.

I had a great 12 years of financial freedom. But I figure, once my kids go to school full-time starting in September 2024, it's best to start working again. I expect college to cost $750,000 in 2036, when my son is ready to go!

2024 Passive Income Investments from Financial Samurai

Recommendations For Achieving Financial Freedom

Manage Your Money In One Place. Sign up for Empower, the web's #1 free wealth management tool if you want to achieve financial freedom.

In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.

After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Definitely check to see how your finances are shaping up as it's free.

I've been using Empower since 2012 and have seen my net worth skyrocket during this time thanks to better money management.

Retirement Planning Calculator - Financial Freedom

Achieve Financial Freedom Through Real Estate

Real estate is my favorite way to achieving financial freedom because it is a tangible asset that is less volatile, provides utility, and generates income. Stocks are fine, but stock yields are low and stocks are much more volatile. The -32% decline in March 2020 was the latest example. However, real estate held steady and appreciated in value then.

Given interest rates have come way down, the value of rental income has gone way up. The reason why is because it now takes a lot more capital to generate the same amount of risk-adjusted income. Yet, real estate prices have not reflected this reality yet, hence the opportunity. 

Take a look at my two favorite real estate crowdfunding platforms that are free to sign up and explore:

Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and manages over $3.3 billion for 500,000+ investors. You can easily dollar-cost average into Fundrise funds with just a $10 minimum.

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends.

I've personally invested $954,000 in real estate crowdfunding across 18 projects to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000. 

192 thoughts on “Achieving Financial Freedom One Income Slice At A Time”

  1. I’m 18 years old and I’m starting college in the fall. I’ve been saving for college and don’t need all my money right now. I have been saving money in a Schwab Brokerage account, and have been looking at investing in their S & P 500 Index Fund. Would this be a good fund for me to invest in?

  2. I just found this site and have spent hours reading your articles. Sometimes wonder if I could create a blog and reap the same rewards. Your articles are so informative. I am married but my networth is around 3.6 million not counting my home, which here in the Bay Area is now valued at over 900 K, no mortgage (purchased for 121K). Who would have ever thought my house would ever be worth that much in a so-so school district, now valued higher than before the housing crisis. In the last year alone, my portfolio has generated nearly 300K in market gains and income. I have about 40% in the market, which is why I very much liked your article on avoiding risk. I am 64, currently on disability because of a neurological disorder and my wife is 62. She plans to retire at 63. So, I am wondering where I stand insofar as your networth is for individuals. It would seem I am over on an individual basis but under the networth you mentioned on a married basis. I actually had to quit work in my mid 40s because of my disability, not an easy transition, but I saved and invested everything I could. Made lots of mistakes, but had lots of successes as well. Thks for your website.

  3. Graduate students budgets

    Dear Financial Samurai,

    I really enjoy your blog. With your help I have been able to save money as a graduate student in New York, with a salary of 66,000 dollars before taxes between me and my wife.

    The key knowledge that I have learned is how to organize all the expenses using a budget.

    I am 29 years old and my current net worth is ~$40,000 and is divided as follows.

    Personal account:

    Personal Emergency Fund: $10.000

    Personal Retirement: $26.000 (taxable account, Vanguard, VASGX) I am still learning so I prefer somebody else invest my money. I contribute $400 (17% of my monthly after taxes salary) each month.

    Joint account with the Wife:

    Joint Checking Account: Were our paychecks gets deposited every month and then distributed to our joint and personal accounts.

    Joint Savings account: $4000 dollars of joint emergency fund and future mid-term goals. We both contribute $400 for a total of $800 a month.

    Plus wife has her own personal emergency fund and retirement account.

    With our current budget strategy having a combined income of $66,000 a year before taxes, we are able to save for retirement and emergencies. Plus we travel twice a year to visit our families (one U.S territory and one country in south America). Additionally, we go out pretty often and still manage to save money.

    By leveraging some advantages that our college provides in terms of housing and healthcare as well as making some sacrifices (to live in the student housing which not have great location and accommodations), we are able to stay debt free and build our net worth.

    I really like all your suggestions but I would like some advice on how to manage better money when you don’t have much of it (perk of being a graduate student).

    Thank you,

    Graduate students budgets

    P.S: We don’t have IRAs because we still don’t now in which country we will build our life yet.

  4. Great article that got my mind rolling. Quick question, if my wife and I are aiming to hit that 55% or more savings on our after tax income, do you include our Roth IRA contributions in that calculation? I’m hesitant to because I feel like the Roth will be for our traditional retirement (after 59y.o) and we want to become financially free in our 40’s (currently 32). So should we be saving >55% of our take home pay after traditional retirement contributions?

    1. Try not to include the tax advantaged retirement accounts given they can’t be touched without penalty until 59.5.

      You can include if you do the math to see what your after tax savings/investments are that will last until 59.5, until your Roth IRA contributions etc pick up the shortfall, if any.

      1. Ok Great, We’ll shoot to be saving >55% of our take home pay, after our Roth contributions. Thanks for the reply.
        If you ever need a surf buddy on Oahu, we live in Kailua and got plenty of boards.

  5. Barry Rogge

    Have you looked at the Guggenheim bulletshare corporate bond funds? They appear to be a relatively risk free way to get a good yield and you can ladder them.

    I am enjoying your website by the way. I am about to finish a job that has payed me a extremely well and I am trying to develop a plan for the income I saved.

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  7. Steve Miller

    I reached Financial Independence 3 years ago (at 50 years old). Now I get to tailor my day to my liking (working out, cycling, golfing, boating, fishing, travel, etc.).

    In my spare time, I am developing mobile apps. Not for the money, just for the fun of doing it. My most recent app I am working on is an app that will countdown the days to retirement or financial independence:

    Enjoyed your article. All the best.

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  16. FS,

    I am so glad I found your site! I have been on my own financial freedom journey and I am glad to find that you have lofty passive income goals as well. I do not want to pinch pennies when I finally pull the plug on my job. I have avoided things like CDs and dividend stocks and focused on trust deeds and multi-family real estate. I am posting my strategies on my blog, so please stop by sometime, you may find something you could leverage. Thanks!


    Deets (

  17. Where can I get risk free CD return of 3.75%? Which bank? The top I can find to save risk free is 0.75% savings account with IngDirect… Please help!

  18. I have taken a keen interest in personal finance over the last few years. I have a pretty solid salary ($135k). I currently max out my HSA, 401k (5% match) and put as much into a Roth as I am eligible (about $2200/yr). After reading your blog, it is clearly apparent I should be saving MUCH more. I started working full time at 25, and am currently 28 with $57k in my 401k. My net worth is about $80k. If you were at a similar age and salary, how much would you save each year after contributing to an HSA and 401k?

    Your passive income streams (and balances needed to provide them) are flat out disgusting. I love it. HOW did you get there (besides extreme discipline and a no-excuse mentality)? How many years did it take to achieve each?

  19. Move to the mid-west and live better? You’ve got to be idding! My wife and I just did that, for 2 years! And the truth, like with most things, is a bit different than what people where we come from in Northern california are led to believe.
    Example: Calif has property taxes of about 1.25% of purchase price plus 3% per year; other states (most) are completely different!. Prob 13 in Calif is more of a lifesaver for the middle-class than even many well informed Californians understand.
    Example: In Michigan propery taxes are a lot different from Calif. And they impace rental prices too, not merely owner occupied homes. A recently purchaced 300k house in Calif will have a 3,700 dollar prop tax per year. But a 300k house in Ann Arbor has an 8,500 dollar yearly property tax! It’s unbelievable yet the locals in the mdwest do not seem to be aware that taxes in Calif are wayway lower on homes. As a result of this the rental prices are a lot higher in the midwest that one would ever imagine. But what rental owner can charge low rates when his-her overhead is so high. Hence the rental costs are not low, even in the forlorn more rural towns, the rents are still quite surprizing.The idea that home prices in Ann Arbor and other midwest cities that still have jobs are lower than west coast prices is only true when compare to prices in San Francisco proper. A veryvery modest, and quite small, but presentable middle-middle class home in AA goes for 225-245k. The bargains we see on the west coast regarding midwest homes are simply not based in reality. They do exist but are in towns far away from jobs and in towns that are a shell of what they once were. They are simply not fun places in which to live.
    Example: the very low 25-75k homes are always, and I mean always in towns that are outside of commuting distance to places with employment. And a commute of 50 mi in the winter on icy 2 lane roads is not smart and its not safe. The winter back there is different from what is ever seen in california and I now live in the part of CA where there is a lot of snow but the winters in the midwest are flat-out frightening.
    When one understands that the 350,000 blue collar GM workers of 1990 are now a workforce of 35,000 then you begin to get the picture. (Ford and Chrysler workforce numbers are almost the exact same) And the forlorn towns to which I refer are everpresent and abundant. In fact, Mich may be the 8th most populous state, but their population just dropped below 10million, heck; LA county just rose above 10 million! The empty jobless towns are everywhere! They cover the landscape and the remaining towns with employment have housing prices that are quite comparable to most normal Calif and other west coast places. Big neighborhoods in AA and other towns that still have employment, have homes in the 500-800k range. Their costly neighborhoods are almost as costly as Calif prices. Yes; modest areas of even AnnArbor do have lower prices, but never below 225-245k for small acceptable cuckie cutter tract homes. The towns that do have low home prices are many miles away and are an emotional “downer”. Ideas of retiering to them is a fantacy held only by those who have never been there. The “cost of living” really isnt much different, except for home prices. And once taxes are brought into the mix, and 10 or 15 years of paying those taxes are included as well, then all things (except milk prices for some reason) are all pretty much the same.
    Seriously, from one end of the good old USA to the other, the cost of living really isnt all that much different. Comparing San Fran home prices to anywhere else is always misleading, including areas of Calif just a few miles away from Sf or Silicon Valley. And in towns in the midwest where the home prices really are 25-75k for a big old Victorian, well it doesn’t take long to understand why. No one who has a choice, would live in such places. My wife and I traveled from Mich to Kentucky, to Missouri, to Minn (try finding a cheap house in Minn) to Chicago (cheap Chicago houses yeah right!, even Ohio and Penn. The story is the same everywhere. Sf is way overpriced, Silicon Valley is overpriced as well, but stories of those cheap midwest eal estate “gems” are totally misleading.
    We were a bit shocked when this reality came to light. We expected different. Most unexpected were-are the 3x higher property taxes. It’s such a relief to get back to Calif and the safety of prop 13.

    1. Prop 13 is definitely great for those who bought more than 10-25 years ago, but for the rest of us, it’s taking away revenue from the state. I’ve had to appeal my prop tax lower every single year otherwise it would just go up 2-3% like clockwork.

      I didn’t realize prop tax is so high in the Midwest. I just like more moderate weather and diversity. It’s SF or Honolulu or bust for me!

  20. Sam,

    Nice to see some commonsense advice with building passice income, and lifestyle design. I think to many are flowing in the wind, and are ready to be smacked in the mouth when it comes to retirement age…


  21. Lisa @ Cents To Save

    I keep this post open on my browser. It is my motivation to get my finances working for me! We are setting small goals and keeping a close eye on the money we do have.

  22. Hey Sam,
    Great post. Financial Freedom is different for everyone, but working towards it is our common goal. Thanks for the tips :-)

  23. I enjoy reading your entries and find that they get my mind going with lots of possibilities for the future. Your concept of passive income is great and I think that it is a great oppurtunity for everyone. My wife and I are finally in the position to save (~$4,000/month) and have been doing so for several months now. I would love to save over next 6-7 years with a goal of about 300-400k by age 40 so that income could be used to pay our living expenses with passive income. My biggest challenge is where to start. We both love our jobs and fortunately work in the health care field. That means that I have no background or knowledge of finance and use logic and intuition as a basis for making decisions as oppose to education and experience. Given the info, where would you start putting money?

  24. Hi Sam,
    Really Great article! I just had a question about how paying off debt other than your mortgage factored into your plan over the past 15 years. I am getting married soon and I want to start saving 50% of our income (investing some), but my soon to be husband has 10K in credit card debt, and I have student loans and a car payment. Did you focus on paying down debt first? It seems to me that since I am not going to get 6% (my student loan rate) on a CD or a savings account, I should pay off our high interest debt fist and then start working on multiple income streams.

    1. Hi Katie,

      Yes, I focused on paying off my no mortgage debt first. I never had any revolving credit card debt as I always paid it off every month. I did have about ~$40,000 or so in student loans which I paid off over 4 years. It felt GREAT to pay off the last $10,000!

      With 6% interest rates (mine was 2.8% for student loan), I’d probably use 80% of your free cash flow to pay off the student loan debt, and 20% to build your savings.

      Good luck!


  25. Hey, Your so right.
    Your message is to much to absorb. The one thing I got was that you are in a win win financial bliss! Now if you could break it down one slow step at a time that would be helpful;or maybe I could teach guitar lessons to you at 40.00 an hour . Wait maybe I could teach you how to drive a truck with air-brakes, ah wait maybe teach you how to cut hair , do a manicure, pedicure. I hope I haven’t subcribed to anything that will take any monies away.Looking forward to a reply from you

  26. To me passive income is the “holy grail” so to speak. I can work on MY TERMS and my efforts and epic successes are mine to celebrate. When something goes right I get income generated regularly without any effort. Only effort is (if any) needed at the beginning, when you setup.

  27. A few questions around your focus on CDs, rentals, and dividends:
    +CDs – aren’t you afraid of inflation eating away at the money here? Seems like you’d be better off in a stock/bond portfolio.
    +Rentals – it sounds like your focus is on owning rental property, do you think you’d be more diversified with a REIT?
    +Dividends – I’m assuming you are large cap focused on a few companies. Don’t you think a mutual of dividend paying stock would be more diversified?

    Sure you might hit a homerun with the rental / dividends focus, but what is the risk you are taking on? A few large companies can fail, a local rental market can crash, but diversified mutual funds should offer less risk (and less headache).

    I’m trying to fit your strategy above with my strategy (401k / IRA / taxable / pension). I’m a heavy index / mutual fund person, and it seems like these aren’t your primary targets. They almost sound like “nice to haves”, almost like I treat social security. Thanks for helping me see your perspective. ;)

      1. I did some research into the actual numbers for CD rate vs. Inflation and found this site that has some hard data (not mine). It looks like you are right, but I’d contend a stock / bond portfolio risk is worth the extra percentage points you’d gain over 30+ years (there will be more volatility). I suppose the same could be said for an individual stock, but the risk would be extremely high :

        As for the “physical rentals” do you have a post about that? I’d be interested in your experience (return) with that vs investing in a REIT. I admit I’ve toyed with this idea, but am not sure if the extra work / risk is worth it over a REIT index fund.

  28. “If one can get their passive income to a level which makes them happy, collecting unemployment benefits after paying all those taxes for all those years is a logical fantasy.”

    The suggestion here seems to be that unemployment can be considered just one of many income streams and that is alright. This just seems plain wrong to me.

    When I think of the reasoning behind unemployment checks, I think of people who unexpectedly lose their jobs and need some money to stay afloat while they are actively working to get another job. Maybe the actual letter of the law is different (though I think the law requires you to honestly say you are searching for another job) but even if it is I would propose that it should be changed to reflect this ideal. In the meantime I propose civil disobedience in the form of not taking unemployment if you don’t really need it. If you’re with me please update your post (or write a new one). Maybe something along the lines of “just cause the government does/does not allow something doesn’t make it right”.

  29. Debt Free Teen

    Thanks for explaining all this! I’m just starting out but I plan to stay debt free and be financially independent. This gives me a lot to think about.

  30. @L@SMG

    Out of curiosity and if you don’t mind: how old are you Sam? You may have posted this somewhere else on blog so forgive me if redundant. As i read i can’t help but wonder and appreciate your feedback. I am early 30’s

    Congratulations on your sucess toward FI as well. $15k passive is a lofty goal and i have no doubt you’ll get there. Since you are clearly a driven individual have you put a launch date on your consulting idea? Are you thinking of getting or already have a CFP, CFA or any Series licenses e.g. 6,7, 65, 66? Thanks

    1. Hi Ken. I’m in my mid 30’s. I’m halfway to my $15K/month passive income goal, and that excludes all other incomes besides CD, rental, and dividend income.

      Because online income takes work, I’m not including it as passive, even though it’s a lot of fun and is my 2nd largest income source now!

      BTW, how did you find my site?

      1. Google searches regarding retirement. I found you months back but never commented as usually sites like these don’t accept guest comments. I was pleasantly surprised to see when i clicked submit it posted something! Cheers to your open format as it helps greatly to improve collaboration and idea sharing. Been crawling around your site for a good number of hours now and will def check back. Email me if you ever open for affiliate type of marketing or featured guest posts etc. I have a day job, do active trading and have some entreprenurial endevors as well. Passive income is key to getting out of the rat race so to speak. Time IMO is the most precious commodity we have and money is a mere tool to create the perception of more time.

  31. MacroCheese

    Do you include the cost of purchasing your own health insurance when calculating future living expenses?

  32. Awesome points. I don’t understand you not paying off the mortgage.
    e.g- Mortgage 300k*.03175=$9375 interest.

    $9375*.35(tax rate for this example. Actual is probably lower) =$3281.25

    So you pay the mortgage company $9375 to keep from paying the government $3281.25?

  33. You shouldn’t be so rough on yourself. In hindsight, everyone would change their historical actions (if they were wise). What if instead, that private r/e fund bought in Detroit or Philadephia or pretty much any of the dodgy US states that are undergoing structural unemployment? Consider yourself fortunate to have avoided those bad investments. I personally know some friends who have lost over $100k in capital in the last 4 years. Aggregate loss across the three I know is $350k loss.

    In hindsight, they would have exited all their trade positions, all their margin loan, all their CFD trades and liquidated their ‘long term’ positions. Thanks for the enlightment. US CD=OZ TD in its features. In light of your plans, it would be a good thing then to invest the $200k and retain $50k for a diff investment.

    1. I’m really not being that hard on myself. At least I put some capital to work in the downturn instead of runaway like a little baby!

      I’ve lost $100K in capital before, and it’s not pretty. However, I’ve also gained that amount and more. It all becomes kinda funny money for a while, and you’re just trying to outperform the broader averages.

      1. Whats your opinion on my earlier post?

        “Awesome points. I don’t understand you not paying off the mortgage.
        e.g- Mortgage 300k*.03175=$9375 interest.
        $9375*.35(tax rate for this example. Actual is probably lower) =$3281.25
        So you pay the mortgage company $9375 to keep from paying the government $3281.25?”

  34. I donno mate, with the title of “Multi Millionaire”, saving 20% of your after tax income should be a walk in the park!

    Without knowing your expenses or income, I can’t help you much. Sorry.

  35. Am I missing something? How are you generating $2800 per month on CD interest income? CD rates are down to 2% now. Even at 5% with daily compounding, you would have to invest over $600,000. At 2%, over a million. Unless you are including the initial deposit as income.

    1. There you go. You aren’t missing anything at all.

      From the post:

      “I’ve predominantly invested all the savings in long-term CDs that have returned 5.5% all the way down to 2.5%.  Currently, my risk-free return is averaging about 3.75-4% a year.  These aren’t sexy returns by any means, but I sleep very well at night and have also never lost money in this portion of my wealth for the past 13 years.  A smaller portion of my savings goes towards my trading account.”

      1. Ok FinSam. This website is awesome! Its a confidence and enthusiasm builder. Thanks for the response and confirmation.

        I just started buying some 3 year CD’s, trying to create a ladder program. I’m not very impressed with the returns, but at least its safe. Stocks can lose 5 years worth of gains in one day.

        I’m thinking about temporarily abandoning the CD’s and purchasing a rental property while prices are low. Passive income streams.

  36. I do have a post outlining my passive income but no figures:

    Looks similar to yours in structure. Obviously with less funds. It would be really uncomfortable for me if any stranger on the street or random ppl who knew me in real life, knew exactly what I owned, what I earn and what I have.

    Strategy A.
    With an extra $250k on top of what I already have:
    * $200k deposit to buy a $1m house. (80%LVR)
    * $50k into direct stocks (banking (CBA/WBC), mining(BPT/BHP), FMCG mainly food companies like Wesfarmers, Woolworths, Coles)

    Strategy B.
    If I had nothing at all and you gave me $250k tomorrow (dream on right?!)
    * $100k deposit on a $500k apartment (80%LVR)
    * $80k deposit on another $400k apartment (80% LVR)
    * $30k in stocks (see above for allocation)
    * $24k three months emergency fund placed in mortgage offset account(3 months of two mortgage repayments plus strate levies for both properties $18k, 3 mths living expenses $6k)
    * $16k left -> save that for building up another deposit/down payment for either a studio/1or2 br apartment or a house

    What would you do with $250k in similar scenarios?

    1. I love how you say you’ll buy a $1 million house! Nice!

      It might be bc of my phone, but I can’t tell from your charts what is your passive income amount, current savings, and income?

      I’m thinking of investing $200,000 in P2P, but I need to meet with someone from LC r Propser first. I’ll keep 25-50k liquid just in case I see a stock investment I want to buy.

      1. Sounds nice but for $1m around our target suburbs, it buys an old dingy house close to the station or a renovated house further away from the station:

        Our roads are so congested it’s like a parking lot every single day.

        I’m not going to post my #s in public. Will send you some breakdowns in an email. I’m sure you’ll perform due diligence on P2P providers before investing your funds with them. Don’t know if you actually need 25-50k for liquidity since you’ve got all the over $800k in CDs (not sure how your US CDs work but if they’re equivalent to TD over here then ok, fair enough).

        1. You can withdraw/use CD interest income penalty free, however you can’t withdraw the principal from CD early without facing a penalty.

          So yes, I guess you’re right. I perhaps wouldn’t need 50K in liquidity since I can withdraw $33,600 a year and have the various other sources of income.

          That said, I love to have dry powder to make bets when I see a kink. There are lots of kinks, and as I wrote above, I wish I bet WAY MORE in the private real estate fund eg $200,000, instead of just $50,000. I was stupid and too chicken in retrospect.

      2. Sam – i wonder about the true definition of financial independence. i’ve read that it occurs once your passive income eclipses your expenses. but in reality that definition leaves no wiggle room. i have 30% more dividend and interest income than my annual expenses. i reinvest the 30% surplus to compound it. is that enough of a buffer over time in your opinion?

        love the site!

        1. Very impressive achievement! I would say you are financially free. The question is, are you actually doing what you want with your free time every day? That is probably an added variable.

          If you’re still working a job you don’t feel comfortable leaving yet, for example, then are you truly financially free?

          What is your situation beyond your passive income?

          Welcome to my site!


  37. I came here from Nelson’s site, and I gotta say, WOW! Great job methodically developing so many income streams and having good analysis on each one. Not only that, none of your passive income comes from online. Nelson must be pissed! hahaha.

    Looking forward to reading more about your strategies.

  38. Money Reasons

    Hmmm, thanks for revealing this information! I was drifting with my spending, but reading your plan has encouraged me to get back on the frugal path that I normally ride on.

    I think I need to get more aggressive with my daytime job. Perhaps become a computer consultant since I now have a little bit of side income coming in too…

  39. Sam, I have six figure passive income coming from my hotel investments in addition to my six figure salary. I am trying to save as much from the passive income to reinvest back into more commercial investments, and hoping to retire in next 10 years once my daughters are on their own. I’d like to start investing in apartments or attractive single family homes soon too. I also would like to start making some money from blogging and other online sources(I have an app built for hotels and rental businesses).

    1. Excellent news. When do you decide to call it quits? After the kids graduate from college? Have you ever thought of retiring earlier? What other passive income do you have if any? Thx

  40. I do fear for those with pensions the changes in pension reforms. It’s promising one thing and providing another. That’s not right, no matter how underfunded our pension system is.

    You must still be excited though. To have potential benefits down the road to collect must be a wonderful feeling!

  41. Your asset allocation looks great. It’s like my own allocation but on steroids. Anyway, didn’t realise you had so much capital. Always thought you were working on under $2m but from working on the figures you’ve just published, it looks like you’re pushing anything from $2.5million to $3.5million(probably closer to $3m) in assets which is pretty awesome. Anyway, thanks for posting- it really was very interesting and illuminating.

    Roughly $840k capitalisation(an estimate based on your average return and figures provided) in CDs is heaps though at only 4% average return. I’d probably have more invested in property but yeh, that’s just imo and nothing wrong with having that much in risk free investments. Always better to be relatively safe than being sorry.

    1. Hi Mate, nice post you have there reflecting on this post. My post is a snapshot in time for right now and I should allocate more to real estate. However, with the discovery of online income, it is much more fun and easy to maintain than rental property. It’s not like rentals are tough to manage as requests are one or two a year. It’s just not as fun and there is more liability involved.

      I’ve got a good slug of change just sitting in the bank for the past 3 weeks which I need to deploy. Right now, P2P seems to be in the lead for consideration!

      1. Thanks Sam. Well I’m not sure how accurate my estimations were but that’s a pretty good chunk of cash and capital to work with. I’ve got the same problem as you atm- sitting on way too much in savings and no leverage to speak of right now until I buy another property to buy. If only I could say my online income was something worthy of mentioning- so far it’s earned about $15 in adwords (excl. paid links) and that’s not exactly something to get excited about lol.

        P2P is interesting…don’t know if it exists in oz(with similar structure) but I’ve seen it mentioned across other US PF bloggers posts for a while now. We had something similar called REITs(Real Estate Investment Trusts) and they all had very bad liquidity problems during the peak of the financial crisis. They were suppose to be relatively low in risk but nowadays in the desire to chase higher yields, professional funds are taking more and more risk. Some of the commentators believe there’s not much risk to P2P but they’re probably all different and I’d be reading the fine prints…

        What about buying more property in San Fran? Keeping things simple.

  42. We’ve lived in the States for 2 years a while back and while 1k in Romania goes a lot further than in US the gap is closing mostly because of the Euro. A lot of items are cheaper in the us than Romania and a lot of time I buy things from amazon or other online retailers and have them shipped to Romania and is still cheaper than buying them from here.

    Anyway US is a very nice place to live, we’ve lived a little up north from Seattle and we enjoyed it fully.

  43. I would DEFINITELY stick it out for 20 years if I could get 50% of my highest salary for life! Let’s say one works from 22 to 42, and tops out at $120,000. Getting $60,000 a year from 42-85, or 43 years would be AMAZING! That’s worth probably $5 million bucks.

    More people should consider the public sector. Work on another relaxing job for just $25,000 a year, and you get $85,000 a year no problem. The pensions are worth it!

  44. Your passive income is impressive, especially considering most of it is pretty low risk.

    My own biggest investment is one single condominium, but that is more building networth through equity gain and capital rather than passive income.
    I only got about $4000 for the whole of 2011 in dividend income. Since then I have sold of my best dividend paying stock because of suspicious market activity, which means this year i am not even getting that.
    The amount my CDs are paying is not worth mentioning.

    I do have a very well-paying day job, and I am hoping a continued saving rate at 60-70% for the next few years will pay off in at least a semi retirement by 45 years old.

    At least now I have some motivation and inspiration!

      1. I certainly don’t hate my current living situation. I think it is the best I can achieve given current conditions.

        The main thing that will change at 45 years old will be my job if I can achieve FI. I think 20 years in the field is long enough to pay my dues for my engineering degree. I secretly long for days of vegging on the couch in front of the TV and letting my brains turn into mush.

        Other than that, I think my life would be pretty much the same otherwise.

  45. I think my best option for passive income right now is real estate income. My current condo would only be able to produce $1-200 a month if I were to rent it out assuming expenses were 30% of rent. CD rates are way too low to have any type of significant impact right now. And I’d rather invest in stocks with higher capital appreciation than dividend stocks for now(since I’m younger).

    I have $500 invested in P2P lending, but not sure if I should put more in. Not really passive IMO. Good post though.

  46. Excellent post!! You definitely have it down to a science. Reading posts like these further motivates me in my quest to retire early. My blog is relatively new so the income from it is slowly trickling in. But while I’m building that up, I find time to focus on my career, as well as other projects to bring in additional income.

  47. Mrs. Money Mustache

    Thanks for the reply FS!

    I wasn’t trying to out-do you, just saying that you can still travel and donate a lot of time when living on a low income. For those living on less, it’s good to know that there’s still the option of doing those things and that you don’t need a ton of money to live a good life.

    It’s great that you’ve traveled so much. I was only pointing out that you don’t need to spend $10K for a 2-week vacation (which is the example you used). If you plan in $15-$20K into your annual spending for travel, like you said, then obviously that eats up a lot of your savings. So, my point is, why not travel for less — you can still see the world that way.

    It’s great that you give so much to charities. Have you tried volunteering your time as well? Do you know how your dollars are being used?

    Anyway, it’s all good, I was just offering a different perspective, particularly for those who have less income.

    P.S. I could speak 3 languages by the age of 5, but I’ve only lived in 2 countries so far. :)

    1. Cool. Don’t hate me for wanting to travel more luxuriously! I can’t help but wanting to see the world the way I do. It’s what I enjoy and am willing to spend more for that enjoyment. I did a lot of fun backpacking and 2 star hoteling trips when I was younger.

      One of my thesis in The Dark Side To Early Retirement is that people who do retire early just haven’t found a job they enjoy enough. Who would quit a job that allows them to be a massage guinea pig and get paid hundreds of thousands of dollars a year, for example? I think you will enjoy reading the article, but don’t get mad at all the truths!

      As for entrepreneurial endeavors, I started a network called the Yakezie Network. Part of the verticals is the Yakezie Scholarship, where we give away over $1,000 to three essay contestant winner to spend on furthering their education. I definitely know where my time and money is going, b/c it’s all for the kids, and I mail the checks out myself. Maybe you guys can help promote!

      Given that you don’t think I’m doing anything entrepreneurial, do you suggest I write a post specifically about my entrepreneurial endeavors and the income I generate out of it? I just kind of loathe highlighting all this stuff b/c it gets too “in your face”.

      1. Mrs. Money Mustache

        Thanks for this fun back and forth Sam! I think we can just say we respectfully disagree and leave it at that, since it seems your readers are not enjoying our playful banter! :) Maybe we can chat some more about this at fincon.

        P.S. In my earlier comment, I said you have an entrepreneurial spirit, so I don’t question that at all! Keep rocking.

  48. That is an awesome passive income stream sam. Right now outside of my day job, the only income I’ve got is a bit of online income, which i’m hoping to increase as time goes by. Unfortunately, I dont have any other passive income sources, but I’m young so I’ve got time to build them

    1. One thing to note is that time will go quickly. Time will actually feel like it’s accelerating the older you get, hence don’t think of yourself as so young. You’ll be 30 before you know it!

  49. Sam, glad I found your site, it’s very inspiring.

    B/c of this post I did a analysis of my own passive income sources and although I knew I was making some I was really shocked to find that I’m making a little over 1K per month.

    Currently I have 3 sources of passive income :

    1) interest on saving accounts 280 USD / month. I have Euro and USD in several 6 month saving deposits ranging from 2.75% (for USD) to 4% (for EUR).

    2) dividends: 380 USD

    3) online business (we have a small e-commerce site selling Kindle accessories in my country Romania): 400 USD.

    4) I also invested in a private business (a street food shack in exchange of eating a few meals / month for free :))

    Total is 1040 USD / month and this is net after taxes (we pay 16% flat tax on any income here in Romania) + a few free meals.

    My target is to have 2000 USD / month in about a year. I’m very lucky that I have a job which pays very well and I can up to save 75 – 80 % of what I make so that will be responsible for the increase and also looking for other stuff to sell online and create new e-commerce sites.

    I’m also watching the real estate market to buy an apartment or a studio to rent it but at the moment the ROI of such investment is around 4 to 5 % which is close to what I get from my bank.

    Now I’m reading your entire site which is a very good read. Thanks for taking the time to write!

    1. Daniel, always great to have a new reader.

      Congrats on realizing more passive income than you thought! Furthermore,
      I’m assuming US$1,000 in Romania a month goes a lot farther than $1,000 in the US!

  50. Wow very inspirational as all of your income sources are diversified like a portfolio. However, I thought I read one time you weren’t going to share your income. Now I feel I am in the know.

    1. I decided to highlight the passive income sources as relevance to PF that anybody can achieve. The online income is not relevant to this blog as it’s not a blog about blogging. My day job income will always remain my own as it’s not relevant to a lot of people either since there are so many fields of work.

  51. I wish I can have as many income streams as you mentioned. Right now, we are still building up our savings and our passive investment so far is a small stocks portfolio. I am looking into investing on bonds and dividends by the end of this year. We are also on our road to purchasing our second home so that we will have this house rented out as another source of income. As long as my husband and I keep our full-time jobs and save our earnings from our other investments, we are confident that we will increase our income as well as our savings.

    1. A second home to live in, and then rent out your first has worked well for me, and will work well for you if you can carefully calculate the numbers.

      Did Barbara hire a VA?

  52. Can you do a blog post on the Private Equity piece. How to find such opportunities and what are the metrics to evaluate investments.

  53. Mrs. Money Mustache

    Cool. I get the $3,000 per month amount, but the $15,000 per month is mind boggling to me! What would you do with all that money?! And why is your range so big?

    Of course, I’m assuming you would have a paid off house, etc. when retiring. We live LARGE (I mean, I can’t imagine spending more unless I started thrashing the Earth with all my consumption) on $2,000 per month for a family of 3! It’s interesting though that many people feel this isn’t possible. Of course, with the extra cash, I would probably end up donating most of it…

    Also, I’m curious why you wouldn’t want to do it now? It’s not really that big a deal… you quit your job, see how things go, learn about yourself, maybe travel for a bit, and then work on your projects and your goals. Figure stuff out. The earlier the better, in my opinion, unless you feel you need the extra money for some reason. Quitting my job was the best thing I ever did – it’s really quite amazing the things that have happened since then: the opportunities, the travel, connecting with family, raising my child, etc. I wouldn’t want to wait for that. :)

    1. A lot of it is for fun. Challenging myself is fun! It’s the reason why I went to college and got my MBA. To test my abilities and see what I can do on my own and in the corporate world.

      I went on a 2 week Mediterranean cruise with my best friend last fall and it was amazing, for example. The travel, the food, the spas, the sightseeing, and the accommodations. That trip for two was about $10,000. We plan to go cruising for a a month a year, so that will cost about $15,000-$20,000. It’s just such a great time, unfortunately it costs a lot! Have you guys gone on a cruise before? If not, definitely try it.

      I’d like to use the extra money to help friends and my parents as well. If I only made $3,000 a month, theoretically, I can only donate $3,000 a month. But that’s OK, as donating one’s time is also very valuable. With the type of income I’m shooting for, it moves beyond self, and towards helping others more. It’s very motivating.

      1. Mrs. Money Mustache

        Thanks for the reply, FS! I’m going to be devil’s advocate here… hope you don’t

        Challenging yourself is fun, but your real challenge begins when you lose the
        security of your full time job and have to find other ways to occupy your time.
        That’s when your entrepreneurial spirit will really kick in! :)

        Travel: I suppose the WAY we travel is where we differ. I love traveling and
        have been to many parts of the world, but I travel differently. I like to see a
        place for real (and for a long time) and how the locals might experience it.
        I like to camp and climb mountains. I spent $8,000 CAD traveling for 3 months
        in Australia and New Zealand, for example (including all flights). Cheaper than
        your Med. cruise, but much longer.

        I have been on a cruise. I hated it. So did MMM. It’s just not my thing. I am
        not a fan of the spas either.

        If you look at our Travel budget in our expenses post, you’ll see we spent just
        over $5,000 on travel in 2011. We even broke it down by trip. We spent a month
        and a half in 2010/11 traveling along the Gulf coast. It was incredible and we
        saw many amazing things, but it didn’t cost a lot. I even went on a fancy girls
        trip to Vegas and MMM went on his annual snowboarding trip to Tahoe.

        Anyway, different strokes… when you’re used to luxury, maybe it’s hard to change
        your habits.

        Now, with the donations, I am on board with that. We donate a lot of our time
        to our son’s school and also gave a large donation to the school this year. My
        Real Estate business also donates 20% of all my commissions to non-profit
        organizations. We also help our our families and MMM donates tons of his time
        helping family members with constructions projects, etc.

        Anyway, my point is… you can still do all that for $24K per year. :)

        1. Oooh, I love the comparison game!

          I’ve lived in 7 countries for 6 months to 20 years at a time. Does that count as seeing a place “for real/ a really long time”? In that time period, I’ve also picked up speaking 3 languages. How many different countries have you lived in and how many languages do you speak?

          I’ve also visited 50 other countries in the world for 1-2 weeks at a time.

          I think it’s great you are a stay at home mom and there’s no need to justify it as it is a precious job that takes a lot of time.

          We have different aspirations at the end of the day. I don’t want to say how much I give, but it is more than both of your tearly after tax incomes and I want to give more. I can’t do that if I stay at this level as I’m driven more beyond my family.

    2. Mrs. Money Mustache

      Hmmm… sorry if I offended you. I don’t believe any of my comments indicate that I look down on people who like to work. This post was about financial freedom and potentially retiring early. The main reason I even posted here was to make a point that having a less expensive monthly cost in retirement is possible. I wanted to make this point for readers that make less money because if I read the post above and made $60K per year, I’d find it kind of discouraging.

      It seems to me that Sam is enjoying the dialogue, as am I, and I think it was respectful both ways.

  54. I’m going with Rich Hot Wife. You’re on to my entire strategy.

    I don’t like planning on streams of income that I physically might have to give up for physical reasons. Although tennis lessons are a small part of the plan (ubersmall, actually….), I would have fun with them, not count on them.

    It looks like you had fun writing this out. It’s a serious, but seriously flexible plan that leaves plenty of room for fun.

    1. Nice! Funny, after all the comments so far, you are the only one to mention “rich hot wife”.

      It was fun, but a little arduous to put this post together. I had to dig deep to figure out what is out there, and I just remembered there’s another income stream that could be a bonus, which is the buying and selling of watches and collectibles. I used to do that often.

      I look forward to reading your passive income report!

  55. The majority won’t be rolling over in another 5 years our so. We’ll cross that bridge when we come to it. For now, I will happily collect the 3.75%-4% interest return on this portion of my wealth.

    I HOPE for more inflation b/c asset prices will therefore inflate. In my view, you can only lose if you lose. I’d take a 0.2% increase over a 10% loss anyday.

    Do you have a post highlighting your passive income sources and strategy? I’m assuming given you are older, you have good insights you can share, and probably much more income! What are you generating now and what are your favorite investment sources?


    1. I’m definitely looking into P2P and muni bonds. I was afraid like Meredith Whiney, that munis would blow up.. and therefore didn’t invest. I think fixed income is kind of risky now, so I will bide my time. P2P is very intriguing, and if I can get an account manager to look after my funds, I will inject a good chunk of change.

      I can imagine the costs of three children and education down the road. Do you think $15,000/month after tax is enough then? That is what I’m baking in for a family of 4. thx

  56. PK, what is the podcast software/plug-in that can allow a reader to just press play/pause right on the post instead of clicking a link to then open the podcast?

    I think I’m going to be in SF for several more years as this is where the action is for the online space. Afterward, just rotate between my favorite places in the world!

  57. Anna @ Good Cents Savings

    I am so impressed that you can keep all these (real and potential) moving parts straight. My mind starts spinning when I think of all the options, but I know that it’s not enough to just keep working hard on all my different projects and save as much as possible – I need more of a blueprint towards a higher net worth. I’m thinking I’d be a great candidate for your online consulting service…let me know if you’re looking for a beta tester! :)

  58. Sam,

    You have done an outstanding job building up streams of diversified passive income.

    Do you have any cash parked in meager interest bearing savings / checking accounts or do you put things into CD’s as soon as you can? I guess since you have a ladder going there are always chunks that are maturing and bringing new cash back to you.


    1. Mike,

      I do have a chunk of change that just hit my bank account a couple weeks ago where I’m wondering what the hell to do with it. I don’t want to put it in a 7 year CD at 2%. The best is to probably use it to buy some more rental properties. But, rental properties compared to online income is more cumbersome, and I want to simplify. I’ve really got to think about how to use the funds.

      BTW, you can always withdraw penalty free all your CD interest income whenever you want.

  59. BusyExecutiveMoneyBlog

    EPIC post Sam!! Really, probably the single best post I ever read. I bookmarked it and will be referring to it regularly.

  60. Sounds like you two are well on your way too! Saving 50% is just every other paycheck. Then I save my year end bonus, so often times, that comes out to 75% after tax.

    I dot feel crimped, and want to try and spend more!

  61. I’m glad you stated the following: “I can promise you that if you do all these things, in 10-15 years, you’ll be set for life.” The problem with many people is they want it now! This plan takes discipline and time, that’s it. Now, I think it will tough for a lot of people to save 55% of their income especially if they have kids. But, I think 30-40% of there net take home pay is doable with discipline and keep the housing expenses low (primary residence), while avoiding the new car trap.

    1. I know a lot of people who work for 10 years and then have kids at 32-35, hence hopefully they can use that time to save and invest accordingly.

      Wanting things now with no money is a sure fire way to get into mad debt and blow oneself up!

  62. Wow awesome monster post Sam! I need to do a better job diversifying my income streams. I have CDs but man the rates suck on half of them. It’s still nice to see the totals climbing up little by little. I don’t have any dividend income at the moment and probably won’t for a while. I have too much going on to properly manage a portfolio and I don’t have the stomach to deal with market volatility. I do have my 401k balanced pretty well though so I get my market exposure that way.

  63. Andre (SF) Nader

    I am so glad I randomly ended up finding this site (from a random Reddit Post). I was just thinking about this exact topic the past few weeks. I am very early on in the process, luckily I have people like you, ERE, and MMM to set really solid examples of what to do.

    My big struggle is where to start! It seems like once you get the ball rolling you benefit from a snowball effect, but the beginning is always tough.

    1. Good to hear from you Andre. Didn’t know this post went on Reddit. I’ll have to check it out.

      I would start on anything you feel you have a strong grasp of first. The point is to just start and never stop!

      1. Andre (SF) Nader

        I back tracked my steps and it turns out that I ended up finding you through MMM’s guest post originally. At the end of the day I am just glad to find your site.

  64. Your post is proof that with patience and discipline, you can generate a great passive income. We don’t have any passive income yet, but I plan to write articles and resubmit to multiple sources by retaining my rights. That will be my passive income for now. We are making about $3,500 a month,which is tight with 3 kids. I would like to get it up to $6,000 in active income and then add passive income to it.

  65. Holy moly, Sam! I think you are all set. You definitely know where you are going, where you want to be and how you are going to get there. :) Just don’t get fat! Also, one day your spouse would like to do something of her own and quit her job. :) But I am sure you will be prepeared for it.

    1. I want to big a Big Blogga! Don’t stop me from reaching my dreams!

      I’m not all set as I still have a gut busting $10,000/month more in after tax passive income to strive for!

  66. Hi Sam, You raised some thought provoking questions while performing a detailed self analysis. I admit, I’m a bit dizzy after reading the article and I am looking forward to watching your situation unfold. Sounds like you are at a bit of cross roads. And ditto to the government waste and prejudice.. I’m totally in agreement there!

  67. Great work committing to saving over that many years. You’re hard work has definitely paid off. For someone just starting out, I’d say it’s inspirational. I am just now starting to have some cash to invest to build up some passive income, so I am asking myself where to start. I am going to build up some cash savings to invest in real estate, but I also want to generate more income since it would take me less time to save up for the rental property.

    1. Corey, you’re WAY AHEAD of me on side income streams man! When I was your age, I had nowhere near $3K or whatever you mention you earn from outside your day job! All I had was my day job income. Keep it up!

      1. That’s funny because I always feel behind. ;) Maybe that’s why I am so motivated. I’m not giving up anytime soon. I’d like to get to 4k after tax from my side income(s).

        1. That would be sweet!

          This is one of the main reasons why I’m so bullish on the economic recovery. I encounter people everyday on the internet who make bank, and you would never know. The internet has given opportunity to so many who want to take it.

  68. Your passive income is very impressive Sam. It seems like now is the time to pull the trigger and enjoy your adventure. You can buy a cheap place in Nevada and call it your residence once you leave your job. The tax saving alone will give you a big boost. Is that right?
    I like the fact that you didn’t include the earning from your 17 years saving (401k and IRA?) in your passive income. Many bloggers add this to their passive income stream and I think it inflate the income a bit since you don’t want to touch those funds.
    All I have to add is that you’d better work on your prenup. ;)

    1. I feel too young though. Just sees wrong to pull the ripchord so soon. But, by 40, like you, I think that is long enough eg 18 years of work!

      Yeah, I don’t include my 401K (what’s an IRA?!) at all. That’s not passive income!

      1. It sounds like you have a bunch of projects lined up already. You’re not going to sit on the beach and relax after you leave your day job right? Well, not for long anyway.

  69. The Financial Blogger

    wow… this is beyond the point of income diversification ;-).

    Is there any form of income you don’t have at the moment? I mean, all you are missing is royalties on a music single or a book, right?

    With an income portfolio as diversified, the only thing left for you is to enjoy life. Congrats on such accomplishment.

    How do you keep up with everything? I mean: how do you answer a tenant’s request while you have received 100 emails from your online business, 100 emails from your day job, coordinate a business meeting with tennis lessons… between 2 trades on the market? Do you have assistant or you are simply working 15 hours a day? I know that a big part is not really “working” since you have fun doing it, but still. It seems a lot for a single human being. What’s your secret?

    1. It’s the same “secret” I carry with me when I battle my opponents on the tennis courts. I tell myself in between points and during change overs, “Focus.”, “Try harder!”, “No excuses!”, “Never give up until the very end.”. Sometimes I win, sometimes I lose. At least I know it wasn’t due to a lack of effort.

      I don’t have product income. That’s something I want to build, but am not in a hurry.

      I find tenants to handle the issues themselves by giving them a list of trusted handymen. I give them full authority to charge up to $200 to fix something, and email me if over that amount. More efficient for them and me. Responding to emails is easy. Also, I don’t have 3 kids like you, so have more time.

      Today I woke up at 4:45am. Worked for 4 hours straight, and have a 10:15am tee-time :)

      BTW, do you still object to the “How To Retire Early” post?

  70. Thank you Sam for highlighting so much detail in diversity. I understand why you want to keep the active and bonus income portions private since each person is in a different occupation with different skills.

    Seems very difficult to generate $10,000 a month in after tax passive income nowadays!

    1. No problem. Yes, it’s very difficult. I’m actually kind of disappointed that after all these years, I’m still just 1/3rd of the way to my upper limit goal. I won’t stop trying though!

  71. Yeah! Great post! We’re not nearly as diversified…In fact pretty much all of our secondary income comes from real estate, and our entire long-term strategy revolves around it. We have significant amounts of cash sunk into some private equity investments from years past, and they’re in about the same boat as you describe your private equity. If that pays off (we’d even be ecstatic with it paying BACK) it would be a huge boost. I’ll be excited when I see our “passive” income approaching what our W-2 income was a few years ago when we were starting out. That will likely take at least 3-5 more years.

      1. One of the disheartening things is that as my W-2 income grows (our combined W-2 income is about 70% higher than it was 5 years ago) it becomes a harder and harder target to reach, AND it makes it harder and harder to give up! By the time we get to $80k in passive income our W-2 income will probably be double that or beyond. Oh well… a few more years of strong saving/investing at those income levels and the passive should really take off!

  72. I love this insight into your income plans Sam. Thanks for sharing so much detail. It is obvious you put a lot of hard work into building all of this, and it is an inspiration for me to focus more on income generating investments.

    Now that I am debt free, other than my mortgage, I am starting to put a lot more of my monthly income into investments. I am on track to max out my Roth for the first time ever while I put more into my non-retirement portfolio as well and take full advantage of my 401(k) matching plus a few percent.

    Looking at your income from outside of your primary job is a good reminder of what we can do.

      1. Interesting stuff on the Roth post. Now you are making me think twice. I put money into the 401(k) first, then hit the Roth, then do other investments and savings. I am a long way off from maxing out the work retirement plan.

  73. I too believe in multiple income streams, the more the better. My goal when I retire is to have $5-6K after tax income per month. I will have that through Social Security and a pension. My retirement savings will be gravy on top of it. Since I will have no debt and relatively low real estate taxes, my wife and I will live quite well. My savings and other income augments that. Since I have no idea how long we will live, I am planning on a modest life. A 3% withdrawal rate seems to make sense, although I will be 70 years old when I retire.

    I am more concerned about physical and mental activity that will keep me healthy. This is one of the reasons, I am starting to do things now to make sure I will have something to do.

    1. You are very fortunate to have a pension! To be able to receive, 50%, 60%, 70%, 80% of your last year’s income for LIFE is incredible!

      I’ve totally disregarded Social Security. But, that would be a nice $2,000+/month gross income boost if it comes.

      1. Don’t forget the medical (for life) and the COLA too! It is not really as sweet as it seems. I wish I had that when I earned much more money. Oh well, Life is not perfect!

  74. This Aggie Saves

    Additional income streams? What are those? I don’t foresee anything in my near future resembling additional income beyond my job.

  75. I should look into P2P, but I want to go LARGE, like $100,000 or something. A 10% return is great, but who cares if you just have $10,000 or $20,000 in it? It doesn’t do much for me, or for most people I imagine.

    I’d like to partner up with a P2P company like prosper, where I can be their spokesperson or something, give them a large chunk of change, and have them actively manage the account so they give me as best a chance as possible not to blow my returns up.

    You need to build the NUT to generate cashflow. Just get cracking.

    1. Gotcha. You mentioned there is a concierge type service w/ LC right? Can I get an account manager who can monitor and pick and choose for me if I give $100K or $200K? If so, I will probably do it, as I’m trying to figure out where best to put my new money other than in a savings account.

    2. Good review. Thx. That Dan B guy seems to be really down on P2P lending.. did he say what his “NAR” was?

      A 0.8% fee does sound like a lot… but not really if I can get 10% on my money.

      If you had $250,000 in cash lying around and did not need it b/c you have multiple sources of income, how much of that $250,000 would you invest in a LC Prime account?

  76. Great post, Sam, and excellent work on the passive income front. I admit I’m a bit green, haha!
    I agree with you on multiple income streams, and I am actually impressed you have such a high risk-free rate of return, and such low mortgage rates. How did you manage to swing those?

    I have an upcoming post titled “Getting Screwed Out of Your Hard-Earned Capital: How CDs and GICs Are Rip-Offs for Long-term Investing”, but this is more applicable to current rates which appear to be 2% or less.

    1. Pretty easy actually. I took a stance 2, 3, 4 years ago that rates were going to come down. Hence, I locked in the longest term CD durations I can find eg 7-year CDs at 4.5%.

      Now that rates have come down, I have then aggressively refinanced all my property debt. As a result, you have a POSITIVE CARRY on your debt + a surge in rental income.

      Let me ask you this: Would you rather make 2% or lose 10% of your principal?

      1. If you can lock in mortgage rates that low, then why not. I had a post about that today, actually, but the rates here are for 5 years, not 15-30 years. 3% or less on a 15-30 year mortgage? It’s a done deal, haha.

        The only thing is, what’s going to happen to the banks if/when rates go up and lots of people are holding cheap mortgages. Isn’t that what the crisis in the early 80s was about?

        1. We took a variable rate at 2.30% for 5 years at the time. Now we have the choice to potentially go to 2.99% for the remaining 4 years, but depends on cancellation costs, too, as not offered by the same bank.

          Come check out the post. :)

  77. Our income streams include just our jobs with a sprinkle of my blog income (ha).

    Our target would be around $5,500 after tax income. Right now we’re at around $4,000-$4,300. $5,500 is ideal mainly so that we could pay down our debt faster.

    1. That’s great you’ve got $4,000-$4,300 in after tax income (passive?) a month! How long did it take you guys, and what are the passive-to-relatively-passive income streams you guys invested in?

        1. Ah, gotcha. Do you plan to build passive income? Or not necessary b/c you enjoy your jobs that you could see yourselves working for a while?

          * need to start new thread

  78. Ah, but $6,500/month is gross. The base case net after tax is only around $4,550 a month. Will keep striving though!

    From the post:

    “After 30% tax, my base case passive income is around $4,550 a month. The irony is, if I didn’t work for a living, my after tax income would probably be over $5,000 a month due to a lower effective tax rate of 20%.

    Another solution is to just move to one of the seven no income tax states upon retirement. Base after tax income will therefore rise to about $5,500/month. California’s 10% income tax is a killer!”

  79. This is impressive – GREAT JOB!

    It is great to earn risk free more than what you pay on your mortgage. I have more in I savings bonds than my mortgage. However, no way am I paying off my mortgage as its at 3.5% but my I bonds are paying 4.7% to 6.1%!

      1. These are US government I-bonds.

        I purchased them in 1999 to 2001 and THEN they came with a 2% to 3.6% guaretee over the inflation rate. However they now pay NOTHING over the inflation rate!

        I also purchased these using a credit card and got hundreds of thousands of frequent flier miles! You can no longer use a credit card to purchase US savings bond!

      2. Definitely no longer as good! Now they equal inflation and nothing more. And the limit is much lower. For a few years I purchased $60,000 worth a year. For many of those $ I got double frequent flier miles from United – can you say Free First Class Trip to Japan!!!!!!

        I loved getting frequent flier miles to move money from cash to cash. I also loved the 60 free use of money!

        The good old days!!!!

    1. Free Money Minute

      Do you have to carry debt a long time in order to get in a situation where you have a loan that has a lower rate than what you can invest money in? For example, if you were to get a loan today at 4.5% (30 year mortgage), would you not have to wait a long time before you could get a savings account, CD or money market account that ever eclipsed that amount? Wouldn’t it make more sense just to pay this mortgage down and get the guaranteed 4.5% return (return by not paying interest)? I guess it all works well while you have income coming in or if you have an account large enough to pay if off if the entire loan is called (if that is possible with what you have).

      1. It’s all about balancing liquidity needs. You don’t want to be house rich cash poor.

        And of course, banks will be slow to raise CD and money market rates and quick to raise lending rates.

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