Want to gain financial independence sooner rather than later? Well, you can gain financial independence the hard and honorable way by doing everything yourself. Or you can gain financial independence the easy way by depending on your parents for money.
When I graduated from college in 1999, a bunch of my fellow first-year classmates at GS proudly proclaimed they had either found a great one bedroom to rent or had purchased a condo somewhere in Manhattan.
At the time, I always scratched my head and wondered how they could afford to pay $2,000+/month for rent or $500,000 for a condo when our base salary was only $40,000 at the time.
As I got to know my classmates better, however, I learned many of them came from very wealthy families. There was a disproportionately large number of classmates who went to private universities.
One classmate's dad had been the Prime Minister of Canada. Another classmate's parents were GS Private Wealth Management clients. To become a private client, the minimum to be a client was having $25 million in investable assets.
Here I was, sharing a studio with my high school buddy for a total of $1,800 a month because neither of us wanted to spend over $1,000 a month on rent. A year later, my roommate abandoned me because his parents bought him a one-bedroom condo near the United Nations building for $260,000. Now that was a good buy.
Over time, I've come to realize there is no one specific way to achieve financial independence. Many people actually view having their parents buy them cars and homes after graduating from college as perfectly normal. As the bull market rages on, there will probably be even more support for adult children.
Although it feels GREAT to make your own money, the slog is often extremely difficult to sustain. Relying on your parents to get ahead is a much easier way to go.
Gain Financial Independence By Depending On Your Parents
Let me share a wonderful example of how one married couple has gained financial independence by depending on their parents. The example comes from a comment to my post, Never Ask To Borrow Money From Friends Or Family.
Nona, who lives somewhere in Europe, writes,
“Oh boy, we just asked my husband's parents for money to be able to afford our 4th rental unit. Do I feel like a loser? Hell no! We are a family with three young children and we chose to be financially independent, without a ‘real’ job, as they say.
Problem in our country is that rent doesn't count as income. And if you don't have a ‘proper’ job, banks won't give you a mortgage. So, even though we had 90% of the money we needed to buy the property, just sitting there in saving accounts, our bank wouldn't allow us the mortgage for the remaining 10% of the money.
So we politely asked my husband's parents if they would be willing to help us out, and they did! We agreed to pay the full sum within 24 months back. They didn't want us to pay any interest (I'm grateful for that!).
The parents are happy they could help us out. Our investment properties are part of the inheritance we want to give to our own kids. We are grateful we could get the loan from our parents. Now we get the freedom to pay as much/ as little as we can, within the given time period.
So no, I think it's great if people can help each other financially. I plan on helping out my own children when I feel the money will go to a good cause.
Financial Independence Overview
Nona's comment is very insightful. She has shown that it's not that hard to achieve financial independence with three kids. Nor is it hard to afford your 4th rental if you can politely ask for money from your in-laws.
I used to think that having a job was vital for being able to get a mortgage or refinance a mortgage. Without a job, we are dead to banks. But my mindset is slowly changing.
For men out there who might feel too embarrassed to provide for their families, don't be. Get your wife to ask your parents for money for you. This way, you can save your ego from taking a hit. You can also soften any of your parents' disappointment in you.
Gain Financial Independence By Having Wealthy Parents
I also got feedback from another reader who proudly explained that she had saved $100,000 by the time she was 25. She's 27 now.
“Sam, I know you harp about not going to a private university due to the cost. But I'm here to tell you that I was able to save $100,000 by the age of 25 and so should more recent college graduates if they work hard and diligently save. I'm well on my way to financial independence by 35, if not much sooner.
I went to the University of Portland where the tuition is now roughly $47,000 a year. After food and lodging, the total comes out to be around $67,000 a year for students entering this year. Despite the cost, I was able to get a $1,000 a year scholarship towards tuition. My parents did pay for everything else.
But I made a pact with them. I wouldn't go on an extended European vacation like many of my classmates after graduation. Instead of going to the Amalfi Coast or Mykonos, I decided to stay back in Portland and look for a job.
I landed a job in publishing as an assistant editor for $38,000 in Portland. Three years later, I worked my way up to $52,000 a year after one job change. Due to my frugality, I was able to save on average $15,000 a year for three years. I lived with roommates, didn't eat avocado toast every day, and didn't own a car.
My $45,000 in savings was mostly invested in the stock market. As a result, it grew to about $60,000. Yes, my parents also gifted me $15,000 a year for the past several years. But I'll happily accept the gift tax-free over having them pay a death tax when they pass.
Financial Independence Overview
Although spending $47,000 a year in tuition may sound like a lot, 16 years from now I expect to face over $100,000 a year in tuition expenses if my son chooses to attend a private university. At this stage in my financial journey, I'm not comfortable paying that sum of money.
Given the massive bull market we've experienced for decades, we shouldn't be too surprised if there aren't more people like Leanna who've been able to amass a tidy sum of money while still in their 20s. The Boomer and Gen X generations are rich as heck. It's only natural they'd prefer helping their children while alive, then after they've passed.
Finally, I do commend Leanna for being frugal and investing the majority of her savings in the stock market while young and unencumbered. That is huge!
More Wealth Out There Than You Know
The point of these two examples is to show that there is more wealth out there than we all realize.
You can gain financial independence on your own, or you can gain financial independence by depending on your parents. You can also gain financial independence by finding a supportive spouse. Choose the easier route.
You do not get extra brownie points for achieving financial independence on your own. Instead, you might just get burnt out. You'll see your friends getting way ahead and wonder how on Earth can they have it so good when you're just struggling. You might even get jealous and angry.
Just know that it is highly likely that if your friend bought a $500,000 home at age 25 or a $2 million home at age 30, they probably got help from their parents. Doing simple math makes it really obvious they couldn't have bought their property on their own.
The sooner you realize parents are helping their adult children with many of life's largest expenses, the less agitated you will be. You must also realize that it is becoming more common for people to believe they earned all their wealth, instead of attributing most of their success to luck or help from parents.
Once you recognize and accept how society is changing with regard to wealth accumulation, you can then 100% focus on building as much wealth for yourself and your family as possible.
Gain Your Own Financial Independence
If you're lucky enough to get tremendous financial help from your parents, make sure you don't lose it! Sign up for Personal Capital, the web’s #1 free wealth management tool to get a better handle on your finances.
In addition to better money oversight, run your investments through their award-winning Investment Checkup tool. You can 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. The better you can track your money, the more you can optimize your wealth.
Gain Financial Independence Through Real Estate
One of the best ways to gain financial independence is through real estate. Once you've convinced your parents to help you out with a down payment on a primary residence, you really should try and build your own wealth. One of my favorite ways is through real estate crowdfunding. Here are the two best platforms today.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing.
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.
Both platforms are free to sign up and explore.
I've personally invested $810,000 in real estate crowdfunding to diversify my holdings and earn income 100% passively. After I had my son in 2017, I wanted to simplify life as much as possible.