There is a downside of financial independence that’s worth discussing. The media likes to make it seem that financial independence is the best thing since slice bread. But I’d like to provide more balance.
One of the things I was counting on when I published, Being A Landlord Questions My Faith In Humanity, was readers coming out of the woodwork questioning why I would be so lenient when my tenants were so thoughtless. Most were empathetic to my situation, but some blamed me for my tenant’s actions. That’s cool. I like to blame TV for my consumption habits.
At the end of the day, I got $216,000 worth of rent over 24 months, a completely redone backyard mostly paid for by them, a professionally cleaned house, and $1,000 of their $17,000 deposit. Things could have been much worse if you read some of the tenant horror stories in the comments section.
My tenants were generally nice guys. They were just clueless. When I sent them the picture of the trash explosion the next day, they immediately called a junk truck to collect everything a couple hours later. They could have just disappeared into the wind since they had their deposits back. But they didn’t.
Hopefully my post will encourage people to be more thoughtful. At the very least, it provides some insights for current and future landlords. I always try to highlight the good with the bad on my road towards financial utopia (doesn’t exist, sorry).
In this post, I’d like to highlight the downside of being financially independent. I don’t know any other landlord who would not have charged a single late fee after eight times of tardiness. But you know I’ve got a masochistic side, looking for ridiculous situations to share with all of you!
The Downside Of Financial Independence
1) Not optimizing for maximum financial returns.
When you are financially independent, you don’t need more money because you already have money. If the counter party isn’t financially independent as well, you start feeling a little slimy for trying to optimize your returns.
As a result, you aren’t negotiating the best deals. You aren’t shopping around to find the best bargains. You’re definitely not driving around the block to find a free parking spot. And you’re always booking flights late because you value optionality.
Instead of optimizing for financial returns, you start maximizing for peace and harmony. With each late payment, I had a choice of letting it go or laying down the hammer, which might have led to more property damage and further disregard of the lease. I knew they would eventually pay, so I showed kindness.
By forgiving their tardiness, I wanted to build credits for future instances when I couldn’t come over in a timely manner to fix something or address an issue. And it worked on two occasions: 1) The kitchen faucet lost cold water pressure for some reason. My master tenant volunteered to meet the plumber, make the payment, and oversee the project. 2) Then my microwave stopped working one day. It was a custom size that was built into the cabinetry. He took it upon himself to go to Best Buy, then to a private party when Best Buy didn’t carry such a model to pick one up, pay for it, and install it. His actions saved me at least three hours of time.
My main mantra is to always give as much as possible first. This way, people are more inclined to do right by you in the future.
Related: To Get Rich, Be Willing To Do The Dirty Work
2) People will take advantage of your kindness.
It doesn’t matter how rich you are, nobody ever wants to be taken advantage of. Yes, my tenants were taking advantage that I wasn’t penalizing them $250 for each time they were late. But the way I saw it was I had $2,000 worth of credit I could withhold from their $17,000 security deposit if they didn’t comply with what I asked for before moving out.
They knew this, which is why one of the tenants said the day before move out, “We won’t let you down Sam!”
I have a wealthy friend who escaped to Paris for a year with his wife and four kids because he couldn’t stand getting hit up for money all the time. He told me, “Every time I open my inbox, I get some random person whom I don’t even know asking if I could donate $100,000 to some organization I don’t care for. It’s maddening I tell you. How about at least getting to know me first?”
Dine And Ditch
One time I met a friend for drinks. He was talking to this startup female founder who was once an ex-beauty pageant queen. She was attractive and she knew it by the way she talked about her relationships with “high powered VCs.”
Both my friend and the founder had to leave, so instead of paying for her own drink, she looked at me and said, “I’ve got to run. It was nice meeting you,” implying that I was to pick up her tab. Since she Usain bolted, of course I had to pay even though we just met. I’ll give her startup a 0.1% chance of surviving with that type of entitlement.
Finally, I get bombarded every day with questions from people who don’t bother to make a connection first. I’ve been asked to give a diagnostic of their entire financial lives. Some have asked whether I can help them with their marriages. Others have asked me to help them with their online business plan. The most common question I get is, “Can I pick your brain?” I’m not sure how anybody thinks that’s enjoyable.
To avoid being taken advantage is one of the key reasons for practicing Stealth Wealth. If people know you are financially independent, they’ll do everything they can to extract as much time and money from you as possible.
3) You start empathizing too much.
I saw in my tenants a rowdier version of me when I was their age. I remember what it was like to struggle at work, survive layoffs, begrudgingly pay a portion of my paycheck to rent, all while trying to enjoy everything that life has to offer. As a result, I started developing a lot of empathy for them because some of them had issues at work.
Another had back tax problems because he somehow forgot to pay them. While another just couldn’t get it together given his parents babied him too much as an adult. I thought I could be sort of a big brother who could provide some guidance.
But empathy doesn’t get you anywhere if the other side doesn’t care. There’s a reason why it’s never a good idea to do business with friends or loved ones. For at least the rest of the year, I’m going to work on being a stone cold business assassin. It’s not in my nature because I’m always joking around and having a good time.
To be frank, I fear the lion within. I’ve never backed down from a fist fight or a shouting match when provoked. A part of me longs to snap an oppressor’s bones as I once did as a raging young man who always defended his honor. Thanks to the feedback from the community, I’ve been reminded how overly soft I’ve become. Time to get fierce and care for no one!
Related: Are You Smart Enough To Act Dumb Enough To Get Ahead
4) You start taking money for granted.
Do you remember how excited you were as a kid to get a crisp new bill in an envelope for your birthday or Christmas? Those were the best! Unfortunately, I no longer get excited about seeing a $20 bill or even a $100 bill in my wallet. Now, I withdraw thousands of dollars at a time to pay vendors without feeling a thing.
The reason why I’ve begun to tip more aggressively since reaching financial independence is because I enjoy seeing the joy in others that I once had. I remember getting a $5 tip for just a $5 ride when I gave an Uber ride to this woman. My eyes teared up with gratitude! For the rest of the afternoon I had an extra hop in my step. Then I noticed the best tippers are those who work in the service industry because they know how hard it is to make a buck.
I wish I would be excited by money again. But I’m not. Nowadays, all I get excited about is living life on my terms.
* I just realized while writing this post that I forgot to collect $420 for the two pro-rated and discounted nights after April 30 check out. I accommodated two of the guys because their escrow closing was delayed. I wanted them out on April 30 because it would take five days for the floor guy to refinish everything with four coats of polyurethane. If I cared more about money, I would have remembered to have collected the $420 on the May 2 walk through.
5) You slowly lose motivation to try harder.
There was a time when I responded to almost every comment. I felt I had to at least say “thank you” to those who took the time to share their thoughts. But now, I respond to only about a third because I’ve lost the energy to keep up. I feel I’ve provided enough value over the years to give myself a break. Besides, the time formerly spent responding to comments is being used to write meaty new posts.
I used to have this goal of writing five posts a week from the current three posts a week cadence. More posts, higher growth, and more revenue. Now, I’m thinking about just posting a couple times a week because I don’t have this insatiable drive to grow my business anymore. Unless there’s a huge tax cut, I don’t want to build a Financial Samurai app or create a larger publication with 10 different staff writers. I just want to have my own little lifestyle business that never feels like work.
The people who hit it out of the ballpark have this ridiculous drive. Pity the trust fund kids who went to private school, got jobs through connections, and don’t really have to create something of their own. When you have everything taken care of, it’s much harder to be your own person. I blame my loss of motivation partly due to my older age, but mostly due to my passive income and steadily declining debt levels.
Related: Debt Optimization Framework For Financial Independence
The Three Generation Cycle
“From rice paddy field to rice paddy field in three generations.” – Japanese/Chinese variation
“Shirtsleeves to shirtsleeves in three generations.” – American variation
“The father buys, the son builds, the grandchild sells, and his son begs.” – Scottish variation
The First Generation comes from a life of hardship. This generation takes the most risks, works the hardest, and makes the most sacrifices to break the cycle of poverty.
The Second Generation grows up a witness to their parents’ struggle and understands the importance of hard work. Because of this awareness, they make good financial decisions and build upon the foundation their parents worked so hard to create.
The Third Generation, however, has no recollection of hardship. They only know a life of abundance. Without an awareness of the work needed to build build wealth, the third generation squanders their good fortune their parents and grandparents worked so hard to build.
My great grandparents left China by boat in order to make better lives in Hawaii and Taiwan. They took all kinds of risk, whereas by comparison, I’ve done nothing close. I fear that a life free of financial worries will dishonor their generations of hard work, frugality, and sacrifice. With consternation, I wonder when my child grows up, will he take his good fortune for granted?
Beware OF The Downside Of Financial Independence
Being financially independent is fine, but unless you have a deep hunger to do something great, it is unlikely you will ever maximize your potential. The downside of financial independence is real. Therefore, a key reminder is to always be mindful of others.
Financial independence can blind you to the world’s suffering. Or financial independence can bless you with the time to help other people. Which will you choose?
The Dark Side Of Early Retirement
Once You Have F U Money It’s Hard To Tell Others To F Off!
How Does It Feel To Be Financial Independent?
ZJ Thorne says
I think it is natural for priorities to shift as your circumstances do. However, if you do not like the changes in your temperament, noticing that and working to correct those deviations is a grand idea.
Very interesting perspective. I always enjoy reading your articles and this has given me a lot to think about. Thanks again.
Matt Miller says
I’ve now lost all motivation to become financially independent after reading this. I think I’ll just slave away forever. Just kidding.
It’s interesting to me that our society has linked working with money. It makes sense. It’s been this way forever. But I wonder sometimes who thought of working for money, jobs, the 40-60 work week. We went from hunter gatherers to farmers where we could settle. Then to industrial jobs and now the knowledge economy. Seems like pretty soon it will be a gig economy where we’ll all be 1099’d for our contribution. Every step along the way, where the economists thought we’d have more leisure time, we haven’t. We instead say no to leisure time in the pursuit of buying more stuff or accumulating more digital dollars in an account. And it’s almost the entire society doing the same thing.
I think your pursuit to go after more leisure time or balance or whatever you want to call it is great. Valuing time over money OR your autonomy over servitude is key.
Several of these comments talk about generations of wealth. I think about how to motivate my son. He’s 12 now, and recently asked why all “millionaires” act so stuffy and fancy. He was referring literally to Thurston Howell III (yes, we watch old Gilligan’s Island reruns) and to other cartoon depictions of spoiled, rich “millionaires.” I said not all millionaires act that way, really very few do. I assured him that there are probably normal people around our community who are millionaires, but who just don’t show it off. The truth is, obviously, that many people are now millionaires (I am, for example), because a million isn’t as much as it used to be. I want to prepare him for understanding one day how to manage wealth in a modest and sensible way. He should know that having money doesn’t mean you are a jerk, and that it is a responsibility.
I haven’t inherited any money to get where I am (my parents do fine on pension checks, but will not leave me any assets when they depart), but my son will inherit money some day: he’s our only child, plus my wife’s parents have written their will to give him, their only grandchild, the first $100,000 of their estate payable when he hits 25 years old. So, from grandparents on the one side and likely from us, he will need to know how to manage inherited money.
I know it’s “never too early” to instill financial awareness, but I am not sure when it is actually appropriate for him to know a ballpark of our asset picture. I’ve seen articles suggest that high schools kids should be told the financial picture, but that seems too early for my taste. We try to convey that our hard work has fortunately created money for the important things (plus some fun things), and that we still need to be careful what we spend, while also being generous to charities, all to create a proper ethic of stewardship, but that seems like enough for now. I just don’t think a 12-year-old, or even any teenager, can act responsibly with more knowledge, such as that his parents are sitting on $6M in assets. It would be a disaster to find out he told friends, even if he didn’t mean to brag. Is graduation from college a good time? Or when one of us dies, putting him in the batter’s box to inherit the money?
I know you haven’t had this situation yet, but I like your site and wonder whether other readers have good or bad stories in this regard.
For what it worth:
I went to a nice HS in an are of California that had prominent people’s kids as students. That may be a different picture than you because everyone kinda knew they were well off.
One good friends dad was a high level executive at a know tech company (my own parents were poor, really poor, when I was young but my dad with a high school education and a first job at 7-11 transferred pathological work ethic into owning multiple stores by the time my highschool enrollment came up) I think handled it the best.
Many of my classmates haven’t done anything but they’re still doing okay, this one friend has done very well.
They lived in a nice but normal house, his dad drove an old car. They paid for expensive education but otherwise he was working at blockbuster to pay for “extras” the day he turned 16. (My parents did the same “happy 16th…you’re getting a job”). Classmates had range rovers (one rolled it over 10 days after they got it and had a brand new one the next week) he drove a beat up 15 year old Camry.
They didn’t let him know the full scope of their assets. His level of knowledge was that he would never really need to worry about everything but if he wanted to have the lifestyle his classmates had he’d have to get it himself.
They basically laid it out for him after college and when he had his first job. He’s now doing great but even still spends like a maniac in my opinion.
I think HS is too early for a detailed conversation. I respect his dad (and mine) greatly and think they did it right. HS….suffer like an average kid (and get a job to figure out what you DONT want to be doing the rest of your life) See what you want around you and talk about how to get it. Get into college and on the right track and then gradually have more in depth conversations about what the families financial picture is.
It’s more about what you model. My family has means and you don’t see many fancy cars or mansions. Same with that friend. Some cousins have much nicer cars and houses than their parents and those were the ones that had everything they wanted growing up and no “fear” of not making it or work experience pushed upon them.
Hope that helped. I’m trying to do the same with my kids but wife from a different experience disagrees. “They don’t need a job”, “they can stay at home if they want” etc. I think that’s nice for one generation but that’s how you ruin the head start for the next.
That’s really helpful. I basically didn’t grow up with money, or even close to people with money, and I’ve ended up being by far the most financially successful of the 7 kids, so I don’t have lots of models. Yours is good advice. Thanks!
How would you enforce the $250 late fee?
John Dabney says
Sam — your point No. 5 is my biggest problem. Once I got to be financially independent, I gained an even greater respect for the people who are able to maintain the crazy intensity and drive AFTER they are massively independently wealthy and never need to work a day again in their lives. They still have the eye of the tiger into their 40’s, 50’s, 60’s and even 70’s.
What do you think makes those people tick? I would love to find that magic.
Hi Sam. Long time reader but this is my first post. On generational wealth, I think people, and successful people especially attribute much of their success to hard work. The fact is, random chance plays much more of a part than we would like to admit. If our grandfather worked 18 hours per day to earn his fortune, there are likely 10 other grandfathers who worked the same 18 hours per day but never became wealthy.
I am moderately successful and sure I work hard. But so do most people. I am successful because early in my career, a hiring manager decided to take a chance on a smartass kid. Had that not happened, my trajectory would be completely different (for better or worse).
Financial Samurai says
I think you’re right. One of the reasons why I try to work a lot is because I know most of everything I have is luck, including this site itself. Therefore, to not work hard would be disrespecting the millions of other people who are not as lucky.
It’s the same with fitness, investing, relationships, real estate etc. Probably 90% luck.
Related: Sweat Dreams Of Becoming A Millionaire Again
This is a good point and a good motivator.
When I feel lazy and unmotivated when I get home from work I think about one of my patients laying in bed. What would they give to have the good fortune and good health to be able to get out of bed and be able to jog a couple of miles. Changes my perspective on what a hassle it is to work out.
In regards to loss of motivation as your financial situation improves I see it, I feel it and I feel guilty. I want to be an example to my kids and have them see their dad work hard but man….I don’t know. I look back on what I worked in my 20s and early 30s. I couldn’t do it again. I’m slower, more tired and frankly probably not as smart (although experience makes up for that thankfully) as I was 10 years ago. And although I feel guilty I’m happier with that. I don’t want to do 100+hr weeks anymore. I care about going home now, I used to prefer being at work and growing professionally. Now I just want to go home and play with my kids, I feel if I was struggling I would maybe still have that fire.
I had an interesting conversation at a Christmas party with my wife’s CEO. He made a lot of money. Clearly as salary but in addition you could calculate his take on the IPO. He spent like mad. I mean like mad. Huge house in the hills of California. Exotic cars. He said something that kind of struck me as both sick and amazing.
“I need to spend it, I need to be on the edge and feel some fear of real loss to keep my drive”. I think it’s true for everyone but question the wisdom of that approach.
Anyway, don’t beat yourself up…I’m sure your grandparents are proud.
Sam, I respectfully disagree with your assessment of luck. Winning the lottery is luck. Being struck by lightening is luck. Winning the electoral college while losing the popular vote is luck. Success driven by hard work is success. “Luck is where preparation meets hard work.” -Seneca
Adriana @MoneyJourney says
We’re not yet doing amazingly great financially speaking, but we’re definitely doing better than others who refuse to save money for a rainy day. So, in regards to people taking advantage of other’s kindness, we decided to just go ‘stealth mode’ whenever money comes up in any conversation.
At first I thought it was kinda mean to just stop helping friends out, but in the end we both realized we’re lending money to people who don’t understand or don’t care at all about finances. People who buy 10 pairs of shoes a month and then complain they don’t have enough cash to pay the bills. So, yup.. real eye-opener!
The struggle is real, lol j/k. I can’t wait til I get to that level. For now, I am usually, but not always trying to find ways to earn and save more. On another norte, my family was first generation in the US, so as a result, we grew up with a real appreciation for money and how valuable of a tool it can be – fitting into your Second Generation Cycle. Even though my kid is more fortunate in this sense, I still want him to acquire good saving and spending habits at a much earlier age than me
John Wilder says
Been there – it’s that constant pressure that creates performance – either external or internal.
Your First Million says
Regarding “The Three Generation Cycle,” I completely agree with this. I recently read a book called “Family Fortunes- How to Build Family Wealth and Keep it For 100 years” by Bill and William Bonner (father & son).
In this book they talk about how a first generation (who is called the wealth creator) needs to set up a family office in order to make the family wealth last and continue to grow over the generations. A family office is like organizing the family as if it were a company or corporation. The family has an “investment committee” who is elected by the other family members to take responsibility of investing the family money.
There are other people in the family, usually the mothers and/or grandmothers who help raise up the children in a family culture that revolves around the family principles of being successful and building wealth.
The book goes into much more detail and makes a lot more sense than what I have written here… but they also give many examples of some well known (and not as well known) wealthy families both in Europe and the US.
It is amazing how some of these families have maintained their wealth for several hundreds of years… passing through many generations. Obviously they know something that most people don’t, and that’s why we have the old sayings about wealth being lost in just 3 generations.
It sounds like you’re just finding your balance post-FI.
On the one hand, you don’t need to be the hard-charging young buck now that you’re FI. I can tell you don’t like this idea but I would view it as a good thing. You’re much more content and happy now…..so what if you’ve lost a little of the angst that drove your ambition? I’d say that’s a good trade-off. Plus as you mention here there are actual benefits (including financial) to being less of a driver at times.
On the other hand, you don’t want to swing too far the other way and get too soft so that people walk all over you or you lose all ambition for the rest of your life. Plus you don’t want to set this example when you have kids since you’ll want them to have ambition. Given all you’ve accomplished, I doubt this would happen but your tenant example shows you self-correcting as you realize you were a bit too relaxed about how you were being treated.
I’d chalk it up to your ongoing evolution to find the right balance between continuing to look out for yourself but also being ever-more generous with others (but in a helpful, non-welfare type of way).
Today, a guy told me he was hungry and he had asked a bunch of people for help buy no one would help him. After listening to him, I reached in my pocket and gave him $20. He looked at the 20 dollar bill and said, “Really, are you serious?”. I told him, get something to eat and good luck, then walked away.
L. Vas says
Next time say to the man, who is looking for easy money, that you have no cash, but you know how he can get $10 per hour. If he is agree, find him some kind of work: to paint, to mow, to repair the old fence, to plant a tree, to clean windows, to distribute fliers, ..etc.
There is enough space for easy work in our neigborhood, i hope in yours too .. :)
That’s fine, if you’re willing to say that to a homeless woman, too.
Sam..long time reader first time poster. I enjoy reading your articles and often forward them to my kids, high school and college age. We have over 30 tenants and are guilty of being soft sometimes so don’t beat yourself up. The majority of the tenants are good with a few bad apples. We have been hit with late pays, sob stories , and just plain crooks. Occasionally we want to sell them all off but sleep on it , calculate the cash flow/ appreciation and stay the course. The smartest thing we did was hire a property manager. They take a cut of the rents but we are not bothered by all the calls and issues.
My hustle had faded as I have aged. I used to work mega hours at my small business scan the internet for properties at night, drive by properties nights and weekends all while changing diapers and caring for young kids. I think back and don’t know how we did it. We have scaled way back. I find myself working fewer and fewer hours. Not worth it to me. We did the hard work years ago so I have no problem enjoying the fruits of our labor.
Your articles really resonate with me. Work hard, save, invest, hustle and enjoy life.
I have family in the San Francisco , grew up in the Bay Area and am amazed at the home prices. With the said I would be nervous to rent properties in San Francisco. I have heard of more than a few crafty renters that are long term low rent tenants stay on the lease , move out and sublet pocketing the difference in rent controlled San Francisco. One was quite ticked off when a new owner did a search and found out they didn’t live anyway near the city and forced the cancellation of the lease. The tenant was using their old apartment as a cash cow. Now that is messed up.
L. Vas says
Property manager’s advices:
1. Make a list with 100 points (for example) where will be situated first 100 features of an “new potential” property/premise (floors -living area/shopping floors/parking ..etc.; distance from subway; supermarkets around; traffic; police presence; green areas; buildings’ quality, etc). After that you can hire a company/specialist/or somebody else to make the research for 1-2 days and to fullfill your list, mentioned above. So will save time for your family and will be calm and rest before taking the serious step/buying the aim.
2. Rule the business with specialist (not alone), give the specialist a big % from the clear income and be happy to give work to another man (of course he has to be a serious man with no wish to steal you place on the market only to be satisfied with enough % in the end of monthly presenting of his management.
3. Diversification of accumulated! …and use again two points above
Three simple rules to be happiest man in the neighborhood!
P.S. If You wanna be a proud and happy father and grandfather teach the child to think and to be humans. (Of course do not forget languages, martial arts, finance, basics of management of people/companies/psychology, love to earth and nature, etc. :) and the cycle of three generations will be broken and our society will be better for all of us!
I try to overtip, too. Mainly because I get enjoyment and emotional satisfaction out of watching the joy on people’s faces. When I got my yard landscaped, I told the laborers that they could pick out anything they wanted from a pile in my garage (clothes, tote bags, weights, stuffed animals). Anything left over would be donated to Goodwill. I couldn’t believe the looks on their faces. They were like little boys at Christmas! They treated my “junk” like precious treasure. I didn’t expect this reaction and was truly humbled.
I also understand not being motivated to try harder. Being financially independent, I easily walked out on a six-figure salary a couple of days ago because I couldn’t stand the manager. In years past, I would have overlooked abusive behavior and tried harder to kowtow to my boss because I needed the money. No more.
Save Splurge Deny Debt - Cameron says
Interesting read of the new challenges that FIRE creates. I don’t think all are terrible as you are providing even more value to tenants and other by allowing them to be late etc. It seems like you calculated the risk/reward and in the end it worked out. Hardly anything to beat yourself up about IMO.
When I consider the vision of what I would want out of FI, I would love the ability to help others. It is interesting to see the downside of people taking advantage but I don’t see myself being flashy and inviting these characters. You seem to have that ability to size up people as well, whether it comes from tenants, the founder lady, or seeing the value and hard work of your recent yard workers.
All great insights as always! Thanks!