The One Ingredient Necessary For Achieving Financial Independence

In the good old days, several friends and I liked having beers after each softball game. We got to discussing what is the one ingredient necessary for achieving financial independence early.

Here were some of their responses:

• Saving aggressively
• Investing in stocks
• Investing in real estate
• Earning side income
• Taking bigger risks in our careers
• Leveraging the internet
• Working ungodly long hours
• Relocating to areas with huge job growth despite the higher cost of living
• Starting a business

All of these ingredients are important for helping all of us achieve financial independence.

However, the #1 ingredient that drove me to FIRE, which nobody mentioned, was FEAR.

More specifically, the fear of failure. The more you fear something bad happening, the more you take action to make sure it doesn’t come true.

Let me share some examples to explain what I mean. Then perhaps you can share your own examples in the comments section below. 

The One Ingredient Necessary For Achieving Financial Independence

Fear is all around us, especially today. Many still fear getting a virus that incapacitates us. We fear losing money in our investments when the economy goes into a recession. Some of us even fear living a life full of regret.

Fear can be debilitating if we let it overwhelm us. However, fear is also a fantastic motivator for change. The key is to absorb just the right amount of fear to get going instead of keeping us paralyzed.

Here are some examples where fear of failure played a huge role in my life. Without such fear, I wouldn’t have broken free of work at age 34.

Childhood Expectations – Fear Of Disappointing My Parents

My parents told me at an early age that academics was the main way to a better life because I wasn’t going to become a professional tennis player. They instilled in me a fear that if I was a C-student, I’d only be able to live a C-or-worse lifestyle.

Not only did I fear living a mediocre lifestyle as an adult, I also feared disappointing my parents. I was always getting into trouble as a kid. Each time I did, I saw the shame in their eyes. I finally stopped being a degenerate once I went to college.

Throughout my childhood, my parents worked long hours. I especially felt bad for my mother who didn’t particularly enjoy the work she did in the U.S. Foreign Service. Foreign service work was my father’s dream, not my mother’s.

My Dear Mother

When I was 12, I remember visiting my mother one day at the US Embassy in Kuala Lumpur as a surprise. I didn’t quite understand what she did, only that she worked in the cultural attaché department.

She was always so chipper at work, and her colleagues always sang her praises. It felt like a wonderland to roam around the halls of what seemed like a fortress at the time.

When I arrived, she was tidying up the magazines on the coffee table. Instead of working in her own office, my mom worked in the reception area outside of her bosses big office. Oh, I got it now. My mother was the assistant, not the officer.

She told me how she had sacrificed her dream of becoming a biologist by foregoing a graduate scholarship from Duke University to marry my father. She still had what most would call a great adventure, working around the world. But I knew deep down she will always wonder what could have been.

If my mother was going to give up her professional dreams for her children, I damn well wasn’t going to disappoint her!

Growing A Career – Fear Of Wasting Money And Time On College

Working in the financial services industry from 1999-2012 always made me paranoid about losing my job. The industry is highly cyclical, which means during down cycles, there are always multiple rounds of layoffs. Without a job, I would feel like a failure. And without a steady paycheck, I wouldn’t be able to pay my mortgage on time.

The fear of being one of the thousands of people let go during the dotcom bust and the 2008 – 2009 financial crisis led me to work extra long hours. I needed to add as much value as possible to my firm. There was a lot of misery getting into the office by 5:30 am and getting berated by clients all day.

Whenever I felt miserable working at 10 pm to catch my Asia-based colleagues, I always reminded myself of friends who had lost their jobs. Then I’d just gut it through one day at at time.

It wasn’t until I started listening to the lifestyles of other people working in other industries did I realize how abnormal it was to always be in fear of losing your job.

Perpetual failure made me save 50% – 80% of my paycheck every year for 13 years. The fear ingredient made me figure out the best way to invest my money in order to one day generate enough passive income to confidently leave my job.

If I was comfortable at work, I’d ironically still be working.

Sustaining A Successful Website – Fear Of Public Failure

I enjoy blogging. I really do. Every morning kind of feels like Christmas because it’s always so fun to read what other people have to say.

However, there’s really no good reason to continue publishing 3X a week anymore. Today’s posts reach 100X as many people as they once did in 2009. But because I publicly made a commitment to write 3X a week, however, I fear being labeled as weak or dishonest if I don’t follow through.

I’ve wanted to just pass out by midnight many times since my kids were born, but I forced myself to write to keep up my streak. All habits die hard.

I have this fear of letting you down, especially those of you who may be going through a difficult time financially. I remember how comforting it was to read and interact with other folks during the financial crisis.

For the longest time, I’ve sent the message to never fail due to a lack of effort because hard work requires no skill. Therefore, if I stop working hard, then I’m just another hypocrite who doesn’t follow his own advice.

Modern Day Society – Fear Of Not Being Good Enough

While I was working, it felt harder to get ahead when there was hardly anybody who looked like me in leadership positions. For example, I worked in Asian equities and for half my career, all my bosses were white.

When I lived in various Asian countries growing up, I was the majority. Everything felt normal. But when I arrived in Virginia as a high school freshman in 1991, the contrasting reality of being a minority instead of a majority became apparent.

Overnight, it seemed I had to address stereotypes, listen to racial slurs, and endure various forms of discrimination that I had never encountered while living in Taiwan, Malaysia, or Japan. The ingredient of fear began to sprinkle in my mind at age 14.

I feared being pigeon holed as an Asian guy who was only an academic. Therefore, I also worked hard on my athletics. I went to a liberal arts school was to become a more well-rounded person.

Perhaps one of the reasons why I’m so against the pursuit of prestige and status is because getting these amorphous things is hard for me. Instead of working hard to elevate my pedigree, it’s easier to just look down upon those who do. It’s also easier to not try.

The Fear Of Poverty

Ever since I lived in Malaysia as a 11-13 year old, I’ve been hyper aware of the haves and the have-nots. To see some of my friends live so poorly really wigged me out as a kid. I often questioned why life was so unfair for so many people.

As a result, I made a promise never to take any job or financial opportunity for granted. I wanted my kids to grow up being able to study and play rather than being forced to work to help support the family.

After you’ve achieved your retirement number, will you continue to work as hard? For most folks, I think the answer is logically no.

Due to my fear of never having enough money, I’m afraid of getting complacent. As a result, I like to start over each year and pretend I have nothing.

Growing up seeing poverty on a daily basis made me afraid of losing everything one day. You’re always wondering when will your luck run out. The longer you go without any unfortunate events, the more you brace yourself for cataclysmic disaster.

Physical Fitness – Fear Of Dying Before My Kids Are Adults

At age 45, my health is not as good as it once was. It seems like the asthma I had as a kid is slowly making a comeback. My colds have gotten longer and my muscles take longer to heal.

If you have dependents and liabilities, for the love of god, please get life insurance. Your health will eventually catch up to you, no matter how healthy your lifestyle. One of my regrets is not getting more affordable term life insurance before I had kids.

I finally got an affordable 20-year term life policy during the pandemic. I cannot tell you how much better I feel mentally. The anxiety of dying early has declined. That’s worth far more than my monthly life insurance premiums.

The reason why I haven’t let myself go is not due to vanity. When you’re no longer in the dating scene, who cares about having four-pack abs? I try to stay fit because I fear an earlier than normal death. My two young children are depending on me until they become adults.

A single friend once told me he enjoys food more than he enjoys the chance at a healthier life. “If I die early, so be it! I’m not going to deny myself my greatest pleasure just for the unknown chance of living until 90.” He clearly didn’t believe in the ingredient of fear as a motivator to stay in shape.

This type of thinking is actually quite freeing. To not have anybody depend on you can be a great blessing. To not care how you look to other people is also amazing.

However, as a parent, I don’t have such luxury. Therefore, regular exercise and not over-eating continue to be necessary habits. I hate working out. Thankfully, I’ve found a fun sport in pickleball to help me stay in shape nowadays.

Who knows whether staying in shape will extend my life. However, I want to give myself the best chance at survival by being more risk-averse with my health.

Comfort May Be Our Greatest Enemy For Achieving Financial Independence

Perhaps one of the worst things that can happen to you is if you are born with everything.

Your parents are rich so you don’t appreciate money. They buy you a car, a house, and pay your credit card bills. Why bother even trying to be financially independent?

Let’s say you are born good looking. Everybody is much nicer to you as a result. But your looks will eventually fade. If you don’t work on your personality in the meantime, you might end up lonely and depressed when everybody begins to stay away.

Or let’s say you were giving things based on your identity and not based on merit. You start cruising because you believe society will always give you a helping hand. But one day, the elites might decide you and your people are no longer worthy of special favors. When that time comes, you might struggle to compete based on skills alone.

It is impossible to fully appreciate how good we have it if we don’t go through some suffering first. The longer our suffering, the more appreciative we will be.

We need a steady dose of uncertainty to keep us hungry. Therefore, perhaps this pandemic will motivate us to change poor habits. Motivation is so important for building wealth and staying healthy.

I remember as soon as I paid off one rental property mortgage in 2015, my motivation to hustle went away. I decided to drop all my consulting clients, travel through Asia for 8 weeks, then go to NYC to watch the US Open for 2 weeks!

Comfort prevents us from trying harder.

Fear: The One Ingredient For A Better Life

As time passes, I’ve been able to be less fearful of failure. Academics, work, and societal fears are behind me now. It feels good not to be beholden to anyone. To speak your mind and do what you want is a blessing.

My main fear now is not being a good enough father. Even though a parent can only do so much to teach their children right from wrong, I still worry how they’ll turn out. There are some really messed up people in society who probably had caring parents.

Although less, money fear still persists because I’ve now got three people depending on me This fear is tempered through a proper net worth asset allocation, keeping expenses under control, and finding ways to earn supplemental income.

Don’t let fear paralyze you. Instead, embrace fear as the key ingredient for achieving financial independence. The fear in our heads is often greater than reality!

Achieve Financial Independence Through Real Estate

Real estate is my favorite way to achieving financial independence because it is a tangible asset that is less volatile, provides utility, and generates income. By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. These properties now generate a significant amount of mostly passive income.

In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms. With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common.

Take a look at my favorite real estate crowdfunding platforms, Fundrise. With Fundrise, you can diversify into real estate through private funds. Fundrise has been around since 2012 and has consistently generated steady returns, particularly during times of uncertainty. The platform manages over $3 billion and has over 350,00 investors.

Read The Best Book On Achieving Financial Independence

If you want to read the best book on achieving financial freedom sooner, check out Buy This, Not That: How to Spend Your Way To Wealth And Freedom. BTNT is jam-packed with all my insights after spending 30 years working in, studying, and writing about personal finance. 

Building wealth is only a part of the equation. Consistently making optimal decisions on some of life’s biggest dilemmas is the other. My book helps you minimize regret and live a more purposeful life as you build more passive income. 

You can buy a copy of my instant WSJ bestseller on Amazon today. The richest people in the world are always reading and always learning new things. Learn from those who are already where you want to go. 

Stay On Top Of Your Finances

To achieve financial independence you’ve also got to track your finances like a hawk. To do so, sign up for Personal Capital, the web’s #1 free wealth management tool.

In addition to better money oversight, run your investments through their award-winning Investment Checkup tool. I will show you 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. It pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Definitely run your numbers to see how you’re doing. 

I’ve been using Personal Capital since 2012. In this time, I have seen my net worth skyrocket thanks to better money management.

To sign up for my private free newsletter, join 60,000+ others, and click here. I’ve been helping people achieve financial independence since 2009. I share all the ingredients necessary for achieving financial independence.