My wife and I were earning good incomes when I started looking for a way out of the corporate grind. Our expenses weren't out of control, so we had room to save. What I wanted was more time with my two young kids, and less of my week consumed by commuting and long hours.
FIRE, or Financial Independence, Retire Early, gave me a way to make the corporate job optional: invest the gap between what we earned and what we spent until those investments could cover our expenses. Bitcoin accelerated my progress, but I still had to decide how I'd spend from the investments and which debts I was willing to carry.
In my conversation with Joe Burnett on The Income Show, we talked through the choices behind how I invest, spend, and borrow. Here are five decisions I find useful when thinking about how to make a paycheck optional.
💼 1. Put your paycheck to work
I think of personal and family finances as a business, with you as its CEO. You're responsible for growing the assets on your balance sheet. Your employer is a customer of that business: you provide something valuable, and your paycheck is revenue. You might also earn revenue from businesses you own or participate in.
Investing part of each paycheck builds assets that can eventually cover expenses your salary pays today. A raise gives you more to work with, but if higher expenses absorb all of it, you're still dependent on the next paycheck. You can keep a job you enjoy while building the investments that would let you leave it.
I began with the traditional FIRE approach: invest the difference between earnings and expenses in stock market index funds, and let the businesses you own through those vehicles do their work. Early on, most of your portfolio's growth comes from what you add. Over time, returns on what you've already invested can add more than you put in each month.
Once I became convinced that bitcoin was a better place for my long-term savings, I started directing more of my income toward it. Its appreciation accelerated my progress.
💸 2. Let your portfolio pay the bills
As your portfolio grows and you get closer to living off it, you need to decide how it will cover your expenses. A regular dividend can feel like a natural replacement for a paycheck: money arrives without you having to sell anything.
I'd rather own investments that I expect to grow substantially over the long term, then sell portions when I need money to live on. I'm willing to accept more volatility in pursuit of that growth.
When a company pays a dividend, it sends cash from the business to its shareholders. To know how much you've made, you have to count both that cash and the change in what your shares are worth; the dividend alone won't tell you.
Bitcoin doesn't pay a dividend, but I can still sell some to pay an expense. In a mixed portfolio, I'd rather sell stocks and other accessible investments first, giving bitcoin more time to appreciate.
⏳ 3. Leave yourself room to wait
Holding through a market decline is easier when you don't need to sell investments to pay next month's bills. While you're earning and adding to your investments, lower prices can let you buy more with each paycheck. Once you're living off those investments, covering the same expense means selling more shares or more bitcoin at lower prices, leaving less invested if prices recover.
I want ways to sell less bitcoin when prices are down: spending I could actually cut, income I could realistically earn from work I wanted to do, or other investments I could draw on.
The freedom I want includes doing work I enjoy. If work you want to do covers part of your spending, leaving a job you don't enjoy can become possible before your investments pay for everything. I explored how continuing income reduces the amount you need invested in Your FIRE Number Might Be Too High.
🏠 4. Keep some wealth within reach
I prefer to keep an affordable mortgage and invest money I could otherwise use to pay it off early. I expect the investments to grow faster than the borrowing cost, and I can sell some if I need money for expenses.
Putting extra money toward the mortgage saves interest, but it also turns money you could invest elsewhere into home equity. Getting that money back out generally means selling the house or borrowing against it. Stocks and other investments in a brokerage account can be sold a little at a time to cover expenses, although prices can be down when you need the money.
My mortgage lender doesn't care whether bitcoin had a good year; the payment is due either way. I'll keep that monthly bill to leave more money invested, but the rate has to be reasonable and I need to be able to cover it through a rough stretch in the market.
With a fixed-rate mortgage, I know what principal and interest will cost each month, although taxes, insurance, and maintenance can rise. With a variable-rate loan, the interest bill can change too. I wrote about choosing between mortgage repayment and investing in I Will Never Pay Off My Mortgage.
🏦 5. HELOC Arbitrage
I also tried borrowing more against my house to invest, in a small experiment using a home equity line of credit, or HELOC. I used it to buy STRC, a preferred stock issued by Strategy that pays a variable dividend.
I borrowed at a promotional 5% while STRC was yielding roughly 9.5–10%. I expected the dividends to cover my interest bill and leave some income over, before taxes, fees, and any gain or loss on the shares. The promotional rate lasted about six months and had already ended when I recorded the interview with Joe for The Income Show.
When STRC fell in price, my lender didn't demand that I sell it. The HELOC wasn't secured by those shares. If I'd borrowed on margin against them instead, a large enough drop could have led the broker to demand more collateral or sell investments to cover the shortfall.
But I still had to pay the bank back. If selling STRC didn't cover the loan, I'd have to come up with the rest myself, with my house backing the debt. The HELOC's variable rate could push my interest bill higher, and Strategy could cut or stop the dividend. I could collect more in dividends than I paid in interest every month and still finish the trade poorer than I started.
I'm not a particularly good trader, and I don't want to spend my days watching prices. For long-term savings, I still prefer accumulating bitcoin and investing for growth.
A higher return is less appealing if the loan payments keep you in a job you want to leave, or managing the investment takes hours you'd rather spend elsewhere.
Start with a change you'd like to make in your working life, then look at what would make it affordable. How much would your investments need to cover after any income from work you'd want to do? Include any loan payments you'd still owe if you left your current job.
I started pursuing FIRE because I wanted more time with my kids and less of my week consumed by the corporate grind. When your investments can cover your expenses, the job becomes something you can choose to keep, change, or leave.
That’s it for this week. Thanks for reading!
Until next time,
Trey ✌️