A High School Graduates Guide To Financial Independence

Through Brewing - Part 1

Merry Christmas and Happy Holidays! Here’s a departure from some of my other posts. I want to talk about an endgame to professional brewing, but it applies to whatever you are doing. That is, eventually not having to worry about money.

This is something that is not easy but life changing.

When I was 32, we had opened our third restaurant (no breweries yet, that would come a couple years later) I was working crushing hours between Albuquerque and Santa Fe, NM. I happened upon a book, which I have mentioned here before, called Cashing in on the American Dream, Retire at 35 by Paul Therhorst. Man, that lit a fire under my over-worked butt. It started me on a path that led me to basically have enough assets to stop working for a paycheck by the time I was 42. Ten years. Though I will say, I never stopped working. I have enjoyed brewing too much to stop.

You, dear reader, have or are planning to open your own brewery and I want to offer up this info just in case you are interested in financial independence more than fancy cars and houses too.

Here is the basic thing you need to know.

Spend less than you make, get out of debt, invest the rest

I could stop there but of course I won’t. So let’s break this down.

To get to the investing part, you need money to invest. So the first thing you need to do is get out of debt. I don’t care what the experts say, there is no “good debt”. Sure, when you open your brewery your will have some debt, but we can talk about that later. First, however, is your personal debt. To get rid of personal debt you need to cut down your expenses. Eating out, coffee at Starbucks, car washes, fashionable clothes, anything really that you absolutely don’t need. And there it is, the difference between need and want. By eliminating these useless expenses you will have extra cash.

Now with that extra cash, make a list of all your debts from the biggest interest amounts to the least. Start throwing all that extra cash to largest amounts first. This is probably credit cards (and never pay the minimum on those, always pay what is owed). When the biggest is paid off, then move all that cash on to the next. Keep at it until they are all paid off. You may still have a mortgage of course, but going into the pros and cons is beyond this post.

Talking about mortgages and car loans though; Get rid of vehicles that are status expensive cars or trucks. Sell them, pay off the loans and buy a good reliable used vehicle for under 10k. If you live in a bigger house than you need, sell that and move to one that costs less, or rent and if you have lived in your house for two years or more, your profit you make from it is tax free. By the way, Warren Buffet still lives in the same house he bought in the ‘50’s.

Our first house we divided it and rented out the other half, which almost covered our mortgage payment.

The goal is to try to live on 50% of your take-home pay. There are tons of resources for this through the FIRE movement (Financial Independence Retire Early).

With this extra money you now have options. Here’s where we get into the investment part.

The simplest way to make it to financial independence is to try to make more money while not spending anymore and every month, put this money into an index fund and leave it there, forever. I won’t go into the details of it but an index fund, like a Vanguard fund, has beaten the S&P 500 consistently since it was created in 1975, returning over 11% if the dividends are reinvested. You don’t have to do anything. You can safely pull 4% of this fund out every year without hurting the fund.

When I was in the early stages of this, I sold my new car that had car payments and bought an old pick up, knowing that in business I would need one. I paid off all my debts, which weren’t a whole lot as we didn’t have a house at the time and started becoming a super saver. I tracked it in a book I called the KMA Fund, for Kiss My Ass, which was my middle finger to bankers. People in the FI movement call this an F-You fund. Enough money that they can tell their employers “FU, I’m out of here!” Free from being chained to their jobs by debt.

The biggest thing that made all this possible, was my wife Sandy was into it too. She was a teacher earning less than 30k per year. Me with three restaurants (we were trying to pay them off) I was earning about 30k.

To Recap

• Cut your expenses to 50% of your income.

• Use that extra cash to pay off all debts

• invest the extra income.

To really get ahead on this process it helps if you are a high paid engineer, lawyer, or surgeon. But if you are a high school graduate like me, you aren’t looking at any great paycheck.

You know what is better than a big paycheck? It’s creating a profitable business. This is a real asset and that’s what I want to cover next week and it directly applies to you my fellow brewer!