Financial Independence
 

My favorite book in college was Henry David Thoreau's "Walden". I especially liked his thoughts about living financially independent. Another good book is "Five Acres and Independence" Much of my focus since then has been on how to recreate a modern "cabin in the woods" like Thoreau did.

Though today we can't just squat on a vacant piece of land and live on soy beans we can recreate a similar situation even in the city. In my case I decided that rental housing would be my garden and a four plex would be my cabin. Instead of buying a starter house I bought a four plex instead. I lived in one of the units and rented all the rest. The proceeds paid me a small sum and I got to live in my unit for free.

As a pilot it is often difficult to accumulate the assets required for such an endeavor due to the nature of the job. The constant travel, moving and low wages make it difficult to get the financial momentum needed. In fact it seems that the profession leads to employment dependency more than most, though financial independence is still attainable. However, it takes a lot of sacrifices up front and a different mindset.

My advise is to start by reading Henry David Thoreau's "Walden, or my life in the woods".

Skyhigh

how about this...spend LESS than you make.... save and invest the rest!!!:eek:

The problem with that notion (although I agree with it) is that pilots (in general) are poor for so long. By the time a pilot reaches a professional wage, they are aching to buy a piece of that american pie and upgrade, upgrade, upgrade.

The condo thing sounds smart. I bought a house right before the economy dumped and lost $30,000 in value. Unrealized losses as the moment, but it still hurts. The vast majority of household income right now (with me not working) is going towards mortgage interest. Horrible situation!

How does one go about when your are getting paid $1300 after taxes? I am not in this situation but I do have Friend from ERAU with $1200 monthly payments on his student loans. Not everyone makes as much as you do.:cool:

I feel for anyone who's making a house payment worth of student loans. Diversifying yourself can't be a bad idea for anyone in any situation, if you can find away that your investment (or liability) could make money for you, more power to you. Works for a great situation of you not "needing" income to pay the rent, as long as you keep your properties full. The way things are right now, i've seen several full apartment buildings being sold off in St. Louis County (my old neighborhood that the airport put a runway through). I'd assume the rent is dirt cheap (close to airplanes) and so is the property, which would lend me to believe it'd be very easy to rent it till St. Louis city buys it for noise abatement, infact, best bet would be buy it, and start writing the city commisioner the day off, trying to get him to rehab the place w/ new noise proof windows, etc, let that drive up the value of the unit, and make them pay you the pretty penny when they buy it back a few years down the line.

Sounds interesting. Picking it up at the library today.

More than that
 

It is a bit more than that but spending less is an important part. Pilots usually know to much about spending less.

Skyhigh

Financial Author
 

Thoreau is more about philosophy and the study of nature then actual financial planning but is is a good read non the less.

Skyhigh

Financial Independence
 

Financial independence means reaching a point in your life where you do not have to worry about money. Your income is completely independent from working for others and usually is the product of financial instruments or real estate investment.

As the pilot profession has gotten worse and worse I began to become increasingly uncomfortable with putting my head in the noose of an aviation career. Originally I saw aviation as a companion to my goals of financial independence however it began to become obvious that it was becoming more of an obstacle. A key component is to be able to utilize your spare time. Most of mine was being spent in a hotel room while I paid others to mow lawns and make repairs.

A path to financial independence needs to build momentum over time. Professional stability and becoming established in one area is important. Flying had me on the move every 6 months to three years. It is very difficult to get anything going when you are expecting to have to move all the time.

Eventually a lay off pushed me out onto the street and I was able to get going in the right direction. I still have a ways to go but I am on the right path. As our national economy continues to change over time I believe that everyone will begin to develop an urgency to work towards FI. Careers just can not provide what they use to. Retirement funds need to last much longer then in previous generations.

Skyhigh

There is a fundamental flaw in this logic of financial independence.

The economy cannot survive long term with a majority of participants in a situation where they do not have to work or produce anything to have money. Making money from money is the goal of many. Anybody with a sane mind would rather push money around and make a profit than to swing a hammer or build a vehicle or flip burgers for a paycheck. The problem is that if everyone (an extreme for illustration) were what I will call "money changers" than the economy would come to a halt in quick order. Those who are able to benefit from changing money are only able to do so as a result of those who are actually producing a value. An investor can only succeed if those with their sleeves rolled up actually DO something.

Real estate - Assuming prices are going up, one could buy low and sell high and make a good profit. Enough of these deals might lead to financial independence. The cost to this is that the real estate market will come crashing down in the end (as it had done) and the money will be siphoned right back out of thing - this is because there was nothing there to begin with. A house is a house is a house regardless of what deeds are thrown around and how many zeros are on the thing. It is a perception of value pushed by an onslaught of folks looking to make something from nothing, artificially inflating prices as demand went up. Now that the real estate market has crashed, we are back where we started to much earlier price levels. How is the society better of from this?

Look at Paris Hilton (perhaps a bad example, but it works). She is no different than a bum on the side of the street in terms of value to society as a member of that society. She can spend her inherited money - but who earned it? What value was given back to society for that money - likely from her parent's involvement with the hotel. She's a leach. Some might argue that if she is paying for a service than she is giving value. But this logic has more holes than swiss cheese. There is no value in money. Whether you hold a one $1 or a $100 dollar bill, both are just pieces of linen cloth with some fancy engraving on them. The value is ONLY what you can potentially receive in the end by exchanging that bill for something. Would anybody pay Paris Hilton with said linen for something of value, besides more green hued videos?

Those who merely turn money into more money aren't much different in the scheme of the economy. Once wealth is achieved in this capacity, the result is an individual who consumes much more than they produce, a net loss on the society.

I am not scorning on investments. Business needs money, investors are required to do this. If one can make money through wise investing, then kudos to them. But the reality of the situation remains. This is one of the fundamental reasons that our capitalist market always swings up and down, up and down, up and down, etc.

Currently, we are at the end a huge upswing in perceived values. Its got to go bust and self correct once in a while - and so we have the current economic situation.

Very interesting Post Bryris
 

I will have to think about that one. I agree with the bulk of your premise however financial independence is a larger topic than just the values of assets. A person can change their lifestyle to reduce the need to rely on the financial system. Rural subsistence living was an early form of american independent living. It seems to me that to some degree America seems interested in returning to some of those concepts.

In regards to real estate it is not very popular right now however it will come back. In 10 years most values will be back to where they were two years ago and more so. Labor, land scarcity and material costs to home construction will insure that values continue to increase over time.

Skyhigh

I think this kind of fit under the Financial Independence topic but this story is what is wrong with financial independence for pilots. My friend who is a few months older than me (early twenties) just got a job at a call center for the local gas company. He will make 51,000 his first year. Now I like my job a whole lot more but I will be lucky on second year pay to get just over half his salary. He is buying a house and oh doesn’t even have a degree for this job. Ya that is what’s wrong with this job, I don’t even know how long it will take me to get that far but I guarantee it will be after fourth year pay. Anyway at least I don't have to deal with phone calls all day.....:rolleyes:

Pilots are broke for so long, in general. Broke is a condition that can be remedied - poor is an attitude that can lead one to being perpetually broke.

I seriously doubt your friend is answering calls for $51k at the local utility phone center. Perhaps if he's in some kind of supervisory position, but as a customer service rep? No, I don't think so.

Well currently I draw Unemployment... as I was laid off over three months ago.... and with a 70% drop in my salary we still spend less than we make. We had to adjust to do that... but thats what you do.

hmm, let me think. How about going to a school that doesn't cost $50,000 a year?

just my .02

ERAU:)

Look Around
 

People in other professions often make a surprising amount of money. In my home town there was a recent job opening at the dump that paid a starting wage of 48K, plus 3 weeks of vacation, medical, dental and retirement after 20 years. The main requirements were a GED and a clean urine test.

The first step to financial independence is to pick a good profession. Build your wealth first then fly.

Skyhigh

Yes, I've heard all about these "other positions" outside of flying that pay enormous salaries.

Here's the deal - this isn't my first job. I have a mechanical engineering degree and worked in that field for six years before getting into aviation. I still have a lot of friends that are in engineering.

The average starting salary for an entry level engineer is pretty close to this alleged "call center job" at the local gas company. Now, I suppose it's possible that Puckhead's young friend showed up at the call center and was offered a job that pays 185% higher than the average call center worker gets, but I doubt it.

source:
Average Level I Outbound Representative (Call Center) Salary. Level I Outbound Representative (Call

I've been on these boards a long time, and I've heard so many of these BS stories it'd make your head spin. So many pilots that have not a clue about the outside world, thinking everybody's out there making over six figures, home with their families all day, playing golf on weekends. So sorry, it ain't true. The "outside" world sucks pretty bad too.

The pay and QOL for an entry level regional airline pilot is terrible, no doubt about it. But there's a whole other world of aviation out there, and if one wants to make more money as an entry level pilot it's very possible.

The majority of my friends outside of work do not fly for a living. They also make half or less of what we do too. Here is the irony: I know captains in the $200K+ range that must pick up extra flying and still barely have their heads above water. At the same time, I know people who make a fourth of that and have money to put into their savings account at the end of the month. And they say we're smart because we fly jets. ;)

I hear you... When I first got out of college, I had filled up credit cards, a new motorcycle, and a new car. Absolutely stupid. When my loans came out of deferment, I didn't have much money left over at the end of the month. It took years of busting my butt and sacrifice to get out of debt while also paying cash for my flight training. It was hard but very good lesson.

Now that I have my debts paid off, I am so anti-debt that I will be on the street collecting aluminum cans before I EVER carry a credit card balance.

Unfortunately, some people never get it and spend the rest of their life living paycheck to paycheck, even when they're pulling down significantly over $100k/yr.

If we published autobiographies it would be hard for the reader to distinguish between the two without referencing the author. :)

Many believe a bigger paycheck or more money is the answer, when in reality they desperately need a simple course in basic personal finance.

Another skillset
 

I have a different skillset outside of aviation that I developed prior to entering aviation. Recently I tried (quite unsucessfully) to re-engage in the former field of work. The switch was more difficult then others have made it out to be. Course timing/salary expectations had alot to due with my lack of success. Good luck to those looking right now.

Where you live
 

I think that a lot of the reason why pilots can have such different perspectives on outside professions is in regards to where they live. In the west firefighters and police are very well paid. Back east those same professions can expect half or less.

Pilots however are fairly equally paid thought the nation in similar positions. The cost of living however is not the same. A starter home where I live has come down a bit however it is still around 180-200K. That is why a guy who works at the dump here can make nearly 50K.

Skyhigh

I think Lab Rat hit the nail on the head when he said:

"Many believe a bigger paycheck or more money is the answer, when in reality they desperately need a simple course in basic personal finance."

Personal Finance is less about how much you make, and more about how much you spend. A previous poster mentioned that after taking a 70% pay cut after a job loss, he still manages to spend less than he brings in (albeit after some major lifestyle adjustments). Although we would all like to earn more money, the reality is that we can become financially independent by saving more/ spending less. Saving is a less sexy topic to talk about than earning more money, but it's equally as important (if not more important) to achieving personal financial independence.

And on another note, I'm bothered by people who think that their job owes them a six figure income, a $500,000 house, 3 cars and a boat immediately after beginning their craft. This is the attitude held by people like the captains LabRat mentioned who makes $200,000+ a year, yet can never seem to get ahead. Living beyond one's means is the single most detrimental pitfall to personal financial independence. Remember that true wealth and financial independence are built over time and as the result of living within one's means...not merely as the result of a $200,000 a year job.

Like financial advisor Dave Ramsey says, "Live like nobody else, so that you can live like nobody else." (i.e. live below your means, so that one day you can reap the rewards of your financial discipline and live very well!)

Income
 

Sometimes I get the feeling that pilots like using frugal living as a means of justifying an under performing career. Suzie Orman was shocked at how much a pilot made when one called into her show. Dave Ramsey I am sure would have something to say in regards to laying out a fortune in training and education to make what a pilot does. Choosing a profession is an important step in regards to financial success as well.

I am certain that few financial advisers would recommend a career that pays so little after such a huge investment and risk as aviation. No amount of budgeting will be able to overcome that. A better plan is to figure out how to make a good living and then to make the most out of what you earn.

Skyhigh

I'm sure Dave Ramsey would have quite a bit to say about that as well. Unfortunately, his advice would fall on deaf ears.

There are so many ways to save money on flight training, it is just astounding to me that people will fork out $100k+ for flight training, which sometimes doesn't even include CFI certs. This is nothing more than financial immaturity.

I am in complete agreement with you that aviation is NOT worth investing that much money into. I'd also say the same for an engineering degree, a business degree, a nursing degree, and a teaching degree. All can be done for MUCH cheaper.

For an aviation education, doing it on the cheap means research, self study, and making sure that each rating is mapped out within a budget. Use cheap planes, fly in a cheap area, and make sure you're flying 2-3x/wk. Build time by splitting it w/ a safety pilot, combine business trips with time building, etc.

When I was teaching, I showed all of my students how to do it on the cheap. Few took my advice to heart, mostly due to laziness. They just wanted to come fly, then go home and do whatever. The truly dedicated were rare, but they were my favorite students and they were much, much better off financially in the end.