This is the first post in a series on American PI:E™ – the recipe for early retirement, true autonomy, and reclaiming your American dream.
“The American Dream is that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.” – James Truslow Adams
My name’s Derek, and I am a Veteran.
Separating from the military after six and half years of service was one of the hardest things I have ever done in my entire life. Most people think that boot camp would be hard, but boot camp was easy compared to the transition to the real-world. Talk about terrifying. My early adult years and the formative years of marriage were all spent under the guidance and protection of Uncle Sam. Life was good: Low cost health benefits, decent pay, TSP retirement plan, relatively stable job security, 20-year retirement options with pension, advancement opportunities, community…overall, not a bad gig.
Enter 2013, a brand new baby, and a desire to raise our children closer to family – closer to our tribe. This was part of the vision of our personal American dream, and we believed in it so much that we began preparations to take the leap. We pulled our boat as close to the shore as we could before jumping – I had a job lined up in financial services through a world-class training program for Veterans, but nothing could prepare us for the culture shock we were about to face in pursuit of freedom in the civilian world.
We jumped into a world with no guaranteed contracts, fewer options for healthcare, no basic allowance for housing or sustenance, and certainly no cost of living pay.
With a six-month old baby, I started a job that would ultimately lead to commission-based pay, a far cry from the stability of bi-weekly checks I was used to getting in the Navy. Our health plan was high-deductible, leading to thousands of dollars in hospital bills after an unexpected trip to the emergency room.
For our first six months after separation, my wife, daughter, and I occupied an extra room in my wife’s parents’ home (thanks mom and dad), before we found a modest town-home under 1000 sq feet that would allow for dogs.
My early work in financial services was hard. I mean … really, really hard. I would spend most days knocking on doors in sweltering summer heat, dressed in a full suit, promoting my services and just getting to know the people I sought to serve. I was sincere, hard-working, and disciplined. I wanted to do right by every person I helped, but the internal fear of failing my family and not putting food on the table was an even greater motivator- a concern I never had to think much about in the military. I remember waking up in cold sweats, feeling honest-to-goodness dread, anxiety, and fear about the enormous task at hand, but every morning I suited up and headed out the door. Sure, things got easier, and all of my hard work eventually lead to success and rewards beyond what was previously imaginable, but I will always remember those first months.
There is a reason we must go through the lowest lows, and it’s usually so that we can appreciate the highest highs. Four years later, many things have changed. It hasn’t been easy, but through the tumultuous transition, we have learned quite a few lessons. We are all a product of our collective experiences (good and bad), we are forged by them. In retrospect, it’s easy to see the grace in every move we make, and every time a little bit of pressure releases we reflect on how lucky we are to have had the privilege of adversity. It is this very experience that drives our tremendous gratitude. It fuels our faith, it makes us whole.
In this series I will freely share stories with you about life and money, being intentional, loving deeply, accepting change and challenge no matter how breathtaking the charge, and building a future that is secure and free.
My lessons are your lessons, your stories are my stories, our experiences are one if we share them. We are all in this together.
This is our American PI:E.
“If you wish to make an apple pie from scratch, you must first create the universe” – Carl Sagan
Looking back now, I can see that the fear I had around leaving the military was largely financially-based. Money touches almost all aspects of our lives, whether we admit it or not. All of my working adult-life has been spent in the classic “active income” model. In other words, I actively work and in exchange for my time I receive money to cover our expenses. In formula-speak, this could look like:
AI:E (active income/expenses)
A sailor’s median paycheck is about $2300/month after taxes. Since my wife and I were both in the Navy, we netted around $4600/month. Our expenses were closer to $2600 so our AI:E ratio was cooking at 177% funding (4600/2300=1.77). While this was awesome, the fear came in when I realized that we were losing this stability simply by changing jobs.
The act of changing careers challenged our perceived sense of freedom.
The average worker in America now will change jobs 15 times in their working life. If financial independence can be so deeply shaken by changing jobs in the AI:E model of living, why do we constantly pursue this as the solution to our financial stresses? What if there were a better way? What is all that working and saving money for anyway? As I began my work in investing and finance, I was introduced to the power of compound interest and passive income. I began to realize that the ultimate goal for most investing is income generation. The answer is as easy as PI:E:
PI:E (passive income/expenses)
What is passive income? It’s earnings you get from real estate, investment portfolio income (dividends & interest), or enterprises with which you are not materially involved. If your income from passive sources covers your expenses (including allowances for wants that allow you to maintain quality of life), you have achieved autonomy.
In my post-navy career I have had the privilege of working with thousands of people, ranging in ages from millennials to baby boomers. When asked “what does financial independence mean to you?” – the answers are all relatively similar:
- The ability to enjoy my money
- Knowing my money will last through retirement
- Being able to pay for kids’ college
- Travel – when and where I want
- Spending time with my family and not have to worry about money
These answers all sound pretty great, but what do they have in common?
One word – Autonomy.
The definition of autonomy is literally “freedom from external control or influence; independence.”
A PI:E of 1:1, or 100% funding = Autonomy
Autonomy allows us to pursue our passions, to allocate time as we see fit, to set our own agendas. Some would choose to actively work with their autonomy, but the point is that they choose to do it. Working in the PI:E model is no longer a function of need, but of choice. It is the freedom we all seek, but rarely articulate.
Annie Dillard said “how we spend our days is how we spend our lives.” The majority of working Americans spend their entire lives working, seeking autonomy, only to enjoy it for a few precious years if they have done a decent enough job of saving.
Let’s flip the script on retirement. Let’s get passionate about taking control of our time, our money, our lives. Let’s all get our slice of American PI:E and start experiencing what true financial freedom really tastes like.
Coming up next:
Baking American PI:E™ – The Three Ingredients