When Cody Berman first started pursuing financial independence, his plan looked a lot like the traditional FIRE playbook: save and invest aggressively, build up a large stock-market portfolio, and eventually live off a small percentage of that nest egg each year.
Berman, the author of “Retire by 30” and host of “The FI Show,” said he originally used the 4% rule to work backward into his FIRE number.
The rule of thumb suggests that someone can withdraw about 4% of their portfolio in the first year of retirement, then adjust withdrawals for inflation each year.
To spend $40,000 a year, for example, a person would need about $1 million invested.
When he started his first corporate job in commercial real estate lending in 2018, he built a spreadsheet showing that if he kept living on his side-hustle income and saved his full salary, he could potentially reach financial independence in five to seven years.
Over time, though, Berman started looking at financial independence through a different lens.
Instead of asking only how large his portfolio needed to be, he began focusing on how much monthly cash flow he would need to cover his expenses.
He calls that the “fast version” of FIRE: building income-producing assets rather than relying solely on a large nest egg.
Berman says there are two main paths to financial independence.
The first is what he calls the “nest egg method” — the traditional FIRE path built around a large investment portfolio.
The appeal of this path is its simplicity.
The math is straightforward — estimate how much you want to spend each year, multiply that number by 25, and build a portfolio large enough to support withdrawals under the 4% rule of thumb — as is the investment strategy: buy low-cost index funds and let compound growth do much of the work over time.
The trade-off is time and, potentially, lifestyle.
Even with a high savings rate, building a seven-figure portfolio can take years or decades.
For people trying to speed up that timeline, the traditional path can require years of aggressive saving, low spending, and delayed gratification.
The second path, Berman said, is the cash-flow method.
Rather than building a portfolio large enough to draw from, the goal is to create enough monthly income from assets to cover living expenses.
That cash flow can come from rental properties, businesses, digital products, or other income-producing assets.
Berman said the math can work faster because someone spending $40,000 a year, or about $3,500 a month, does not necessarily need $1 million invested if they can instead create about $3,500 a month in mostly passive cash flow. “You can get to $3,500-ish in monthly, mostly passive cash flow, typically a lot faster than you can get to a million dollars invested in the stock market,” he said.
For Berman, real estate became one of the clearest examples of that idea.
Between late 2020 and mid-2021, he and his wife, Lauren, bought 11 rental units.
They put roughly $200,000 toward down payments, he said, and the properties generated enough cash flow to cover much of their lifestyle.
If he had invested that $200,000 in the stock market and used the 4% rule, it would have supported about $8,000 a year in withdrawals.
Since real estate allowed him to use leverage — borrowing money to buy income-producing properties — the same amount of capital could produce far more monthly cash flow.
He is careful to point out that leverage cuts both ways: “Leverage is a double-edged sword.
You don’t want to be overlevered and have a bunch of mortgages, and then your property values crash, and then you’re left holding the bag.” Used wisely, though, he said it can shorten the path to FIRE.
He has seen some real-estate investors reach financial independence in roughly two years, while the fastest nest-egg paths he has seen typically take closer to seven or eight years.
Berman’s own path included parts of both methods.
By late 2021, shortly before his 26th birthday, he considered himself financially independent.
At the time, he said he had about $500,000 invested in the stock market and 13 rental units producing about $3,700 a month in cash flow.
His digital products business was also taking off, earning more than $10,000 a month in mostly passive income.
Ultimately, Berman said that real estate gave him something his stock portfolio did not: recurring monthly income. “With the stock market, it’s not like I’m selling off investments every month to live,” he said. “But with real estate, we’re actually getting rent in our account.”
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