Broke Again At 49, And This Time There Is No House To Blame

After stretching for the nicest house I could afford in 2023, I ended up living paycheck to paycheck for six months. It was stressful enough that I picked up a part-time consulting gig to shore up liquidity. Thankfully, stocks and real estate kept rebounding after a rough 2022, and the broke feeling faded.

I promised myself I would never feel that way again.

Three years later to the dot, I am broke again. And this time I cannot blame a house.

A Severe Miscalculation In The Capital Call Timeline

Earlier this year I wrote about the difficulty of investing in traditional venture capital as you get older. These funds take 10 to 12 years to return capital. Commit today and I am 59 to 61 before I see the money come back.

Which is exactly why I see the next five years as my last hurrah for aggressive venture investing. After that, the math stops working on a human timeline.

So in March 2026, I asked the general partner of a top venture capital firm if I could get into their new fund. He graciously said yes. I asked the operations person handling my onboarding how much I could invest, and she told me anywhere between $100,000 and $1 million.

As a San Francisco resident since 2001, I feel every new tech advancement viscerally. I have also become an AI maximalist who wants to own the very technology that may disrupt my children’s futures, potentially for the worse. So I committed the maximum: $1 million.

My invitation to their previous fund in 2024 had gotten lost in the mail. Opportunities like this do not come around often, so I decided to go all in. Better to say yes and figure out the details later, I told myself.

There Was Just One Big Problem

I did not have $1 million liquid. Not even close as dual unemployed parents who make a pittance as an author and substitute pre-school teacher.

But I have been a limited partner in traditional venture funds for over 15 years, so I made what felt like a reasonable modeling assumption. The fund would call roughly 20% – 30% of committed capital in year one, 20% to 30% in year two, another 20% to 30% in year three, and the remainder across years four and five.

That math gave me a budget I thought I could handle.

Six months into the fund’s closing, a whopping 46% of committed capital has already been called. And there are still several months left in the year.

I am now completely tapped out. I cannot meet another capital call over $20,000 without selling existing assets and paying capital gains tax.

Why Being Forced To Sell Feels Like Losing

This is a bigger problem than it looks on a spreadsheet.

My investment philosophy for the past 14 years post FIRE has been to buy and hold forever and minimize taxes. Selling one asset to fund another asset is not wealth creation. It is wealth transfer, minus a 20% long-term capital gains haircut, plus the 3.8% net investment income tax, plus California state tax.

In my bracket, including State, that is roughly a 33% toll on every dollar of gain I am forced to liquidate. What a waste of money.

I would rather grow my net worth by adding new capital, not by shuffling it from one pocket to another and handing the government a tip along the way.

I’m also not blameless here. I have mismanaged capital calls before, most memorably when I missed a $20,000 call because it got buried in my inbox. I wrote an entire post about how to manage capital calls better going forward.

Do VC Funds Have Covenants That Limit Capital Calls?

This is the question I should have asked in March. So let me answer it for you now, since almost nobody explains it before you decide to invest in traditional venture capital.

Hard annual caps are rare. In most limited partnership agreements, the General Partner (GP) has broad discretion to call capital whenever an investment opportunity appears. That is the entire point of a blind pool. You are paying them to move fast when a hot company opens an allocation, and a covenant that says “no more than 25% per year” would kneecap them in exactly the moments you want them aggressive.

What the Limited Partnership Agreement (LPA) does contain, and what you should actually read:

Investment period

Usually three to five years. The GP can only call capital for new investments during this window. After it closes, they can still call for follow-ons, management fees, and fund expenses. This is your real outer boundary, not a pacing schedule.

Notice period

Typically 10 business days, sometimes 10 calendar days. That is all the warning you get before having to wire the funds after a capital call. Know this number cold, because it defines how fast you need to produce cash.

Recycling provisions 

This is the one that catches people. Many LPAs let the GP redeploy early proceeds instead of sending them to you, or distribute them and recall them later. So your total wires can exceed 100% of your commitment, usually capped at 110% to 125%.

Here is why it exists. Management fees and fund expenses eat roughly 20 cents of every committed dollar over a ten-year fund. On my $1 million, that is $150,000 to $200,000 that never reaches a startup. Which means the portfolio has to return about 1.25x just to get me back to even. Recycling fixes that math by putting early exit proceeds back to work, so a full dollar of my capital is actually invested.

The GP has a second motive, of course. More invested capital means more total gains, a bigger carry pool, and better interim marks to show the next set of LPs. Both things are true at the same time.

The part that hurts is unpredictability. A distribution you already mentally spent can get recalled. Worse, you can owe capital gains tax on a gain whose cash is no longer sitting in your account.

Management fees on committed capital. 

Roughly 2% per year on the full $1 million, whether or not a dollar has been deployed. On a ten-year fund, that is another $150,000 to $200,000 of calls that have nothing to do with investing.

Side letters and Most Favored Nation (MFN) clauses

If you want pacing protection, this is where it would live, and it is generally reserved for anchor LPs writing eight-figure checks. A most-favored-nations clause lets you see and opt into terms given to other investors. Worth asking about even if you assume the answer is no.

One more wrinkle that explains bunched-up calls: many funds now use a subscription credit line. The GP borrows against LP commitments to close deals instantly, then calls capital later to repay the facility. The result is fewer calls, but much bigger ones, arriving with less correlation to actual deal timing. If you are modeling smooth quarterly drawdowns, a sub line will wreck your model.

The five questions to ask before you sign to become an LP

1. What is your expected deployment pace by year, and what did your last two funds actually do?
2. What is the notice period on a capital call?
3. Do you use a subscription credit facility, and how does that affect call timing?
4. What is the recycling cap as a percentage of commitment?
5. What are the remedies if an LP misses a call?

Ask these over email so you have it in writing. A good operations manager will answer all five in a paragraph. A GP who gets annoyed by the questions has told you something useful too.

The problem is, if you’re trying to gain access to a tier 1 VC firm, you want to come across as pain-free as possible. Therefore, read your onboarding docs carefully. They should answer most, if not all of these questions.

What Happens If You Miss A Capital Call

There is no version of me missing these calls, and here is why.

Default provisions in most LPAs are designed to terrify. Depending on the fund, a defaulting LP can face interest charges on the unpaid amount, forfeiture of a meaningful chunk of their capital account, forced sale of their interest at a discount, and loss of all future participation in the fund.

But the financial penalty is not the real deterrent. The real deterrent is that venture is a small world. Default once and you are not getting invited into fund IV, fund V, or the fund down the street where the GP plays tennis with your GP. The invitation is the scarce asset, not the capital.

So I will meet every call. The only question is where the money comes from.

Three Ways Out

Not all is lost. I have a windfall sitting in my VCX position from 2023 to 2026, and the lockup is now over.But I do not want to sell shares right before the main event, which is the Anthropic IPO. Selling now to fund capital calls would mean giving up the exact asymmetry I bought the position for. The capital gains tax would also be high.

That leaves three doors:

A bridge loan from the Bank of Mom and Dad. Available, humbling, and a strange thing to contemplate at 49 years old. That said, I consulted with my dad before committing the $1 million, and he did mention he has spare funds in case I run out of money.

Earn more online. More personal finance consulting sessions, more business development on Financial Samurai, more book work. Active income to cover a passive income shortfall. But since I started FS in 2009, I’ve always wanted to treat this site as fun first. Focusing too much on business bums me out.

Go back to work part-time. After going to the last YC Demo day, there are plenty of fantastic startups I wouldn’t mind consulting with. San Francisco is in a boom loop with a ton of demand for people who understand distribution, marketing, and AI.

So far I have mis-budgeted by at least $160,000. By the time the year is done, the miss could be over $200,000. At the very least, I need to lock down expenses for the rest of the year.

The Desire To Be Challenged

I have to be frank. Committing capital I did not have was not entirely by accident. Part of me wanted the challenge of producing $1 million I did not have.

Being FIRE since 2012 has mostly been smooth sailing, thanks to an unrelenting bull market. There was 2018, a terrifying few weeks in March 2020, and 2022. Otherwise things have generally been good.

Smooth is wonderful for about three years. After that it starts to feel like being a boat in a harbor. Safe, maintained, going nowhere. Boring. It also feels a little too lucky, which feels unfulfilling.

The 2023 house purchase was the last time I felt real financial pressure. Stressful, no question. Also exhilarating. It forced me into the part-time consulting gig, which paid well, taught me things, and introduced me to new people full of hope.

I came out wealthier and with better stories than if I had never stretched. The financial pressure pushed me out of my comfort zone, which I appreciate.

Manufacturing Scarcity To Create More Motivation

Manufactured scarcity is a hell of a forcing function. With no deadline and no consequence, I write a little slower, wake up a little later, and let good ideas sit in a draft folder for a year. It is far too easy to slack off in America, especially once you are FIRE.

With a wire due in 10 business days, everything sharpens. I return emails the same day. I stop treating my site like a hobby that happens to make money.

Even my calendar in the morning gets looked at instead of ignored. And time with my children gets more precious, because there is less of it when work is actually pulling at me.

There is a line in that old Goo Goo Dolls song about bleeding just to know you are still alive. That is manufactured scarcity. After 14 years of financial independence, the edges go dull. A capital call is a cheap way to sharpen them.

Something may be slightly broken about me. But I would rather feel alive and mildly panicked than comfortable and slowly fading.

Just be careful. This only works if the downside is survivable. Take the challenge in a size you can afford to lose.

A Small Piece Of Good News

Just as I was finishing this post, I got an email from a venture debt fund where I am an LP. It is sending a distribution of over $11,200. This is on top of about $4,600 a week earlier.

Nearly $16,000 against a $160,000 shortfall is not a rescue. But it is the first good news of the quarter, and I will take it. Perhaps more distributions are forthcoming as well.

Time to survive the next six months and grind!

Questions And Subscribe

Have you ever committed to something before you had the money, and then made it work? Do you find financial pressure motivating or purely destructive? And for fellow LPs, what is the fastest your fund has ever called capital?

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If you want a step-by-step framework for building wealth without repeatedly blowing up your liquidity like I do, pick up a copy of Millionaire Milestones: Simple Steps To Seven Figures, a USA Today bestseller published by Portfolio Penguin. It covers the exact milestones that let you say yes to opportunities like this one without sweating the wire.