We’ve Become Early Retirement Evangelists

Have you ever had someone show up at your door and try to sell you something? I’m not talking about a neighborhood kid raising money for something–I’m totally OK with that. I’m talking an adult who wants to sell you on their religion, their cleaning product or their home improvement services. Annoying huh?!

But now, I want to walk door to door and tell people how great early retirement is. Can you imagine how that conversation would play out?!

Ok, I’m not going to walk door to door. When we get a little in our liquor, we do try to get all of our friends to join us on this early retirement adventure. Mr. Ms. Liz especially. “Why are you working?” “You don’t have to work, right?”

It reminds me of conversations I’ve had to have about why we don’t/won’t/didn’t have children. Half hour conversations about our decision process and then they still assume we weren’t able.  BTW I don’t know if we were able . . . because we never tried.

Decisions like early retirement or family composition become foundations for our lives.

And interrogating people about why they work when they don’t have to or why they don’t have children is like asking people why they do or don’t believe in God. It chips away at the foundation of their lives.

But I think we’re just trying to communicate how kick a$$ fun it is to not work. Yep, it’s really fun. So occasionally we do some chipping.

Our biggest limitation in retirement has been our love of our normal lives. This is why we haven’t embarked on an epic trip or bought a camper. We love our normal, everyday lives and the people we get to hang out with. We don’t have a strong desire to leave either.

I no longer define my success by my salary, my company’s success, or my leadership role. I define success by the amount of joy I have in my life. The joy in my friendships, the joy in keeping active, the joy in improving my Pickleball game, and the joy in connecting with people through this blog.

Sometimes, I wish we would have done it earlier.

We could have been more frugal. We could have skipped the new cars, the stupid big home, the vacation home, boat and some expensive hobbies and travels.

I could have been better at chasing money–taking jobs I would have enjoyed less but for more money.

We could have retired as soon as we reached 25x our annual spend. Depending completely on the math behind the 4% rule.

Other times, I think we did it just right.

Life is about balancing living for now versus living for later. We could have been super frugal, erring on the side of living for later and not made it to later. We’ve both lost people far too early and know all too well that there are no guarantees.

I also think about how increased frugality would have affected our friendships. Traveling, camping and boating deepened them. I don’t have a biological sister but I have three sisters from other misters. Would we be as close if we hadn’t survived sand storms, medical emergencies, and wine shortages? Oh, and that time we forgot to bring the camp grill . . . and the stove? Thankfully, I’ll never know. But I do know beef tenderloin is quite delicious when cooked over a fire on a marshmallow skewer.

In my mind, chasing money isn’t a race worth winning. I got out of accounting for a few years in my mid-twenties and hated it. My happiest day was when my bank statement would arrive and I could reconcile it. Not lying, I’m such a dork. So moving from accounting to another role would have made me miserable. No amount of money is worth misery.

I’m a worrier and a planner. If I had retired with just barely the resources I needed, I would spend my retirement worrying about money. We waited until we had saved over 30 times our cushy retirement budget. And we have fallback plans for our fallback plans. I worry about money not at all. I budget it, I track it, I forecast it but I don’t worry about it.

And although this may seem unnecessary, it was important to me to leave my staff and my company in good hands. I spent 17 years there, my colleagues and employees were like family. When I did leave, I left them with someone more capable than me. I set her up for success the best that I could and she was more than ready.

So if we show up at your door and try to convince you to join us on this early retirement journey, please be kind. It really just means we’d like to hang out more and we want you to experience your best life. And for us, we found our best life when we retired.

The Real Goal . . . Happiness

You wouldn’t think I’d need a reminder of this but I did. I was listening to the Choose FI Podcast this weekend. They were interviewing Todd Tresidder who writes at FinancialMentor.com. He was talking about different paths to financial independence and said something like “really it’s all about happiness, what makes you happy”.

People achieve Financial Independence (FI) in many ways. The loudest message is that reaching financial independence takes frugality, and in many cases fairly extreme frugality. Every decision is weighed against the financial impact. All spending must be a hack of some sort.

Some of us are hard wired to be optimizers and hackers. We love finding the best deal, spending hours to save tens or hundreds of dollars. And if this describes you, all I can say is bless you. I have a few of you on my speed dial. If I need to know where to get the best deal on a [fill in the blank], I call you.

And I’ve written about my frugality and some of my hacks. Because I reached financial independence by keeping my spending low in spite of increases in my salary. Growing that gap between what you earn and what you spend is essential if you want to hit your ambitious financial goals. Continue reading “The Real Goal . . . Happiness”

You CAN Break the “Rules” and Still Get Here

Being retired early is like a really good chocolate cake. Once you’ve experienced it, you want everyone you care about to enjoy it too.

I’ve been writing so much about budgets lately, my readers are probably saying “enough!”. But I truly believe I reached financial independence because I budgeted and tracked my net worth. When people want to get their financial act together, I suggest they start with a budget. It’s one of my rules.

But you CAN successfully reach financial independence in spite of breaking almost all of the “rules” of personal finance.

I’ve spent a ton of time reading FI/RE (Financial Independence/Retire Early) blogs since I Googled “Can I Retire Yet?” after a particularly trying day at work. There are hundreds of these blogs but most of them were saying this:

Get or stay out of debt
Live on less than you make
Invest the difference

BAM! – simple right? There are a bunch of ways to do this and each of the bloggers (now including me!) are trying to help you by sharing their path to FI/RE with you.

There are fewer paths than you would think: Continue reading “You CAN Break the “Rules” and Still Get Here”

I’ve Stopped Wishing My Life Away

My Dad used to tell me not to wish my life away.  I was always looking forward to what was coming, what would make my life better.

When I was 7 I couldn’t wait to be 10–double digits!
When I was 10 I couldn’t wait to be a teenager.
When I was a teenager, I couldn’t wait to drive.
When I could drive, I couldn’t wait to graduate.
When I graduated I couldn’t wait to go to college.
When I went to college I couldn’t wait to graduate.
When I graduated, I couldn’t wait to hear if I passed the CPA exam.
When I passed the CPA exam, I couldn’t wait to start my real job.
When I started my real job, I couldn’t wait for time off.
And for the last 22 years, I couldn’t wait for summer.
While I also couldn’t wait to retire. Continue reading “I’ve Stopped Wishing My Life Away”

The Math Is the Easy Part

Achieving financial independence is hard in spite of the math being surprisingly easy.

Here’s the math: 

Mr. Money Mustache tells the shockingly simple math behind early retirement much better than I can.

Save 5% of your take home pay and you’ll need to work 66 years; save 20% and you’ll need to work 37 years; save 50% and you’ll need to work 17 years; save 70% and you’ll need to work 8.5 years.  Yep just 8.5 years.

This is a bit simplistic–but close.

I have my retirement mapped out in mind numbing detail.  And you should too.

But for the smarty pants readers of this blog, it’s not too hard, right?

But here’s what’s hard:  Continue reading “The Math Is the Easy Part”

When Should YOU Claim Social Security?

Social Security is available from the time we turn 62 years old.  But there is a penalty for taking it before our full retirement age–the payment is lowered.  And there is a benefit for taking it later than our full retirement age–the payment increases for every year we defer until age 70.  There is no reason to defer past 70.

For most of my readers, your full retirement age is 67.  For those born between 1938 and 1959, your full retirement age is between 65 and 67.  For those born before 1938, your full retirement age is 65.

Conventional wisdom says if you are in good health, you should wait until age 70 to claim Social Security because that maximizes your payment.  The payment grows 8% per year from your full retirement age until 70.  8% sounds like an amazing increase until you realize you are trading twelve months of payments for that increase.

And conventional wisdom assumes you are living paycheck to paycheck.  You get your Social Security and you spend your Social Security.

If that’s your situation, then you’ll claim it when you need it to pay your bills and put food on your table.

But I suspect many of my readers are in our situation:  We will have other resources available to pay our bills.  We will claim Social Security so we optimize our long-term finances. Continue reading “When Should YOU Claim Social Security?”

The Joy of Working . . . When Working Is a Choice

The job I retired from was with a terrific company.  I spent 17 years working with some of my best friends and even my fake kid.

Each year, the CFO would gather her leadership group–the accounting, HR and IT professionals who reported to her for a “Summit”.  A gathering to share knowledge, communicate updates and, frankly, to spend some time wining, dining and team building.  Attending these Summits was always a highlight in my year–a paid vacation with my buddies.

I retired 14 months ago.  But this year, I was asked to attend the summit.  And wait, it gets better.  I was asked to ***geek alert*** present a short class on one of my favorite subjects–Excel.

Initially, I was both terrified and thrilled.  Terrified because I HATE public speaking.  My hope was that my short speech at my retirement party would be my last.  Thrilled because it was an incredible honor to be asked to return.  I was excited to see my former colleagues and I love teaching people about Excel.  Helping people with Excel was my favorite thing about my old job.

I got over my terror by convincing myself I’d just be sitting at a table behind my laptop screen.  And I was–it didn’t end up being scary once I got started.  It helped that the room was filled with my friends.

It was really invigorating.  The group was super excited to learn new tips and make their processes more efficient.  There was more than one “wow” comment while I was presenting.  How often does that happen?!

And I was asked to stay over–in a beautiful resort and join the group for dinner and shenanigans after my session.  The shenanigans included sake bombs that sent more than one person stumbling back to their room–thankfully, not me.

Oh, and I got paid to do this!  It will help me fund my IRA this year.

I spent a ton of time preparing.  I developed an agenda that allowed both novices and experts to walk away with a couple new tips.  And being ultra prepared helped me get over my fear.  It was so worth it!

If I thought I had to take this on because I needed the money, my fear of public speaking would have been more than a bit paralyzing.  I would have resented the amount of time it took to prepare–especially because I spent way more time on this than I could bill.  Since it was a choice, I could focus on my excitement.

Not needing the money transformed the way I thought about the entire situation.

There are more benefits to being financially independent than I ever expected. 

I expected my financial independence would mean I could replace work with fun activities.  And, yes, I have.

I didn’t really think about being able to pick and choose money-making opportunities based on whether I thought they would be fun.

Last week was a perfect example.  Hanging out with my old friends, making some new friends and being able to contribute again was a rush.  Having people thank me and tell me how they would use what they learned to improve their processes was incredibly rewarding.

Oh and at least one of them wants to hire me to help them one on one.  That sounds fun, so I’ll do it!

But even before I quit my job, my financial independence paid dividends.  My boss was doing everything he could to keep me around.  This gave me a lot more control–I took advantage of it by working from our desert home as much as I felt comfortable.

So I’d say whether you want to retire early or not, save your money.  Save a lot of money.  Save as if you were pursuing financial independence.  The rewards go beyond the ability to replace work with fun–and that’s pretty awesome on its own!

Introducing the FIRE Prowess Score

Once again, I’m adding a link to a blogging chain.

The last chain was a series of articles about drawdown strategies.  A group of bloggers detailed out how they expected to support themselves when their paychecks stopped.  It was a fun exercise and it forced me to get more specific about where my money will come from in different market conditions.

The latest chain is a new way to assess our efficiency at reaching financial independence.  The FIRE (Financial Independence/Retire Early) Prowess Score was developed by JW, the 30 something behind The Green Swan, it goes like this:

FIRE Prowess Score= Change in Net Worth / Total Gross Income

His goal was to develop a measurement that worked across all income levels so geeky bloggers (watch me raise my hand!) could compare themselves on an even playing field.  The typical measurement we’ve used is savings rates.

The downfall of savings rates is that it’s easier to save 75% of your income if you make $500,000 a year than if you make $50,000 a year.  The savings rate super heroes in this space are often doctors.

I love that this is called a prowess score.  Prowess means skill or expertise in a particular field.  Yep that makes sense.  But it also means bravery or courage–and I think it truly takes some courage to rock this FIRE Prowess Score.  You have to live differently than those around you.  You have to focus your limited resources on things that matter to you and ignore the things that don’t.  That takes some courage for sure.

OK so how does it work?  Let’s say you are calculating your FIRE Prowess Score for the last 5 years:

-Add your income for those five years–I got my historic income from SSA.gov
-Take your current net worth and subtract your net worth from 5 years ago
-Divide your change in net worth into your total income
=And you have your FIRE Prowess Score

Here’s an example:

5 year increase in net worth: $100,000
/ Income 5 years @ 75,000/year = $375,000
=FIRE Prowess score of .27

JW gave us descriptions for the different score levels so we can pat ourselves on the back or berate ourselves to do better:

If over the last 5 years your FIRE Prowess is:

  • Negative or 0.0x – Not even on the path toward retirement, let alone FIRE. If you aren’t saving and investing any money and your net worth isn’t growing then it is time to make some changes and develop positive financial habits. It may be a change to a frugal lifestyle or getting an advance degree to take the next step in your career.
  • 0.0x to 0.25x – You’re conscious of your retirement and know you should plan for it, but early retirement may not be on your radar at this point.
  • .25x to 0.50x – You’ve got the ball rolling and you’re certainly trying! Keep investing wisely, perhaps add a side-hustle or few lifestyle tweaks to lower expenses and FIRE can be within your grasp.
  • .50x to 0.75x – You’re working hard toward your retirement goals! Early retirement is definitely possible. Keep working hard and that investment snowball will be rolling (compounding) in no time!
  • .75x to 1.0x – FIRE is on your mind and you are performing in overdrive right now!
  • 1.0x and over – You are killing it! Don’t make any stupid mistakes and FIRE will be within your grasp in no time. In this scenario, your net worth is more than your lifetime earnings which Joe at Retire By 40 recently wrote about. This is certainly a tough milestone to reach, but maybe one day I can make this claim!

OK so drum roll please . . . here are my scores:

2016:  2.79 off the charts!
5 Years 2012-2016:  1.34  I’m killing it!
10 Years 2007-2016:  .89  not too shabby!
Post College:  .72  it took me some time to get this FIRE thing going.
Worst Year:  -1.34 in 2008 when my net worth shrunk 16%

How did I rock it so much in 2016 you may ask?  I quit my freaking job!  I had a full year of growth in net worth against a bit more than half a year of income.  We may need to come up with a different scoring system for those at the end of their accumulation phase (that’s just a nice way to say older folks).

As long as the stock market cooperates, I’m really going to rock it this year.  My net worth continues to grow and my income is almost non existent.  So far my FIRE Prowess Score is 20.97 for 2017.  Oh shucks, JW said this score doesn’t work for folks who aren’t working . . .

I think JW’s descriptions are spot on.  I would say over my lifetime I’ve been focused on saving for retirement but I didn’t put my savings into overdrive until my last 10 working years.  I also made some investing mistakes early on–thinking I was some sort of Warrenita Buffett rather than just shoveling money into a S&P 500 index fund.

Check out the other bloggers’ scores in the chain:

Calculate your FIRE Prowess Score whether you’re pursuing early retirement or not.

What can you do to improve it?  Save more of your income and invest it smarter–show your prowess!

Your Retirement Questions Answered

When people find out I write a financial independence/early retirement blog, they sometimes take a breath and start peppering me with questions.  I thought it may be helpful to y’all if I answer the questions I get asked most often.

How much should I contribute to my retirement?

If you want to retire at a typical age then 15% of your gross salary before taxes and benefits.  This 15% can include your company match.

At my last job, the company matched 25% of my contributions up to 6% of my salary so that worked out to a 1.5% total match.  If I wanted to retire around my full retirement age for Social Security, then I should have contributed 13.5% of my money.

If you want to retire early, you should be contributing 15% to your retirement and saving outside of your retirement accounts as well.  How much depends on your expenses and risk profile.  Run a few calculators, or build a spreadsheet and figure it out.  Here’s a calculator from Vanguard.

What if I started late or don’t have much saved now? Continue reading “Your Retirement Questions Answered”

How I’ll Fund My Retirement

Many of the financial bloggers I follow are pursuing financial independence.  Not many of them are already there.  So there isn’t much information about how to fund your life once you are retired.

My fellow blogger, Fritz, at RetirementManifesto decided to correct that by creating a chain of articles discussing drawdown strategies.

I decided to join in the fun and lay out my draw down strategy.

I don’t have a pension.  I am counting on Social Security though I’ve reduced my expected payments by 30% because something has to change with Social Security, right?  At 52, with a husband in his 60’s (sorry Mr. Ms. Liz!) I feel secure in counting on this.

Curious about how I got here?  Here’s my savings rate and net worth growth.

First, a couple snapshots on where I am now.  I’m following Fritz’s lead on format. Continue reading “How I’ll Fund My Retirement”