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:
There’s the Earn More! Crowd
There’s the Spend Less! Crowd
There’s the Budget/Track/Monitor Crowd
There’s the Pay Yourself First Crowd
There’s the Super Frugal Retire In Your 30’s Crowd
There’s the Less Frugal Retire in Your 50’s, 60’s or whenever Crowd
Though the crowds take different approaches, they use many of the same “rules” to get there. I achieved financial independence in spite of breaking many of these “rules”.
Rule #1. Budget and track your expenses.
You know this is a rule I followed to the extreme. We not only budgeted and tracked our expenses but also our net worth. Setting those net worth targets helped me keep my eye on the prize and, of course, I think everyone should do this.
But there are many people who reach financial independence without ever following a budget:
So if you hate budgeting, move as much money as you can to investment accounts and live on what’s in your checking account. When your checking account is empty, you’re done. Open the pantry and figure out what to make for dinner.
Rule #2. Rent – home ownership doesn’t make financial sense. Real estate barely keeps up with inflation yet carries a lot of market risk and additional expense. Paula writes about this on AffordAnything.com and she’s right.
But I broke that one and the growth in our home values was a huge contributor to our financial independence. I enjoy the stability that comes with owning my home, I wouldn’t want that huge part of my life to be controlled by someone else.
Decide whether you need roots or wings. if you need roots then home ownership may be right for you, if you need wings then maybe not.
We’re such rule breakers, we even bought a second home–gasp! But we bought it during the downturn when we were certain we wouldn’t lose money. It would have been a better financial decision to rent. But I love being part of this community and we wouldn’t have achieved that by renting–noticing a roots theme here?
Rule #3. If you buy a home, buy the least expensive and smallest home you can stand. This will keep your costs down and you won’t be trying to keep up with fancy neighbors.
We broke that one, we built a stupid big house that we love. And we’re fortunate that, like us, some of our neighbors aren’t as fancy as their homes. We just shake our heads at the ones who are.
Rule #4. Buy used cars and drive them until they’re almost dead. Let someone else take the hit for depreciation when that car is driven off the lot.
We broke that one most of the time. We bought new cars but drove them close to 10 years. We were rescued from our errant ways with company owned cars in our later working years.
Rule #5. Hustle, hustle, hustle. Figure out a way to make extra income in addition to your regular job.
I did some bookkeeping on the side in my twenties but when my responsibilities grew, I had neither the time nor the desire for a side hustle.
If you can side hustle without affecting your success at your primary job, then hustle away. If your hustle will affect your earnings or performance in your real job, I’d skip it.
Rule #6. Minimize debt. The only debt you should carry is mortgage debt and only because interest rates are so low.
We followed this rule to the extreme. No consumer debt since my mid 20’s; no debt at all since 40.
So you can get away with breaking some “rules” and still achieve FI/RE.
It may take you longer and you may need a higher income but you can get there.
You need to find the path that works for you. If it is super frugal, retire in your 30’s that’s fine. If it looks like our “buy that boat”, “buy that second home” and retire in your 50’s or 60’s that’s fine too.
Find your balance between living for now and living for later. Then go bravely down your path.
Oh, and here’s that amazing chocolate cake recipe I want to share with everyone I care about. Add a bit of Grand Marnier to the frosting and it’s extra good, YUM!
Photo Credit: our friend Alan in Camp Hale just above Red Cliff, Colorado.