Hi there, glad you’re here. This is my first post, originally published on 1/1/2013. If you’re new to this blog, this is a great place to start.
My goal is to retire in 1500 days at age 43. I am writing this on January 1, 2013, so if all goes according to plan, I’ll sail off into the sunset of early retirement in February of 2017, just in time to celebrate my 15th wedding anniversary.
The three parts you are about to read are my manifesto. Part 1 details how I arrived at this blog. Part II discusses the way you need to think in order to retire early. Part III breaks out my financial situation and the goals of the blog.
I. The awakening
My life was good. I had a job that paid well. I had two good kids and a good wife. I had two decent cars in a middle class enclave with nice neighbors.
We were smart with our money. I maxed out my 401(k) every year and even saved beyond that. When housing was going gangbusters and before we had kids, my wife and I flipped homes. We would buy older, outdated homes and spruce them up. We would live in them for a couple years, therefore not incurring any taxes on our gains and make a nice profit.
We had kids; two beautiful girls. I planned to raise them as best I could and send them on their way.
I planned to retire in my 60s and and retreat to some warm weather state. My life was ordinary.
Right around 2010, I started reading the Get Rich Slowly blog. The author, JD Roth, discussed how he attained early retirement by abandoning the ridiculous, debt intensive, consumerist lifestyle that most people seem to embrace. My journey had begun.
I started reading about other people with similar early retirement ideas. Mr. Money Muchtache, The Simple Dollar, Brave New Life and Early Retirement Extreme all started to open my eyes to another way. A better way. The common thread was that financial independence early in life isn’t a silly dream, but an easily attainable goal if you play your cards just a little differently. Not only did most of these folks attain early retirement, but they did it without huge sacrifice. These aren’t investment bankers making millions a year, just normal folks who figured out what is important and what is not much earlier in life than most.
I was hooked. I was awoken. I was now suddenly aware of an alternate universe where people in their 30s and 40s are able to retire with just little lifestyle tweaks here and there. Again, I have to reiterate; no get-rich-quick schemes; just smart decisions along with intelligent saving and investing. Some people will call the tweaks a compromise or too much to give up. Those people are still asleep and haven’t yet come to appreciate what truly matters.
So, do you want to work until you’re 80 or be able to retire to a beach in Costa Rica when you’re 45? I enjoy my work, so I’m not sure. What I do know though is that I want the freedom to choose! By rejecting a consumerist lifestyle and putting in a little hard work, you can set yourself free from the Matrix to live life on your terms. What could be better?
This is it. You get one life and one shot. In 80 years, we’ll all be worm food. Make the most of your time and live it the best you possibly can. Evaluate your value system carefully and figure out what is most important to you. If you’re honest with yourself, you’ll come to the conclusion that experiences and family time trump an expensive car. Realizing this is your first step out of the Matrix.
Take the red pill and follow me.
II. What really matters
Think about the happiest, most meaningful times in your life. I’ll give you a moment if you need it. Seriously, think about it for a day or a week or a month if necessary. Write these times down and then come back and read about mine.
OK, ready? Let’s get started. Here is my personal braindump:
- I remember the holidays as a child. I remember my grandparents coming over on Thanksgiving and Christmas. We would all sit down for a wonderful, homemade dinner and enjoy everyone’s company.
- I remember our family vacations. They weren’t extravagant affairs. Sometimes we’d go camping and sleep in tents or the back of our pickup truck. We’d swim during the day and have camp fires at night.
- I remember the joy I felt in college when I worked my ass off and earned As in difficult classes like organic chemistry and calculus. I felt on top of the world when I graduated at the top of my class in a difficult major.
- I remember meeting my wife for the first time. We argued about pro-wrestling. That may sound a bit strange, but we clicked.
- I remember my first child being born. She came out purple and quickly changed to a normal color after she took her first breath. She didn’t utter a sound, not a scream or a cry. She seemed to look around, wondering where the heck she was and what was going on.
- I remember my second child being born. She came out, took a deep breath and started screaming. I remember thinking “How can something so tiny make such a loud sound?” She didn’t stop screaming for almost 45 minutes.
- I remember all of the crazy things our kids have said:
- Do caterpillars fart?
- Does thunder have legs?
- When I grow up, I want to be a banana! (uttered with great enthusiasm)
- Have you ever been to Yosemite National Park in the spring? Standing in the mist of 3000’ high waterfalls will reboot your soul.
What is the common thread in all of the above experiences? None involve possessions or buying stuff.
Not only do materialistic pursuits not generate long term happiness, but they are actually detrimental. If you have to work long hours to support a material lifestyle, what are you giving up? Are you going to miss your child’s first little league hit because you’re putting in long hours at the office? No one ever said on their deathbed (except maybe Steve Jobs) “I wish I had worked more.”
If you disagree with all of this, stop reading now. This is the fundamental principle of this blog. If you think that you need expensive things to make yourself happy, reevaluate your life. I’ve seen people who buy things to fill an emotional void in their life. Is this you? Find a different way to fill that void.
III. The goal: $1,000,000 and no debt
What would it take for me to retire early? I did some number crunching and a whole ton of research. Here are the main points:
- How much money do we need?: My wife and I wrote all of our expenses in a book. Every time we returned from shopping or paid a bill, we logged it (more on this in a future post). Based on our logs, we can live on $2000/month or $24,000/year. This is assuming no mortgage or other debt. However, for safety’s sake, I’m bumping this up a bit to $30,000.
- No debt: Currently, all of our cars are paid off, but we still have a mortgage. This must be paid off. The exception I’ll make to this rule is a rental property that generates more money than its mortgage.
- 4% rule: Now, how much money do I need to guarantee an income of $30,000/year? The 4% rule is a really good guideline and the one that I will stick to. Based on the 4% rule, I need about $800,000 to retire with no debt. However, I’d like very much to be able to help my children through college, so I’m going to bump the number up to $1,000,000. $1,000,000 is the magic number.
From here to $1,000,000
Here is my current financial status as of 1/1/2013:
- Money in the stock market: $573,777
- Money in Prosper.com and LendingClub.com (microlending): $5,760
- Cash: $6,506
So, I currently have $586,043 and need to get to at least $1,000,000 and I’m giving myself 1500 days, or a little over 4 years. I’m going to assume a return of 10%. I’ll also be contributing $2,000/month towards my investments.
I fired up this little investment calendar and ran my numbers. Here is what I came up with:
So, not quite $1,000,000, but close. I expect to be able to increase the amount I put in per month over time, so that will make up for the slight shortfall.
- Getting canned: Should I lose my job, I may have to use my savings to live on. I am a contractor and my current contract runs through the end of 2013.
- Stock market taking a dump: If the US is attacked again or we have another economic meltdown, my portfolio will sink.
- Real estate: I’ll be jumping into the rental market soon and possibly even flipping more properties. From crunching the numbers, I feel that I can purchase rentals that will generate me significant income from the start. More on this later.
- Stock market: The past four years have been pretty miserable. I do believe the next four will be better.
- Side jobs: As a computer programmer, I often am able to get side jobs. Some come from friends, some come from Craigslist.org and some are jobs I create, such as writing smart phone apps. More on this in a different blog.
Where do we go from here?
Here is what I want to do with this blog:
- I’ll break down my financial situation frequently. At the beginning of each quarter, I’ll tell you how I’m doing here. You’ll know if I’m making my goals or if I’m full of hot air.
- I’ll tell you more about me. I’ve done pretty well so far, but have also made some stupid mistakes. I’ll be writing about both. You’ll know how I got to where I am now and also how I plan to get to retirement in 1500 days.
- I’ll detail my investments. I have too much money in the stock market now, but will be branching out into rental properties shortly and detailing it all.
- I’ll tell you about Lending Club and Prosper. I’ve become an online lender and have been doing pretty well at it. I really like both of these sites as income generators.
- I’ll get on my soapbox frequently about rejecting consumerism. I see ridiculous things people do to waste money all the time. Learn from their stupidity. There is a better way.
- I’ll tell you how to save money. From doing projects around the home yourself to smarter shopping, there are a lot of things that we can all do to help make our piggy bank a little happier every month.
- I’ll give you examples of what not to do. Most of the people I know make bad decisions about money. I will give real-life examples of this, and tell you how I think they should be changed.
- I’ll give you examples of what works. I have had some good role models, too and I’ll be writing about their lessons.
So, I hope you learn something that makes your life better in some way. However, I also want to learn from you. Please contact me with any thoughts, your story, suggestions, comments. I’d love to hear from you!