FIRE Advice for Noobs: The Resume Gap

I’ve got another great post in this series today everyone! Matt from The Resume Gap is here today to share his journey to FIRE.

To new readers: this is an interview series with people are close to or have already achieved FIRE (Financial Independence Retire Early). It’s a goal of my own, but I’m just beginning on the road. So I look to those who have already gotten there for guidance and advice!




Matt is newly retired at the tender age of 28. (My age!) He and his partner Daniel are gearing up for some amazing long term travel, including skiing their way across the US and Canada, and renting a lakeside apartment in Guatemala. #dreams

I asked Matt to share how he reached FIRE so quickly. His story is inspiring and he gives practical advice. I’m super excited to share this post, and I can’t wait to follow his travels!

What can you tell us about your FIRE journey?

Hey Kara! Thanks for inviting me to participate. This past January, my partner Daniel and I quit our jobs, moved out of our apartment, and sold most of our possessions. For the next couple years (at least – hopefully much longer), we’re planning to travel around the U.S. and the world – visiting friends and family, exploring nature, and seeing all kinds of historical sites and attractions along the way.

I hadn’t even heard of FIRE until two or three years ago, but I’ve known since I was pretty young that I didn’t want to follow a traditional career path. I got focused on my finances and started saving aggressively at age 21, when I started my first full-time job. I didn’t hate the work I was doing (in fact, I really enjoyed a lot of it), but I did hate the lack of freedom and flexibility. That’s what motivated me to save money and pursue financial independence.

When will you reach FIRE?

Using the 4% rule of thumb for a safe withdrawal rate, I hit FI at age 27. I quit my full-time job at 28, though I don’t really think of myself as “retired.” I still have a few active side hustles, and I imagine that my future could include many types of work – whether it’s a new entrepreneurial venture or a part-time job for fun (gigs like working at a brewery or a ski lodge sound particularly appealing). That said, I don’t expect that I’ll be looking for a traditional 9-5 office job any time in the foreseeable future.

How did you get involved in this world?

I’ve been reading personal finance blogs for years as a way to stay focused and inspired about saving and living frugally. I started blogging late last year because we love meeting new people and hope to make new friends around the world.

Will you have any streams of income in FIRE or solely just your savings?

I’m planning on three sources of cash flow: The majority will come from investments (mostly stocks, some bonds and other assets). I’m also renting my condo full-time as a vacation unit, which will produce some passive income. Finally, I’m planning to do some occasional consulting work on the side. Ideally, that will keep my withdrawal rate low and allow me to grow my investments over time, even without a full-time job.

What is the single most important step someone looking to reach FIRE can take?

Envision your financially independent future and commit to it being a priority in your life. When most people stumble upon the idea of FIRE for the first time, they want it immediately. I know I sure did! Unfortunately, reaching financial independence usually takes years even for the most aggressive savers. Pursuing FIRE requires sacrifices. It usually means fewer luxuries, fewer splurges, and a lot more self-control. You may have to say “no” to expensive people and activities. If you’re not committed to the vision of your future, it’s tough to stay on track.

What is the first step you recommend people take? 

Track your income and expenses. It’s almost impossible to know how long it will take to reach FIRE or where you have room for improvements if you don’t know exactly where your money goes every month. Once you know how you’re spending your money, attack every line item. How can I save money on my housing expenses? How can I save money on my transportation expenses? How can I cut back on my entertainment expenses? Income is on the table, too: How can I earn more in my current job? How can I make extra income on the side? I still go through this exercise every month to monitor how I’m doing financially and improve continually.

Where do you keep your investments and how did you choose?

Most of my investments are in broad market ETFs, including VTI, VT, and BND. I’m a fan of Vanguard, mostly because of their exceptionally low management fees. My asset allocation is stock-heavy, which I think is yet another benefit of FIRE. If I were 65 years old, I wouldn’t feel comfortable allocating 80%+ of my portfolio to stocks – my time horizon would be too short, and my alternatives (like going back to work) would be limited. As a young “retiree,” though, I can afford to be more aggressive. If the market crashes, I have plenty of options available – whether it’s moving to a lower-cost place (domestically or internationally), working a real job for a while, or expanding my side hustle business.

What kind of investing should newbies be looking into or do you personally recommend?

Keep it simple. Pick an asset allocation (three or four ETFs or mutual funds, at most) and stick to it. Don’t try to beat the market. Amateur investors often spend hours trying to figure out how to earn a marginally higher investment return when they could be getting ten times the value from learning a new skill, building a new source of side income, or finding new ways to reduce their expenses.

What is your annual savings rate?

Over the course of my seven-year career (that sounds funny, doesn’t it?), my savings rate was 70%.

I’m a low income earner, at 35K a year. How would you approach FIRE on that income? 

On the spending side, I would approach it exactly the same way: track every expense and work to reduce spending on things that aren’t important to you. Personally, I would have reached FIRE eventually on a $35k income – just with a longer time horizon.

On the income side, even a modest increase (say, to $45k per year) could have an enormous impact on your progress – potentially cutting your time to FIRE in half. I would consider alternative career paths (taking into account my satisfaction level with my current work) and start looking into side hustle opportunities.

How did you calculate your FIRE money needs? Which tools are best to do so?

For people just getting started, understanding your expenses and applying the 4% rule is all you need to get a good idea of your target. As you get closer to pulling the plug, you can play with the sensitivities and run more scenario analyses. For that, I like cFIREsim, FIRECalc, and Personal Capital’s Retirement Planner.

How do you deal with market dips that take away big chunks of your savings?

Frankly, I don’t know for sure. I’ve accumulated the majority of my savings over the past five or six years, during which we’ve seen steady growth and no major declines in the stock market. That said, I have a plan for what I will do: close my laptop, go outside, and not make any rash decisions.

Do you have a back-up plan? 

I definitely wouldn’t have taken this leap of faith if I didn’t feel like I had many back-up options in place.

One of the benefits of achieving FIRE relatively young is that I can always go back to work – much more easily than someone retiring at 55 or 60. I could also reduce my spending substantially or even sell my rental property. It takes willpower and flexibility to reach FIRE, and I think those are the same traits that will get me through any unexpected turn of events.

What money tips would you tell your 27 year old self? 

Keep saving – FIRE is even better than you imagine it!

Hop over to The Resume Gap to learn more about Matt, Daniel and their adventures!

Kara

Kara Perez is the original founder of From Frugal To Free. She is a money expert, speaker and founder of Bravely Go, a feminist financial education company. Her work has been featured on NPR, Business Insider, Forbes, and Elite Daily.