Do you have a dream? A numero uno, want it so bad you can taste it, dream?
Mine is to reach FIRE. I want to truly own my time and money. I don’t want to have to depend on a job for my income, and I don’t want to spend my days doing something I don’t enjoy.
After I paid off my debt last June, I gleefully opened a Traditional IRA and began socking away money. That’s the number one thing you read on early retirement websites right? Max out the IRA! IRA 4lyph! I’m proud to say I maxed my IRA out in December 2015. I had really and truly started down the path to FIRE!
Then I realized: I have no idea what to do next. Of course, max out my IRA in 2016, that’s a no brainer. But $5,500 a year does not get you to early retirement! I awoke to the fact that while I have this goal of reaching FIRE, I don’t have any idea of the concrete steps I need to take to get there.
I’m not shy about asking for help when I need it. So I’ve asked a few friends who are thisclose to early retirement for some tips and pointers for those of us who are just beginning our journey to financial independence! Today we’ve got our first guest in the series: Steve, from ThinkSaveRetire.
Steve and his wife are actually going to retire this year! His story is awesome, and one I find very inspiring.
In his own words:
“I got started on this path much too late in life. Through my 20s and early 30s, I was one of the masses – I wanted the nice cars, big houses and expensive “stuff”. I was resigned to the fact that I’d work until social security kicked in, and then I’d see about escaping the grind. I made good money, but I only saved the bear minimum. I spent the rest.”
Sometimes it feels like those who retire at 30 or 33 started saving at 16. I got into this game at 26- there’s no way I could retire at 30! For me, hearing about someone who turned their bad financial habits into good ones in their early thirties and still got out of the rat race way early is incredibly inspiring!
I asked Steve to answer a few very basic questions about his steps to FIRE, as well as some questions about situations that a lot of us FIRE Noobs are in. (Like saving as a single person as opposed to a married couple.)
So without further ado, here are Steve’s words of wisdom for us noobs!
Our goal is to reach financial independence by the end of 2016, at which point we will shortly thereafter begin our next lifestyle of full time travel in an Airstream RV. Right now we are in savings and acquisition mode, preparing our finances for our purchase of the Airstream and truck very shortly. Our planned post-retirement budget is between $25,000 and $30,000 a year.
The goal is by December, 2016, and that will mark my official retirement date from full time corporate work. My wife will continue to work until February of 2017 to make herself eligible for Social Security.
Originally, my discontent with working a full time job was the initial impetus, and the more involved we became in early retirement, the more that we wanted it. We began reading a lot of blogs and actively prioritized saving as much money as possible every month, and with dual incomes, the potential to save is downright amazing.
The only income that we actively plan on is our investment capital gains, but we probably will take odd jobs and work camp every now and then depending on how the market is doing and how we feel at the time. Investment returns are very much passive income just like any other source of money. In my view, in fact, it’s the ultimate source of passive income.
Prioritize their future. It is easy to want “the nicer things in life” now under the guise that we might not be here tomorrow, but that mentality keeps people working far, far longer than what would otherwise be necessary. When we prioritize our future, we begin to think of our lifestyle in very different ways. We save more. We spend less. We appreciate the simpler things in life and we begin to NEED less.
The first step is to decide how badly you want it. To make something like this work, you need to WANT IT, and want it bad. Financial independence needs to be prioritized above all else and focus maintained even when things get hard. We won’t always be perfect, and that’s okay. But winning the mental game is the very first step to achieving this monumental financial goal.
The plan started with the end goal in mind. We want to travel the country full time, and estimating our anticipated expenses to support that lifestyle was ultimately the key to determining when we can call full time work a thing of the past. With any retirement scenario, an estimate of post-retirement expenses is necessary to determine how much money is needed for retirement, which can then be used to estimate the retirement date.
The only tool that we really use is Personal Capital. It provides an excellent overview of our financial situation and makes the math easy.
We primarily use Vanguard. Low fees and lots of options. We choose diversified LifeStrategy and Targeted Retirement funds because they are the easiest and most well-rounded funds available, and we don’t like to day trade. Vanguard just makes it easy.
I am a big fan of either the LifeStrategy or one of the Targeted Retirement funds for beginner (and seasoned) investors. It makes investing super easy and relatively stress free. Money is automatically diversified and all investors need to do is keep funneling money into it. The last thing beginners should do is day trade or engage in a lot of “beat the market” buying and selling because, more times than not, it just doesn’t work.
We have a traditional 401k, Roth IRA, taxable brokerage accounts and an Ally savings account.
Only one: quit buying stupid crap that you don’t need. I know it might be fun to spend money on things that you believe will make you happy, but very few of them truly will. Most happiness is temporary, but saving money can lead to very lasting financial benefits.
They don’t matter. The latter half of 2015 and beginning of 2016 dealt a blow to our investments, but luckily, it truly matters not. Historically, the stock market will always generate a return for investors over the long run, and we are investing for those longer-term capital gains, not short term ebbs and flows. We ignore dips just like we ignore spikes.
The back up plan is finding work somewhere for a while until we feel comfortable again with hitting the road and traveling for a living. Living in an RV affords us with the luxury of reducing our expenses significantly by moving locations and living more off-grid, so we hope to avoid having to settle down in one area to work for a while. But if we need to, we need to. No big deal.
Nope. Save as much as you can with whatever income you have. Living below your means isn’t a couples-only thing.
ThinkSaveRetire is a great resource for more in depth FIRE reading. Definitely check it out! My fellow noobs, if you have any FIRE questions you’d like to ask in this series, leave them in the comments!
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.