Happy Memorial Day to our friends in the U.S. We’re taking some time today to send out gratitude to all of those who’ve served (if that’s you, THANK YOU!) and remember those who’ve died in service. Also sending out a big thanks to those who’ve served the country in non-military ways: through Americorps, Teach for America, the Peace Corps and countless other good deeds that help level the playing field and bring us all closer together.
Today is a “clip show” of sorts, putting together for the first time all of our money beliefs and actions that have gotten us where we are today. We spend a lot of time looking forward, and projecting future health care needs, where our income could come from and of course all the feelings. Today we’re sharing the master list, the grand compendium of everything that’s helped us get this far in our journey to early retirement.
There are really no secrets here, no magic razzle dazzle. Everything is total common sense, though some of it runs counter to the conventional wisdom of budgeting (we can’t help it — we’re anti-budget). This is the formula that was worked for us:
Keeping Track
We have a tracker going back to 2006, the year we moved in together, before we had combined our finances. We can tell you our year-end net worth for any year since then, how much mortgage debt we had in any year after we got our first mortgage in 2009, and how our retirement and taxable accounts have fared over time. For us, keeping track is hugely motivating — we never want to see those numbers move in the wrong direction (which could make it hard once we have to start living off those investments). And when I was paying off my debt, a tracker is definitely what helped me shave almost a year off my payback plan.
Making Specific, Time-Bound Plans — A big part of keeping track has been tracking progress toward plans, from the first which was debt payoff, to the second which was buying our first place, to our ultimate and soon-to-be-achieved goal of early retirement. We’ve never said, “Here’s our goal. Now let’s work toward it.” Instead we’ve always said, “Here’s our goal, which we will achieve on X date. This is exactly how we will reach it.” Not quite sure where that wisdom came from — probably just that we’re both detail people — but putting time boundaries on goals has never led us astray, and we’ve often ended up beating the deadline because keeping track is so motivating.
A Mindset of Saving
There’s a false dichotomy out there that says people are either savers or spenders. In truth, a person can be both, especially if you have the means to do so. And even though we’ve written quite a bit about our former baller days, the truth is that we also saved money during that time. Saving money is something we’ve always done, from that $250 per paycheck I’ve had HR put in my savings account for 11 years and counting, to the automated investing we now do religiously.
Save Before We Could Afford It — Back when we both had credit card debt (Mr. ONL) and credit card debt plus student loans and a car payment (me), we both still saved. Mr. ONL invested in an IRA and emergency fund, and I did automated monthly mutual fund investments, along with that paycheck split to savings. Sure, you could argue that we’d have gotten a better return by paying off the debt as fast as possible, but I’m convinced this time taught us to save no matter what, which is a habit that has stuck.
Max the 401K — Mr. ONL gets all the gold stars for this one. He was maxing his 401k way before he hit an income level you’d think he’d need to be to do so. That’s part of why we’re already golden once we hit age 60. But we’ve both always prioritized 401k savings, and we’re even still maxing now, despite being good to go on our tax-deferred funds. It helps reduce our taxes now, while we’re in a high bracket, but it also just feels like, “Why not keep saving that money?” Future us should be pretty stoked.
Hide Money from Ourselves, Live on the Difference — This is probably our single most important strategy for saving a high percentage of our income for years now, especially because we have never been able to stick to a conventional budget. Instead, we try to engineer it so that as little of our paychecks as possible ends up in our checking accounts, and then we force ourselves to live on the difference. We’re not perfect on this count, and sometimes end up dipping into the “life happens” fund when, well, life happens. But for the most part, this has become a completely ingrained habit, and is why we’re confident we can live within our drastically reduced means in retirement. We wrote a big post on all the ways we hide money from ourselves last year.
Deflating Our Lifestyle
Avoiding lifestyle inflation is a huge way to get ahead financially, and we’ve definitely done that — always increasing our investments to consume any pay raises or new sources of revenue. But we’ve gone a step further and actively worked to deflate our lifestyle. This year, as part of upping our game, we increased our monthly investments by more than our annual pay raises, and we’ve done this same thing for the past several years. Meaning: We’re now living on less than half of what we lived on five years ago, despite earning significantly more. The secret here: make changes gradually. We never cut our spending by 50 percent — that would have felt jarring and have triggered our inner rebels. Instead, we’ve just shaved a little off each year, or increased investments a little each year, forcing only a very slow belt tightening. But just like any compound interest, we’ve seen enormous results over time.
Consciously Choosing Where to Live
We, especially I, have lived a lot of places. And despite regional differences, one thing I’ve for sure learned is that the vibe of the place greatly impacts how much we spend, not to mention the real estate market.
Living in a Non-Status Place — Before we moved to the mountains, we lived in a big city where there was a lot to do, and where the culture was to go out to new bars and restaurants. Even entry level workers would regularly drop $200 at dinner. Crazy stuff. But because that’s what we were surrounded by, we didn’t think that much about it, and we did the same. At a certain point, though, we realized we didn’t want to blow through all our money that way (the money we weren’t saving, anyway), and we started to crave a less money- and status-obsessed place. The result: we now reside happily in a mountain town where there’s plenty of wealth (that would be the second homeowners, not the full-timers), but there’s not that same money-obsessed culture. In fact, most people don’t even know what their friends do beyond basic professions, no one talks about work or money, and the activities people suggest are always free or cheap (bowling would be a big night out, and virtually all parties are potluck — but most get-togethers are focused around the free outdoors).
Minimizing Housing Costs — If hiding money from ourselves has been the secret to our saving, minimizing housing costs has been the secret of our not spending. We were scarred big time by the 2008 economic crisis, and decided we never wanted to take on more debt than we could comfortably pay back on a single income, without dipping into our emergency savings. This was totally driven by fear, not rational thinking, but we’re pretty happy that that fear led us where it did, because both of the homes we bought were well below what the banks would have said we could afford. That means our house will be paid off next year, only six years after we bought it, and we’ve invested a lot of dollars over the years instead of paying them to some bank.
Avoiding Debt
We both have had debt. I had $30,000 of non-mortgage debt at one point, when I was earning $32,000 a year, and that was a pretty daunting thought. Eventually I paid it off, just as Mr. ONL paid off his credit cards, and ever since then we’ve been staunchly anti-debt. We still use credit cards for the travel points (though we don’t get into all that travel hacking and manufactured spending), but we always pay them off in full each month. We’re paying off our mortgage as fast as possible to get out of that debt. And while professional landlords would tell us that this is bad for cashflow, we financed our rental property with a 15-year loan instead of a 30, because we want that sucker paid off faster. It probably goes without saying, but we would never take out a HELOC or second mortgage unless it was literally our only option left in the world. Some people are comfortable with leverage, and would have no problem sleeping at night with added debt, but that’s not us.
Giving a S%!# at Work
Recently I tweeted that I’d gotten some bad news at work — nothing horrible, I just didn’t get a project I really wanted. And a few people tweeted back that it was either admirable or weird that I let work stuff affect me, given how close I am to retiring early. But the fact is, I do let it affect me, because I give a s%!#. Mr. ONL is the same way. We still care just as much about doing a good job as we did when we thought we’d do these jobs for much longer. We’ve been with our companies a long time, and we’ll care about how they’re faring even after we’ve retired. We care about our clients, we know they pay a lot for our services, and we want to be sure they feel well taken care of.
We’ve never viewed work as just a paycheck, or something that ends at 5 pm. And while that mindset means that we sometimes work harder than we absolutely must, it’s also certainly a big part of why we’ve advanced quickly in our careers and why we’re well compensated. And we plan to keep caring about work until our last day there. Caring is underrated.
Changing Our View on Stuff
Not to sound all high and mighty on any of this stuff (because we are faaaaaar from perfect), but here’s one where you can totally make fun of us. We used to be people who would go to Target for one thing and leave with $100 of stuff, none of which we needed. Most of it was just clutter that would later end up in the the trash or at Goodwill. We realized at a certain point that we needed to change our views on stuff, and we’re happy to report that we’ve mostly reformed our ways.
Decluttering Often — I’m a huge believer in continually decluttering. I keep a “donate” box going at all times. You can also do a massive, all-at-once, KonMari-style declutter, but I’ve never had time to do that to our whole house. But however you declutter, doing it often or in a big dose is a pretty harsh reality check. Coming face to face with all the stuff you’ve bought but never used or bought frivlously is a stark reminder that we can probably all make do or even thrive with much less. Anytime I now feel an urge to shop, I try to do some decluttering, and that usually stops me in my tracks.
Experience Stuff Vs. Stuff Stuff — Unlike a lot of personal finance bloggers, we still buy things. Sometimes a good number of things. But we have made the distinction between stuff that lets us have experiences and stuff that’s just stuff. In other words, we’re spending according to our values, one of the most important of which is to spend lots of time adventuring outdoors. That means we sometimes need new skis (or, let’s be honest — sometimes we just want new skis). We don’t make those purchases lightly, we shop around, we try to buy used and we read all the reviews beforehand. But we still buy them. But things that are just home decor, or kitchen gadgets, or electronics that will quickly be obsolete, or non-essential clothing items — we now pass on all that stuff.
What Would You Add?
Which of our secrets do you also use? What else would you add that’s made a big difference for your finances? Any random Memorial Day reflections? ;-) Share away!
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Categories: we've learned
Thanks for sharing some background on how you got to where you are today, so close to early retirement. I think being willing to deflate one’s lifestyle is huge. This has allowed us to weather the added expenses of children without increasing our expenses much. That may change as they get older and cost more, but knowing how to gradually cut back excess is a helpful skill.
I didn’t know that you guys also deflated your lifestyle! High five for that! I’m sure that thinking about the future comes with a lot more variables when you have kids, so knowing that you can be financially flexible must give you so much peace of mind!
It’s been in small ways–nothing terribly exciting, but the slow creep definitely started to catch us over time!
That’s still so awesome!
A great rundown. It took us a little while to shift our thinking towards these things. We were caught up in the minimum payment cycle for too long. Having a plan, paying yourself first, and focusing on experiences now serves us well.
I can relate to that minimum payment cycle! I’m thankful that a parent gave me a loan so I could pay off the credit cards and then pay back the loan much faster than I could have the cards with their 20% interest rates! That’s a big part of why we believe in paying things forward financially, because we benefited from that kindness! But thank goodness for you guys you got your finances in order, and now you’re spreading the good word through financial education to the public! So wonderful. :-)
One key point I noticed was avoiding lifestyle inflation. We’ve always been mindful of this. Just because our salaries have increased over the years does not mean our spending increases too. We save more and spend just what we need. Great list of things for everyone to keep in mind!
The Green Swan
Thanks, TGS! Yeah, lifestyle inflation is a biggie! If you’ve always been mindful of that, then you’re way ahead of most people!
I think you summed it up really well. It’s funny because I don’t think it’s a secret. It’s kind of like losing weight. People know what they SHOULD do to lose weight, but actually doing it are two different things. There is a HUGE gap there.
Yeah, no actual secrets in our secrets. :-) And such a good analogy. Yes, we all know the basics of both finances and weight loss, but actually getting ‘er done is a whole other story!
Your secrets are excellent! I’ve noticed that some of these become easier with each passing day. You might not think you can save so much as you’re getting your life started, but if you start small and continue to push the amount, before you know it, you’ve got a nice nest egg waiting for you.
Avoiding debt and deflating your lifestyle are similar in that you don’t feel like your missing out when you can find happiness without spending as much money.
— Jim
Oh, totally! They definitely get easier over time — practice makes perfect. And we really are huge believers in making changes gradually instead of all at once. We’ve never felt like we had some rug pulled out from under us because we’ve ramped our spending down bit by bit — wholeheartedly recommend that approach to anyone contemplating getting on the FI path!
Lifestyle inflation is probably the area we are most concerned about. We have done well thus far with pay increases, but Mr. Hodgepodge is up for promotion this year, which if it happens should come with a significant pay increase. Our goal is to save the difference, but I’m a little afraid our spendy side may overcome us.
None of this stuff is all-or-nothing. You could save *most* of the pay increase and still inflate your lifestyle a little. Just keep checking in along the way, and ask yourself, “Is spending more making life better?” The answer could absolutely be “yes!” and there’s no shame in that. But it could be that the extra spending doesn’t make you any happier, and then it’s worth re-assessing things. :-)
Agreed, we had talked about spending 2% more and saving the rest. I’m always just nervous about our spendy saver habits, but you are so right. I need to remember that it is not all or nothing.
Absolutely. Cut yourself some slack. Any progress is great, and faster progress is better. But don’t discount the small stuff. :-)
You pretty much nailed everything on the finance side. I just want to add one quick story about Memorial Day.
Back in 2007, I was a second lieutenant at my first duty assignment. As part of our normal duties we went through basic combat skills training taught by the base security forces. Prior to a deployment, people would go through a more thorough version, this was just introductory. For a young guy this was kind of fun, but we were shooting blanks and explosions were simulated.
About nine months later, I read a news report that sent shivers down my spine. A 28-yr old security forces troop from my base was just killed in Iraq. I recognized the name and when I saw his picture I knew exactly who he was, one of my combat skills trainers.
Although I barely knew the guy, I still think about him all the time. My hands are trembling typing this. RIP Travis and all those who have fallen while serving our country.
http://thefallen.militarytimes.com/air-force-staff-sgt-travis-l-griffin/3466852
Wow, thank you for sharing that story, DTG! It’s so tragic anytime anyone dies young, but thank you for the reminder of the real human cost of our freedom and security.
You pretty much summed up everything. No more secrets!
When you look at it deeper, becoming financially independent is really really simple… but it’s not easy. It takes lots of planning and commitments. Unfortunately many people either lack one of these or both of them.
Haha — not that they were ever secrets to begin with! :-) I love how you put it: FI is simple, but not easy. But I actually do think there are easier ways to do it, and harder ways. Doing a massive lifestyle deflation all at once would be hard, but making changes gradually is much easier!
I think you hit everything I can think of (I know you are DIYers and that would be the only thing I could add)
We have been making small adjustments on all savings and debt reduction over the last 2.5 years – it has grown to saving 36% of our after tax income and paying extra on my student loans – like you I don’t think we could have done this at once – it wouldn’t have lasted long.
Yes, meant to add DIY! That’s definitely in the mix big time! That’s so awesome that you’ve worked your way up to that great level of saving and loan paydown! I’m sure with time you’ll accelerate your progress even more. :-)
Your list and approach is far more complete than ours. We still have a lot if improvement room.
I fully agree wih the give a $h#t at work. I also do care. When i stop to care, i know it is time to move on, like i just did. And by caring, you indeed make fast progress and get better reward. Nothing wrong with that. A nine -2- fiver should not expect the same. And at the same time, it is a personal choice… As long as you understand the consequences
We got to this list over a lot of years, one step at a time. :-) And YES — caring at work is a huge plus. So many people in the FIRE space complain a lot about work (no judgment — we used to do the same), but we realized that if we’d had that mindset throughout our careers of complaining, we wouldn’t be where we are!
so true… a lot of the complainers at work get stuck at a certain moment. You need a just do mentality, care for what you deliver and look through the unhappy things.
Completely agree with you! Even people who think they are complaining just to vent, that negative thinking comes through in their work. Those who stay positive and focus on quality are generally rewarded!
I am big on decluttering too :) And what is good about that, is that sometimes the items you want to get rid of are items that can be sold on ebay or craigslist, so it is money back in your pocket! Or your emergency fund ;)
We usually lack patience to sell on Craiglist or eBay (we did more CL when we lived in a big city, but here it’s hit or miss), but more power to you if you can recoup some of your investment on things you no longer need!
Thanks for sharing – a great list I have bookmarked it. Was checking off myself as I was reading :) The theme through all of this us and what I try to do constantly is to be grateful for what you have – not just material things but people and environment too. It is evident in your blog you live by this too.
I realized we’d never put everything together in one place, and it seemed like a good holiday post. :-) And so completely agree with you on gratitude! It is so important to appreciate what we have, plus gratitude is a major driving force in happiness! :-D
I’m all about hiding money from myself! Out of sight, out of mind. I continue to work on deflating my lifestyle (which decreases the stuff I need) and consciously avoid debt at all costs. Love your list, and couldn’t agree more with your tips for success!
That is the single biggest piece of our progress — hiding the money. :-) If we feel like we have money, we are more likely to spend it, but hide it just a step or two away from our checking account, and suddenly it’s invisible! And glad you like the list! ;-)
I loved this post. I’m a reformed shopaholic and I still will come out of Target spending $100 sometimes. Yesterday it was only $20 so baby steps!
But I agree with decluttering when you feel like shopping. I want to buy another bookshelf for my growing book collection but maybe I’ll just see if I can give some stuff away instead.
I’d say going from $100 at Target to $20 is a lot more than baby steps! Nice job, Athena! :-) And yeah, I forget where I heard the advice, but it was basically: If you’re buying more things to put your things into, you have too many things. :-) (That is speaking directly to former Container Store addict me, I think!)
I think the biggest secret to money is to view money management as an experiment. For a few months, Rob and I were like secret FIRE devotees until we realized the RE part isn’t exactly a goal and that I wanted to be home sooner rather than later. No problem, change the goal, change the strategy. It also allowed me to fail at about 7-8 money making attempt before finally figuring out that freelance writing worked for me.
YES, great point Hannah! We have changed a lot over time (example: originally we gave ourselves allowances to spend however we wanted, but then found we didn’t need them and stopped doing that). I love that you guys have such a flexible approach. Putting yourself in a position to take advantage of opportunities is pretty much the best thing you can do.
Caring is definitely underrated.
This is a bit of a tangent but…as much as I find Office Space to be a highly entertaining film, I sometimes wonder if it (and other films/TV shows like it) has helped to drive an increase in the cultural acceptability of not caring about one’s job, particularly if one’s job happens to be located at a desk inside a building. Certainly many people find their jobs to be unfulfilling, and maybe Office Space simply reflected that fact. But I do find it tiring to hear work constantly referred to by so many people as simply a “grind” or a “rat race”. Work, I’m starting to believe, is often what you make of it (provided of course that your job is safe and ethical and that you are receiving a living wage). There may be some exceptions, but I think that in a lot of cases we can choose to care or choose not to care. Good for you for choosing to care. :)
So funny… I think of Office Space as such a boy movie. But I do think so many of the ideas from it, especially the TPS report, have made it into the culture. It’s an interesting question of whether it just gives voice to existing frustrations or if it just magnifies them in some way. I do think there is something inherently unfulfilling about a lot of modern work — it’s so disconnected from real people, and few of us actually make or do anything. BUT, I could not agree with you more that it’s all about the mindset. There’s some good in every job (well mostly every job), and it’s up to us to see that. If we choose not to, and to focus on the bad, that’s our own fault. Plus, the whole idea of not caring is just so odd to me, at least for people earning a living wage. This is what you’re spending the bulk of your time doing and you can’t even muster up the will to care about it? I can’t relate to that thinking at all! It doesn’t even feel like a choice to me!
Oh, is the TPS report a real thing? I have never actually worked in a business-type situation so I really have no idea. :) Obviously the movie struck a chord with a lot of people, so it must have reflected something important in daily office life. And it’s funny; it never would have occurred to me to think of it as a guys’ movie, but I can definitely see the argument for that.
I always assumed that the TPS report was a fake thing, but many office jobs have their equivalent of some stupid, timewasting task that feels totally pointless. And you’re so right — it definitely struck a chord!
Great list, ONL! I would add:
1. Understand the tax implications of your current investments and how you tax situation will change in [early] retirement. Invest in a tax-efficient manner.
2. Minimize investment fees. 1% or 2% a year can steal half your money over a long stretch of time.
3. I need to do more decluttering. Thank you for the reminder!
Good call — we should probably do a follow-up post that’s all of the things we’ve had to learn and come to understand. We could make a pretty long list of those things, including the ones you listed!
I’ve had a lot of financial privileges (which I just blogged about this morning! bit.ly/1Z8VY5o) like starting out debt free, and growing up understanding the importance of saving. But honestly I think the biggest key for me has been hustle. I didn’t go into a lucrative industry but I’ve worked my ass off, built employable skills and a reputation, and it’s gotten me far.
I feel pretty positive that working hard will never lead you astray! Good for you for working your butt off and keeping it going, despite the privilege you had built-in!
As I always say, the steps to FI are simple and similar to other folks heading/arrived same place. Tedious, life-long, but simple. Often almost funny/bewildering to me how come so few see it this way in USA. Congrats on finding a balance.
Hi Olga — Thanks for stopping by. What’s funny is that we don’t actually find any of this tedious, especially with our pay-ourselves-first approach. Sometimes we almost wish there was more to do on the money front. Ha! But it all just happens automatically, and all we have to do is not spend too much. :-)
This was an awesome, and right on the money, post! Each of the steps you have taken are things we have done to set ourselves up for the Encore Voyage. Your discussion of avoiding lifestyle inflation is perfect! Each time hubs and I would get a raise at work, we would simply increase our automatic investments by that amount. If we were living fine on the current amount, did we really need more? We just didn’t give ourselves a “spending raise.”
Which bring me to the point of making your investments automatic – People who wait to save until they believe they can afford it will never save. If it is just gone before you see it, you adjust.
Thanks for a great post! ~ Lynn
Thanks, Lynn! The way you put it about affording to save reminds me of the saying that if you wait until you’re ready to have kids, you’ll never have them. (We don’t have kids, but I’ve heard that enough times!) But maybe that’s the point: If you wait until you’re ready to do anything, you’ll never do it. So you just have to do it!
I don’t think there’s too much that we do differently. Our biggest contributor is stopping the lifestyle inflation before it got out of hand. We still saved when we were spending more, but reeling in that excess, truly excess spending gave us LOADS more to invest which spurred our FI journey along greatly.
Being mindful of day to day spending is another big one for us, and avoiding our trigger stores like Costco, Target, or others where we know we can easily buy stuff we don’t really need.
Amen to that! I can’t even remember the last time I set foot in Target — that’s at least 50% of our success. ;-)
It’s easy to focus on the success of almost reaching early retirement, without realizing that you two made mistakes along the way, just like the rest of us. I would add perspective as an important tool. The ability to step back and look at progress over time and the bigger picture can help you through tough times and/or motivate you to keep working hard. You’ve got great perspective and it’s paying off, literally :)
Oh, I love that point! Perspective is SO important! To stay grateful, to appreciate the progress, to forgive yourself when you slip up… so many reasons!
I love slowly acclimating yourself to living on less. Brains react well to slow change and barely notice them (we all know the boiling frog analogy), but definitely rebel against restrictions.
Haha, just call us the boiling frogs! :-) Yeah, we’ve found that we have major rebellious tendencies, so we try to make all changes in ways that stay below the rebel radar!
A key thing for me is not budgeting – but rather automatically saving what I want to save (usually 50% or more). I read a long time ago that by doing this you force yourself to live on what is left and force your mind to come up with new and interesting ways to make more money if it is not enough – PAY YOURSELF FIRST!
That is the single biggest secret of our success, too — we don’t budget at all (except for big expenses we know are coming), but instead pay ourselves first and live off the small remainder. :-)
I like to buy stuff too! I just make sure it fits in our values. Vacations and outings with family are a must. I also try to find cheaper versions of things too. Someone at work who thinks I’m “cheap” commented on my iPhone because she didn’t think I’d have a luxury item like that. I then told her that it’s an iPhone 6 used I bought off ebay and my phone bill is only $27 a month :).
I’m pretty focused on saving for retirement. Our Roth IRAs are already maxed for the year and I’m working on putting down as much as possible on the 401ks. I also want to kill our mortgage as fast as possible. Considering it’s still sitting pretty at $250k (originally $300k) it’ll take awhile. I’m throwing everything extra I can into it.
I get the opposite comments! Like “I can’t believe you drive such a crappy car when you do what you do!” (And it’s not even a crappy car, it’s just not a new fancy car!) ;-)
I love that you’re so focused on your retirement savings and home payoff. I know other people will tell you that you should invest that money instead, so if you ever need reassurance about paying off your mortgage early, we’ll provide it! :-)