Our Full Financial Plan and Philosophy // + the Mad Fientist Podcast

I’m super stoked to be on the Mad Fientist podcast today! I met Brandon and his wife Jill at FinCon, and we talked about doing the podcast, but I was a little freaked out about having my voice out there. (Kinda violates a key tenet of anonymity, even if our anonymity is only temporary.)

But I finally decided that anyone listening to the financial independence podcast is at least considering doing something like what we’re doing, so we have a vested interest in keeping each other’s secrets. (Pretty please keep the secret!)

Ultimately, I decided to go for it, and I had tons of fun chatting with Brandon – we talked more about the mountains and travel than actual money! Because that’s what money is for: paying for the things you value most. That’s why we’re still working a little longer despite hitting technical financial independence a year ago, because we always want room in our spending for fun stuff. But since we didn’t get into all the details of our financial strategy, I thought I’d put them all here, so anyone new to the blog can get a good intro, and regular readers can get a refresher of all of our plan elements and strategies in one place. (Plus I needed an excuse to share the crazy car-eaten-by-snow pic below… keep reading!)

Life Goals First, Money Second

Neither of us have ever been interested in being rich just for the hell of it. Okay, well there was that one time Mr. ONL owned a slightly extravagant car. (Thank goodness he bought it used and sold it for as much as he’d paid.) But we’ve always wanted to travel and have time for big adventures, the kind you can’t fit into long weekends or even two-week vacations, and the kind you can’t save until you’re 65. That was something that brought us together in the first place, in addition to laughing so hard together that it hurt, and from early on in our relationship, we were plotting ways to avoid spending 40 years working in our stressful, all-consuming careers. As soon as we heard about early retirement and learned the math behind it (h/t to the Charltons and their great book), we were in, but only because it supported the life we wanted to live, not because of the money.

Related post: 10 Questions to Ask Yourself Before Retiring Early

Constraining Our Spending Without Budgeting

Budgets aren’t a good fit for us. We’ve tried, we’ve failed, we’ve moved on. But we are able to live on what we have, so we’ve followed an automated strategy of paying ourselves first that makes the balance in our checking account artificially low. While that may not have worked when we were earning entry-level salaries, it works well for us now, and we don’t spend money that’s not in checking unless it’s some big deal thing we’ve planned for.

Leaving the Big City

We are huge believers in aiming toward the life that you’ll love living, not just the life that’s the cheapest, so we’d never advocate leaving the city if you love city life. And we actually did love city life, but we suspected we’d also love mountain life, since the mountains are our true love, apart from each other of course. In the city, it would cost a small fortune anytime we wanted to get together with friends because it usually involved a trendy restaurant, but in our small mountain town, we tend to see our friends more, and the things we do together are free – having game night at one of our houses, going for a hike, having a picnic in the park. And even though we still pay the “mountain tax” and live in a high cost of living area, we spend so much less living here. And we have so much more time to ski, bike, backpack and climb since we’re not schlepping back and forth from the city anymore. We do now keep our house freakishly cold, though, because natural gas rates are out of control in rural areas.

Buying Less House Than We Can “Afford”

We recently paid off our mortgage only five-and-change years after moving to the mountains. Though we were aggressive in paying it off, by far the biggest factor in being able to do that — and being able to save so much for retirement on top of it — is that we didn’t listen to the banks when they told us how much house we could afford. Seriously, if you earn incomes that are significantly above average, the amounts they say you can borrow are worthy of a spit take or ten. While we might have drooled over some of the houses in that price range, the thought of owing that kind of money was sickening to us, and we listened to our guts on the price range that felt comfortable. If we hadn’t, we’d still be years away from retirement, not a few months. Even with our first place, we wanted to know we could comfortably cover the mortgage on one income, not two, so bought based on that. You can never go wrong underspending on housing.

Not Inflating Our Lifestyle

The most painless way to save by far is just to stick to the spending level you feel comfortable at, and when you get raises and promotions, automatically save that extra money. While some more hardcore frugal bloggers have continued the college lifestyle into their 30s, we didn’t do that at all. We absolutely inflated our lifestyles for several years – including our baller years – but then when we got serious about our financial goals, we just let things level out, and we banked all the increases.

Deflating Our Lifestyle… Gradually

Of course the amazing thing about pursuing financial independence is that your motivation gains momentum, and as we’ve gotten farther along toward our ultimate goal of quitting at the end of this year, we started taking a much more critical look at our spending, and questioning whether each outlay really made us happier or otherwise improved our quality of life. For us, though, the key has been cutting things out gradually, so we’ve never felt like we went from this sweet spendy life to a state of austerity and deprivation. Giving things up one at a time, or even invisibly, has made us feel like we haven’t given up anything at all.

Banking Our Windfalls

In addition to banking raises, we’ve made a habit for many years of banking windfalls, like our year-end deferred compensation or any tax refunds we might get. It started by just deliberately not budgeting how we’d spend that money. While we saw our colleagues talking about what they’d buy with the money, or what extravagant vacation they’d go on, we saw our bonuses as the ticket to the fast track on the Life board. “Get bonus, save it, skip 15 steps.”

Thinking Through Sequencing

While the 4 percent rule (and its corollary, the rule of 25x) is a good rough measure of what you might need to save to retire, it doesn’t account for real-world circumstances, like that you might have more saved in your 401(k) or other tax-advantaged accounts than you have in your taxable funds (this is true in our case). Or that you might have more income coming in later in life, like after you pay off a rental property (also true for us). Or that you might want to keep more of your funds sequestered for later years in case you have expensive health care needs, or just because knowing you’ll be comfortable in your “traditional retirement year” lets you sleep at night. The math is definitely more complicated, but we’ve built a two-phased retirement plan that will have a leaner spending target in the early years when we don’t mind camping in the dirt and sleeping in hostels while we travel, with a cushier reward waiting for us when we hit age 60 and can access the tax-deferred stuff without penalty or back-door conversion.

Lots of Contingencies

We may be setting a record for the number of contingency plans we have, but that’s important to us. We don’t like tossing and turning at night, and we learned a lot of important lessons from the 2008 financial crisis that stay with us, like that the mindset of “well, we can always just go back to work” may not turn out to be so realistic when times are tough. That said, we did finally have the lightbulb moment that we’ll earn some money in retirement, which will take a lot of the pressure off our investments, but that hasn’t stopped us from relentlessly asking “What if…?”

Low-Cost Index Funds and Automation

We have the most boring investment strategy possible, but it’s served us well so far: invest in those completely unflashy Vanguard index funds (S&P 500, total market, and total market bonds), and do it twice every month, no matter what. It’s all set up through auto-transfer, so we don’t have to exert any willpower or risk decision fatigue to save money, it just happens.

Keeping Our Cars

We won’t be those typical personal finance bloggers who will tell you that you should never buy new cars. We’ve bought both of our cars brand new off the lot, but we negotiated like crazy to get their cost down (pro tip: negotiate via email with dealerships’ fleet departments and ask area dealers to beat the best offer you receive, and then when you get a better offer, do it again). But what’s made it work out for us to buy new is to keep the cars forever. We still have our 2004 Honda Civic, though it’s not necessarily ideal for our mountain climate, and we can’t imagine parting with our Subaru Outback. We may sell the Civic when we retire, just because we won’t need a second car when we’re not commuting to the airport for business travel, but not because we wouldn’t be happy keeping it forever.

Putting Our Marriage Before Money

I get a few questions each month about how to get your spouse on board with your early retirement vision, and my answer is always: Focus on the life goals and get those into alignment first. If you don’t agree on where you want your lives to go, that’s a way bigger problem than money or your FIRE plan. And if you do both agree on what you want out of life, it’s way easier to have the money conversations from that place. The truth is, if we weren’t both equally fired up about reaching early retirement, we wouldn’t be pursuing this. We’d be working toward whatever other life goal we both cared about. But having one of us early retired and the other still working isn’t our particular vision of happiness (nor of marital bliss). This isn’t true for everyone, but we see FIRE as 100 percent a team effort. And regardless of how you see your finances, you should see your marriage as your most important investment.

Breaking the Rules Sometimes

Saving money feels wonderful, and we love watching the numbers on our spreadsheets grow as much as anyone. But we don’t put that above all else. People are way more important to us than money, for example, so we made a personal loan to a family member despite the conventional wisdom telling us not to, and we bought our rental property to rent to a relative, meaning that the math on it wasn’t as favorable as professional landlords would say is essential. But both of those decisions are working out well so far, and we feel great about them. We also give regularly to the philanthropic causes we’re passionate about and urge others to do the same, and we still splurge on travel a few times a year, because we believe in enjoying life on the road to early retirement, not just after you get there.

Being Born Lucky

As much as we think early retirement is more doable than most people imagine, we aren’t going to claim that anyone can do this. A whole bunch of factors went into this even being possible for us, from getting tons to help along the way, to having a fairly subsidized life, especially growing up (you probably did, too), to having good early retirement role models on both sides of our families. We remind ourselves every day how lucky we are, and that gratitude is a big part of our happiness.

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There you have it: the full rundown with lots of links on every aspect of our financial plan and philosophy. Any questions about our plan that we didn’t answer here? Fire away in the comments.

Share Your Thoughts!

You know I’m dying to know… what did you think of the interview? Am I the biggest dork ever? ;-) Anything new or surprising that you learned that you’d like us to share more about? Let us know in the comments! xoxo