Unknown: “What do you call a person who is happy on a Monday? Retired.”
Recently, I came upon an online article where it featured several young workers who were all under the age of 24. All of them were young workers who quit their jobs of less than 2 years due to high stress and burnout, to travel. One of the featured persons was a young lady who chose to travel the world with whatever savings she had, and another was of two buddies who both quit their jobs to travel in a converted bus.
Reading the article brought back some great memories of my own. My wife and I did exactly the same thing (twice): Once, when we quit our jobs and sold everything to move to Oahu, Hawaii from New York City, and another time when we chose to do the same thing, but almost in reverse, to move back to the East Coast, namely to the suburbs of Philadelphia.
Getting ready to embark on a new journey was some of the best times of our lives. We vividly recall that feeling of freedom and sheer joy, knowing we no longer needed to work (at least for awhile). Our plans were to travel right after selling everything, having the time of our lives, before needing to find work again.
Despite that reality, we loved our month of traveling this great country of ours. When we did it the first time (NYC to Hawaii), we embarked on a southeast road trip going all the way down to Key West in Florida from NYC. We spent an incredibly fulfilling and a fun month visiting places like Myrtle Beach, Hilton Head Island, Orlando, Miami, Key Largo, and Key West. Needless to say, we had a great time hanging out at Disney World, and enjoying the beach vibes of southern Florida.
For our second time around (Hawaii back to the East Coast), we spent 3 weeks touring our own island of Oahu, where we were living at the time. It was back to “vacation mode”, of renting a convertible to cruise the amazing island of Oahu, of doing luaus, and just doing what most tourists do when they’re in Hawaii, that is immersing oneself with the world class Waikiki Beach, Kailua Beach, Sunset Beach, and Lanikai Beach.
We had a blast, once again feeling free and feeling great after quitting our jobs and selling our home of 2 plus years which was located right on the outskirts of that world famous Waikiki Beach. After we moved back to the East Coast, specifically a suburb of Philadelphia, we spent another month or so, living the carefree lifestyle like that of recent early retirees.
We spent quality time with our family and friends, not caring when we’d get up in the morning, and just concentrating on having fun. We spent that month visiting Atlantic City with our parents and reconnecting with our friends.
But like all good things, those wonderful two months came to an end. Life had to go on, and that meant us needing to find work again. We were living the lives of early retirees but we weren’t really. We pretended we were, but we knew we needed to make money and possibly prepare for retirement which was fast approaching.
We had this sudden realization that retirement was no longer something we can put off when we were nearing our late 30’s. We knew we both loved living without jobs, to wake up when we wanted to, and just planning our days/weeks figuring out how to enrich our lives (traveling, exercising, or just killing time binge watching).
As much as we loved living without jobs, we knew then, that we really needed to pay our dues, work our asses off, and seriously plan for our retirement, so we can actually retire early. Retirement, up until that point in our lives, was something that was so far away in the future, that we didn’t care much about.
As we got older (we were in our mid thirties when we moved back to the East Coast from Hawaii), we knew we had to do something about our retirement. Right around that time, we encountered the FIRE (financial independence retire early) movement, which was our turning point. It showed us to forgo mindless consumption, to live on much less, while voraciously saving for retirement.
Our nieces and nephews are all in their early working years (Gen Z mostly with some Millennials), and I’ve constantly reminded them of the importance of planning for retirement at an early age. I’ve stressed that there are no shortcuts to prepare for retirement, and the earlier you plan for it, the easier it’ll be.
As nice as winning the lottery, getting a hefty inheritance from a long lost uncle, winning big with cryptocurrency, and/or relying on any number of ill-advised investment schemes may be, none of these are realistic, attainable, nor recommended. Plan your retirement using realistic strategies that has worked for countless number of FIRE movement participants.
Don’t fret and complain about needing to go to work on a Monday morning. If you’re like us, who didn’t enjoy working and constantly day dreamt about retiring early to travel, then do something about it! If we can do it, anyone can do it. Like anything you accomplish in life (learning an instrument, being good at sports, learning a skill, etc.), planning for retirement requires sacrifice, discipline, patience, knowledge, and dedication.
If you’re willing to do all these things, then there’s no reason why you can’t reach your early retirement. See below for some of the most important tips that helped us be financially independent and to be able to retire early:
- Cut down on spending (think buying needs vs wants most of the time)
Despite learning about the FIRE movement, it took us awhile to really embrace spending less. It was really hard for someone like us (poor immigrants from South Korea) to not spend. Growing up poor meant when we finally earned enough money to have disposable income, we started spending like there’s no tomorrow.
We bought things for our home, we bought things for us (CD’s, DVD’s/BluRays, home theater systems, home gym, souvenirs, etc.), and we bought things for our family. It was so hard to control our spending after we moved back to the East Coast!
We eventually got better and better at spending less, to a point where we only bought things that were needed vs wanted. We would ask ourselves, “Do we really need that item X?” We found out that if we waited few days before purchasing it, the answer was usually a “No”.
No one is perfect. Treat yourself once in awhile to buy that “want”. Just do it sparingly after you’ve been really good most of the times.
The better you get at controlling your spending, the faster you can reach your goal of financial independence!
- Downsize your body, downsize your home, downsize your life
I’ve always been a firm believer in the importance of exercise. It teaches discipline, willpower, sacrifice, among many other positive things. To me, reaching your financial independence isn’t that different than exercising. You have to do just about the same things to reach your goal, namely discipline, willpower, sacrifice, etc.
You can’t control your finances when you’re out of shape physically and mentally. Life requires you controlling your body and your mind. You have to learn to keep your urges in check (spending frivolously, doing drugs, overeating, etc.). When you can’t do that, bad things usually happen: depression, anxiety, hopelessness, or worse…
When you can control yourself can you finally control other aspects of your life, including financial. Learn to spend less, don’t buy unnecessary stuff, and practice Minimalism. Downsize your home from a gigantic 4 bedroom home for the two of you, to something smaller. Downsize your life from taking extravagant international trips to something more suitable for someone trying to retire early, like a day trip to hike for example.
Here’s the deal: you can’t continue to live the same way and expect different results. You can’t continue to spend, spend, spend and expect to retire early. Change your lifestyle by embracing minimalism, then change your life.
The more you practice, the easier it’ll be. After awhile, you’ll notice there’s more money left over at the end of the month to start saving for retirement.
This is a feedback loop: get better at spending less, you’ll have more money to save, then you’ll start spending less and less because you’ll want to see your savings grow bigger and bigger. We know we did.
- Learn about retirement accounts and use them!
Learn as much as you can about retirement accounts like the company sponsored 401k, or individual retirement accounts like the IRA/Roth IRA. There are so many places you can learn about these accounts, including this blog, and countless other financial blogs, news, and online searches. Be engaged, seek out knowledge, and don’t be afraid to ask someone if you need help.
Companies have 401k specialists who can help, and major brokerage firms like Fidelity, Charles Schwab, etc., have customer support staff who can help. No one will do the saving for you. You have to do it.
- Embrace index funds and not individual stocks
Investing should not be complicated. Learn to think long term when investing and look for ways to minimize fees. Quick answer? Index funds.
Unlike buying an individual stock of one company, an index fund buys stocks of several hundred companies. Index funds provide two major benefits: 1) they provide diversification so that even if one company’s stock fails, you don’t lose everything, and 2) they feature much lower fees compared to regular mutual funds, saving you potentially hundreds of thousands of dollars in the long run.
Like most FIRE movement adherents, we’re also big on index funds that track major indexes like the S&P 500 (500 of the biggest U.S. based companies) and/or NASDAQ (technology based companies). Start investing in these first. After you become more knowledgeable, you can start branching out into other investment strategies like actively managed mutual funds, bond funds, etc.
- Don’t forget about emergency fund!
Because life will throw you a curve every once in awhile, you need an emergency fund to help you get over the hurdle. Life happens, like car repairs, home repairs, dental implants, etc., and you must have one to survive. If you don’t have one, then you’ll most likely borrow from your high interest credit cards or worse, payday loans. Don’t do that!
Don’t be like most Americans who can’t come up with $1000 in an emergency. Start saving up, then keep going until you have 6 months or more monthly living expenses saved up in a high interest online savings account.
Even after you retire (like us), emergency fund can be a lifesaver as we’re experiencing stock market/bond market downturn since last year. We’re selling less of our bond funds and we’re using portion of our emergency fund to pay for our monthly expenses.
- Have a realistic retirement plan and don’t rely on fairy tales
Like we discussed, don’t rely on hitting the lottery or waiting for a life changing inheritance from a long lost family member. Most people will be extremely disappointed waiting for these things to happen.
Maybe you’re one of those people who still believe in Santa Claus or you believe somehow you’ll be rich. Well, good luck with that. I’d rather prepare and plan myself than wait for something to happen…
- Learn a skill that pays you well
Retiring early isn’t easy when you’re working a retail job that pays minimum wage. We know because we also worked minimum wage jobs while we lived in Hawaii, and it was next to impossible…
Instead, learn a skill, any skill that pays you well. Learn computers, learn to be a dentist hygienist, a plumber, carpenter, etc.
It doesn’t matter what you learn as a skill, as long as you enjoy doing it and it pays you well. I went to a computer school after working as a car salesman for close to 5 years after realizing I needed to do and be better. I’m glad for that decision because my final job as an IT support technician allowed us to retire early.
You have to take charge of your life and want to get better. No one will do it for you.
What is my eventual goal for reaching my financial independence???
This is simple. Figure out what you can live with on a yearly basis then multiply that by 25. This is the minimum amount you’ll need to be financially independent. This is supposing that each year, you’ll withdraw no more than 4% of that sum.
For example, if you can live on $20000 per year, then you’ll need $500000. (20000 x 25 = 500000)
So why the 4%? This is the industry standard percentage you can withdraw each year without seeing your nest egg decrease. On an average year, stock market will return roughly 8 to 10%. In theory, even if you withdraw 4%, and you figure an average inflation rate of 3%, you still shouldn’t see your nest egg decrease.
In conclusion:
As nice as quitting your job and traveling is, there comes a time when you realize you have to pay your dues and plan so you can actually retire early. We know we did the exact same things (twice!) but we’re lucky in that we finally came to our own conclusion that we needed to plan for our fast approaching retirement.
Relying on fairy takes to plan your retirement is a bad idea. I’m sure there’s someone out there who got lucky, but that’s probably a small fraction of the population.
Forge your own path and follow the guidelines that helped us to retire early: spend less, learn always, learn a skill, exercise, and save, save, save. These tips have been true for humanity from the beginning as it is now. You can’t spend your way into retirement! It never works.
Spend less than what you make (hopefully much less), put aside money towards your retirement, then repeat until you become financially independent. There is no shortcut to any of this…
Thank you for reading and good luck on your journey to financial independence!
Jake
Wandering Money Pig
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