My goals are simple
1. Save as much as possible
2. Enjoy life right now
3. Reach financial independence and the flexibility that comes with it by the time I’m in my early 40s
Yes, I’m one of those guys – the guys who blog about their journey to early retirement but I think my path there will be quite different. I read a lot about early retirement and visit blogs and forums that discuss in a lot of detail because one day I want to get there myself but I often find myself wondering if that lifestyle is for me. What type of investor and early retiree am I?
There’s the very frugal people who somehow manage to rent a place for $350/month and live on a budget of $600 total while seemingly subsisting entirely on a diet of rice and beans and hot sauce. These are the guys who will tell you they don’t want to spend $20 for a ticket to a concert because if they just invest that today in a dividend stock and let it compound for 30 years, it’ll be worth $150 and generate $6 in annual dividend income. Great, if I wait 30 years I can finally get myself a free ticket after waiting 3.3 years for my dividend income… or I could go to the concert and have an experience of a lifetime. It’s a trade off for sure and some people certainly future potential that money may have more than the experience they could have now but I’m just not wired that way. That’s not to say that I’m a spend-spend-spend type of person but I do enjoy a nice meal out with my girlfriend once a week, I do enjoy seeing a show with friends once a month and I value these things more than I value what the money spent on these things could mean for me in the future.
Yes these frugal types manage to save about 90% of their income while busting their ass at work and projects for 10 years and retire early in their 30s on a budget of 30k/yr or more depending on income and lifestyle. It’s impressive, it’s what they want to do and I applaud them for it. Sometimes, I’m even a bit jealous that I’m not wired that way as when I, now 31, sit in a cubicle on the 16th floor of an office building in random expensive city, USA and wonder if I should have done less and saved more. I could be sitting and home and working on my passion projects by now with my portfolio generating the 30-50k needed to cover my expenses but in the end the reality of my life sets in and I think about how much I’d have to give up to get there.
These guys must not live anywhere near where I live because a dumpy one bedroom apartment around here runs about $1000 before for rent alone. Yes, I could move to a much lower COL area and maybe take on room mates for the next 10 years and limit my spending to a third of what it is now and I could probably get there but would I want that kind of lifestyle? I happen to live in one of the top 10 expensive states in the US and I like it here. My family lives here, my friends live here, it’s safe and beautiful and close to major metropolitan areas with tons of things to do and culture to digest and delicious food to eat. It’s full of great people to meet and talk to and sure those things all probably exist in areas that are significantly cheaper than here but this is where my father settled the family when he brought us over from Europe to the US in search of a better life and this is where I live.
It’s expensive, it’s not the best place to be if you want to retire early but I love it and I don’t want to move.
Looking at some of these lifestyles, I can also see that these guys are way more frugal than me in other areas. I don’t live an excessive lifestyle by any means. This blog entry is being written on an old ass ASUS PC that is long due for an upgrade but it still works so why upgrade? I have iPhone 5s that won’t be upgraded until it dies and which replaced an old Nokia that I used way past its life cycle and way past a time where it was socially acceptable to have a phone where one had to text by pressing the numbers multiple times. The point here guys is that I’m not spending money like crazy but I do like certain things which make this type of lifestyle hard for me.
I’m a guy who likes his food, steaks and high quality meats and cheeses are my money’s Kryptonite. Visits to high end restaurants aren’t daily occurrences by any means but food is a passion of mine and spending money there doesn’t bother me as much as some others. I also spend quite a bit more than the average potential early retiree on rent when you look at my income simply because of where I live – it’s not something I can control readily and while I could easily downgrade a bit from my current place or find a roommate or two or three, I place a high premium on personal space and personal time so that’s out of the question.
The problem with all these things is that I’m saying – nope that can’t change, this can’t change and that isn’t getting me anywhere.
I was looking over my financial statements last week, more specifically my 401k contribution for the year which in years past has been near or at the maximum and saw that YTD, I’ve only contributed $7000 this year with only a few pay periods left. That’s not good guys and it’s far below where I need to be in order to reach my goal of retiring in my 40s.
How did this happen? I can tell you that I started work in 2008 when the economy was in the dumps with a yearly salary of 45k and I contributed more that year than I did all of this year at a salary even though my salary has nearly doubled since then. I looked at that 401k YTD contribution and asked myself how I’ve gotten away from my initial plan and how my savings rate has declined year over year as my salary grew.
And the answer is lifestyle creep. I live in a more expensive apartment now, I go out more often than I did then and I do other things that I wasn’t doing back then because my mentality back then was different than it is now. I was more concerned about retirement in 2008 than I am now even though I’m closer to it now than I was back then; even though the path back then was more muddled than it is now and that needs to change. I need to get back to the type of person I was in 2008 and work on improving my savings rate back to where it was back then. If I could nearly max my 401k a few years ago when I was earning thousands of dollars less than I am now, why aren’t I maxing it this year too?
These are the types of decisions and choices that are going to haunt my financial future and while I’m never going to the be the type of ultra frugal person I’ve spoken about earlier, I really need to take a good hard look at what I’m doing to reach those goals I’ve laid out in the beginning because I think I’ve begun to lose track of that. And in the end, that’s what lead me to start this blog.
I want something that will force me to be accountable for my budget and my savings and this is the perfect vehicle for that. I’ve lost track of my spending habits and my saving habits have suffered as a result. If I want to actually have financial independence in my early 40s then I need to do more than just save 7-8k a year in my 401k and max my ROTH. I need to take full advantage of the tax saving options available to me in order to maximize my ability to get there. Not to say that saving 7-8k per year plus some one top of that is a small feat but if I want to retire early then I have more work to do than that.
And so this is it – this will be about my journey to get there. I hope to track everything here, my income and expenses and my investments and growth through the months and years that are coming.
I’m a passive investor by nature with most of my money in index funds but I still think that individual stocks have a place in my portfolio I can buy them at an attractive valuation. The end goal here is to get enough money, enough of a safety net 10 years from now in order to passively retire and move on to other passions. And that can come through a variety of avenues, whether they be index fundings tracking a basket of stocks or bonds or REITs or even individual stocks. I’ll write about my journey to that goal here – write about my progress and write about anything that I feel is important in my journey there.
I’ll also write about individual stock analysis as that’s one of my passions. I work in the insurance industry as a profession but I studied finance and have a background in it so if I’m looking into a stock and deciding whether or not I should make it a part of my long-term portfolio, I’d like to let you know about it and include you on my journey if you happen to come across this tiny blog and feel like it’s worth reading.
And hopefully by the time I’m 40 or 42 or whenever it happens, this blog will be a testament to my journey as I sit at home on a tuesday morning without a job to go to – the dream of many people my age.
That’s not say that I won’t earn any money in my 40s, I have some passive income hobbies right now like writing that generate some additional income beyond my salary and I plan to continue that and add to it as I age but it’s these investment decisions that I make now that will be the backbone of my income generation in the future and will be the decisive factor of whether or not I can quit my 9 to 5 job earlier than most people. My hope is that I can and today is the day I get serious about it again. I think I’ve gotten a good start during the early part of my career and have a good portfolio already but I can’t afford to get lazy now. Today is the day that I start to get serious about saving again and when I look back at this day 10 years from now, I know that I’ll be happy I made this decision now.