Here is a new guest post in the series on plans for extreme early retirement. This one is from a young couple of professionals in their 20s. I currently have a few more lined up. If you are interested in contributing your own story or plans, see here.
Currently in our young 20s, my wife and I have decided to break free from our golden handcuffs and embrace our vision of early retirement. My wife was brought up in a “high achieving” household more than I, but both of us to a good extent were raised with typical societal pressures and expectations – attending a top college, getting a well-paying and well-respected job, working our way up in the world, perhaps with grad school thrown in somewhere, and down the road retiring to enjoy our golden years as ‘successes’. Sounds pretty normal, but to us the biggest alarm bell in these expectations is the precedence of prestige over passion, and the implicit message that it is good to delay gratification from earnings. While Tim Ferriss is on the whole a bit nuts, he and The Four-Hour Workweek are big inspirations to us in reminding us that money is worth little without time and that many of the real joys in life are cheap or free. We strongly believe that it doesn’t make sense to spend the most physically able and least geographically bound years of our lives working for a questionable ‘freedom’ we have never experienced, don’t know if we would enjoy, and that we would only get to taste in our least physically able years. No, thank you.
We were lucky in having each brought a few tens of thousands of dollars to our marriage (my wife from babysitting, tutoring, and summer jobs and mine from a windfall family gift), but along with her portion my wife brought to our relationship a deep sense of frugality, which I both moderated and adopted. With a goal of financial freedom, we started saving like crazy, helped by our slightly outlandish salaries out of school.* My wife worked in management consulting, while I worked (and still do, for a few more months) in finance. While we live in a major city with a high cost of living, we managed to keep our expenses lower than nearly everyone in our social circle while surprisingly not compromising much on our standard of living. Keys to us were having no debt and having no interest in obtaining any, maxing out our 401(k)s, spending way less than we earned, and not increasing our standard of living when more money came in. We knew our priorities, and happily accepted trade-offs like living in a smaller apartment in order to eat out when we wanted to. It’s no secret – it was certainly easier to execute the above steps given that we had a decent sum of money laying around when we married. Our investment approach is very “Boglehead-ish,” and we are strong believers in low-cost passive investing. We use Moneydance to track our net worth, and as typically emerges from the above approach to finances, that net worth figure grew constantly.
While our expenses are significantly higher than Jacob’s – around $30,000 / year, we saved more than 50% of our income and our net worth grew from $80k in September 2007 to $125k in January 2008. By September 2008 we had grown that figure to $209k, and after a precipitous fall in Q3 2008, we broke $300k this past September and are now in the mid $300s. We are both shocked, thrilled, and humbled by our current financial position. Honestly, I am convinced that had I not married I would have an iPhone, a projection TV, a loft downtown, and very little cash in the bank – rather than the opportunity to take off over ten years from work.
I am patiently waiting for my January 2009 bonus to hit my bank account before resigning from my job, but practically we consider ourselves financially free today. While our net worth is not enough for us to retire on with finality, we plan on taking a long-term “mini-retirement” in the near future, during which time we plan on living in a variety of locations, exploring and developing our hobbies and talents, and getting started on what we want to do next – for me, starting a business, and for my wife, playing in the arts. Since we are both either out of the rat race or on the exit ramp, I can’t expect our net worth to continue growing at the staggering pace that it has been. But that’s kind of the point. We have made it — at least for now — and with kids not on our minds for the next few years, it’s time for us to step back and enjoy.
I fully recognize that our situation isn’t easily replicable, but I hope that it can inspire young professionals living in their cubicles to see that there are other possibilities. That said, the key components of our approach do work. Spend less than you earn, save like crazy in solid investments, don’t take on debt, and put windfalls in the bank.
I am happy to answer any questions you may have about our story – as long as they wouldn’t breach our anonymity. Thanks for reading.
*In case you were wondering, our starting salaries were both in the $60s and increased from there, along with the hours we were putting in.