For those who don’t know, FIRE means Financial Independence and Retire Early.
It’s not a very popular concept, especially in America, the land of “bigger is better” and “more is better” as a way of life. Most people I know in the 20-30s age range are buying big homes, going out to eat and to bars, concerts, festivals, traveling, and generally not thinking about money at all besides “hmmm should I check the contribute to 401k box or not?”
Thank goodness for the internet!
I’ve been a long-time reader and subscriber to some amazing personal finance blogs, like The Simple Dollar, Mr. Money Mustache, The Frugalwoods, and most recently Physician on FIRE and Mrs. Picky Pincher. And through their wise words I’ve become more and more inspired and determined.
The road to FIRE may seem like a long and arduous one, but it is one which leads to paradise. Yes, we will have to make a lot of life choices that aren’t popular or cool. No, we will not live in the biggest, fanciest house we can afford, drive flashy new cars, or party hearty every weekend.
A lot of people wonder, why would you do this? I mean, sure, not having to work sounds fun. But it seems like a lot of WORK and a lot of SACRIFICE.
It all boils down to one word: FREEDOM
Having “F-you money” is all about being free to do as you please with your life. Freedom to sleep in all day, or wake up for work at 7am. Freedom to pick up and move to Vietnam for a year, because you’ve always wanted to see a waterfall out your back door. Freedom to have a family, freedom to travel, to build your own business, to volunteer for a cause you’re passionate about, to train for a marathon, or lay around in your pajamas.
Let’s take a look at the most common budget-busting areas, to see what we are currently doing right, and where there’s room to trim.
Housing
Mortgage – this one we have under control, and in fact I do a little happy dance every time I see this charge in my bank account.
Think I’m crazy? Let me explain.
Through multitudes of apartments, and then rental houses, hubby & I had been inching our way up in lifestyle inflation and wrecking any chances of real savings through constant moving. We needed more space, we had dogs, we needed a yard… and of course we most recently were living in Connecticut, one of the most expensive parts of the country.
The rent there hurt… REALLY hurt.
Suffice it to say folks, that when we moved to NC & bought our first house, we were now paying basically HALF in mortgage what we once paid in rent! A small bit of it is going towards equity (don’t even talk to me about the interest burden early on during a loan), and some glorious day a few decades from now we can theoretically stop paying for housing forever!
(Yes, I know property taxes are a thing, forever. Don’t get me started on that either. And we may move, in which case, this house likely becomes a rental. If anyone knows of a place anywhere in the world where you can buy an island, with no property tax, pretty please email me! For serious.)
Food
I track all of our grocery spending, and have been for 2 years now. Every receipt gets entered into a Google spreadsheet, and though it sounds like a lot of work it only takes a few minutes while waiting for a video game to load or some such.
I’ve been noticing that we were holding to 200-300/month pretty well for a long time, then we had moving expenses and food costs exploded (restocking a new house, eating out, ordering pizza…) and we haven’t really recovered.
I can not justify $600 / month for just 2 people! Even with a food blog, that is quite frankly ridiculous. I mean, I don’t expect us to subsist solely on rice & beans (though it is delicious) but we have to get that under control. And I know I’m the one to blame. >.<
I’m working on it, and will be publishing our weekly eating as a series now to help keep myself accountable and on track!
Transportation
We both own our vehicles, a 2004 Honda CRV and 2005 Honda Civic. We only have to pay yearly insurance, tag renewal, gas, and upkeep. Unfortunately, we are both very auto-averse, so we don’t garner the additional savings of things like doing our own oil changes or small repairs.
But I can check my oil level and top it up, fill my own tires with air, vacuum, wash it, refill fluids, and change wiper blades!
We could of course sell one car, since hubby is lucky enough to work from home, and just keep one for my commute. We have discussed the possibility of myself commuting at least in part by bicycle too. The numbers are being run, and this is an ongoing discussion.
Unfortunately, I work in one of the most expensive counties in the state for property, so the likelihood of being able to move to within walking/biking distance anytime soon is about nil. All affordable homes are ~20+ miles away, so I’m stuck with a 35 minute commute for the foreseeable future. 🙁
Entertainment
Our absolute ideal way to spend a weekend?
A potluck game night with friends. We make one main food item, a few other people bring more food, and then we just hang out enjoying each others’ company and playing board and card games. Super low-key, super frugal, and it is always a good time!
A close second?
Playing video games and watching Netflix together, eating whatever is in the house. And/or a nice long walk or hike. Maybe some household chores thrown in if we’re feeling frisky.
We both have pretty low-key hobbies: reading, writing, cooking & baking, games, playing music. The hubs’ big costs (re: guitars/amps) are already sunk, and there won’t be any more large costs added in the foreseeable future.
Some people would find that mind-numbingly boring, but those people are probably not going to retire by the time they’re 40, will they? And I have never been disappointed by spending time strengthening my marriage and friendships instead of spending money. So I’m pretty pleased with this aspect of our lives currently.
Pets
We do have 2 pups, who we adopted about 3 years ago now. We did make this choice knowing pet ownership comes with many costs attached. However, we do all their ‘pet maintenance’: bathing, grooming, nail trimming, flea and tick prevention.
We order their food in bulk from Amazon, and since they are both under 30 pounds, it costs us maybe $30 to feed them for 2 months. Besides required tags, checkups and vaccines, they are low-key, just like us.
But if anyone has tips for lowering the cost of pet-parenting, please feel free to share below!
Clothing / Misc.
I think I may have spent a total of $50 on clothing in all of 2016-2017 so far. The vast majority of my closet has been with me for years. I buy pieces that fit well and are well made, mostly second hand (you can find gems at Goodwill and thrift stores if you’re willing to look through a lot of… not-gems).
Then I wear the crap out of them, basically until they are stained or ripped and cannot be worn any further.
By choosing to not keep up with current ‘trends’, but instead dress in a ‘classic’ way that never goes out of style, I don’t need to constantly be adding pieces to my wardrobe. I have enough accessories and mix and match pieces that I can dress up or down at my pleasure.
I also do my darndest to keep in shape. I’m definitely not supermodel slim by any stretch of the imagination. But as long as I don’t gain or lose more than about 10 pounds, 99% of my wardrobe continues to fit me, season after season.
And the hubs?
He works from home, and considers khakis the dressiest thing he should ever have to own or wear. I have never seen him show any interest in or buy clothing other than new socks one time. If he has on pants at all, it’s probably track pants. He’s a born athlete, and yes I knew what I was getting when I married him 😉
We very rarely go anywhere ‘just to shop’.
I purposely avoid going to a store unless there’s a specific reason or a list. We mostly keep an ongoing Amazon list, and once it gets big enough we click ‘order’. We may pay slightly more for toilet paper, Draino or nyquil, but by avoiding big box stores in general we also avoid impulse purchases.
Oh, and makeup/beauty products spending is just not a thing for me.
Why do we care about these numbers?
To figure out your FIRE number, some people say you need enough saved to replace 85% of your working salary. But that is just not true.
When you no longer go to work, all expenses associated with work go away, like work clothing, office supplies, lunches out, the commute, convenience purchases because you forgot your coffee/lunch/ are too tired to make dinner…
Plus, you will be living off of investment income, which is taxed at a lower rate than working income.
Therefore, a better way to figure out what you need, is to track your monthly & yearly expenses. Let’s say you normally spend about $5,000 per month between mortgage, car, food, gas, etc. That’s $60,000 per year.
If you want to use the 4% withdrawal rate, you need to have saved 25 times that, or $1,500,000 before you can retire.
That’s a lotta moolah!
But, let’s say that you do some creative frugalizing of your life: downgrade your house, trade in your car and buy one used with cash, trim the grocery budget, drop the cable and home phone bill, et cetera, and now you spend $3000 per month, or 36,000 per year. Now your 25 multiplier requires only $900,000 saved!
Still a big number, but more manageable.
Now, imagine you develop some side income streams. You start a YouTube channel, launch a side business, freelance write some journal articles, build birdhouses, take up dog walking, whatever. Now you bring in an extra 1000 per month reliably, or 12,000 per year. You only need an extra 24,000 to make up the difference, so you can retire with $600,000!
By maxing out your 401K and getting a 10% match at work, plus some stock index investing on your own, you can easily reach that amount (assuming compound interest) in under 10 years.
And boom! You’re “financially independent” and ready to retire!
In Conclusion
Well, I don’t see how we could cut down our current lifestyle much more than we already have without some serious quality of life sacrifices. The good news is, we are extremely blessed, and already live on much less than we bring in, as a 2 full time paycheck household.
That means our “FIRE number”, or how much we need to have saved in order to “retire”, is lower than it would be if we spent twice as much per year.
So the point is, now we are looking into more ways to build side income, and saving as much as we possibly can in many ways and vehicles. If anyone has suggestions or recommendations, we would love to hear about it in the comments below!
This is a wild and wonderful journey, and we can’t wait to learn and grow, and hopefully achieve freedom sooner rather than later.
How about you, readers? Do you have retirement plans? Any wisdom to share from already-retirees or soon-to-be-retirees?
