Tell our readers a little about yourself, your blog, and your early retirement.
I’m 47, six years past retirement. As my bio on Quora.com says, I worked for The Man for 21 years, invested mostly in boring index funds, and built up 35x my yearly expenses before ending my career. I’d say that my main contribution to the FIRE community is a rule of thumb I invented called “FTI” -- the F*$% This Index. :-) It’s your age times your net worth, divided by your yearly expenses -- when that is over 1000, you can tell your boss “F*$% this!” and retire. I go into great detail about that at Quora (and answer many questions that people have about it). It’s just a rule-of-thumb, though; something to sum up your early retirement efforts and a nice checkpoint to reach on your way to permanent financial independence.
Tell me about the early days. How did you get started?
I was just a smart kid who got good grades, went to the local state university, got a straightforward degree in engineering, and got a job with (and worked two decades for) a big company. No special circumstances to speak of -- just your basic career. My salary tripled over 21 years, but that’s nothing extraordinary; I topped out at about $115,000 (and adjusted for inflation, I peaked about halfway through). The big financial differences between me and the typical American are that (a) I didn’t spend every dime I earned, and (b) I didn’t have children.
I started out working a lot of overtime during my introductory period (when I was still paid for overtime) to pay off my college loans, which were much lower in 1992 that they would be today. Soon after that, I started investing the minimum in my 401(k) to qualify for the company match. The crucial point for me was having lunches with a friend who was nine years older than I, who taught me a good bit about passive investing and encouraged me to put more and more money into investments. I was never a big spender, so as my salary started to ratchet up, it was easy to invest 20%, 30%, 40%, 50% of my salary. This was through the 1990s and 2000s, so it included the Dot Com crash and the Great Recession -- but I never cashed out anything along the way. I’m not really a penny-pincher, but I made the realization that my happiness isn’t really tied to the act of buying things -- and that made a huge difference.
The conventional wisdom in my office was that each child cost seven years of career, so I can certainly attribute some of my early retirement to that fact. That number has been borne out by my co-workers who followed an otherwise-similar financial path.
What roadblocks did you hit along the way? Any mistakes we can learn from?
Early on (the mid 1990s), I made the mistake of chasing after mutual funds that I thought would outperform the market. These came with high management fees, of course -- Jack Bogle’s message hadn’t reached me yet. But by the 2000s, I’d converted everything to index funds at Fidelity and Vanguard and was basically just emulating a Target Retirement fund, adding to indexes as needed to adjust my investment ratios. Now, in retirement, I sell the funds in small increments to rebalance my portfolio as I pay for my yearly expenses (and for other splurges, such as the Tesla I bought last year).
My biggest investment mistake followed the sale of my first home -- I’d made a tidy profit and didn’t need all of it for a down payment on the new home. So I figured “Hey, it’s real estate profit -- I’ll plow it back into an REIT index fund!” Yeah, that was 2006. Bye bye, half of that money. :-) Of course, I compounded the error by selling the fund when it was down 50% and it promptly rebounded -- I suppose this was a small price for me to pay to learn the lesson “You’re not an active trader and you don’t really know what you’re doing”.
What are some tips for increasing your savings & living frugally? Do you feel like you've missed out on anything?
For me, it was a realization early on that no matter what I earned as income, there was going to be someone else living in my town who earns less, but is still happy with his life. All I had to do to become a millionaire was live like that guy. If I earned $40,000, I'd live like someone who earned $35,000. If I earned $100,000, I'd live like someone who earned $60,000. Once that idea was in place, I did so automatically -- investing in a 401(k), then employee stock purchases, then a Roth IRA, and finally just a regular investment account at Vanguard. All these would be funded by direct withdrawal from my paycheck. Nothing would change about my life except a set of ever-larger numbers next to my name.
I'm not an ultra-low-expense guy like Mr. Money Moustache -- I lived in a simple condo to start, but bought progressively larger and nicer homes, and we are planning to build an even higher quality home in a few years, I drove an Accord, a Prius, and now own a Model 3. My wife and I eat at restaurants two or three times a week. I was a member at a fancy golf club for 15 years. Our combined expenses now are over $80,000 per year -- probably still not the lifestyle imagined by young people with millionaire dreams, but more than comfortable for us. The key is to always maintain a large gap between income and expenses and invest it wisely -- there's no real trick.
I'll also be the first to admit that I've been lucky. I've had no health scares, no catastrophic financial disasters, and no early life choices that would sabotage my finances for decades to come.
There's more detail here if you're really interested, for some reason:
What’s the biggest misconception about FIRE?
I don’t really know -- so far, my retirement has been exactly as I expected. I love it!
What books, tools, resources do you recommend to others?
The big one for me was “The Millionaire Next Door” by Stanley and Danko. It’s philosophy more than anything else -- just the revelatory concept that the people you think are wealthy probably aren’t and the ones that are wealthy might be the ones you least expect.
The resource that’s been most helpful to me has been the standard spreadsheet. We’ve used it to budget our lives for years and years, and I’ve designed a Monte Carlo simulator to game out our finances in hundreds of scenarios.
What’s next for you?
More of the same. I met my wife just five years before I retired and she’s still working for a few more years; until then, I’m going to continue volunteering at local schools, tutoring math and coaching the math competition teams. We’ll travel more after she retires, but I’ll probably always want to be involved in schools to some extent. I don’t have a side hustle planned because I’m not interested in piling up as much money as I can -- about $50k in expenses per year (maybe $80k for the two of us) is more than sufficient. We plan to build a new home about the time she retires, paid for in cash, and really cut back our monthly expenses -- simplifying at home to free up money for travel.
From that point on, the plan is to have a stress-free few decades of fun and adventure!