Which profile are you?

September 30, 2018

The trip into the FIRE isn’t going to be about giving up everything you’ve ever wanted or how you live your life, because let’s face it, I’m not going to do that, so why should you?

 

Your first task as someone who cares about early retirement is to decide who you are as a person or family and how your spending and financial situation can be tailored to help you get where you want to be with the least pain and agony possible.

 

Are you Sally Spender?

Are you Benjamin Budget?

Are you Franny Frugal?

 

Or are you somewhere in the middle, like me? I’ll call our middle ground Charlie Chug-Along. Most of the Benjamin Budgets and Franny Frugals who are reading this are already light years ahead of Charlie Chug-Along and Sally Spender, but there is a place for all of us in the FIRE world. Sally may end up as a FatFIRE, which is a group of people who are working toward financial independence on a higher annual income. The other three characters above will fit into the typical FIRE group, which spend more in the range of $50-$60,000 a year and under, whereas the FatFIRE group spends $100,000 per year or so and plans to keep that up in retirement.

 

I ran the numbers for myself, and we currently spend around $30,000 to live a comfortable, upper-middle class lifestyle without giving up many luxuries. I am allowing for $40,000-$45,000 in retirement, which includes an addition for paying 100% of our own health insurance premiums and expenses. I would guess Franny Frugal comes in somewhere below that, and Benjamin Budget knows for sure, because he already has a budget and is tracking his spending.

 

A couple pieces of advice to get you started are:

1)      Keep track of your spending! If you don’t want to budget, at least download your bank account details and track what you are spending your money on so you know how much you need to live off of annually and where you may want to make cuts if needed.

2)      Pay off your high interest consumer debt as soon as possible. You can do this in many ways. Some people like to start with the smallest loan or credit card and then move to the next. That is a viable strategy, but not everyone wants to proceed that way. You can also look at which has the highest payment or interest rate and work from there down. Paying off the highest interest rate account first will save you money in the long haul. Paying off the item with the highest minimum payment first will free up the most money to pay off other bills first, so the choice is individual.

3)      Make sure you are taking advantage of any employer sponsored 401k match. If you’re not, you’re giving away free money toward your retirement, which you’ve probably heard from a million people already. Once the money is coming out of your paycheck you won’t notice the difference and if you make traditional 401k contributions you will be lowering your federally taxable income, so win-win!

4)      Consider starting a side-hustle to make more money. Perhaps tutoring kids or students, driving Uber, or freelance writing on the side interest you? These are all good ways to make extra cash to invest or put toward your debt.

 

Do you have a side-hustle already? Do you like to budget and already know your monthly expenditures? Do you hate budgets? Tell us in the comments! We love to hear from readers.

 

 

Observations and FIRE

September 7, 2018

First of all, thank you to those of you who have found this blog and are reading as I build this and get it started. This means a lot to me! Let’s talk about some observations I’ve made lately.

I’ve read quite a few other early retirement blogs and I find a few things remain a common thread through all of us who are, or desire to be, retired early. (I’m omitting the FatFIRE people, because they have a slightly different title for a good reason.) Let’s talk about the common denominators, because one in particular has stuck out to me this week.

1.       Most of us CHOOSE to live somewhat frugally before and during retirement. I’m not talking about living in the worst possible home, extreme couponing (this is a big NO for me personally; I’m lazy!), or only eating rice and beans. What I often see in most of us is that we somewhat want to be stewards of the Earth. We drive sensible, fuel-efficient cars. We think physical activity, such as biking or walking, is superior to getting your car out to drive a quarter mile to the store. We don’t feel a need for shopping a ton or buying tons of possessions. Many of the bloggers who have retired early prefer travel and adventures over owning things and consuming things. Essentially, we don’t desire extravagance in life, but rather a moderate existence without taking it to an extreme. I am not saying that has to be you in retirement, as there is the FatFIRE group who will welcome you with open arms for wanting and planning to spend $100k-ish each year! I am saying that we each take a different road to retirement, so whatever gets you to your destination is a good thing! In many cases I’ve seen that a similar path leads a lot of us there.

2.       The second item is the one that has been getting to me all week! I have spoken to multiple people over 50 whom I work with about retirement. The common thread I’ve found among these people who have great amounts saved up, and also have pensions, but they continue working is that they are AFRAID (and a lack of math skills isn’t helping, is my guess). Let me repeat that: they do not have FIRE, they have FEAR. All of them have asked me similar questions such as, “What will you do for healthcare?” “Are you sure you’ll have enough money at ___ age?” Lastly, my personal favorite is, “Won’t you be bored?”

Let’s answer these questions to put Freddy Fear at ease.

1)      Healthcare is available through individual insurers, it’s also available through state exchanges (as long as the ACA remains intact), and on top of that the individual mandate was repealed, so you can go without, self-insure, or carry a catastrophic plan with a very high deductible. The bottom line is: you’ll survive if you do your best to remain healthy, have enough money invested, and carry at least a catastrophic plan for the big things like cancer that we can’t predict.

2)      The second question makes me laugh as a CPA. I can do math. I’m a big fan of calculations and analysis. These are executives I’m asking, so I am really hoping they possess the math skills to at least read the advice on the Internet and figure out their own funds. If not, there are tons of people like me who are willing to help them! Many bloggers are even doing it for free. (I’d be happy to answer questions as well!)

3)      This is an easy answer: no, I will never be bored. I have worked more than full time for many years since I was 18. I have many hobbies I ignore for 9+ hours a day, such as running, which I only get to do 1-2 hours a day maximum. If you don’t have an alternate purpose, such as volunteering, raising kids/grandkids, going for long walks, reading, or knitting, I encourage you to develop a hobby. They are a means for having an alternative source of self-esteem than your work performance!

 

If you need help with the hobby ideas, leave a comment and I’ll be happy to suggest things! 😉

 

 

FIRE Intro

August 31, 2018

What did you spend money on last weekend? Do you remember? Was it a mindless trip to Costco or Target?

 I mentioned the latter two stores, because I think we’ve all heard a co-worker or friend at some point say, “I can’t go into a ________ store without spending more than I planned!” Or “I always spend at least $150 at that store!”

 I think we have all been there at some point. You walked into a store with a list and a plan, but then you realized that Susie needs a birthday gift for that party she was invited to on Friday. There’s another $30 to buy the latest Barbie or board game. (Is it just me or have board games become insanely expensive?! Ha!) I feel like we always find other food items that look really good, or we want to try, and that adds $5 here and another $5 there, as well. Maybe you need some tips on how not to blow the budget? Or what you can do to save money in other areas to make up for the “surprise purchases”?

 Join me on a journey through every topic under the sun, such as budgeting, minimalism, how early retirees can deal with healthcare (I get this question often, because have you heard how American healthcare is handled? Sheesh!), frugality, investing, your 401k, H.S.A. or H.R.A., etc. I’m happy to answer reader questions, as well! Should you buy the house? Should you take out a HELOC? How do you decide what to do? Let’s find out.

 Let’s start running toward the FIRE (financial independence; retire early)!