Our Financial Independence Day
We recently were contacted by the blogger Even Steven Money. He keeps a list of early retirement bloggers and tracks progress toward their financial independence day. We love his idea and think it is a great resource for people looking for other perspectives on achieving financial independence and retiring early. We were happy to be listed and share our date, May 2017.
Why May 2017?
Within a year or two of finishing college, I realized that we could be very happy living far below our means and started thinking about early retirement. Mrs. EE was skeptical. She was always pretty career minded and thought my ideas weren’t realistic. I admit, I had no idea how we would actually do it or if it was possible.
As time went on, she started to come around. We envisioned eventually living a glorified “dirtbag” lifestyle, working sporadically to support a life built around pursuing our love of outdoor activities. We wanted a bit of financial security before quitting our jobs so that we wouldn’t have to actually be “dirtbags” if we decided it wasn’t as fun or exciting as it seemed.
This idea grew as our savings started to accumulate and we paid off our mortgage. We found that we were killing ourselves from Monday-Friday every week to basically live for weekends and vacations. However, we still never had any great urgency to quit our jobs. We weren’t happy with our lives. At the same time, we were comfortable, too comfortable with the money and benefits that came with our jobs to pursue something different.
Having a child made us much more interested in the idea of early retirement. When little EE was about a year old, we started to get more serious. We were working all day, and she was in daycare. We’d get home, feed her and have only 1-2 hours with her before putting her down to bed. On the weekends, we wanted to see her in the free time we had. However, this is when we had always done our things as a couple. While we loved our time with our daughter, we found we were getting outdoors less, and our relationships with family and friends were suffering.
This really clarified that our most precious resource was time. We didn’t want to look back in 25 years and realize that we had spent the vast majority of our time working while life passed us by. Something had to go. We decided it would be work!
Unfortunately, at that time we still had no idea of whether we could pull it off. One day while hiking in the fall of 2013, we decided to just set a deadline. In May of 2017, I will turn 41. We had always talked about retiring by 40. Why not set our date before my 41st birthday to give us a goal (Mrs. EE will be 39 at that time). It seemed like as good of a deadline as any. It gave us a couple of years to figure everything out. Let’s do it!
Why Have an FI Date?
I realize that seems like a pretty random and arbitrary way to pick a date. So why have a date at all?
Rarely in life do we achieve anything by chance. The simple act of having a goal makes the likelihood of achievement far greater. Prior to setting our FI date, we had ideas and dreams of early retirement. After choosing a date we were on our way to a concrete goal (though admittedly still one we had no idea if or how we could achieve).
There are differences between an idea or dream and a goal. A goal is objective, measurable and time sensitive.
Our goal is to achieve financial independence, defined as accumulating 20-25X our annual living expenses, and begin our early retirement by May 1, 2017.
The other key feature to a goal is that it should be written to make it more concrete. I decided that we needed to take that to the next level and not only write down the goal, but start the blog with weekly posts to document our journey, keep us motivated, and hold us accountable to ourselves and anyone who cared to follow and learn along with us.
How Our FI Date Changed Us
Once we had this concrete goal, we started to take action. As is often the case, one action led to another then another, turning the snowball into an avalanche.
The first thing we did was develop a plan. We looked at what our financial advisor was doing for us. We quickly realized his “plan” was an extremely generic and sanitized computer printout. His advice for us was flat out awful. We fired the advisor and took control of our own investments and planning. We also developed a tax strategy for the first time in our lives. These simple actions increased our savings by $15,000+/year (and growing every year) simply by saving investment costs and taxes. We started tracking our net worth and watching our assets grow every month.
We also realized that we had no idea what we actually spent in a year and so we set up an Excel spread sheet to track our spending. We had no intention of lowering our spending to an artificial level to achieve our goal. We simply wanted to know what our expenses were to track progress toward the goal.
However, once we started to see where our money was going it was virtually impossible to not change our spending. A couple of numbers jumped out at us. We were spending over $100/month for cable t.v. that we rarely watched and almost never actually enjoyed (and the cable company would regularly sneak in increases of a few dollars every couple of months-Mrs.EE). Seeing the numbers gave us the extra push to cut it as we had talked about for years. We made other changes with phone plans, changing how we shop for groceries, and decreasing energy usage which improved our lifestyle and decreased living expenses. As we look at our expenses every month for the blog, we find our already “frugal” spending continues to decrease simply as a function of being aware of where our money is going.
Seeing our net worth consistently increasing while gradually decreasing our expenses means that every month our goal is becoming more of a reality.
What Lies Ahead?
We are now in the home stretch. With that we have a few big challenges. The biggest technical issue that we have is figuring out what we will do about health insurance. Every time I try to learn about the Affordable Care Act (Obamacare) my head starts to hurt and so this project keeps getting pushed to the back burner. The thing about a deadline is that it forces me to overcome my natural tendency for procrastination of things I find undesirable.
The other challenges that we face and questions we have to answer are actually exciting and fun as we get to design the lives we want rather than fitting in life around work schedules.
What do we want our lives to look like when they don’t revolve around work? Will we continue to work for money when we don’t have to? If so, doing what and how much?
How will we shift our mindset when shifting from an extremely high savings rate to spending down assets we worked to accumulate? Would it be better to gradually transition? Where do we want to build flexibility into our plans?
Where will we live? How will we structure our travel? Will we relocate for periods of time and slow travel or keep a home base?
What do we want for our child in the way of lifestyle? What is best for her education and social development? How will our early retirement effect her?
Wow, there is still a lot of work to do and less than two years to get it done. We better get back to work!
Have you set a FI date? Do you think it would be more motivating or frustrating if it seems far away? How close are you? Share your thoughts.
*Thanks for reading. If you enjoyed this content, you can find my current writing at Can I Retire Yet?. Enter your email below to join our mailing list and be alerted when new content is published.
I’ve got 10.5 years left to work. Free by 50 is my motto. Like many others I wish I’d started earlier, but I’m glad I started now. I reckon it’s going to speed by.
I would agree that it will speed by. In our experience, once we set a specific goal and measured progress towards it everything started falling into place. Getting started is the hardest step to anything, so congratulations on righting the ship and getting moving in the right direction.
Cheers!
EE
On your What Lies Ahead, I’ve thought and discussed some of these same topics with Mrs. Even Steven. As we get closer to certain milestones we are going to reevaluate our plan, my student loan is almost finished and will start to go into a heavier phase of investing(still a little murky in my head though), in less than 2 years one of our rental properties will be paid off and that will be a large milestone for us and play a role in how we decide to move forward.
When we talked about our plan last and the final months, we talked about private care insurance/Obama Care and different obstacles we face as we get closer, the best thing we can do is save extra money for something like this and be flexible. Reading and learning from others along the way of course.
Agree totally about leaving some margin for error and learning from those ahead of us and those taking a similar path. As exciting as this phase of life is, there is definitely a bit of a fear of the unknown b/c the path we are traveling is definitely not the norm.
Great idea to start this list and thanks for including us on it! I hope we’re able to help others to pay things forward for all the help that we’ve received from those ahead of us.
EE
I like your thoughts!! I don’t have a hard deadline set yet. However, I have the same thoughts and questions you have about insurance, working in some capacity, a home base, how to raise children in that environment..
Look forward to hearing your further thoughts at that as the time gets nearer…
Tim,
Thanks for your interest in our blog and taking the time to contribute your comments.
This is the part where things get really interesting and exciting in our minds. We don’t for a second take for granted how fortunate we are to be on this path to FI at such a relatively young age. It will be awesome to be able to decide how we want to spend our time instead of having the vast majority of it dictated to us by work demands.
Cheers!
EE
It’s cool to read about your thought processes and evolution. It’s been similar for us — planning around a somewhat arbitrary date, the blog increasing our motivation, watching our stretch goal actually start to look possible…
Did you see Root of Good’s breakdown of the ACA, and optimal levels of income to qualify for subsidies? Super helpful. http://rootofgood.com/affordable-care-act-subsidy/
I saw the ROG post and also thought it was very useful. Being that we are only projecting 20-25X expenses when jumping into ER we are planning to earn some income in our early years. One of the things that we will be looking at is finding the “sweet spot” from a tax perspective where we can maximize income w/o starting to incur tax penalties.
We hate how complicated the tax code is and how it incentivizes people to not earn income. That said, everything we read seems to favor an early retiree so we plan to use that to our advantage.