In conversations over the years with friends and acquaintances that are feeling squeezed, I can often identify spending behaviors that don't appear to correlate with their not-enough-money-to-ever-retire-early complaints. As an example, I recently had an exchange with an acquaintance that was considering leaving the profession of teaching because it left them feeling too financially stretched to ever retire early. However, this friend has such an over-accumulation of stuff purchased over the years they have to rent storage space at the cost of $75 a month. Which is $9,000 over the ten years they've been doing it, plus the loss of interest had this money been invested, plus, of course, the purchase cost of the unused items themselves. This friend also enjoys dining out on a very frequent basis, and watches for all new computer gadget releases with baited breath, buying each latest-and-greatest as soon as it hits the stores. And has the hefty credit card charges and monthly service contract fees that go along with chasing technology.
I also have a 50'ish friend lamenting about retirement that drives a late model luxury car, owns an iPhone and and iPad (plus the monthly service fees that go along with) and just purchased and remodeled an enormous new home.
And another that doesn't believe that vacations should ever involve cooking, but rather should always be spent in expensive hotels that necessitate eating every meal out. And as a result doesn't feel they will be able to afford to retire ahead of age 65.
From my perspective, all of these folk have a good amount of additional money to sock away monthly toward an earlier-than-65 retirement objective . . . they are just choosing to direct it elsewhere. Which is totally their prerogative by the way, but which would seem to indicate that early retirement really isn't their priority after all.
In our case, we knew early retirement was a priority, and tried hard to align our spending decisions accordingly. First and foremost, we lived below our means for many, many years. We also had to repeatedly resist the temptation to ratchet up our standard of living each time our paychecks increased, because as tempting as it was to do so, it was directly counter to our stated objective of early retirement.
We followed a 90/10 rule with our salary increases, company bonuses, tax refunds and other monetary windfalls - we saved 90% of the net, and spent the other 10% on something we both wanted, generally travel. We refinanced our home twice in order to lock in a lower rate of interest on our mortgage, and then worked to pay it off as fast as we could, ultimately in 17 years rather than 30. We primarily purchased used vehicles, and kept them for a really long time.
We also tried to be very careful about what we got used if it wasn't congruent with our projected early retirement budget. We kicked around the idea of getting involved with golfing or scuba diving, but ultimately decided we weren't willing to work the extra years necessary to include either in our retirement budget. It did, however, make both financial and physical sense to build our early retirement life around activities like hiking, running and bicycling. Aside from them being things we enjoy tremendously, they had the advantage of being good for us, and virtually free no matter where we were.
Each dollar saved put us closer to the point when we could retire - the point at which 3% of our amassed portfolio could cover our projected annual retirement income needs.
I guess the point I'm trying to make is that achieving early retirement is not impossible. It's a combination of living beneath your means and working to increase your savings % each year, paying off your home as quickly as possible, resisting the urge to spend "found" money, resisting recreational shopping or eating, looking for inexpensive ways to build regular fun and satisfaction into your life and never taking your eye off the ball.
I am tired of defending our leaving the regular work force. We are willing to live with less. We are not complaining of "not having". Still, it drives me crazy to hear, "I don't think you are fully thinking what you really need." I am 54 and hubby is 60. We are not slugs, but we both enjoy the freedom to be ourselves. Our grandparents did it all, well into their 90's, with much less.
ReplyDeleteYou have done an excellent job explaining what we understand for ourselves.
Thanks
Janette,
DeleteLike you and your husband, we are entering retirement before most of our peers, and it can make for some awkward moments to be sure. I'm increasingly convinced, however, that few people are really victims of circumstance. The majority of folk I've observed appear to be pretty much precisely where their spending and saving choices over the years have put them.
I really enjoyed your post. It's nice to read that someone else has the same general ideas of "living beneath our means".
ReplyDeleteThanks for the post!
Mary Ann,
DeleteIt's amazing how satisfying living beneath your means can be. It often demands approaching things with creativity, leading to some very pleasant outcomes. One quick example - in my quest to keep our grocery purchases in line with our Food Budget, I began planning my meals around less expensive, seasonal fruits and vegetables. That resulted in some outstanding new meals, which ultimately pointed us toward vegetarianism.
Oh good grief, apparantly new google allows me to visit you! Good for you with regard to this post. Even though I am experiencing my personal crises at the moment, overall I love on an income that allows me to do what I want-because I make choices. we all make choices every day, and I know many people who live well on much lesss. Life is generally about choices-ones we make.
ReplyDeleteBarb,
DeleteI applaud and thank you for your perseverance!
Over time I've learned that a paid-in-cash purchase beats out a paid-by-credit purchase every time. The difference in peace of mind is significant. I'v also learned that being at peace and feeling content has absolutely nothing to do with spending money.
I love this post! My husband and I are not ready to retire yet but we feel that we are on track to retire early. We are 33 and 39. We have decided to "semi-retire" for the next year while our son is young to enjoy family time. We know that we have to still work but by keeping a budget and staying below that we feel that we are still on track to retire early.
ReplyDeleteWe have worked hard, saved where we could and lived well below our means. It wasn’t always easy and still isn’t. There are so many cool things out there that we would love to buy - gadgets, toys, and stuff for the house!
It does irk us though, that people think we are loaded with money because we decided to work less now. The comments are endless. If they lived how we have they could be where we are to...but they didn’t. I go to their houses and they are filled top to bottom with new items. I see them go on elaborate family vacations, I see them eating out multiple times in a week, I see them with a new cars, lavish birthday parties for their kids and multple iphones and data plans per household. I know why they have to work as much as they do, but they don’t.
Our new biggest pet peeve is that, if we do go out with friends or family, regardless who it is, people look at us to pick up the cheque…if we can work part-time, that must mean we have lots of money and that means we should pay for everyone.
Amanda, Welcome and thank you for leaving a comment!
DeleteLiving well is the best revenge of course . . . I no longer feel any need to justify our ability to retire early. I try to never, ever, discuss money, only what we've been doing to keep busy. That seems to take some of the sting out of it for others. We also sometimes get the closet-envy question of "Aren't you bored?" to which we generally reply, "Only if we choose to be."
But really, you have family and "friends" that expect you to pick up the check just because you've structured your life financial to give you options others have chosen to forego? Hmmm, perhaps its time for some new friends and to revert to potlucks with family?
Seriously, that is beyond my ability to comprehend. We do pick and choose who we go out with based on their restaurant tab splitting track record. We avoid going out with the big spenders, inviting them to pay in advance events, or dinner at our home instead, and focus on easy to afford restaurants that make splitting the bill, even if there is a minor discrepancy between what each couple ordered, no big deal. And we have one set of friends, bless their hearts, that we work with so well, we end up mirroring what each of us orders, resulting in almost identical shares of the bill, which we do always just split in half.
Our other strategy is to frequently comment that now that we are on a fixed income we have to watch our pennies like there is no tomorrow. I like to think of it as a bit of reverse psychology hedge against future passive aggressive comments.
As does continually pointing out how inexpensive it is to vacation in our RV, explaining away our financial ability to do so some 20 weeks of the year going forward. The truth is that most of our friends think RV'ing is the same as camping, which they have no interest in. That most definitely works in our favor as well!