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Old 06-30-2015, 02:32 PM   #1
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Default Financial Independence/Early Retirement

Anyone else here on this path or interested in talking about it? I know the miata community does a lot of DIY and tries to save money where it makes sense so I figured some of you may also be on the FI/RE train.

For the uninitiated, the math behind becoming financially independent with the ability to retire early, reduce the amount you work significantly, make a career change, or just increase your flexibility to make decisions is actually rather simple. For example, starting with a net worth of $0 you could reach FI in 17 years if you can save 50% of your take home pay, 10 years at 66%, and a mere 7 years at 75%. Obviously saving is easier if you make more but it's also easy for many middle class Americans to cut out fat from their budget.

Here are two good resources to get the basics with some extremes mixed in as well.

http://www.mrmoneymustache.com/2013/...ne-blog-post/]

Mad Fientist - Financial Independence

The conversation gets more interesting when you start getting into specific strategies and assumptions for individuals. I figured since I don't like to discuss finances with my coworkers and friends (save a few I am close with) I see what thoughts you gays have. It should also be interesting as we all partake in an expensive hobby which may alter our expenses significantly depending on how much we spend on mods, track time, etc.

I'll start with some of my basics. I am 25 years old and I am currently able to hit a 50% savings rate at the moment focusing my investment strategy on a mix of maxed 401k contributions, Traditional IRA, and taxable accounts. At this point I just stick to low expense index funds and try to ride the market instead of time it because I have no interest in active investing. I am a CPA and make a solid income so I expect to be able to increase my savings rate as my salary increases. I am trying to focus on minimizing or eliminating any lifestyle creep as my income grows instead of trying to reach the extremes of cost cutting. My goal is to be able to completely retire in my late 30s or by 40 at the latest. I will likely not actually retire at this age but take the opportunity to go part time or make some sort of career change to something I enjoy doing even if I make little to no money doing it.

Anyone else got any thoughts?
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Old 06-30-2015, 02:40 PM   #2
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I've thought about it, but I'd rather have the money/time and do it now, then 10/20/30 years down the road.

Hell I could die in a car accident on the way home from work today, eat incorrectly prepared puffer fish, etc.

I make a decent income for my part of the country and put roughly 15-20% into savings/401k combined.
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Old 06-30-2015, 03:19 PM   #3
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There is a delicate balance between saving for the future and living like a homeless person. Save all you want, but don't deny you (and your family) those experiences which make lifetime memories. There is a difference between frivolous spending and enjoying your money.

My mother's family was extremely frugal. They found out when their parents passed that the family was in no way poor (or even close to it), but that the father had just been very cheap. They all felt cheated. That's no way to live your life.
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Old 06-30-2015, 03:21 PM   #4
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I've thought about it, but I'd rather have the money/time and do it now, then 10/20/30 years down the road.

Hell I could die in a car accident on the way home from work today, eat incorrectly prepared puffer fish, etc.
This mentality I do get and I agree with it. However, I save most of my money on things that don't really contribute to my happiness. I just got back from a two week trip to Italy, I spend quite a bit of money on my car and track time, and I own 3 vehicles including a motorcycle. I find that experiences and learning new skills are what make me happy so I spend my money in those areas. Alternatively, I have a cheap phone plan, basic and cheap housing, buy all used vehicles (8+ years old) with cash, and try to cook as many meals for myself as I can. It seems to me that housing, new vehicles, and eating out is where most people spend way too much money that isn't really contributing to their lasting happiness.

I don't coupon cut, ride my bike to work, grow my own food, or any of the other more extreme cost cutting measures people employ but I am still able to save significant portions of my income. Granted I am young and single so I have not been inflicted with health issues or children at this point so my situation could always change.

EDIT: The time portion you mentioned above is also another factor that got me more interested in FI/RE. I don't want to wait until 65+ to retire when I might not have the physical health to do the things that I want to do. I would rather be a little more cautious with my spending now so that I can retire when I am still in prime physical condition.

Last edited by Ryan_G; 06-30-2015 at 03:38 PM.
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Old 06-30-2015, 03:34 PM   #5
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This mentality I do get and I agree with it.
Good for you. I see a lot of people who don't understand this at all and it makes me sad. There's no prize for dying rich.
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Old 06-30-2015, 03:38 PM   #6
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We are saving 25% of our income between roth/traditional retirement plans, and several other investment vehicles. As active duty military, I get a pretty nice retirement fund in just a few years, but we're not even counting that as part of our retirement goals because, hey, **** happens.

50% of new pay raises go straight on top of that 25%. Even without future pay raises and military retirement, we are looking to retire at age 60 on about $6k/month in 2014 dollars, which we decided won't be too shabby.
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Old 06-30-2015, 03:39 PM   #7
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<p>I just graduated college. Started a new job. I was able to graduate with no debt (huray scholarships) and feel like I am in a good place to start saving. My plan is to put 50% of my income towards savings. My company does a 4% 401k match so I will be putting 42% of my actual paycheck into a savings account. I currently don't have any interest in investing, mostly because I have **** luck and am not careful or remember to do things. And I feel like that could lead to trouble. While putting money in savings I'm going to live how I have been for a couple months and see where my &quot;spending money&quot; reserves end up. If they continue to grow, while I'm still saving 50% then I will look at how much and allow for additional expenses. Will report back in fall </p>
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Old 06-30-2015, 03:42 PM   #8
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<p>This also could all very well change depending on my current relationship. She wants to be a doctor, and is currently studying for MCATs while becoming an EMT. If she does get into med school and I go with her I will definitely be evaluating it again. Dat surgeon money </p>
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Old 06-30-2015, 03:48 PM   #9
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<p>My company does a 4% 401k match so I will be putting 42% of my actual paycheck into a savings account. I currently don't have any interest in investing, mostly because I have **** luck and am not careful or remember to do things. </p>
I would highly recommend you utilize some basic investment vehicles like low cost index funds by vanguard if you are risk averse. You just set it and forget it. It allows you to diversify your risk over the entire market so unless the whole thing explodes you will do much better than the 0.05% or whatever your savings account will return. If the whole market explodes then you will have other much bigger problems than investment losses to worry about. Stocks have already made large gains over where they were in 2007 at the height of the bubble.

If you just keep huge stockpiles of cash you will be losing out on purchasing power as inflation outpaces your savings account returns. You want to keep enough cash on hand to cover 3-12 months of expenses depending on your personal preference. I personally keep a 6 month emergency fund and the rest of my non retirement account savings goes into a mixed portfolio that has enough liquidity that if I needed more money I could get at it within 3 or so days.
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Old 06-30-2015, 03:51 PM   #10
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<p>
Quote:
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I would highly recommend you utilize some basic investment vehicles like low cost index funds by vanguard if you are risk averse. You just set it and forget it.</p><p>mixed portfolio that has enough liquidity that if I needed more money I could get at it within 3 or so days.
</p><p>Is there an actual like easy button for this? Can I walk in somewhere and say I want to invest money, not lose any and get it within a week. My main issue is I have absolutely zero interest in finance and can't even get myself to learn stuff. I would need some pretty serious spoon feeding.</p>
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Old 06-30-2015, 03:59 PM   #11
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I don't save as much as i should right now. I have a backwards way of looking at it. I figure if i get my fun cars taken care of now, i can pay down a house fast as **** when i buy in 2 years. Currently just throwing in 401k to employer matching limit and socking back a little extra for downpayment on a house.

Current plan is to buy the store she works at when current contract is up, milk it for 10 years, then retire.

So... we have a plan, the plan just doesn't require much work right about now. We'll both "fully" retire in our 40s.
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Old 06-30-2015, 04:01 PM   #12
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<p></p><p>Is there an actual like easy button for this? Can I walk in somewhere and say I want to invest money, not lose any and get it within a week. My main issue is I have absolutely zero interest in finance and can't even get myself to learn stuff. I would need some pretty serious spoon feeding.</p>
You have to be careful letting professionals spoon feed you. You need to understand how they are making their money and what, if any, conflicts of interest they may have. No one can guarantee you won't lose any money, especially in the short term. However, you can invest in such a way that you minimize your risk. If you want someone to walk you through it I suggest trying to find a fee based financial planner. Do not use a broker as they will try to sell you a bunch of **** that makes them a lot of money and will give you less than optimal returns (i.e. whole life insurance). You could also go on to vanguard's website and create an account. Then you can just link up a bank account and start putting money into an index fund and not worry about it. They will evenly automatically rebalance your portfolio for you if the distribution becomes too heavy in any one area due to market forces. This will ensure that your risk is always hedged.

EDIT: Other examples of low risk investments that still offer a much better return than a savings account would be a money market fund or US treasury bonds.
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Old 06-30-2015, 04:02 PM   #13
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Quote:
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<p></p><p>Is there an actual like easy button for this? Can I walk in somewhere and say I want to invest money, not lose any and get it within a week. My main issue is I have absolutely zero interest in finance and can't even get myself to learn stuff. I would need some pretty serious spoon feeding.</p>
I can answer this question for you with clarity. Who cares the most about your money?
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Old 06-30-2015, 04:05 PM   #14
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My thoughts. I too am planing to retire early.

I can tell you that saving your way into retirement while working for someone else is difficult if you plan to retire early. If you're okay with retiring at 65, then yes it's doable, that's how most people do it. If you want to be done with work in 10-15 years, you're very likely NOT going to do that working for someone else.

You'll need to start your own business and grow it to something that makes YOU (not your employer when you work for someone else) a lot of money.

I recently quit my 6 figure job to start my own business....
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Old 06-30-2015, 04:10 PM   #15
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I think I found my easy button. Just called my dad and he has an old college friend who is at Meryl lynch and manages all of his investments. He has a son who is also about to take up the business. My dad said that he trusts him with his money and all he has to do is talk to him every few months and discuss some investment ideas. I'm going to get in contact with him. I think by staying with someone who knows my family I can find a way to do it. I'll report back when I meet with then.
<br />
<br />Roth 401k or normal?
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Old 06-30-2015, 04:16 PM   #16
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For example, starting with a net worth of $0 you could reach FI in 17 years if you can save 50% of your take home pay, 10 years at 66%, and a mere 7 years at 75%. Obviously saving is easier if you make more but it's also easy for many middle class Americans to cut out fat from their budget.
Interested in this thread,

For me personally just getting my msm has been a constant uphill financial battle between repairs/mods/improvements. I should be getting it back soon but I'm still playing catch up on Credit Cards/Car Payments/School Loans. Car & School payments are actually almost done being paid off but essentially I am at a net worth of $0... or negative

In hindsight, I could flip the msm for a lump sum and be done with all debt & start fresh with another miata & more car payments.
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Old 06-30-2015, 04:23 PM   #17
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Originally Posted by aidandj View Post
I think I found my easy button. Just called my dad and he has an old college friend who is at Meryl lynch and manages all of his investments. He has a son who is also about to take up the business. My dad said that he trusts him with his money and all he has to do is talk to him every few months and discuss some investment ideas. I'm going to get in contact with him. I think by staying with someone who knows my family I can find a way to do it. I'll report back when I meet with then.
<br />
<br />Roth 401k or normal?
While investing with your dad's friend is definitely preferable to putting it into a savings account I would still suggest you get an basic understanding of how he makes his money. Is he fee based or does he make money from the products he sells? You want someone who is fee based so that they have no incentive to sell you a product that provides them with high margins while providing you with less than optimal returns.

To the traditional vs Roth question this is going to depend a bit on your situation. Mathematically, a traditional 401k or IRA will yield higher after tax returns due to the fact that most people fall into a higher income tax bracket while working than when they retire. However, Roth IRA's offer some additional flexibility before the age of 59 1/2 that might provide some value to you depending on your specific situation. If you have no interest in learning about finance for yourself this is definitely something I would discuss with a financial planner.
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Old 06-30-2015, 04:31 PM   #18
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My thoughts. I too am planing to retire early.

I can tell you that saving your way into retirement while working for someone else is difficult if you plan to retire early. If you're okay with retiring at 65, then yes it's doable, that's how most people do it. If you want to be done with work in 10-15 years, you're very likely NOT going to do that working for someone else.

You'll need to start your own business and grow it to something that makes YOU (not your employer when you work for someone else) a lot of money.

I recently quit my 6 figure job to start my own business....
I have to say I really disagree with this. Starting your own business requires taking a huge risk and a certain level of business savvy to succeed. This is not a path for most and the chances of failure are quite high. If you do succeed the rewards can be quite large but it is far from the only or even best way to do it.

Retiring early has a lot more to do with being able to live off of less than you make. I posted the math above and it is really that simple. What you make doesn't matter. It just matters how much you can save. Making more means you can live on more while saving more and makes the process easier. However, If I can happily live off of 25% of my take home on $36,000 a year I would still be able to retire in 7 years if I planned to maintain the same standard of living adjusted for inflation for the rest of my life. The reason most people that retire early do it by running a small business is because they are able to sell the business and get a nice lump sum payment from their sweat equity that allows them to retire. Most people in the U.S. live near or beyond their means. Since most people don't have a business to sell that provides them a large windfall all at once they just never build up that nest egg over the course of their career.
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Old 06-30-2015, 04:33 PM   #19
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General question- how old you all expect to be when you die?

I'm figuring with modern medicine and my relatively clean lifestyle I'll be well over 100 when I kick the bucket (obviously barring any freak accidents etc.) My parents are 62- super fit for their age and they smoked for 15 years... I'm guessing they'll live to be 100.


Edit: what I'm saying is that being retired for 60+ years is going to be boring. For my retirement I'll be the cranky old man at Ace hardware making keys and making fun of you for not knowing how to fix a running toilet.
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Old 06-30-2015, 04:37 PM   #20
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General question- how old you all expect to be when you die?

I'm figuring with modern medicine and my relatively clean lifestyle I'll be well over 100 when I kick the bucket (obviously barring any freak accidents etc.) My parents are 62- super fit for their age and they smoked for 15 years... I'm guessing they'll live to be 100.
I expect to live a pretty long time based on my family history. I would like to spend as much of that as possible in a position that provides me with A LOT of flexibility to travel, enjoy meaningful work, volunteer, and spend time with my family and friends.

EDIT: The point is not that you have to retire in the sense of do nothing for the rest of your life but sitting on your porch. If you have any other life interests or hobbies it should be relatively easy to fill your time. Go mountain biking, travel, volunteer somewhere, take a job doing something you love but makes little to no money just because you can, learn a new skill or language. The possibilities are endless. The whole point of attaining financial independence is to provide you with the ultimate flexibility and avoid being stuck somewhere you don't want to be.
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