Can I really retire in my 40’s? That’s the question that I asked myself. I was sitting by myself on a beach somewhere in Kona, Big Island one year ago. MissRandom was resting in the hotel room (she was pregnant with our first child).
We made over $200k annually, so I would think we made good money. But I was aiming to retire at age 55. I started questioning myself why. The math just didn’t add up. Why it takes so long to be financially independent?
What’s the meaning of life?
I have to admit, I’m a melancholic, introvert kinda guy. I tend to question many things when I’m alone, especially in the grandeur settings, like facing the Pacific ocean during sunset. Why am I here in the first place? What’s the meaning of life?
I was about to become a father for the very first time. Growing up, I didn’t have a father figure. My mom is a single mother, raising 4 children by herself, being a pretty successful businesswoman at that time.
Understandably, she didn’t have much time for us. Thus, she enrolled us in athletic activities, music lessons, chess, math, English, you name it. I was a swimmer, I play piano, I’m good with math. In her mind, it’s better to occupy her children with competitive activities, then having us grow up with who knows what, influence-wise, role model-wise.
I did’t understand much at that time. I just remember being alone a lot, even when I competed (no parent cheering me on). But now I understand and appreciate her very much for what she had done for us, considering the circumstances.
As I grew older, I made a vow to myself, to be a good, present father for my future children. To always be there. And this is my opportunity.
I determined to be in as many activities in my son’s life, cheering him in many many games, if not all, to the point where he’ll say, “It’s ok, dad. I got this, you can just go play golf” (I’m a lousy golfer).
I spend close to 1/3 of my life sleeping (less and lesser now). The other 1/3 for pretty much working for the corporation (more and morer now). This leaves a little over 1/3 for everything else. This doesn’t scale in the long run. It doesn’t fit with my meaning of life, what really matters in life. This has got to change.
I needed to start planning on my exit plan from the corporation. I set the goal to exit by 2025. But how?
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I started to research around and stumbled upon Mr Money Mustache article on The Shockingly Simple Math Behind Early Retirement. First of all, the name is catchy, I started reading more articles. The proof is in the pudding. This is shocking to me. There are 30-something, or even late 20-something folks out there that live the early retirement life! And these are not professional athletes, actors, or tech founders.
They earned W2 income too for 10 or less years. What set them apart is the amount of money they save during the earning years. Most save more than 50% of their take home pay, some even do 70% or more.
Ok, this is heading somewhere. The American dream’s math of saving 10-15% is wrong. I need to save a lot more than that, at least 50%. In order to accomplish this, our lifestyle needs some adjustment.
I started to analyze what’s eating our money. It was helpful to actually come up with a budget, at least to see what the big ticket items were. We figured, it will take a long time to figure out small items like buying Starbucks. We had to start somewhere. I downloaded the Personal Capital app (highly recommended, and it’s free) on my phone to help assessing my net worth and see the breakdown of where money is allocated.
We had 4 properties at a time (including our home). Two of them were bleeding in cashflow, meaning we had to pay money to cover the difference between rental income and expenses. One property alone was -$700/mo.
I also had a European car that kept breaking down (2005 BMW X3). Repairs alone costed more than the car’s value in the past 2 years. I know, this was stupid, but it was the last remnant of my bachelorhood.
MissRandom is always frugal, she sticked with her 1999 Honda Accord for a long time, which also started to require maintenance as it crossed 200k miles.
The higher power had a sense of humor of telling us to change our lifestyle. MissRandom got into an accident. Her Honda was rear ended and triggered a chain of accident with the car in front of her. Thankfully, she was ok, so was the baby.
The three drivers were all pregnant ladies and crying. Kudos to my wife, she was calm and comforted the other drivers. She handled the situation like a champion. But the ol’ faithful (that’s what she called her car) was total loss.
At around the same time, my BMW just decided to break down spectacularly. The cost of repair didn’t make sense. It would be a lot of hassle to try to sell. I’ve had enough. I called a donation company to have it towed.
This was 2 days before our life-changing Big Island trip. Thankfully, insurance paid the total lost for my wife’s car. And the check we received for the total lost (for an old Honda Accord) was more than the value of my BMW! That’s it, I’m done with fancy car, especially the European car.
Long story short, when we got back from Hawaii, we leased a Nissan Leaf for $179/month, zero down. This is still less than the monthly cost of gas for my old BMW. Even though in general I don’t like leasing, this particular deal makes sense for me (and we got the fast charging port too). The cost to charge it full tank is less than $2.
This took care the money eating car issue. Now unto the bigger ticket item. Within a couple of months, we sold our rental property that bled the most. I had been waiting for 12 years for this, riding the 2008 house bubble. We made a little bit of profit, thanks to Seattle’s appreciating market in 2017 (still going).
This gave me a lesson to never invest in real estate again if it doesn’t produce healthy positive cash flow.
With some of the big ticket items gone, we made an adjustment to our budget. We plan to sell our other rental property that also has a negative cashflow.
We figured how much money we need to live on comfortably, in the range of $7k – $8k / month. Seattle is getting expensive now. We still plan to be able to retire here, but if things getting tight, we can always move to a more affordable location.
Plugging this number and calculate the 4% rule giving us our FIRE number of $2.5M. This will give us up to $100k / year, a comfortable buffer.
Then, we figured out how much money we need to save annually for the next 7 years, assuming 8% of return to get us there.
Aha! This is doable. It will require further tweaking and optimization in our lifestyle, but we feel that this is something that we can accomplish with discipline. Knowing what the destination looks like gives us the motivation to keep going.
Yes, 40-something is my new 65. Lucky for missRandom, if we do this right, she can still say she retires in her 30’s.
I wish I had this revelation, knowledge, and resources when I was in my 20’s. But no regrets. It shapes me the way I am, the experience will guard rail me to stay in the course. And I intend to share these experiences and information with you.