Hi it's Amy and it's tim from go with
less. thank you so much for joining us today and taking a look at our channel.
today we're going to cover a topic that we've actually covered in the past in a
20 part series and that is how we retired in our 40s. what we're gonna do
today is a reader's digest slash Cliff Notes version of that 20
part series. yes if you were one of the people who watched all 20 episodes? thank
you so much. I am gonna put them in a playlist at the end of this video so you
could follow along. that's kind of like more the autobiography of our retirement.
but we're gonna do kind of like a quick and dirty video so that I don't have to
steer people to 20 videos to answer the question "how did you retire in your 40s?".
we're gonna answer that today in hopefully under 20 minutes. we come out
with a new video every Wednesday. sometimes it's about our retired life.
often it's about travel. something like budget travel, ways that we can travel
less expensive so we can travel more often. we hope that you'll join us by
subscribing over here and with that let's get started. today we're going to
give you a list of 10 things that we did to make our early retirement happen. we
retired in our 40s we're gonna give you some guidance on how we made it happen
that doesn't mean necessarily that this is the way you should do it. or
necessarily that this is the way that it has to be done. also some of the things
that we're going to talk about may seem a little crazy to you. and so we don't
think...in hindsight...we certainly don't think any of the actions that we took
are crazy. our life now, our retired life, is amazing. and we'll elaborate on that
as well. but before we started on this path we probably would have thought some
of these things were kind of crazy and a little extreme. but we're here to tell
you four years after we retired that we don't have any regrets at all and, if
anything, we regret not doing some of these things sooner. we'll start out by
talking about our income. not the specifics of our income but how we
earned a living. Amy and I both were salespeople and part of the beauty of
sales is the harder you work the more money you can potentially make. another
beauty of sales is that you don't necessarily have to have a college
education to make a great living. Amy and I both do happen to be
educated however we had peers that we worked with that made great money being
salespeople doing the things that we did. so while our journey had us making nice
incomes, we understand that this doesn't fit everybody. but is there anything you
can do in your life to increase your income? maybe you can take on a second
job? maybe you can tutor children or sell things on Etsy or drive for uber or
board dogs in your home or get more education or certifications to have
maybe a different job? is there anything that you could be doing to increase your
income? obviously if you're gonna retire early you have to save a lot of money
and that's something that Amy and I did from the get-go. we both...we've only been
together for 12 years but from the time I got out of college the first
professional job I had I was saving everything that I was allowed to save in
my 401k and Amy was doing something similar. for example if we had a tax
refund we would put that money right into investments. as Tim mentioned I was
also in sales and I would live on my base salary and save my commissions. now
my commissions could be more than my base salary some years and my peers
would spend a lot of money and do extravagant things sometimes with big
bonus checks mine went into savings. also I should say that I was a stay-at-home
mom to Tim's kids for five years and when I went back to work every single
dollar of my entire income was put into savings because we had already been used
to living on Tim's income. so when I went back to work we kept that income in
investments. so in addition to our IRAs and 401ks and these tax deferred things
we also put money into just traditional savings accounts and we did that along
the way as well. and when I say savings accounts I actually mean that we both
were invested in the stock market so throughout our investing career we've
had money in the market. while Tim and I dabbled with a little bit of debt right
out of college in our early 20s, avoiding debt was something that was kind of a
big thing even before we met each other 12 years ago. neither one of us had any
debt (other than a mortgage) and we never picked up any debt either. that meant that if
we didn't have money to buy something we didn't buy it, we waited until we had the
money or we didn't buy it at all. yep and we were both incredibly privileged in
that our college educations were paid for by our parents. so that was a blessing
certainly. so we didn't have any student loans or
anything like that. the only debt we've ever really had is a mortgage.
okay so we've been saving our money. what did we do with it? we put it into
low-cost investments. and I'm going to say that we didn't always have our money
in low-cost investments. obviously when you're investing in a 401k you're
investing in whatever options are available in the plans that your
employer offers and so that hasn't always been an option for us. also I
dabbled in stocks at different times (so did I). I think we had our money in the
market throughout our investing career. so we've had our money in the stock
market throughout. we've settled on the right thing for us to do is to have our
money in low-cost index funds. yes that would include things like VTSAX which is a big fund for the fire community (that's the financial
independence retire early community) because it's a low-cost fund that
mirrors the entire stock market. we have money in bond funds, international stock
funds but none of them are extremely aggressive.
none of them are expensive and that's where we invest. that's exactly right.
in roughly 2013 we were having a conversation with a life insurance agent
and he introduced us to this concept of "how much money do you need to retire?". and
after the fact we figured out that what he was talking about was called the 4%
rule. at the time he just gave us simply the math. yeah what is the 4% rule? you
take your spending for the year and multiply it by 25 times and that's the
amount of money that you're going to need in order to retire. now it's a
different number for people who retire earlier. it's suggested that it's the 3
percent rule. so what that means is you take your spending and you multiply it
by 33 point 3 and that is the total amount that you need invested to be able
to retire. so 25 times your spending is 4% of the total investments. it's the
same thing it's just a ratio. but learning that allowed us to have some
number in mind of how much do we need to retire. and we are doing something on the
3% end for sure. two quick things to note about the 4% rule. number one is you have
to have your money invested in the market in order for the math to work and
the rule gives you the details on what that looks like.
the rule also allows for inflation let's say you start out with a million bucks
and you're working with the three percent rule that would allow you to
spend thirty thousand dollars in year one. in year two you get to inflation
adjust that number so you would have thirty thousand times one point nine
percent or whatever inflation happens to be at the time. so the rule has a
requirement that you have to be invested in the market and it allows for you to
inflation adjust your spending. in order to know the numbers for the three or
four percent rule, you need to track your spending. tracking your spending is
something that Tim feels very strongly about. I certainly do. probably the reason
for that is because I have been tracking my spending since my first job out of
college. somebody introduced me to quicken and from there I've tracked
every penny I've pretty much ever spent since I've had my first job. the reason
that this is so important is because this is the math that you need you need
to know how much you're gonna spend in your retirement or how much you're
spending now to understand what you're gonna spend in your retirement. so if you
don't have that number you can't figure out if you're gonna retire. also tracking
your spending is what you're going to do if you're ever going to work with a
budget. so we don't happen to have a budget. we spend and then we go and look
at the numbers after we've spent the money and that works for us. however if
you're gonna keep a budget and try and keep your spending under control this is
the only way that you can make that happen. now we've done a video recently
on all the different options we are using for tracking our money I'm gonna
put a card up above so you can check that out later because it will give you
the details. it's incredibly easy nowadays to track what you're spending.
and here we are at what may be the biggest thing that allowed us to retire
early. i'm going to say that this is the biggest thing even above my tracking. and
that is one where we lose people all the time so I hope that you will continue
watching even though you may tune out mentally on this one. spending less. when
people ask me "how did you retire early?", I should just put
a tattoo of my forehead "spend less" "spend less". spending less is that was our key.
once we reduced our spending...sixty five hundred dollars a month we took out of
our monthly budget. once we took that out, we were able to retire
like that. yep there's a concept in the early retirement community called
lifestyle inflation. the idea is as you get a new job and you make more money,
you buy a bigger house, you buy a bigger car etcetera. that's lifestyle
inflation. so your life and your lifestyle inflates along with your
income. so what Amy and I did whenever we found this early retirement stuff is we
deflated our lifestyle. actually we like to say we didn't deflate our lifestyle.
our lifestyle now is more full and more robust than it's ever been. we deflated
our spending. so by deflating our spending that was really the key to our
early retirement. the number one thing we deflated was our house. once we sold and
got out of our house, that was a huge chunk of the $6,500 was having the big
house. and it wasn't just the mortgage payment, it was the lawn service and the
housekeeping that had to come with this big giant house. and the heating bills
and the property insurance and decorating the house. all of it. anything
that had to do with maintaining a house. that was by far and away the biggest
chunk of our spending. but when you're taking $6500 a month out of your spending,
it's coming from almost everywhere. it came from shopping. it came from dining
out. it came from entertainment. it came from...we sold it one of our cars. yeah
our cars. we now drive our cheaper car. so we have a car that's less expensive
to drive for gas mileage and all that. and to repair. that's the car that we
drive all the time, not the fancier car. that one sits in the garage and we're
actually gonna be going down to one car soon. but the idea here is look at every
single thing you're spending. everything and see if there's anything that can be
reduced. I'm gonna give an example of a conversation I had a few months ago. I
was chatting with the woman who said "I was a single mom to six kids.
I've got spending less down to a science". and I said well you just let me know
that you live like an hour away from your job and your six kids are all grown.
how many of them still live with you? she said none lived with her. so she still
had her house for six kids an hour from her work and didn't think that she could
possibly reduce her spending a single penny. and she really believed that. so be
very very honest where can you reduce spending in your life. we look at
everything and we've become experts in doing everything kind of cheaper. we are
really careful with our money but we still want an amazing life. we're not
willing to compromise on that. but we don't want to spend a lot of money for
it. and we still think that we have fat in our $36,000, quite a bit of it. yep so
we're not super cheap and frugal about everything, just about things that we
aren't that passionate about. the things that we are Super Duper passionate about -
travel and our health - these things we actually spend quite a bit on. I'm gonna
put a video up about our splurges that we just did a few weeks ago. so there are
places that we actually increased our spending after we've retired but almost
everything else went down. when we were planning to retire early something that
we had to seriously consider is where was our money invested. not specific
funds but was it in post tax money or pre-tax money? so those dollars that we
have invested in IRAs or 401ks we won't have access to until we're 59 and a half
unless we're willing to accept a 10% penalty (which we're not willing to accept) at withdrawal. so we had to make sure that
we had enough post tax dollars...money that we've already paid taxes on...
available to spend to get us until we're 59 and a half years old. and that was
helped a lot by putting my income into savings for over four years.
what that meant is that we have enough money to get us to 59 and a half and
beyond without having to have to worry about taking money out of that 401k or
IRA. a little footnote about Social Security because I'm guessing we might
get a question or two about that. we aren't factoring Social Security into
our retirement planning at all. we have paid into it our entire lives so
hopefully we're getting something out of Social Security but we don't know what.
so because of the uncertainty it's not part of our financial plan. and we do
believe Social Security will be there for us we just don't know how much. so it
again, it's hard to factor into our planning. so it'll just be a nice bonus when it
happens. far away the biggest expense that we have in our current life is
insurance. whether it's health insurance or homeowners insurance or car insurance,
health insurance...we pay for a lot of insurance. and we think that insurance
if you have any amount of assets is critically important to protecting those
assets. so we couldn't afford to not have health insurance here in the States .one
trip to the hospital could cost hundreds of thousands of dollars so we have to
make sure we're protected in every way that we could possibly be protected. and
our very last point is we had a plan B. the cool thing is we didn't have to go
back to intense corporate jobs if our plan didn't work. because we brought our
spending so much lower to $36,000 a year, we didn't need as much to live and that
meant we didn't have to have crazy jobs in order to maintain that level of
spending. and I'm going to we had a plan C a plan D a plan E a plan F. so we've been
through multiple iterations and our plan continues to evolve. but the idea is if
something happens with our current situation and the market goes to zero we
have a plan. so we have ideas - What's our our plan if our money goes to zero? - our plan is we probably won't live
here. we'll live someplace else. we'll use geographic arbitrage to live someplace
else where it's very inexpensive to live. and actually what Tim says, he's kind of
joking around. but we do look at other countries as an option for Plan B. so
Tim's right. we have a lot of different Plan B's one of them would be going and
working like minimum wage jobs. another would be going to a cheaper place.
thankfully house sitting factors in here and we can get on the road and live
somewhere else and not pay any accommodations when we're housesitting.
so I'm gonna say that maybe plan e (roughly) is gonna be we're gonna be
full-time nomads in a year. we believe it's gonna cost us less when we are on
the road and traveling full-time then it costs us to be here in our current
townhome that's completely paid for. and the reason for that is because here we
pay HOA fees, we pay a we play taxes, we pay for electricity and utilities. so
there are a lot of expenses that come from being in this place. when we're on
the road and we're doing housesitting or we're living places that are less
expensive, we believe we'll be spending less than that thousand dollars a month.
yeah so there you have it! that's our ten. we would love to know do you have plans
to be financially independent? do you have plans to retire early? are there
places in your budget that you can reduce your spending? is there anything
that you learned today about our journey that maybe you can apply into your own
situation? so we hope that you will put any comments down below and I've been
pretty good about staying on top of answering those, right?
absolutely! amazing job at that. to if you like the video today, please give it a
thumbs up. if you haven't subscribed yet, what are you waiting for? over here,
please. we do come out with a new video every single Wednesday. and if you know
anyone who's interested in retiring early and wonders "where the heck should
I start?" please send them this video or share it on your social media. we'll see
you next Wednesday. thanks for watching. far and away the largest expense - a little more enthusiasm! far and
away! not that excited! You surprised me!
