Whenever Dave and I tell any of our friends or family that we have “retired” early, we are always met with the same simple question: how? Did we incite any early retirement jealousy? Hopefully not. But I do think that our newest adventure in life has sparked a bit of extra thought in most of our friends and family.
Whether you want to full on quit your nine to five, or if you just want a bit of extra monetary freedom, we are here to tell you our version of how; how to quit a day job, how to retire early, even how to take a year sabbatical from work.
Think About Money Differently
Quitting our day jobs to enjoy an early retirement was not our plan from the beginning, but we made a few choices early on that gave us the opportunity to do just that.
Our family and friends always knew we thought about money differently. We try to keep our costs down even to the point of being called frugal/cheap. Paying off debt and saving was the priority over expensive meals and cars with those fancy windows that you don’t have to crank.
I suppose the main difference in our thinking over many others is that the more you save, the less you need to work. The more you spend, the more time you need to spend working before you can quit and pursue other dreams.
For example, Dave has been maxing out his 401k since well before we met. If you talk to him about it he’ll tell you the story of when one of his work buddies asked him why he contributed so much. He gave a simple response, right in front of his boss(with who he was always very honest with). “Because I don’t want to be in a s*%@&y job like this when I’m 60.” And he thinks I’m blunt.
Here’s another example: The year my rent raised up to just under $1,000 a month, I said enough. I boomeranged back into my parents house to save up a down payment for a home purchase.
After looking around in the 2012 Denver market, I settled on a one bedroom condo in a fun part of downtown. Not my ideal purchase: people living next to me and above me, no second bedroom, an HOA that I would later find was insolvent and lazy. But instead of paying $200,000 for a two bedroom house in an Englewood neighborhood, I paid $130,000 for a condo in a fun part of downtown.
Did I want the cute two bedroom, with a large yard, and a one car garage? Of course. Did I want to be house poor and constantly worried about paying the mortgage? Absolutely not. What I really wanted was to focus on paying off my student loans and increasing my savings. That was the priority.
(My mortgage by the way, $737. So amazing! I’m sure I will never have a mortgage or rent that low again.)
By keeping non-discretionary expenses low and being mindful of our spending, both Dave and I were able to put ourselves in a good position both debt-wise and savings-wise.
We still had fun and went out with friends. We still traveled. We took camping trips to the Tetons, short trips to Vegas and Tahoe, and longer trips to Spain and Aruba.
Ah, Aruba. The Perfect Money Saving Example.
Such a perfect example, and I’m totally going to brag. A few years ago, two of our best friends were getting married in Aruba. At the time, flights averaged $800 from Denver. And I don’t exactly remember what the cost was per night at a hotel or resort, I think in the $200/night range. Just not an option we were willing to afford.
Luckily, we knew a few people who were invited and put word out that we wanted to rent a VRBO (vacation rental by owner). We ended up staying in a five bedroom, five bathroom house with a pool for $400 per couple…for the week.
Couple the cost of the house with what I paid for a flight (60,000 bonus miles I received from opening a miles credit card – remember, we pay off all credit card debt monthly), my total outlay was about $300. Again, $300 to fly to Aruba and stay for a week. That’s just what I paid for me. Dave was extra.
The savings just on my side of the trip allowed us to spend a bit more on the experiences: a scuba trip, jeep rentals, restaurants. But the best part was being able to hang out with eight of our good friends around the pool drinking cocktails we made ourselves for very little money. Such a great trip!
So… A Summary of How
First Step: Pay Off Your Debt
This one sucks, and yes, I know that some debt is good debt and we’ll get more into this later. But seriously, pay off your debt. You can’t quit your day job when you are paying the minimum on your credit cards. Bankruptcy doesn’t help with student loans, and car payments not only suck up your cash in principle and interest, but make you pay for full coverage car insurance too.
Step Two: Save Money
Seems simple, but how can you save money to live on later if you are living paycheck to paycheck now? I’m not saying that you must subject yourself to becoming a recluse and that anything fun is off limits. I’m simply saying pay yourself first.
Put a portion of your paycheck in a savings account every time you get paid, before you do anything else. And for the love of God, contribute to your 401k if you can. If your company matches a certain amount of contributions then this is non-negotiable. You’re just throwing away free money if you don’t.
Step Three: Spend Intentionally
Dave and I go to happy hours not because we are cheap (though friends have argued differently), but because we don’t think craft beers are worth $7-$8 a pint. We can drink a six-pack at home for $9. That’s like getting four free beers. But we like the experience of going out for a drink and are OK paying $4-$5 for a pint or two. If the beers are $4 or less, we might even throw in some happy hour nachos.
Just because everyone else is going to the five star restaurants, buying new, fancy things or spending hundreds of dollars on those new pair of sneakers endorsed by whichever sports star doesn’t mean you have to.
A Final Example
Back in the day, I was working in the Risk Department of a popular Brokerage Firm in the Denver Metro Area. I was making pretty decent money, but I drove a white 2003 Chevy Cavalier. An 18 year old’s car. (I know this because I was driving that same make and model when I was 18.)
Every day I parked my beater car next to all the fancy cars in the corporate parking lot. And everyday I had to remind myself that I was debt free and saving at least 50% of my paycheck every month. Still, it wasn’t particularly fun.
But I didn’t have a car payment, the car got great gas mileage, and I only paid for liability insurance. I didn’t shell out thousands of dollars just for the car to drop in value the second I drove it home. I had no worries about door dings or bumper scrapes.
Best of all, the money I saved by driving my little beat up Chevy allowed me to quit that job and take some time off. Everyone else in that parking lot is probably still there, stressing out over presentations and annual reviews.
The other way of thinking about your car can best be described by one of my favorite colleagues. We were speaking about people in another department and she said to me “They must get paid well over there, So-and-so drives an Escalade.” Always keep in mind that if you can fog a mirror, the dealership will lease you pretty much any car on the lot. The type of car you drive does not by any means show off wealth. Don’t believe me? Google Mark Zuckerberg’s ride.
Meanwhile, I can go to yoga when they go to meetings, I can end my day at 2pm with a cocktail while they’re pounding that fourth cup of coffee hoping it will give them the jolt they need to finish that last project. Yep, that was a good car.
Finally, Step Four: Plan While Thinking Out of the Box
Dave and I didn’t plan to move three states away from most everyone we know, but we did. We knew that buying a house in Denver meant that we had to stay chained to our cubicles that much longer. So we made the choice to be open to other locations.
Then we found Boise. A Denver twenty years ago – though growing like crazy. We were able to cut our housing budget in half, and by buying a super fixer-upper we got a huge lot and a house with a ton of potential very close to downtown.
I got a job with a great company out here, worked for a bit, and when the time was right, resigned to take some time off and pursue other dreams. Now we get to explore Idaho and the Pacific NorthWest, hit up some breweries and wineries, and fix up the house.
We also get to spend some quality time figuring out what we want to do with our retirement. Because let’s face it, retiring in our 30’s and 40’s leaves too much time to just do nothing. And it’s way too easy to have that first cocktail at breakfast. Bloody Mary anyone?
We will both work again, I’m sure. But this time it will be on our terms. All because we put ourselves initially in a good financial situation and continue to take advantage of the opportunities that few others care to see.
If this sounds like something that you may want to pursue, please feel free to reach out to us! We are more than happy to share our experiences with you and we love sharing our opinions (of course!). Until then, happy saving!