My husband and I have been saving and investing for most of our 16-year marriage, and I have always believed we were doing pretty well.
We bought two rental properties in our 20s that are almost entirely paid off now, and we have saved for emergencies and invested in a brokerage account for a long time. We contributed to retirement accounts in our old 9-5 jobs, but more importantly, we really stepped up our retirement savings when we became self-employed and switched to a Solo 401(k).
But I didn't really think about early retirement or our exact exit date from the working world until I turned 40, which was in January of this year. For some reason, turning 40 made me look at my work in a whole new way. While I have been writing about personal finance for the last decade, hitting this milestone really made me focus on my own situation and what my husband and I could accomplish if we stayed the course.
Fortunately, I quickly found that all the steps we have been taking put us on track to reach our "retirement number" by the age of 50. While it's common for early retirement enthusiasts to try to save up 25 times their annual expenses, we are over-planners who like to be on the safe side. With that in mind, we opted to shoot for 35 times our annual expenses. This goal amount also allows for retirement withdrawals well above the "4% rule," which is another popular method people use to determine when they can retire.
This simple exercise really made me think about my life and my spending. Here are the main factors that have changed in the way I think about the money we work hard to earn.
1. Pursuing early retirement led me to create a monthly investment goal
To figure out approximately how much money you'll have for retirement later on, all you need is a simple compound interest calculator like the one on Investor.gov. To use the tool, you just need to enter your current amount invested, how much money you plan to invest each month, the interest rate you expect to earn, and the length of time you plan to invest.
While my husband and I have used a monthly budget for the past decade, I have never been one to set a specific investing goal. We save the maximum allowed in our Solo 401(k) retirement accounts, but I have always just invested what was left in our brokerage accounts.
After playing around with a retirement calculator, however, I decided it would be wise to create a numeric investing goal to shoot for each month. With this monthly investment goal amount, I should easily reach my retirement number thanks to compound interest when you factor in my current amount invested and an expected return of 6%. If we can invest more each month or earn a higher return than 6% over the next 10 years, that's even better.
2. I am even more intentional with everyday spending
We have lived with a spending plan for a really long time, and we use a zero-sum budget that sets limits for fluctuating expenses like groceries, dining out, and entertainment. While we have always done pretty well when it comes to sticking to our budget, having a specific retirement goal date and retirement amount made me even more intentional with how I spend.
Now that I'm on path for an early retirement, I think a little harder about pricey takeout meals and small remodeling projects around the house. This doesn't mean we don't take care of our home or dine out; it just means we are less likely to do home upgrades we don't care about, and we're more likely to pick up a $5 Little Caesars pizza versus splurging for Thai food.
We haven't been "wasteful spenders" for a long time, but we have become more disciplined when it comes to looking for more ways to avoid spending as well — for example, borrowing tools from neighbors instead of buying new ones or spending more time price-shopping for items we do have to buy. Side note: I still refuse to use coupons.
We all know that even small amounts of money saved can add up over time, and that's especially true when you invest. The more I don't spend now, the more I can dump into my investment accounts to reach my goal faster.
3. We are more eager to pursue money-making opportunities
We have always worked hard, but the fact we're self-employed has given us some control in terms of our income. If I wasn't self-employed and couldn't just take on more projects, I would probably pick up a side hustle instead.
Either way, I have really buckled down and tried to earn more money this year especially. After all, having more income at my disposal makes it even easier to reach my retirement number earlier — and of course, to cover any emergency or surprise expenses that come along. Earning more also makes it possible to pay for some splurges (we are currently remodeling our kitchen) without straying from our monthly investment goal.
Early retirement is something I have wanted for a long time, but realizing it was only a decade away made me more intentional with almost everything I do.
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