When I think about our journey to financial independence/retiring early (FIRE) and the steps we are taking to get there I already know our path will be different than most. What I didn’t realize is that even the main road isn’t quite as well travelled as I had expected. Every person on a similar journey starts at a different point with their own personal set of parameters: age, marital status, level of debt, cost of living, kids, income level, etc. Just as the starting point varies, so too does the journey. Some start small by tracking expenses and making small changes to their spending habits and others make bigger changes like downsizing their homes, trading cars for bikes, moving to a lower cost of living area or picking up side jobs to increase their income.
Last month, the couple behind Our Next Life issued The Road Less Travelled Challenge. They list out their view of the unwritten commandments for how to achieve early retirement that have been touted by enough FIRE pioneers that they’ve started to seem like rules. They point out in the post that since retiring early is a subversive act on it’s own that allows people to ignore the “rules” for how long you have to work, there shouldn’t really be rules for how you get there either. The challenge is to talk about the road we’re taking that is different than those around us who are on a similar journey.
I have just LOVED reading the posts from everyone who took the challenge and have such a great appreciation for the different roads everyone is on. Here are a few standouts I wanted to share:
Gwen at Fiery Millennials got started much earlier than most of us, having stumbled upon the concept of financial independence in college. She’s 25 and single and while not overly concerned with being frugal she does have a 50% savings rate and plans to retire by 35!
Middle Class Dad is focused more in financial independence and won’t consider retiring early until their nest is empty. He believes he should lead by example for his children by ensuring that they see him work. “To be the Middle Class Dad I want to be for my family, demonstrating hard work, a middle class standard of living and responsible financial management are all part of the equation.”
Matt and Daniel at The Resume Gap are rejecting the 4% rule (the 4% withdrawal rate guides FIRE followers on how much they need to save so that they can live off a 4% withdrawal from investments). They point out that higher withdrawal rates at 5%, 6% and even 8% don’t necessarily spell doom for your investment accounts depending on market conditions. (Side Note: I absolutely love the analogy of FIRE as a religion)
In my response to the challenge, I’m going to approach this rather methodically by breaking down each “commandment” that was presented by Our Next Life:
Commandment #1: Thou shalt live by the 4 percent rule, excepting when thou art more conservative, and then thou shall live by the 3 percent rule.
Where we differ: I actually don’t know if we will target a 4% withdrawal rate or go more or less conservative. We are both fairly risk tolerant and I could see us making the decision to retire early before reaching the 25x living expenses mark knowing that we would need to reduce expenses or take on part time work if things got bumpy somewhere in the middle.
I can also see us working for longer than anticipated if we both find ourselves with jobs that we love when we hit the 25x point. We don’t know what the future holds and if some predictions are correct (return rates diminishing over time) we might need to hold out longer based on a lower withdrawal rate.
Commandment #2: Thou shalt make thy choosing between Vanguard index funds or dividend-yielding stocks.
Where we differ: We don’t. We’re fully bought in here. I’m not a financial expert and not terribly interested in playing the stock market. Real estate is an investment area we’ve toyed with but we actually just made a move to reduce our RE holdings by selling our primary residence in favor of renting.
Commandment #3: Thou shalt employ the backdoor Roth conversion if thy 401(k) is of goodly size, which it must be, because thou has maxed it lo these many years.
Where we differ: I max out my 401k because my employer does not cap their matching benefit. Mr. TBW is self-employed and has yet to set up a 401K or alternative although he may start this year since we have a windfall coming from the sale of our home. We did convert some of my 401K to a Roth last year but we still need to evaluate if this is the right move given our income pushes us into the AMT.
Commandment #4: Thou shalt be frugal in all things, and shall not partake of worldly temptations like cable television. Bigger riches await those who partake only of self-powered travel.
Where we differ: We’re definitely not as frugal as we could be. Forget self-powered travel, we have 3 cars for the 2 of us (one is driven by our nanny). On that note, the nanny is an expense that is certainly not frugal (her income eats up about half of mine) but it is temporary. We did trade our gas guzzling SUV for an all-electric car and we have cut down spending on frivolous items. We still have an outrageous budget for food (Mr. TBW spends $10-15 per DAY on lunch) and we eat out (or take out) more than I’d like to admit.
I try to balance our spending so that we’re focusing more on experiences vs. things. I’m happy to pay a bit more for grocery delivery and I love having cleaners come to our house every 2 weeks because both those expenses free up time with my family. As part of my 30 Before 30 Challenge we’ve spent a lot on our recent adventures but every one of them has been worth it (except maybe the treehouse…).
Commandment #5: Thou shalt feel at a disadvantage if thou art unmarried, with children, or employed in a non-IT or engineering career.
Where we differ: We do have kids and that does have a significant impact on our FIRE timeline and our options for what we can do post-FIRE. Outside of the nanny expense, we have reduced our kid-related expenses as much as possible by relying on gifts and second hand sources for clothes and toys. As they get older I plan to limit them to 1 scheduled activity each (or per season, still undecided) in favor of spending more time together as a family enjoying shared hobbies. I want to instill the values of living within your means and teach them to disregard anyone who tells them they need to live a certain way to enjoy their life.
What about “The Road Unknown?”
After analyzing my own responses and the responses of others in the community I realize one of the biggest differences is that we don’t have a set path. We have a timeline of 10 years but that could be shorter or longer depending on the market and decisions we make. We are entertaining a lot of options for our future:
- Where we’ll reside: We’re renting now because we’re undecided about our longer term plans. We want to settle somewhere in the next 4 years so that our girls can grow up in a single school district during their school years. We want to stay fairly local because we have family in Seattle and Portland and as the parents of the only grandchildren on both sides, our own parents would throw A FIT if we tried to leave (besides, we have amazing families and we want our kids to grow up close to grandparents, aunts and uncles and cousins). Beyond that, we could see ourselves moving anywhere within 100 miles of here.
- How long we’ll work: I could work really hard and move through the ranks in my job so that I can increase my income and reach FI quicker or I could quit my current job in favor of something more flexible that would likely impact my income and my working timeline. Right now I’m not in love with my job but I do think it’s possible that I could find work that I love that might even prolong our timeline until FIRE. Mr. TBW loves what he does and still struggles with the thoughts/possibilities of walking away. I imagine he’ll want to continue working for a bit after we reach FI but will be much more picky about the projects and clients he takes on and the hours he works.
- How much we’ll save: This is closely tied to How Long We’ll Work. Right now we have projections that put us at the 25x living expenses in year 10. A lot could change in 10 years, our income could go up/down or our spending could go up/down and we might just go with the flow. Like I mentioned above, we’re fairly risk tolerant and I could see us walking away from the working world before we hit the 25x point if we feel we want to get started early.
- How much we’ll travel: We aren’t big travelers now but we have big dreams of seeing the world. We didn’t catch the travel bug until the last 6 months (much of that is thanks to the FI community) so we haven’t quite figured out where we want to go, how old our kids would need to be, etc. We’ve discussed pulling the kids out of school at 10-13 yrs old and spending a year on the road in an RV. We’ve talked about taking a year off after FIRE and moving our family to another country to immerse them in a new culture. I love the idea of slow travelling vs. trying to see everything and every country in a shorter period of time. All of this depends on what life throws at us over the course of the next 10 years.
How about you? How does your journey differ from ours? What is your unique life situation or perspective that impacts how you will move from now through your FI(RE) date?