I started this blog telling you that I was closer to retiring sooner than the standard sixty-two to sixty-seven stated average age for my generation. Based on my goals, it’s actually a moving target. There are ranges and more extreme options that factor into when I arrive at the actual moment.
What More Could I Do To Reach The Retiring Sooner Goal?
For instance, I could hit the retiring sooner goal much faster by moving to place with a lower COLA (Cost Of Living Average). I could do that within the USA (I live near the beach in a tourist community) or maybe even more easily to another country. I even posted an article about a place a couple could live comfortably on $18,000 a year. If that’s all I needed, I could retire today. It’s nice to have something like that as an option.
Also I could hit the retiring sooner goal faster by decreasing my expenses to the point that my current stash of cash could support me indefinitely. We could work on a few less efficient areas of our budget and make that happen.
As an example, if I got a little more serious I could sell my house and turn the equity into a smaller and more efficient home that I helped build to keep the costs even lower. I should be able to do that and have no mortgage. We’d also save on our community’s HOA, and my taxes and insurance would also be lower. Why don’t I do it? Equity is building in our home at a rate faster than typically experienced on average. I bought this house as an investment, and so far it is paying off on paper. More on that a little later.
We could implement some less serious disciplines to help as well. The point I’m making is that there are almost always proactive things you can do to decrease your spending and increase your savings rate. Your savings rate is the most powerful tool to help you win the retiring sooner game.
Things We Did To Help Us Toward The Retiring Sooner Goal
It’s a journey for us, and we have made tremendous progress by making some tweaks like lowering data use, delaying purchases, and not paying for cable. I also wrote about a couple other things that we have done that you could also do to lower your expenses here.
All of those steps along with others helped us increase our savings rate. Going into 2017, we had a decent savings rate consistently ranging from 23-27% depending on the year. When I lived near Atlanta several years ago, I was able to buy a really nice town home for cash and our savings rate was almost 50%! Based on several unfortunate events and personal investment mistakes*, we hit some snags that changed the trajectory of what we were building.
Bad things happen. Markets correct or even crash. Home equity decreases due to real estate trends. You make mistakes. Even so, the path is proven. It works if you work it. So we kept our optimism high, settled into our new community, and kept moving toward our goals. It is paying off.
Our Personal Progress Toward Retiring Sooner as of 2017
2017 was a good year. Our net worth increased by about 15%. Our savings rate increased to 34.6%! And that’s after giving a significant percentage of our income to charity. (We have a deep conviction about giving to charitable causes. If we cut this expense alone, we’d consistently have a savings rate 35-45% range.) We increased our savings rate even though there were several unexpected large expenses, including a big dental bill for my wife.
For the sake of transparency, we overspent our budget in a few categories. As mentioned before, we overspent in general healthcare. I use that budget category to cover every expense that is outside those covered by our plans, and it doesn’t include our premiums. We have several ongoing prescriptions and children who need to see the doctor, have their teeth cleaned and have their cavities filled. We don’t pay for dental insurance, so any cleanings or dental work is totally out of pocket.
Also, we overspent on groceries. This category includes household items, cleaning supplies, etc. It’s pretty much every consumable item that keeps the home running other than the maintenance, utilities, etc. I’ll likely often rant about how much it costs to operate my home. I do so because I think it’s too big and its community is too expensive. Take it with a grain of salt. We purchased it as a foreclosure and have gained considerable equity as result. I wonder, however, how much of that gain is being eaten away by higher utility bills, higher taxes, higher maintenance, and higher insurance. But I digress.
Part of the reason we overspent in groceries is because we entertained a bit more this year. Friendships and fun hold a high priority for us. We also like to be generous, and my wife is a great cook. So she likes to take dishes up a level with little extras and make delicious desserts. We also go back and forth on how much meat we need eat. Two growing boys and their protein requirements keep pushing the meat bill higher. My contribution to the debate stresses the inclusion of other sources of protein that are much less expensive, and we are working toward it. A Mediterranean diet seems most appealing to my wife and I. So as we do better at sticking to it, I think our bill will reflect lower costs.
Another category we overspent was something I called “School Extras.” This category is a great nuisance to me, but I get the tension. However, something asking for more money comes home with our boys almost every other week. It’s so annoying! We did away with this category and the funds now need to come from another category in 2018. We did that so we’d have to account for it in a way that those spending choices would have to be weighed against trips and other fun things we’d like to do. We’ll see how well it works.
I’d like to briefly point out that too many budget categories can work against you. I think they are good if you take a larger budget and break it’s total up among several smaller categories in order to keep spending under control. A little extra margin provided by a raise here and there led me to be a little frivolous. I added a category AND added extra spending to it. Every thing you spend has to come from somewhere, so that tactic wasn’t a good one. I’m not perfect, but I try to learn from my mistakes. Like I said, we faced the facts and adjusted for them. Hopefully it’s a lesson learned, and now it’s one I’ve passed along to you.
Planning For Progress In 2018
Even with these overages, we more than made up for it in other places by intentional spending and saving. After a bit of discussion, we adjusted our budget down for 2018 to reflect our 2017 spending so we could use the newly found margin intentionally toward our savings rate. Whittling away at the margin in line item categories helps increase your savings rate, so we do it regularly. We especially do it when that margin shows up consistently from month to month and year to year.
It’s interesting how you get used to consuming less and don’t really even miss it. Also, you can get similar results when you work toward more efficiency in your consumption.
If we can keep going on this trajectory, I will be retiring sooner– much sooner. Or at least I will have the option for retiring sooner. Like I’ve said before, my job is very fulfilling. I might semi-retire and work some form of part time. I might not retire unless they tell me I’m too old, and they need my portion of the payroll for someone less geriatric. Who knows. I mainly want the choice, and I’m making progress on having that choice completely on my terms.
As of the end of 2017, I’m closer to retiring sooner.
*Some of my mistakes (maybe misfortunes in some cases):
- Selling a house at the bottom of the market in order to make a hasty move.
- Starting a side business in an economy and location that weren’t conducive for success.
- Making an investment at a risk and cost level beyond what I was comfortable with even after receiving expert counsel to not do so. (This one will likely break even, but it’s still stressful.)
- Buying high and selling low. Trying to time the market is almost always a mistake. 🙂
- Not taking profits when expertly advised to do so from an investment I really didn’t truly understand. [There’s a pattern here. :)]