Are you dreaming of financial independence or early retirement? But not sure were to start or what to do. Well you will enjoy this week’s interview with Eat The Financial Elephant.
Their blog is about their journey to financial independence and early retirement (by age 40). The emphasis of their blog is to show that you do not have to be extreme in any means to achieve this type of success. This husband and wife both came from average backgrounds and started out with virtually nothing, have never been extremely frugal and have earned above average professional salaries but neither have ever earned 6 figures in any year. They live fairly standard lifestyles (on the surface) that include living in a nice home, being a two-car family, working normal jobs and recently becoming parents. They have made major financial mistakes, especially in the area of investing. They believe their lives are different than most because they have dedicated much of our time and resources to seeking new and exciting adventures. They have traveled the world in pursuit of hiking, climbing, skiing and mountaineering in beautiful places, attending major music and sporting events, and learning about other cultures.
Let’s hear how they have simplify things so they can retire early but still enjoy life alone the way:
What event lead you to decide you needed to change your lifestyle?
We have known for a while that we didn’t want to work forever and live a traditional lifestyle. Our original vision was to become “Dirtbag Millionaires”
. However, we had no real plan and no urgency as we had become complacent living a fairly standard busy professional lifestyle.
In fall, 2012 we had two major life events that really made us reassess our priorities and speed up the time frame. First in September, my cousin who was a great friend and inspiration to both of us died after a battle with cancer. This made us realize how fragile and potentially short life can be.
Then in October we had our daughter after 11 years of marriage and thinking kids were not a possibility for us. This made us realize that we had an opportunity that few parents will have. We could both retire while our child is young.
Most families today have 2 working parents. Virtually every family has at least one full-time “bread-winner”. Trying to balance work, parenting, marriage and other relationships and interests is very challenging. We had an opportunity to spend the time we want with our daughter without sacrificing our interests and relationship if we could free up all the time we were spending working.
We knew we had to try it.
What steps did you need to take to make sure you could do it?
At first, we simply thought it was an issue of understanding finances so we started reading everything we could about investing and retirement planning. We fired our financial advisor and took over managing our own investments. We developed a financial plan that made sense for what we wanted to do with our lives.
As we continued to read and learn, we realized we also really needed to change our thought process. We needed to redefine what retirement was to us. We needed to define what we wanted from life and figure out how to pursue this life that we want, rather than viewing retirement as some magical thing that would solve all of our problems.
What was your biggest challenge or roadblock when it came making that change?
I think the biggest challenge is learning to trust ourselves and think independently. As a society, we are trapped in this herd mentality of all thinking, acting and living essentially the same existence.
When taking an unconventional path for your life, everyone wants to tell you that you’re crazy and it is so risky. However, as we have taken the time to get a deeper understanding of the issues we face and develop plans and contingencies we realize that much our fear and anxiety are just a fear of the unknown. We’ve learned to block out these voices that are not offering constructive criticism but just reinforcing fears that are not based on facts or logic.
How will you feel once you reached your goal and are able to live the lifestyle you desire?
This is an interesting question because I feel that many people get all caught up in thinking that life will become magically better once an arbitrary goal has been achieved. We started off on this path and found that we were becoming more dissatisfied with life, even as we progressed towards our financial goals.
Our site was originally meant to document our journeys to financial independence and early retirement, learning the fastest and most efficient ways to these goals. However, we continue to grow and change. We now realize that we need to gradually transition, working less and less until we find a place where we achieve balance in our lives and we are living a lifestyle that we never want to retire from, which may or may not include working for money.
What are your current financial goals?
We are currently working toward our written goal to increase our assets and decrease our expenses to the point that we have 20-25X our expenses by May 1, 2017. However, this is a pretty arbitrary goal and one that we are constantly re-evaluating.
What tools do you currently use to manage your finances?
How’s this for simple? We have two Excel spreadsheets. One to track all of our investments. One to track our spending. We also have a one page Word document that contains our entire wealth/investment plan.
What is the biggest change to your finances that has enabled you to live your current lifestyle?
We have always just naturally lived below our means and been good savers, basically having a 50% savings rate (after tax) by living off of Mrs. EE’s salary and banking mine.
The only major changes we have made are to greatly decrease our tax bill and investment expenses by learning to manage our own investments. We also continue to gradually become more efficient and cut wasteful spending that we find since we started tracking our expenses over the past couple of years.
Why did you start the Eat the Financial Elephant blog?
We realized that we got tremendous benefit from reading other blogs in the early retirement/financial independence community. The information and insights we gained from them was so different from the same things we heard over and over from mainstream sources and our financial adviser. We realized that we could never pay back all of those people that helped us so much.
We started our blog to share our successes as well as our failures/mistakes to help others. We looked at it as a way of paying forward all that we could never possibly pay back to those that helped us.
The blog has had the unintended consequence of being very motivational to us to continue to learn and develop our plans more completely and we’ve unintentionally created a support system of people we otherwise would have never met that follow along and advise and encourage us. It is a pretty awesome thing.
What type of feedback have you received since it started?
For about 6 months we were just learning how to drive some traffic our way and we had little consistent traffic or feedback and almost quit on several occasions.
Since the beginning of 2015 we have had a few opportunities to get some exposure and have been steadily growing and feedback has been overwhelmingly positive.
What three things do recommend in order to simplify your finances?
1. Pay yourself first through automated withdrawal from your paycheck. We always put one income directly towards getting out of debt and then transitioned to saving/investing money in this way once we were debt free. This allows you to build wealth quickly without ever missing the money.
2. Use your 401(k) (or 403(b) or whatever version you have available through your job) to combine automated savings, free money if getting a match, tax benefits up front allowing you to save more money, and tax-free growth as long as the money stays invested. All these benefits can be had with one simple decision.
3. Use a cash-back rewards credit card (unless you are horrible with credit and spending). It allows you to make a little money in a completely passive way doing something you would already do, gives you consumer protection and makes tracking your spending very simple.
What are your best savings tips?
1.) We’ve always started with a big picture view with savings. Early on we realized that the biggest expenditures for almost all working Americans are housing, transportation and food. For those that go to college, this is also a massive expense. Optimize in these areas to get some BIG wins before trying to fine-tune everything at once.
2.) Learn to manage your own investments. The finance industry has great incentive to have you focus on returns while ignoring taxes and expenses. The only things you can actually control are taxes and expenses and managing your own investments gives you an opportunity to save massive amounts of money in these areas (with no loss or even improved returns on investments).
3.) Track your spending. We never did this until starting our early retirement planning about two years ago. Even with a high (50%) savings rate, we were amazed at the wasteful spending in our budget that we never even realized.
What percentage of your income are you saving?
For 2015 we should be at about 70-75%. Traditionally, it has been 50% give or take (see questions #7&10)
What book, blog, or podcast would you suggest to someone who is looking to simplify or improve their finances?
I would recommend “The Stock Series” at jlcollinsnh.com where he lays out his “Simple Path” for wealth. It is great for anyone from beginner to seasoned investors and emphasizes simplicity in building wealth.
What advice or thoughts you would like to share with others who are looking to simplify?
Financially, focus on the very big picture items. Buy a house that is affordable and pay close attention to location in relation to work, family and any other things that you do frequently. Find the most economic form of transportation that makes sense for you. By doing these two things you will be able to develop a high savings rate by controlling housing and transportation costs. Then immediately take that savings and automatically start pouring it into automated transactions to your investments, preferably in tax advantaged retirement accounts, which will start saving you on taxes. Now you will automatically be building wealth every month without ever thinking about it.
In life in general, I think the most important thing is to develop an attitude of gratitude. Many people, including at times ourselves, spend a lot of their lives focusing on what we don’t have and feel that we always need to have and do more. The more we learn to just slow down and appreciate the things we already have in life, the happier and more satisfied we become.
Thanks for sharing your story with my readers.
Please check out Eat The Financial Elephant to learn how you too can retire early without having a large salary.
You can also follow their journey on twitter @elephant_eater.
To read previous interviews in the series click below
If you are interested in sharing how you have simplified your financial life, send me an email and I will follow up with you. Enjoy the rest of your week. Til next time, take one step at a time to simplify.