Recently, it dawned on me that Retire By 40 is a bit disorganized. It has been almost four years since I started writing, and that means there are a lot of blog posts. A new reader can drop in and read a few articles, but it’s not easy to get the whole perspective on this early retirement journey that I’m on. So I thought I’d put a recap together and add it to the Start Here page. That way a new reader can get up to speed before continuing on to other articles.
Life is great when you’re young, isn’t it? You don’t have much responsibility and you still have plenty of fun even when you’re poor. Our family immigrated to the US when I was young and we struggled financially for many years. The whole Financial Independence/Early Retirement concept is foreign to the working class and I didn’t even know about this until I was well into my career. It seems like an upper class concept, but that’s not true. There are many ways to reach Financial Independence and I think anyone can do it. Of course, it’s much easier if you make good income.
1996 – I graduated from college with a Masters degree in computer engineering and started working for a big technology company right away. At this point, retirement was the last thing on my mind, but my dad convinced me to invest in the company 401k. I increased my contribution every year and I was maxing out the 401k contribution after a few years. I also saved and invested a little bit on the side, but it wasn’t a huge amount.
I got a new car (compact Ford), went to concerts, took some international trips, and enjoyed myself. I wasn’t living large, but I wasn’t that frugal either. My income was pretty good and I lived within my means. Debt wasn’t a problem because my parents help paid for my education and I never ran up my credit card.
I went to college with Mrs. RB40, but she went off to join the Peace Corps for a couple of years. We got married in 1999 and moved into a house shortly after. She struggled for a few years to find the right job that suited her personality, so she kept her frugal lifestyle. I knew she didn’t like to spend money while in college and she had always had frugal tendencies since she was a kid. This was good because we could have spent much more money in our 20s.
2003 – I enjoyed being a computer engineer when I started working. There were challenging problems to solve, new technologies to learn, and sometime it was even fun. Sure, I worked long hours, but it wasn’t a hardship because most of my friends worked long hours, too. I got a few promotions early on and I was making pretty good money by 2003. By this time, the company was asking me to take on more leadership responsibilities. I tried, but I wasn’t very good at it. I didn’t know how to deal with people who didn’t perform and I got very stressed out. Anyway, we had the benefit of a 10 week sabbatical every 7 years, so I took the time off to get away and think about my career.
When I got back, I changed jobs and transferred to a different group within the same company. I told myself that I’d give engineering one more chance and picked a job in the area that I really enjoyed (hardware debugging if anyone is curious.) Things were good for a few years until I was asked to take on more leadership roles again. I declined and job satisfaction went downhill pretty quickly. There were a lot of reorganizations and my manager was let go in 2009. I wasn’t having any fun and I hated dragging myself to work every day. Some of my friends left the engineering field altogether and that’s when I realized there was an alternative to sticking it out in the same career for 30 years.
Financially, we were doing quite well during this period. Mrs. RB40 went back to college, got her Master degree, and found a more stable job that she liked. We paid down our mortgage a bit, invested in the stock market, and maxed out our 401k and Roth IRA.
I’m not exactly sure when I learned about the Financial Independence for the regular people concept, but it must have been around this time. I was reading a lot of personal finance sites because I wanted to learn more about investing. I stumbled onto Jacob’s Early Retirement Extreme at some point and I thought, wow, what a great idea. However, I still thought I need to change jobs or companies to keep the income rolling.
2010 – 2010 was quite a pivotal year for us. Mrs. RB40 told me that we were going to be parents. I was getting really stressed out at work again and even the engineering technical work wasn’t fun anymore. I was goofing off more and more at work by reading and commenting on many blogs. One day I was at my desk and I had an epiphany – “retire by 40!” That’s an awesome blog name. If all these regular people can blog, why can’t I? Imagine telling your pregnant wife (who can be a bit of a workaholic) that you want to quit your job. She didn’t take it well at all. But she saw that the job wasn’t the right fit for me anymore, and besides, she was tired of hearing me complain.
I was 36 so I had 4 years left before I turned 40. We had been cutting back and living a more frugal lifestyle over the previous few years so our expenses were pretty good. We never really lived it up anyway, so that wasn’t a big deal. Anyway, my exit strategy wasn’t full financial independence. We just needed to function financially without my paychecks.
I began to think more seriously about generating more income streams to offset my paychecks.
- I converted most of our growth stocks to dividend stocks in our taxable accounts.
- We were renting our old house out at this point and picked up a 4-plex and a small condo during the downturn.
- I tried peer to peer lending.
- Most importantly – I started making a little income from Retire By 40!
2011 – Mrs. RB40 gave birth to our son and I took a 3 month sabbatical to try out being a stay at home dad. The experience was great and I wanted more. I promised myself that if we could live without my income for 12 months, then I would quit my job. This test run is very important because it showed Mrs. RB40 that we could do it.
2012 – By 2012, I was a mess at work. I didn’t get much accomplished and the stress was seriously screwing up my physical and mental health. I took a medical leave to figure things out and quit work soon after. Mrs. RB40 was fully supportive of this change. The important thing I realized was that you don’t have to be financially independent to quit your career. You can make up for the short fall by working a bit and have some backup plans.
Life has been pretty good since I left my job in the summer of 2012. My health improved tremendously and our family is better off for it. Financially, we also did pretty well. We were able to keep our monthly cash flow positive for the most part and our net worth increased about 40%, thanks to the strong stock and housing markets.
One important thing I learn since I started blogging is everyone has to forge their own path to financial independence/early retirement. Some people are very successful at real estate investing and they will have a reliable source of income for the rest of their lives. Some people built a business and sold it off for a large enough amount to retire. Some people live a very frugal lifestyle and can achieve FI without a huge paycheck. There are many paths out there and you’ll have to find your own way.
Here are the keys to my early retirement.
- Start saving and investing early. I started saving and investing right away when I got my first full time job. On the surface, it looks like my early retirement journey only took a few years, but that’s only possible because I started investing in my early 20s.
- Live a moderate lifestyle. We always lived within our means and avoided consumer debt. We could have lived it up a lot more, but our financially unstable youth encouraged us save and invest instead. Avoiding lifestyle inflation will pay off in the long run.
- Mrs. RB40 on board. Mrs. RB40 was hesitant to get on board the early retirement train at first, but I convinced her eventually and she has been very supportive since. Having the right partner is essential to building your wealth.
- Have a clear goal. I suspect a lot of people can reach early retirement/semi-retirement pretty easily if they put their minds to it. Most people just don’t realize that it’s possible so they keep working and spending.
- Motivation. For me, it was the desire to get away from the engineering career that wasn’t the right fit anymore. If I liked my job, then I’m pretty sure I would still be working.
- Side incomes. In the beginning, the income from Retire By 40 wasn’t that much, but it made me realize that a little active income goes a long way in early retirement. Even if I stop blogging, I can work part time and make $500-$1,000/month and our finances would still be just fine.
- Flexibility. Here is the final hurdle that a lot of people with a high paycheck have trouble with. They are afraid that they won’t have enough money to fund their retirement. If you’re smart and disciplined enough to reach FI (or just get close), then you should be able to solve future financial problems. If the stock market crashes, perhaps you can stop withdrawing and work for a few years. Retirement doesn’t have to be permanent. If it doesn’t work out, you can always go back to work. I guess it takes a certain amount of blind optimism to quit your well paying career.
Well, that’s my early retirement journey so far. What do you think? The next big turning point for me will be when our kid goes off to school full time. I will have a lot more time on my hands then and I’ll need to figure out what to do with my spare time. Perhaps I can start a micro business…
Are you on a journey to financial independence/early retirement? How long will it take? What’s your motivation?