How we’re setting ourselves up to retire at almost any age

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KJ: We’ve continued with our aggressive savings path for seven years now and while we’ve still got a ways to go until we’re “financially independent” (think, the ability to live off of our savings without requiring a paycheck), there are a number of very important steps we live by today to help set ourselves up for future success. Not that we’re scaling back from work anytime soon, but following the seven steps below will ensure we one day get to that goal. Sometimes making money is just one step – you have to know the tools and steps on how you can then maximize the money you have made!

1) We LOVE brokerage accounts
Okay, so love is a bit of a strong word, but you get the point, right? Brokerage accounts are a financially independent person’s best friend – maybe even the budget’s soul-mate. The best thing going for a brokerage investment account (lots out there from Fidelity to Schwab to Vanguard to TD Ameritrade to Scottrade) is that you’re not limited to (1) how much you can contribute (the sky is truly the limit!) or (2) when you can access the funds.

It’s number two above that is the key to financial success and freedom. A 401(k), HSA, 529 plan, 403(b), IRA, etc. have their own tax advantages, but they come with a lot of baggage (read they come with their own rules and restrictions on when you can access the money or what types of expenses qualify in order to avoid taxes and/or penalties). The same is not true for a brokerage account. Need funds for a home renovation, family vacation, living expenses for an early retirement? A brokerage can be your go-to, but the same isn’t true for the tax-advantaged accounts above! Not that those accounts aren’t important just that they can limit your flexibility for certain goals.

2) Roth IRAs are your friend
Not to contradict what I mentioned in the paragraph above, but Roth IRAs are a great tool for those early retirees. Given that money you put into the Roth can be withdrawn at any time and avoid taxes or penalties, it can be a potential source of funding retirement if the need to access these funds comes before age 59 1/2.

3) Outline your goals
People are always shocked that we never argue about money. We never argue since we have a clear, common goal in mind that we’re working toward – financial independence as soon as we can. Knowing where you stand – via our quarterly personal finances presentation I pull together (Excel geek, check; PowerPoint geek, check; Personal finance junkie, check!) – goes a long way in making sure your purchases, no matter how big or small, are aligned with one another. It’s a recipe for disaster if you and your partner’s goals conflict with one another.

Be realistic about them too. If you’re only saving 5%-10% of your income, don’t make a goal that you want to retire in 10 years unless you really plan on trimming your expenses to almost nothing at that point – probably not all that realistic if you’re not even trimming to that level today!

4) Keep your expenses low
As we’ve written about in the past, having low expenses not only means you need to have less saved to be financially independent, but it also means you have more of an ability today TO save for your future. Our goal isn’t to just cut out all expenses we possibly can and avoid spending any money since there’s a delicate balance between today’s here and now and the uncertain future. You don’t know what you will be like in the future nor do you have certainty that you will make it there, so find that balance between enjoying your life today and not spending into oblivion in case tomorrow never comes.

We do things like shop around for EVERYTHING. This is time (and money) well spent for most every purchase we make. Knowing what things cost and when to pull the trigger to buy in mass quantities when it’s on sale is key. Here are some of our other tips and tricks for everyday expenses:

For clothing, we use Rue La La, Haute Look,, TJ,, Crate & Barrell Outlet, Joss and Main, and don’t forget For gift cards, we use Any purchase at a major retailer or restaurant, we check out Cardpool to see if they have any gift cards on sale. It’s a GREAT way to stretch that budget just a little bit further.

For energy, we use

For food and groceries, we use Ibotta (use referral code gskxnwt), weekly grocery sale ads (some via e-mail and some directly in the mail), load coupons to our account before heading to the store, and optimize our Costco purchases.

5) Pay off the mortgage
In a recent post, we talked about our choice to refinance to a 15 year mortgage. So, in just under 15 years from now, we’ll be able to claim that we’re truly debt-free! Even though the rate is so low, we may choose to put some extra toward principal each month to try and bring this timeline even closer. This is by far our largest expense each month, and getting rid of this expense will go a long ways in helping us reach financial independence sooner rather than later.

6) Align your credit cards with how you spend money
I feel like we’ve got a really good system with our credit cards. We periodically open new credit cards to take advantage of bonus airline miles or sign-up cash bonuses. One time, we got $400 on a Chase credit card that we opened as the signing bonus. Several times we have gotten 50k miles just for opening a credit card and spending the required amount in the time period specified. Free money? Yes please! Just don’t get caught carrying any balance on the cards (or spending on things you wouldn’t otherwise purchase) as that’s a lose-lose proposition there. Our main go-to credit card now is a 2% on all purchases cash-back card from Fidelity. The redemption process is even automatic too – it deposits money monthly into an account of our choice without even having to think about it!

7) Extend the ownership life of your cars
We’re going on year seven of Angela’s car and year three of my car. Both still have a long life ahead of them, and not making unnecessary purchases in this area of our budget not only keeps our insurance costs lower (costs more to insure that fancy new car!), but by paying cash, we don’t have any monthly payments required. Cars are hardly a good asset since they decline in value so much over the course of their life with much of the decline occurring in the first few years of ownership. If you’re replacing cars too often, then you could be wasting thousands – if not tens of thousands – of dollars that could otherwise be used to help you accomplish your goals of reaching financial independence.

    What are your secrets for reaching financial independence?
    Share with us any tips, tricks, and rules you live by!

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4 thoughts on “How we’re setting ourselves up to retire at almost any age

  1. I totally agree with you that keeping your expenses low is really important especially when you want to retire early. We should know the difference between needs and wants.

    • Thanks Clarisse! Very important distinction to understand the difference between a want and a need. Budgeting and goal setting success relies strongly on that premise!

  2. Thanks Kirby, a good read to help stick with the goal of increasing our savings. I need Kyle to read this so that he can get over his “car fever”.

    • Sounds like a great plan! Please do send on to him, and we’ll be happy to have a stern talking to him over some cheesy bread… 🙂

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