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March 28, 2014


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It does look like you are good on the home and spending only $300 on WalMart to cover your basics is just incredible. Is there any way you can get out of the SUV loan and dump the ATV? If so, the personal loan would be a snap and then you would be well on your way with your plan.

I'm trying to be frugal and it's very seldom that we go out to eat at the restaurant or fast food chains. But this Monday I'm going to treat my family to a good restaurant to have a simple celebration because my daughter made it to top 5 in her school.

I went to your blog, but it says you already retired at 40?

What dollar amount have you calculated that you will need to have saved up at age 40 in order to retire? Also, just out of curiosity, why do you have a goal of retiring at 40? An individual's biggest earning power tends to be in their 40's and 50's.

I like your example of skipping the $20 McDonalds meal in order to have $300 in retirement. Now just apply that same line of thinking to other purchases in your life. By your calculations, not spending $250 on an ATV payment could mean $3,750 in retirement. Just keep that in mind the next time you or your husband are tempted to make a discretionary purchase such as that on credit.

I find it weird that people will classify rental income as "passive." I mean, it may be for certain IRS purposes, but it's not like royalties. Maintaining a rental property costs time and money. Assuming your husband is planning on returning to work in the relatively near future, and especially if you plan to have any more kids, I'm not sure you want to be operating a rental property in the short term.

I agree with JimL. If you can get out from under those vehicle payments, your savings rate can increase 6 fold! I've seen it time and time again where too much car and or home really sinks a family's ability to get out of debt and accumulate wealth.

You do seem to have a good handle on your spending so you are clearly on the right path to retirement. Dump the vehicles and your chances of retiring by 40 will increase dramatically.

I admire your willingness to be open about some of your financial mistakes. The next step is to correct them!

Your car payments are ridiculous for your income. Used car values are very high right now. I'd suggest selling the SUV and the ATV /immediately/!

Retiring by 40 is a very aggressive goal. If you're going to be in that position in 17 years, especially on a single income, you'll need to start making hard choices now. One of those hard choices will be to live with affordable used cars.

You surely know that the car payment (and ATV payment) are only one way that these items bite you. An SUV uses more gas and will likely have much higher long term maintenance than, say, a Honda Civic. The ATV has additional costs associated as well.

If you can get those costs under control, you'll have substantially more room to play with. Start running scenarios -- if you want to retire at 40, you need to boost your saving rate significantly!

I don't understand why a 23 year old would already be wanting to retire by 40.

Maybe I am very unusual, but believe it or not, I used to look forward to going to work. Admittedly I did have a very interesting and challenging job with a major aerospace company in Silicon Valley and was a member of a team that worked on the design of the underwater nuclear missiles for the US Navy's submarine fleet.

Once the youngest of our 3 children was old enough to be left my wife also went back to work as a pre-school teacher and also contributed to our savings.

Don't get me wrong - retirement is great! I retired 22 years ago when I was 58. However in order to have a wonderful retirement you need to be debt free, have a substantial amount of capital and a good sized income stream from stable investnents.

We had a great life when we were working. We bought a nice cabin in the woods above Lake Tahoe so that the whole family could go skiing in the winter, and enjoy hiking, boating, and other activities in the summer. Once our children considered themselves too old to hang out with Mummy & Daddy we sold the cabin for 6 times what we paid for it, and bought a condo overlooking the beach near Santa Cruz that became our weekend getaway.

If you plan your life right, working can be every bit as enjoyable as being retired, with the great advantage that you are still young, healthy, and full of energy. We travelled all over the world, 2 or 3 trips/year right up until the end of 2010 when we were 76 and 77, and decided to stop after my wife had two hip replacements and a major surgery.

Hi Old Limey! I agree with you, I love going to work! In all reality, I will probably never stop working because I love what I do, like you. My goal of retiring by 40 is more of a financial independence goal point. I want to have options, to be able to walk away from a job I don't like, I want my husband - whose body is failing him to be able to quit working a pursue other things as well. I have to admit, your retirement (later than 40) sounds quite wonderful!

Hi #7 - you are absolutely right, that car payment takes up 18% of my monthly take-home income and is the single largest thorn in my financial side right now. Freaking hate it! The hope is that once we pay off the personal loan, we will throw everything we have into paying off the SUV and sell it once we are out from underwater....unfortunately the ATV stays....that is the husbands thing, he loves it, and quite frankly, he will spend more than $250 on hobbies each month if he doesn't have it....marriage is about compromise, right?

Hi Steve,
Can't wait to dump the car payments! They are the worst thing we have going right now!

Hi Sarah,

You are so right! Rental income is definitely NOT passive, but I consider it more passive than, say, blog income. Renting is hard work, but I am hoping to hire a property manager to at least help with a little of the day-to-day management.

Hi Limey Junior,
Check out my site here
I made an unfortunate choice when picking my blog

Hi JimL,

I would love to say that we eat really frugally, but I don't feel like we are deprived at all! I coupon a bit for household supplies, and for the rest our secret is ALDI. I save nearly 60% over Walmart even, without even trying. I can't wait to dump the car payment - as soon as we pay off the personal loan - but unfortunately the ATV stays. marriage=compromise....amiright?

So, where is the line item for food if not all purchased at Wal Mart?

Could your husband pick up a bit of part time work to pay off the ATV?

For those of you who say you don't know why anyone would want to retire at 40...I think you're missing the point. Not everyone has jobs they love. I know hotels, in particular, are not known to be particularly great places to work. I have seen it with my current BF and a past one, both of whom worked at hotels or had to deal with them regularly. It's easy to say "find a job you like better", but not always easy to pull off. Not everyone is a smart engineer with cutting edge, in demand skills. Some of us are just not that smart.

And maybe they won't want to retire at 40. But the point is, having the OPTION to WALK AWAY from a job at 40 automatically makes life more enjoyable, even if you keep working.

Otherwise, I agree with the others...getting rid of one or both of those cars in favor of smaller used cars would probably help them a lot.

You're doing just fine for your age (though as you seem to recognize those vehicle payments are too high), but how is that you think you'll be able to retire in ~15 years? I'd like to see your calculations on this. :-)

Here is the very basic calculation she made:

I wish I could run a study of people who retire at forty with, say, less than $10 million of assets. I think, barring founder wealth or similar, it would be so difficult to comfortably provide for the risks and changes of forty-five years that not many of the group would make it. Personally, I'm very concerned about getting first my mother and then, eventually, myself through the twenty years or so we're likely to live after a more standard retirement age, simply from a risk perspective. Admittedly, if you retire at forty you are more likely to be able to return to the workforce if something goes wrong than if you retire at sixty-five, but every year you're out you're diminishing your hireability.

Why do you need $300 in phones/internet right now at home? Could you cut that out for a year to pay off your personal loans and cars? What about cheaper haircuts? There's a lot more wiggle room in that budget... especially if the walmart line does not cover food.

Also...does that calculation assume a 7% return OVER inflation? Because at even a 2% inflation rate, your $619,299.00 will actually need to be $802,036.11 to maintain the same purchasing power 13 years later.

Sara, I think your concerns are valid but blown way out of proportion. Even if you ratchet down your withdrawal rate to 3%. 3% of 1M is 30K per year. Not a fortune, but a lot of people are bringing in less than that. If you're young you can still pick up a crappy part time job to supplement that 30K income. GL's conclusion that her family could live on 25K per year if their house and debts are paid off is reasonable. It turns out another blogger, Mr. Money Mustache, has been retired almost 9 years and he and his wife and kid live on just slightly above that amount in Colorado. Bottom line is if you live in a reasonable cost area, you can probably live on 25K or less.

And even if $1M is cutting it too close, $2M would generate 60K per year at a very conservative 3% withdrawal rate. Certainly that is more than enough to live on for most people and it's much less than $10M.

Correction: I meant to say many people can live on 25K per year if their homes and other debts are paid off.

This seemed like an ad for her blog. Was surprised to see a sponsored post on this blog.

Anon -

It was not an ad nor was it a sponsored post. But thanks for being a coward and leaving an anonymous accusation.


Sorry for the late comment. I think your
goal financial freedom is shared by many
Of the FMF readers And I applaud you.

I too am looking to find financial freedom.

You seem to be heading in the right
direction. When I was your age I had
a negative net worth. So .....

I agree the cars are a huge problem. The
payments are outrageous for your income
and let's face it they are a depreciating
Asset. Not a good place to have money

It all starts with spending less than you earn.
Live below your means and invest the gap
wisely. Compound interest will be a tremendous
friend to you over time as well.

At age 23- you are in a position to have
compounded interest deposit more into your
Accounts than you will.

Many readers comment on the car loan.

I made a mistake of buying a new car in my 20's. The monthly payments really bothered me afterwards. So I paid off the loan ASAP. Turning the mistake into benefits, I then kept the car for 15 years of trouble free transportation, getting my money's worth.

As for amount of car loan, I think it shouldn't be more than 50% of income. So one must save up for the down payment before buying.

I am on my second new car, it is now on its 13th year.

A common thread that seems to run through so many young people such as GL and her husband is that their parents never taught them the great importance of SAVING and FRUGALITY.

My wife and I learned these lessons from our extended families and also from the experiences of living in England as children during WWII when almost everything was rationed even for a few years after the war ended.

Also when a young couple makes the decision to emigrate, go to a country thousands of miles away and not even have the money to get back home if things didn't work out, believe me, they become frugal and save hard.

We landed in Montreal in 1956, aged 22 and 23 with $400, raised 3 children, both worked hard our whole life, retired at 58 and 59, saved every penny we could, especially in the early years, travelled all over the world, have a lovely home in the best part of town and a net worth now of over $10M.

It would be good for young people like GL to realize that "From little acorns, mighty oak trees grow".

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