Want to retire early? Make penny-pinching a way of life
One thing I’ve noticed about people who want to hang up their careers very early in life — millennials call the trend FIRE (Financial Independence, Retire Early) — is that the successful ones are super frugal.
My friend Elizabeth Morse lives in rural New Mexico. Now 48, she retired at 42. She previously earned close to $40,000 per year, mostly working at a private school. Her income spiked to approximately
$80,000 for just four years prior to retirement when she worked in the school’s development office.
She was pleasantly surprised to be earning that much in those years but soon realized — at around age 38 — that she could retire very early. She didn’t do any fancy math or tax-savings tricks to plan her FIRE.
Instead, she saw that she and her husband, Alan, could live on around $42,000 per year. Between his pension and their joint savings, they’d have that covered.
I asked Elizabeth about her keys to early retirement.
She and her husband, a retired math teacher, previously lived in faculty housing at the private school, taking financial advantage of that and free cafeteria food. Living that way, they saved 25 percent of their pay every year.
“If I’d had kids or divorced, I wouldn’t be able to do it,” she acknowledged.
Her hobbies come straight out of the 19th century. She frequently walks in the national forest that abuts their property. She reads constantly. She knits constantly. She makes her own yarn for knitting with a spinner. In fact, I learned from Elizabeth the origin of the word “spinster.” (Look it up!) “If your hobbies are free,” she said, “the money just accumulates.”
They are too far from the nearest town to buy drinks from a coffee house or dine out much. She bakes her own bread and almost always cooks at home. She recently bought a half-cow and a whole lamb from a nearby ranch, from which they’ll derive two years’ worth of meat. By her estimation, they will pay $1.12 per pound of grass-fed meat. That price easily justifies the cost of their chest freezer.
Her husband’s tastes and hobbies are similarly modest. Although he loves stamp collecting, he recently scratched that itch by organizing and disposing of someone else’s extensive stamp collection — which, as Elizabeth explained, provided all the fun with none of the expense. Philately, I gather, may be pursued either expensively or frugally.
Elizabeth wasn’t always this way.
“I grew up as an American in the 1980s, where going to the mall and shopping was recreation,” she said. But as she grew into her 30s and 40s, she figured out what she really liked doing with her time.
Although she jokes that her nonparticipation in consumerism is “countercultural,” she also sees it as a key to her early retirement.
“Everybody who wants financial independence has to be somewhat countercultural,” she said. “We live in a culture that pushes instant gratification.”
As old school as this life seems, they aren’t shut off from the world. She’s on Facebook. She and her husband listen to radio and podcasts. Their internet plan doesn’t have enough bandwidth to stream video, so they still get old-school Netflix CDs through the mail.
As I write this, I see from Facebook that Elizabeth and her husband are in Paris on a houseboat on the Seine River. Their day-to-day frugality and early retirement have led to some pretty big perks.