Can I be financially independent by 35?

I think I can….well at least that’s the goal.

Let me preface by saying that when I say financially independent, I mean that I won’t need to work but I won’t be fully retired. I still plan to work once I hit my goal, but I won’t be dependent on that work. Instead, I’ll be able to live mainly off the money from my portfolio and take side work to make up the difference (I’ll talk about that a bit further down).

But yeah, so my goal is to semi-retire by 35. Now, that would be really easy if I was making $100,000 or more per year. I could easily do that with the way I save currently. But I’m making a fraction of that amount. I’m actually making less than the median for my age group, race, and ethnicity according to the BLS. Last year I made about $33,000, the year before was $28,000 (after tax). Everyone who starts FI has their own set of circumstances, so I’m not going to try and say my way is the best because I have lots of things that benefit me that others might not have (a partner to split bills with, working from home).┬áLet’s start with what I do have going for me.

A little background

  • No debt, no car: First off, I got to go to college for free. It was mainly paid for with academic scholarships and my parents were able to cover the rest of my 3 years. I never had to pay for a car, since my dad was unable to use his when I was in high school. In college, I biked and walked so I wouldn’t need to buy a car. Now, I share my girlfriend’s car since I work from home.
  • Worked during summers: During summers, I would work at a pizza restaurant and save all my money. Then I also had the benefit of getting money because I was a dependent and my dad was above the social security age. I earned that money for about 2 years or so. My grandma also left me some money in her will as well. So all of that added up to about the amount a low wage worker would make in a year. Coupled with the fact that I had no debt, I’m ahead of most people my age.
  • Lived at home after graduation: Once I finished school, I lived at home and still didn’t need a car. I got a job right away at a restaurant, but quit and right away got an internship at a marketing agency (which is what I went to school for). Eventually I moved to another state and the agency allowed me to work remotely and started paying me above minimum wage.
  • Have always lived in a 1 bedroom and split rent/bills: The first apartment I had was a 1 bedroom in a not-so-great area, and was split between me and my girlfriend. Since I worked from home, I still didn’t need a car and we barely ate so I spent almost no money. Eventually we moved to another apartment and still split the rent. I also use my girlfriend’s car (we split gas) but we really don’t go out much besides groceries.
  • Started putting savings into Schwab Index Funds about 2 years ago
  • No health insurance: That’s a choice I make, I pay the penalty
  • Good amount of free time: My work is 25 hours a week. I have extra time to do things online and try to make extra money.

The Plan

So my current plan is growing my money with my index funds and saving as much as possible. I used to live so frugally that I spent almost nothing, except on rent, food, water, utilities. Once I started traveling more, I realized that makes me happy and that spending money on it is a good thing. I could save much more if we didn’t travel, but we don’t go out to eat much, don’t drink, don’t go to the movies or spend on entertainment throughout the year.

We are also planning to buy a small piece of land eventually and get a tiny house plus two stand alone studios, or a small cabin (yes, very cliche millennial I know). With the tiny house, we expect the cost to be less than $80,000 which is much cheaper than a typical home. That will mean we don’t have the rent cost anymore. If we choose to pay in installments rather than a cash lump sum, it will probably be less than our rent right now. But I’ll still be factoring in monthly amounts to cover incidentals.

I still don’t plan to have a car. Maybe we’ll end up getting a shared car that we split.

What Now?

So right now, I’m just trying to save as much as possible and will be experimenting with a few ways to save more and make more money (I’ll put some conservative estimates as to what I hope to make from each):

  • Selling things on eBay & Craigslist: I have lots of junk at my parent’s house. I plan to bring some of it back with me when I go visit in April so I can list it on eBay. Mainly books. I also want to test out retail arbitrage (I know…I’m late to the game). ($1000/yr)
  • Continue my current job: I LOVE my job! I’m super into FI, but if I can keep my job up until the point I hit FI I would still choose to keep working. My bosses are awesome, my coworkers are nice and supportive, and the clients are enjoyable to work with. The work we do is interesting and I think it really helps out the businesses we work with. ($30,000 after tax)

Final Thoughts

Two to three years ago I had no idea what financial independence or early retirement were, I’d never even heard of the terms. I don’t know how I discovered them (most likely Reddit), but I’m so glad I got introduced to the concepts and learned about all the people that have successfully done it. It’s like the story about the 4 minute mile. For years nobody was able to crack it, but once someone did, then scores of other people suddenly were hitting 4 minute miles too. Knowing that something is possible makes it so other people know it’s achievable and they’re willing to work for it.

It’s the same with FI. I’m a big time planner and I love punching in the numbers and seeing how changing up my savings and spending can increase my chances of FI in my 30s. Just knowing it’s possible makes it that much more motivating! It’s the best way to take control of my future, and it makes me enjoy saving even more.

Why I write down every dollar I spend

Why I write down every dollar I spend

Since December 2015, I’ve been keeping a spreadsheet that contains every dollar I’ve spent up until now. It may seem tedious and a waste of time, I could just look at my credit card statements to see what I’m spending. But it’s much much different.

The spreadsheet breaks down my earnings for the whole year, my expenses, and I can see if I’m on track budget-wise each month.

I started doing this spreadsheet after a particularly bad month of spending money to eat out. When you have no overview of what you’ve spent and no budget in place, it’s easy to go overboard.

I now limit myself to $50 a month to eat out. Sometimes I’m under, sometimes I’m a few dollars over. The point is that each time I open my spreadsheet I can see where I’m at and it helps me stay on track. If I’m at 50% of my eating out budget and it’s only the 5th of the month, then I need to slow down and resist the next time I’m craving a burger. It will cause me to choose making ramen at home to going to Wendy’s.

I used to think budgets were pointless.

I’m quite thrifty and frugal, I don’t need a budget.

But having one has helped me know just how much I can save each month, how comfortable I am with spending on a trip, and if I’ll be ok if I was let go.

What I’ve learned from tracking my spending so far

My annual expenses are very low (and can go lower)

If income stopped coming in, I know what my annual/monthly expenses are. I can estimate exactly what I’ll need to make it through 3-6-12 months. Having my spreadsheet has helped me feel comfortable in the amount of savings I have. I know I can survive at least a few years with no income coming in (not that I ever plan to do that).

I live very frugally, but I can drop that spending even lower by renting a cheaper place, using the car less, cutting my food spending, getting a cheaper health insurance plan, etc.

I can resist going out

My girlfriend and I are homebodies. We don’t like going out, the last time we went to a movie we had gotten free tickets. The last dinner out we had was because we both had gift cards. We’re frugal and we like it that way. But that’s not to say we don’t enjoy ourselves. We go out to eat, get bubble tea, have coffee. We’re going on a trip in October to Europe because she found discounted flights.

My spreadsheet helps us resist going out too much. Back before the spreadsheet we’d end up spending well over $150 each on eating out. Now we are able to drop to around $50 each. If she brings up going out to eat, I can bring up the spreadsheet and recommend we go later on in the month. The budget helps give us some structure.

Makes me accountable for every dollar

I know just where every dollar I earn goes. People lament that credit cards are pulling us away from the feeling of spending that we used to have when we used cash. If you had $50 in your wallet and spent it all at the mall, you no longer can go to another store and buy more. With a credit card you’re not able to see your spending right away or really “feel” it. A credit card removes us from the buying process.

My spreadsheet brings me that feeling of accountability for my spending. Although I use a credit card (and pay it off each month) I’m able to see just where my money goes. I don’t buy things like gum or candy or a random coffee on the way home. Because I know that feeling of pulling out receipts and putting them in the spreadsheet. Little charges like gum, snacks, or extra things I don’t need add up and I can see it.

Buying with a purpose

Every time I spend, I’m forced to see my expenses go up and my savings go down. I have to hold myself responsible for every charge. Not facing the money you’re spending is how people end up wondering where all their money goes each month. You look at your credit card statement and wonder “What did I spend $679 on?”. I know when I shop that buying a certain item will bring my savings lower and lower. I constantly ask myself “Do I really need this?” and 99% of the time the answer is no. Sure, I like a new shirt every now and then, but I only go when necessary. We don’t go shopping just to go out, we go with a purpose.