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Old 08-04-2010, 12:00 PM   #21
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1. Marry a frugal spouse
2. If you have kids, make sure you have a mother or mother in law that can babysit your kids for free or cheap. Daycare is a no-go for FIREing by 40.
3. Buy a house that is 50-60% of the area's median housing price.
4. You and your spouse have to work.
5. Save 50%+ of your income
6. Don't pay interest on consumer debt (unless it is very low like <3%). Low interest education debt (that leads to a career that will compensate you well) and mortgages are ok.
7. Don't buy new cars frequently. Consider buying used and keeping 10 years.
8. Invest in a tax efficient manner. Defer taxes when you can (if it makes sense).
9. Keep monthly recurring expenses low. Make sure you are getting value for everything you are spending your money on.
10. Focus on building net worth by increasing income producing assets (investments, bonds, CD's, maybe even real estate based on your asset allocation or investment goals). Reducing your mortgage and student loan debt (assuming low rates) is secondary.
11. Start early. Have your savings/investments on auto pilot as much as possible so you won't miss the money and won't "forget" to invest/save each month. Treat savings and investments just like another bill - it is a bill - a down payment on your retirement.

This is basically how I have run my finances and I'm well on track to FIRE by 40. The only detour we took was DW and I each spent 3 years in law school (and have the debt to prove it!) and neither of us practice law nor really use it in our careers.

Edited to add: gubmint subsidized health insurance/health care by 2014 factors into the plan as well.
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Old 08-04-2010, 12:06 PM   #22
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Originally Posted by Calgary_Girl View Post
Here's a family profile from a couple of years ago that Money magazine did. Both were in the military and retired at 44 and 40 (although the money is pretty tight IMO....)

Retired at 40 - February 1, 2008
I read the article; thanks for sharing.

They are fine for now but I agree that things will be a bit tight when they increase their consumption and travel expenses, as they plan to do in ~10 years' time.

If their children go on to post-secondary eduction they will need to win scholarships or contribute to the associated costs via part-time and summer work (I am not sure that that there is anything wrong with that).

P.S. As you are a fellow Canuck, here is a related article for you: Freedom 55 is for Wimps.
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Old 08-04-2010, 12:08 PM   #23
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I read the article; thanks for sharing.

They are fine for now but I agree that things will be a bit tight when they increase their consumption and travel expenses, as they plan to do in ~10 years' time.
Not only that, but going back to what I said earlier today on another thread, if they are on a tight COLA'd income stream where they can't afford much more than the "essentials of life," chances are that their COLAs won't keep up with their personal inflation rate, as the "flat" CPI is primarily due to falling big-ticket discretionary items offsetting inflation in essentials like food, energy and health care.
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Old 08-05-2010, 09:45 AM   #24
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How to retire at 40?

1)Don't take on any DEBT, at all.....
2)Don't have kids
3)Save 35% of your take-home pay, or more.
4)Eat a lot of brown rice and fish you catch yourself.
5)Grow your own veggies
6)Work a side job, and save every penny from that

How hard was that?
I'm thinking trust-fund baby sounds easier, but then, Paris seems to be having a hard time...
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Old 08-05-2010, 11:44 AM   #25
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I think even shooting for 35 when you are 20 is mighty aggressive. Not saying it can't be done, but that's college years and "Jimmy's first job" years. Not usually a lot of money going into the bank unless you are in a highly sought after position with an abnormally high salary.

My DW has had a Roth since 18 and 35 is nowhere near a possibility, we're still shooting for around 45.
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Old 08-05-2010, 11:54 AM   #26
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I think even shooting for 35 when you are 20 is mighty aggressive.
I agree. That's why I suggested setting your target at 35 if you hope to retire by 40...
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Old 08-05-2010, 12:30 PM   #27
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Well, you can start even earlier than 20 really, in the right environment. If someone starts when they are 15, takes 40-50 credits worth of community college classes in high school, they can then transfer these to a college and graduate by 20. Admittedly this wouldn't work for a hard science/engineering path quite as well, perhaps 20-30 could be transferred, but still, that's an extra year or two early even for that.

My high school had that option, but I chose the route where I would have almost no classes my last year of high school, wasn't really thinking of FI at all at that point. I know one girl from my high school did this though, and finished college at 19 (psychology degree took all the community college credits), then finished law school by 22. Didn't need to be a prodigy, just really good planning and a lot of maturity, community college classes are really easy.
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Old 08-05-2010, 12:57 PM   #28
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I think even shooting for 35 when you are 20 is mighty aggressive. Not saying it can't be done, but that's college years and "Jimmy's first job" years. Not usually a lot of money going into the bank unless you are in a highly sought after position with an abnormally high salary.

My DW has had a Roth since 18 and 35 is nowhere near a possibility, we're still shooting for around 45.
i would say even with everything going for you, retiring by 40 without some outside and miricalous source would suck. i am grateful for my salary and consider myself to be very lucky, as the salary is generous and benefits are sweet. i could only retire before 40 if the market returns 10% annually for the next 13 years and the stars align perfectly. even then, what i am projecting i will need, might not be enough (inflation). plus the healthcare issue. i only control so much.

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Well, you can start even earlier than 20 really, in the right environment. If someone starts when they are 15, takes 40-50 credits worth of community college classes in high school, they can then transfer these to a college and graduate by 20. Admittedly this wouldn't work for a hard science/engineering path quite as well, perhaps 20-30 could be transferred, but still, that's an extra year or two early even for that.

My high school had that option, but I chose the route where I would have almost no classes my last year of high school, wasn't really thinking of FI at all at that point. I know one girl from my high school did this though, and finished college at 19 (psychology degree took all the community college credits), then finished law school by 22. Didn't need to be a prodigy, just really good planning and a lot of maturity, community college classes are really easy.
CC will better ensure you can be out in 4 years with an engineering degree. My college degree required 142 credit hours to graduate. most hover around 120.

what about military academies, don't they tack on your college years after so much active duty service?
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Old 08-05-2010, 01:24 PM   #29
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Well, you can start even earlier than 20 really, in the right environment. If someone starts when they are 15, takes 40-50 credits worth of community college classes in high school, they can then transfer these to a college and graduate by 20. Admittedly this wouldn't work for a hard science/engineering path quite as well, perhaps 20-30 could be transferred, but still, that's an extra year or two early even for that.

My high school had that option, but I chose the route where I would have almost no classes my last year of high school, wasn't really thinking of FI at all at that point. I know one girl from my high school did this though, and finished college at 19 (psychology degree took all the community college credits), then finished law school by 22. Didn't need to be a prodigy, just really good planning and a lot of maturity, community college classes are really easy.
I took this route. Well, AP classes and afternoon classes at my eventual University instead of CC. Came in with 60 credits, 95% of which counted towards my engineering major. Graduated in 3 years with 2 degrees at age 20. Finished law school at 23.

Don't really use the law degree for much, although it probably earns me a very small premium in salary and may help if/when I jump ship to a better engineering firm.

One big financial help was going to state schools that ranged from $3000 a year (beginning of undergrad circa 1998) to $12000 a year (final year of law school). Before grants and scholarships which I received to some extent every year. We definitely would not be where we are today if we had paid $20-40k a year for a combined 13 years of schooling between DW and I.
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Old 08-05-2010, 04:34 PM   #30
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I know one girl from my high school did this though, and finished college at 19 (psychology degree took all the community college credits), then finished law school by 22. Didn't need to be a prodigy, just really good planning and a lot of maturity, community college classes are really easy.
That certainly makes sense, if one believes that the purpose of post-secondary education is to obtain 'qualifications' (in the shortest time and with the least amount of thought possible) rather than a bona fide education. Sadly, many (most?) universities currently appear to cater to that notion.
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Old 08-05-2010, 04:49 PM   #31
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That certainly makes sense, if one believes that the purpose of post-secondary education is to obtain 'qualifications' (in the shortest time and with the least amount of thought possible) rather than a bona fide education. Sadly, many (most?) universities currently appear to cater to that notion.
Most folks have to earn a living, so it isn't necessarily a bad thing to have a four year degree function as a vocational education for professionals.
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Old 08-05-2010, 06:33 PM   #32
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One big financial help was going to state schools that ranged from $3000 a year (beginning of undergrad circa 1998) to $12000 a year (final year of law school). Before grants and scholarships which I received to some extent every year. We definitely would not be where we are today if we had paid $20-40k a year for a combined 13 years of schooling between DW and I.
This is a *big* deal and true for me as well. I went to cheap state schools which were easy on the budget (less than 5K/year for my BSEE). I also got my MSEE at the same school which was mostly paid for by my employer. Cheap degree + well-paying job + not having a lot of student loans to pay is a very good combination.

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2. If you have kids, make sure you have a mother or mother in law that can babysit your kids for free or cheap. Daycare is a no-go for FIREing by 40.
3. Buy a house that is 50-60% of the area's median housing price.
Your list on this thread is excellent. The above items are the only items that we didn't follow. We have an almost 3-year old kid now and my parents do help, but he's way too active for them to watch full-time so we day care it. It's an excellent and expensive one at about $800/month, but we figure its temporary and taking advantage of the tax break brings down the cost to less than $600/month.

Our house was not too far from the median, but it was a smaller house, not a big McMansion and despite the housing crash, it has still doubled from when we bought it 10 years ago so we got lucky. The key for me was putting 20% down, not using it as an ATM machine and not restarting the term during a refi.
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Old 08-05-2010, 07:13 PM   #33
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Interesting... our finances (DW and I) are in many ways stronger than those of the canadian couple in that article. Our net worth is steadily approaching 1.1 million, yet we can't retire yet. I would trade away many hundreds of thousands $ of our assets to have that fellas soon to kick in pension of 40k before he hits 40 years old. That to me would be PRICELESS.

The real challenge we face is trying to generate INCOME from our assets. Not easily done in our situation.
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Old 08-06-2010, 10:04 AM   #34
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This is a *big* deal and true for me as well. I went to cheap state schools which were easy on the budget (less than 5K/year for my BSEE). I also got my MSEE at the same school which was mostly paid for by my employer. Cheap degree + well-paying job + not having a lot of student loans to pay is a very good combination.
Such a no-brainer, yet some people (or their parents) will spend 7-8x that for various reasons. Not always good reasons. Part of our future spending plans also involves the two local State U's that have top notch programs in virtually every discipline. We hope to accumulate enough college savings for the kids to basically pay their full tuition at these State U's and figure out the room/board as we go along via loans, grants, etc.

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Your list on this thread is excellent. The above items are the only items that we didn't follow. We have an almost 3-year old kid now and my parents do help, but he's way too active for them to watch full-time so we day care it. It's an excellent and expensive one at about $800/month, but we figure its temporary and taking advantage of the tax break brings down the cost to less than $600/month.

Our house was not too far from the median, but it was a smaller house, not a big McMansion and despite the housing crash, it has still doubled from when we bought it 10 years ago so we got lucky. The key for me was putting 20% down, not using it as an ATM machine and not restarting the term during a refi.
Thanks for the compliment! I hope to write a book on my strategy one day, but I'm not sure how well a half page of text will sell...

About the day care/preschool - we look back and wonder if we made the right choice to forgo these and instead leave the kids with Grandma. There are pros and cons. We just signed up the youngest for some part time pre-school just so she can socialize more and be exposed to other kids. But not a budget buster at $100/month for 2 months.
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Old 08-06-2010, 11:04 AM   #35
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The real challenge we face is trying to generate INCOME from our assets. Not easily done in our situation.
If you want income it should (normally) be possible to convert your assets to bonds, dividend-paying common stock, etc. Are your assets unusually illiquid?
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Old 08-06-2010, 11:08 AM   #36
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If you want income it should (normally) be possible to convert your assets to bonds, dividend-paying common stock, etc. Are your assets unusually illiquid?
Sure, it's possible. This is just a terrible time to convert assets to yield or to annuitize, unless you believe inflation will remain near zero (or negative) for decades to come.
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Old 08-06-2010, 12:41 PM   #37
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Thanks for the compliment! I hope to write a book on my strategy one day, but I'm not sure how well a half page of text will sell...
With my endorsement on the jacket cover, I can't see how it won't be a best seller!

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We just signed up the youngest for some part time pre-school just so she can socialize more and be exposed to other kids. But not a budget buster at $100/month for 2 months.
Geez, I know CA is expensive, but how are you getting day care for 100/month? Even if its parttime, that seems very low. Do you have some dirt on the preschool owner?!

My coworker puts his kids in a somewhat shady unlicensed Vietnamese daycare where everything is done under the table. I'm sure its fine, but I wouldn't feel comfortable putting my kid there. He pays about $800/month for two kids and that's about the cheapest I've heard.

To bring this back on-topic, we hope putting him in daycare will enable him to retire by the time he is 40.
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Old 08-06-2010, 12:43 PM   #38
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To bring this back on-topic, we hope putting him in daycare will enable him to retire by the time he is 40.
It really means you'll be able to retire by the time he is 40. I feel your pain. Ours are finally ending daycare this month
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Old 08-06-2010, 01:55 PM   #39
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With my endorsement on the jacket cover, I can't see how it won't be a best seller!
Thanks for the endorsement. I'll send you your cut of the royalties as soon as I get them...


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Geez, I know CA is expensive, but how are you getting day care for 100/month? Even if its parttime, that seems very low. Do you have some dirt on the preschool owner?!

My coworker puts his kids in a somewhat shady unlicensed Vietnamese daycare where everything is done under the table. I'm sure its fine, but I wouldn't feel comfortable putting my kid there. He pays about $800/month for two kids and that's about the cheapest I've heard.

To bring this back on-topic, we hope putting him in daycare will enable him to retire by the time he is 40.
Pre school is only 2 days a week from 10 am -12:30 pm. Something like $5 an hour. And I forgot, it is actually $87.50 a month - they made a mistake when they quoted me the price. It's a city parks and rec pre school, hence government subsidized to some extent (by me as a taxpayer).

We pay my mother in law a bit more than $100 a month per kid for child care, which we will continue to pay on top of the "pre school" fee of $87.50. All above the table so that we can use the dependent care FSA and save a bunch on taxes, and MIL continues to pay no taxes due to her low income. America IS great! MIL isn't so good with the spoken English or doing educational things with the kids (actually there is very little of that), but they play educational computer games and play outside in the yard a lot - stuff kids should be doing. We work with them at home at what I call "Daddy Home school". The older one is brilliant. The younger one is stubborn as a mule and isn't so interested in learning, hence the need for pre school of some sort. So she can hopefully ER by 40 too!
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Old 08-06-2010, 01:56 PM   #40
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When out two kids went to school, our day care payments went from a mortgage payment to a car payment...........
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