Concrete Goals

The ultimate goal that unites the authors of this blog is early retirement. In order achieve this goal, it is first necessary to define smaller, concrete goals that encompass everything you want from your early escape. You can’t just say “I want to retire early” and expect it to happen if you don’t have certain thresholds to chart progress.

I have difficulty defining such goals, as I am especially prone to changing my mind and trying to keep my options open (I’m an INTP :)). I have thought long and hard about what I want/need in retirement and these are the loose goals I have come up with:

– A tiny house and a place to park it permanently. I want this to be located in an area where I can ride my bike or walk everywhere I need to go. (I am in love with these salvaged material Tiny Texas Houses: I like the idea of not having monthly rent and having very low utility bills. However, it seems difficult to find a place to install your tiny house. The land I’ve looked at in surrounding areas is often more than the cost of the tiny house itself. Does anyone have suggestions for parking a tiny house? My only idea so far is to work out a deal with a family member that has a house with surrounding land. I am hesitant to rent land because that would defeat the point of buying the house (to eliminate a rent payment).

* I need to research this more and determine the amount of money I will need for the house, land, and installation – then I will have a more clear picture of how much I will save in addition to my retirement budget for my tiny house.

– Around $200,000 in investments. Hoping to pull in around $6,000/year from dividend generating portion. The amount I need may be lower if I do indeed purchase a tiny house.

* I need to estimate the cost of health insurance, food, utilities, clothing, tiny house maintenance, etc, so that I can decide on a more defined goal amount.

These are the things I previously thought I wanted:

– A smart car. I still love smart cars, but I cannot justify spending $11-14k on a new one or even $10k on a used one when that is such a large portion of my retirement goal amount. Also, the costs associated with owning a car are a turn off. I recently purchased a vintage Schwinn Collegiate and I would love for it to be my main source of transportation.

– A normal sized house (ha). I value minimalism and owning anything over 1,000 square feet would probably lead to acquiring more possessions needlessly. Also, I don’t want to have a mortgage or spend my entire retirement budget on a house.

While I continue to research the costs associated with my goals, I will keep saving money every month and split it between cash and stocks/funds.

Readers, does anyone else have trouble making concrete early retirement goals? It seems like it would be easier to just save up for retirement through investments, but my desire for a tiny house won’t go away 🙂

The first step in my early retirement journey.

<This is a popular post on the blog… just note that it’s by a contributor, not the main author of SkillsFIRE>

I decided I wanted to retire early back in January 2011. Most retirement books and blogs focus on when to take social security or how to save up a million dollars over many years. Personal finance books told me to save 10% (or even 15% if you’re feeling wild). I wasn’t seeing any results from the traditional advice.

The first step:
I was a typical young professional when I started: cell phone with data plan ($100/month), brand new car with huge car loan ($400/month), high rent, a long commute…you get the picture. I calculated how much discretionary income I had every month after paying my bills and it was a measly sum. I was making good money, but I still couldn’t manage to save more than a couple 100 dollars every month. I was frustrated – I knew that I couldn’t achieve my goals at the rate I was going.

I decided to lower or eliminate my expenses everywhere I could. It was a very tough process. I was always tired after work and had no interest in looking for a cheaper apartment or selling my car, but it was a vital first step to getting on the right track for early retirement.

Since I was lacking in motivation, I started with the small expenses:

– Cell phone: I was stuck in a two year contract with a big name cell phone provider. I logged on to their website and read my phone agreement. It turned out that the early termination fee was pro-rated, so it was much cheaper than I expected to get out of the contract. I then calculated how much I would be saving every year by purchasing a prepaid phone. I saved hundreds of dollars over the term of the contract by paying the ETF and buying a prepaid phone. My main priority when reviewing expenses was to eliminate as many recurring expenses as possible. By canceling my cell phone plan and switching to tracfone, I no longer had a monthly payment. I now have a separate savings account at my bank where I keep windfalls (credit card rewards, refunds, etc) to purchase more minutes when I run out. This feels much better to me than paying $100/month.

This is the phone I have:
It is widely available (I picked mine up at Target), only $17, and is technically a smart phone. I can access the internet at 5 cents/minute if I really need to check my email. It also has a camera and mp3 player. I don’t feel deprived at all without my apps or whatever else makes smart phones so exciting.

– Food/Drink. This was a huge area of savings for me. I started bringing lunch to work with me. When coworkers asked if I wanted to go out, I told them I was trying to save money. I would play a “game” with myself and try to eat every single thing I had in the pantry and fridge before going shopping again. This is a good way to get rid of stuff that’s still good, but you haven’t used in the months since you bought it.

Once I had lowered the small expenses as much as I could, I began to see savings and feel the reward of my efforts. This was a good time for me to think about the big expenses and re-think necessities.

– Commute. I moved from the city I went to college in (which was 1 and 1/2 hrs away in traffic) to a city much closer to my work. This cut my commute down to ten minutes, which meant less spending on gas, insurance, and maintenance.

– Car. I sold my new car and bought an old Toyota Corolla with a large down payment. Sure, I didn’t look nearly as cool driving around in it, but this meant that hundreds of dollars were freed up every month to save.

– Student Loans. I graduated with relatively little student loan debt, but it was always a looming black cloud in my financial world. I began aggressively paying off the balance.

I eventually made a pretty extreme move in order to save money. I was living in an expensive part of California (Silicon Valley) and the cost of living seemed atrocious. I was making plenty of money, but I couldn’t keep nearly as much as I wanted to every month. My solution? I moved to Austin, TX. The cost of living was a whopping 41% cheaper here. Granted, I make less money now, but I am actually able to save much more than when I was making over $10k more every year. I am able to live in half of a 2bd apartment for $400/month, take public transit to work (this has eliminated need for a car and all the expenses associated with owning one), and buy cheaper groceries. Also, there is a lot of free entertainment (it’s the live music capital of the world) and they have great community resources, like an epic library and numerous well kept parks and trails.

I’m not suggesting everyone should move across the country to save money. Just take a hard look at expenses. Can you live without a car? Can you move closer to work and bike? Can you rent a room in a house instead of having your own apartment?

Again, this is a difficult process. I basically turned my life upside down when I decided I wanted out of the rat race, but I feel much better about life now. I don’t worry about being able to meet commitments if I were to lose my job and I am able to sock away more than I spend every month. It was worth it.