Guest post: 16 more months to retirement!

George Cooper / June 05,2020

This is a brief summary of my financial life. My net worth is currently 580k and my goal is to hit 800k (26 times estimated future expenses) in the next 16 months.

My spouse and I currently save 8k/month which is approximately 60% of our net annual household income of 140k.

Critical Point #1…A plan was hatched. I found myself on a gorgeous island (Kay Kauker) off the coast of Belize with my beautiful wife on our honeymoon, nearly broke and out of money. We had quit our jobs three months before arriving in Belize and traveled through the Rocky Mountains in our VW bus, made our way down the Mexican coastline via local Mexican buses, and eventually landed in Belize after three terrific months of hiking and beach combing. However, we were nearly out of money and quite frustrated. I was frustrated because our plan to head south into South America before returning home was over because we ran out of cash to travel. After arriving in Belize, we had enough money to fly home to Seattle but that was about it. And we had a small nest egg that would last until we found work. Our net worth was about 3k and we had no income.

Back in Seattle, our apartment had been sublet to a friend and the job market was good. I had a BA in social sciences and my spouse had a master’s degree in social work. What we really wanted as a newlywed couple was enough money to travel indefinitely independent of financial worries.

On the Island of Kay Kauker, our plan was hatched – to return home, get jobs (including starting a small business of some kind), and to build a nest egg that would support our travels. After that goal was reached, presumably we would be free to live life more independently while giving back to our local communities along the way. We agreed to remain child-free and to stay focused on romance and adventure over the course of our lives which would greatly simplify our plan. We worship no deities or follow any dogmas.

So, we were pretty much broke yet happy.

Critical Point #2…The US financial crisis. Fast forward 15 years….Bam!! The US financial crisis in 2007 hit most people hard and it certainly did rock our world. In our quest for financial independence and early retirement we’d made some pretty good investments in rental properties (our new small business) and made a lot of stupid purchases. In fact, we were over $500k in debt when the US credit markets locked up and people began to panic. We had implemented our plan, sorta, but somewhere along the way my pursuit of a simple life and self-sufficiency had gotten out of control. I had yet to be introduced to ERE principles. When the crisis hit, we had two good jobs with a total household income of 95k and at the time we owed 250k on our 900 sq ft home in Seattle, we owed 90k on a rental in Eugene, Oregon, and we owed another 65k on a small beach front rental property on the coast in Florence, OR. We still have most of this debt since I consider real-estate to be a good financial investment. We set a goal back in Belize of becoming financially independent in 10 years which was turning into 20 years due to a number of stupid consumer debt decisions. Had I not spent cash so recklessly during those 10 years on a jacked-up lifestyle, we would have met our 10-year goal of financial independence on schedule.

Now the stupid debt: When the financial crisis hit, we had two new cars that we owed a total of $55,000 on and a home equity loan for 70k (an expensive sailboat, hardwood floors for our home, etc.) and 3 visa cards with a balance of about 7k each. The only stuff in our position that was paid off was our Eurovan camper, two kayaks, a motorcycle, and our lovely pets. All of a sudden, within a few short months of the debt crisis, our jobs were both highly at risk.

The Action Plan: Since our incomes could not support our excessive expenses, I needed to get my head together before our incomes dropped (due to a potential layoff) and we were ruined. This was our action plan:

  • Sell both cars, pay off those insane car loans, buy and drive two inexpensive yet presentable used vehicles (pay cash, 5k each). We needed two cars for our jobs. Done!
  • Sell the motorcycle (I do miss that bike!) and pay off one visa. Done!
  • Sell the Eurovan camper and use the proceeds to pay off two visas. Done!
  • Sell the $30,000 sailboat (this was an emotional one!) and buy an $8,000 sailboat that would make us just as happy and pay off half the home equity loan with proceeds from the boat sale. We love to explore the Puget Sound and aren’t willing to give this up. Done!
  • Now that we had cashflow from items 1-4 above, we could pay off the second half of the $70,000 home equity loan. This took about 2 years. Done!

The last step in our action plan was to fundamentally change how we deal with money and face the fact that we could not budget together successfully. This was the hardest hurdle of all. We needed to learn to set priorities together each month, plan our expenses, and enjoy hitting our goals. After figuring that out, our expenses started to drop dramatically and our savings rate increased significantly a few years ago.

Critical Point #3… Increasing my income.About 5 months ago, I realized that increasing my income was critical if early retirement was going to materialize. So, I gave up a comfortable job after 15 years of working for the state of Washington and landed a one year contract for a private medical company doing IT work in Seattle at a significantly increased rate. I left the state with a pension that I will begin collecting at age 65. We currently carry three mortgages that total 377k. In 16 months, we will get rid of our biggest expense, housing, of 23k a year.

The Exit Plan The plan is to radically simplify our lives in 16 months which is when I turn 50 years old. It’s true that retiring at 50yo may seem spectacularly late to many in the ERE community but I feel ecstatic about the opportunities it will bring considering I’ll get 45-60 hours each week of my life back. Our current plan to achieve financial independence looks like this:

  • Continue to save about 8k a month for the next 16 months and don’t blow cash.
  • Sell our rental in Eugene this summer and pay off the mortgage at our rental in Florence which will become our primary residence in 16 months. Our housing costs will be $150.00 a month after moving there.
  • Invest the remaining proceeds from the sale of our Eugene rental of approximately 100k.
  • Sell our home in Seattle the summer of 2015 and Invest the proceeds of approximately 220k.
  • Quit our jobs!!!
  • Move to Florence and live on the beach for the foreseeable future. Be debt free with a net worth of approximately 800k.

In the next 16 months, I need to learn more about investing wisely (I am focusing on index investing) and better understand our future budget that includes maintaining a small inexpensive camper and sailboat, and developing a better understanding of costs associated with spending winters in warm countries.

 16 more months to retirement!

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