You’ve probably seen Will Ferrell in the movie “Old School”. If so, you probably remember the streaking scene. If not, you’ve certainly heard of crazed fans streaking across a sporting field completely naked and completely alone as they dodge security. This may seem like a strange analogy for financial independence / retiring early, but just hear me out.
READY SET STREAK!
In a streaking situation you’ve got a person who just comes out of nowhere. They may not have a 100% plan, but they hit the field full steam ahead. This will hopefully be the first parallel you can find between your financial journey and the journey of the naked field rusher. This takes me back to the biggest problem most have that is commonly referred to as paralysis by analysis. I talk about this some in my Investing Made Easy post. In short, this is where you refuse to start a process because you don’t feel confident in your plan or have complete understanding of a situation but the time for streaking is now!
The beautiful thing with the fusion of technology and the ideology of Jack Bogle is that powerful and low-cost investing can be done on your cell phone in just a few minutes through Vanguard. Simply open an account, purchase some VTSAX if you have $10K to invest, VTSMX if you have $3K to invest, or heck VTI if you have $116. Once you have an account set up simply develop a focus on savings and put every extra penny in those accounts through automated deposits and extra lump sums (if you have already padded your emergency fund). Grab your phone, open an account on Vanguard, shove money at it, then rinse and repeat.
For us military members it’s actually even more simple because we all have access to TSP (keep in mind this money isn’t designed to be touched until age 59.5). A minute of free time on the MyPay site along with a decision on the percentage you want to save puts you well on your way. Take some time and read about the different funds you can invest in. I prefer the C fund because it tracks the S&P 500 much like the index funds I recommended from vanguard but with even lower fees. You’ll also have to make the decision on whether to go the Traditional or Roth route which will depend on your current and future earning scenarios. Once you get a little deeper into the subject you may also want to research Roth Conversion Ladders for extra flexibility.
GUYS….GUYS….WHERE IS EVERYONE?
So now back to this streaking scenario. You’re on the field and you quickly realize you’re friends aren’t streaking alongside you anytime soon. This is the harsh reality of partaking on the journey of financial independence. You will probably find that the only people who seem to truly understand you, are on blog sites like this one or random discussion boards. Setting out to maintain a savings rate above 50% will invite a lot of criticism. I’m above 70% and people think I am insane or it is impossible, but I assure you it is possible and I’m at least partially sane. Most people will take your view that materialistic things are unnecessary and dumb that down to simply being cheap. They will try to make you believe that you’re throwing away your best years because you’re too frugal to take part in any adventures. None of this has any foundation in reality but it is a simple defense people will use to argue why they won’t streak along side of you.
Over the past few holidays I found myself wanting to travel and do some hiking, backpacking, and trail riding. I almost ditched the plans when no one else wanted to go but I ended up just making the trek on my own and was so happy I did. It can be hard to stick with some journeys when you feel like you’re on your own or no one cares/understands your accomplishments along the way. It can also be tough to fight social norms when it comes to discussing how much money you have/owe or how much money you make. Posting my net worth at the bottom of this article was admittedly terrifying. You may find yourself alone but you will also be so thankful when you’re trading your office chair in for a hammock.
I DID NOT SEE THAT COMING!
You’re streaking and you find yourself alone so you’re just heading off in a steady straight line right? As Lee Corso would say “NOT SO FAST!” As the action continues there will certainly be some surprises. Will there be tasers, will the players assist you or trip you, will you escape security or be tackled immediately. In real life, these surprises will take a few good or bad connotations. Let’s say the stock market crashes, which is a bad surprise right? Not at all, it is actually more like a Black Friday sale. So when those negative turns come along just try to save and buy more, because it may never be that cheap again. For the military, we are often asked to relocate to higher cost-of-living areas. On the surface this can seem as a detriment to retirement plans but not if you fully utilize your Basic Allowance for Housing (BAH).
Some military members look at BAH as this tax-free portion of their check that is meant for housing only. So why not just spend it all on a big house in the most expensive part of town? In reality, the government could care less what you spend your BAH on and money is just money. We aren’t some agency spending different coded “colors” of money. In my case I’m going from Colorado Springs area to the Boston area which is an increase from $1400 BAH to $2800 BAH. My current rent is $575 and my new is $800. This could be viewed as a rent increase of $225, or more accurately as lowering my Rent-to-BAH ration from 41% to 28.5%. You may also get moved to a state that requires no state income tax which you should take immediate advantage of and keep this state residency indefinitely.
There will also certainly be roadblocks. You could find yourself in a situation that leaves you with a 15 year career and not a penny of pension. You may try for one more kid and end up with twins. People often use the excuse of “life happens” for a reason to avoid getting serious about finances but in reality it is just all the more reason to attack your savings goals even harder.
I freely admit nothing in this article is groundbreaking, and that’s the beauty of how simple retiring early is. You push money into these index funds, you don’t sell them, you find a safe withdrawal rate you feel comfortable with (2.5-4%), you document your spending, and when your safe withdrawal rate * your networth = your annual spending you are ready to retire. Along the way hopefully we can all spread the message and have some friends tag along and retire early with us. I hope that articles such as can help us wrap our heads around the things we’ll encounter along the way and keep us motivated.
Check Out My Blog and Learn About Me
I started a blog about 9 months ago as a hope to document my journey to early retirement from the beginning and document the successes and mistakes along the way. With weight loss I found it to be hard to listen to the body builders telling me what to do because I want to blame my failures on genetics and I see parallels with finance. There are many great blogs out there with authors that are months away from retirement or many years deep in it but I wanted a method to allow everyone to follow along from the start (watch the fat kid get abs essentially).
If you enjoyed this article or want to read some more articles that have a little bit of math and a lot of just general discussion, I have those linked below.
Thanks for reading!
Check out some of the other posts from my blog Saving-Sherpa
- How to Maximize a TDY – My first entry where I spent $4 over two weeks
- How to Create a Budget – Includes my free Excel based budgeting tool
- Investing Made Easy – As simple as the title sounds
- Buying Happiness – How to maximize your happiness to spending ratio
- Eliminating the Excuse – Proving you can even travel Australia on a budget
- Age 26
- First Lieutenant in the United States Air Force
- FI journey began March 2015 w/ $38k
- Have averaged ~70% savings rate
- Average expenses around $1,700
- Net Worth $122,000
- No inheritance or parental college assistance
- Simple index investing strategy