Road Less Traveled Challenge: Reverse Engineering A New Lifestyle

One of the things that constantly inspires me about the personal finance community is the enormous amount of diversity among our goals and road maps.  I think we can all agree that there are a number of guidelines (as opposed to commandments) that provide us with methods for escaping from traditional work requirements.  However, the individual strategies and destinations are all our own.  Our Next Life recently challenged bloggers to discuss how they’re traveling down a unique path to financial independence or early retirement.  This is the story of our divergence.

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The Traditional Path

My initial feelings after learning about FIRE were pure defeat. There were all of the these blogs about financially intelligent people who started saving early and had built up portfolios with hundreds of thousands of dollars in investments.  They had saved enough money (by investing earnings and keeping their expenses low) to create a fund from which they could draw 4% annually and never have to work again. Some, like Mr. Money Mustache, retired early and completely.  They were able to blog about shifting their focus from work to hobbies, travel, and their family.  And, here we were, with over $200,000 in debt.  It felt like there was no way that we could escape and have freedom from the demands of full-time work anytime in the near future.  How were we supposed to save up hundreds of thousands of dollars and pay off all of our debt?

 

Discovering Other Options

With continued exploration of the blogosphere, I discovered that there are many others who are still in the process of rebuilding their finances, just like us.  Reading Dave Ramsey’s Total Money Makeover gave me confidence that we can beat our debt.  In doing so, we would have options beyond the normal route of working full-time until old age.  The key is the application of early retirement principles: spend less and save more.

The reason that so many people get trapped in working forever is their unquestioning acceptance that money is for spending.  They believe in the term “disposable income.”  These individuals craft a life around working for money and then rewarding themselves by spending all of that money.  They probably feel proud if they’re able to save the recommended 10% for retirement.  They use neighbors and friends as a guide for what they should be buying, and covet all the things associated with standard definitions of success.  Real trouble comes to many who so wholeheartedly believe in their entitlement to consumerist rewards, that they end up using credit to finance their expenditures.  We know all too well how quickly the interest creeps up on you, and you become trapped.

Early retirement is all about building a better life for yourself, not defined by material possessions.  The ability to break free from the trap of consumerism and pressures to keep up with the Joneses is pathway to having more options in life.  Even with people like us, who are working hard to escape from the blood-sucking credit card companies.  We realized that being purposeful with our money and not wasting it on everyday indulgences, opens up new possibilities for the future.

 

The Middle Path

If there is one road for the traditional spending and saving patterns and another for early retirement, we’re traipsing through the forest, making our own path, somewhere between those two roads.

First of all, unlike many other personal finance bloggers, we do not rely on formulas and spreadsheets. We are not waiting for a magical number representing an amount that we can draw exactly 4% from and not have to worry about money ever again.  Our debt prevents us from just saving a high percentage of our income to amass significant investments.  Yet, we want to find a way to not spend the next few decades of our life working full-time employment.

Our solution?  We are reverse engineering our freedom.  We have set a (somewhat flexible) deadline for fixing our finances. The goal is to have all of our debt paid off by then, including student loans and mortgages for our house and the rental property.  Once the debt is gone, we will save as much money as possible.  This will allow us to only worry about earning enough money to cover low living expenses due to our adherence to a frugal lifestyle.  It doesn’t take very long to calculate how much you need to survive, with no mortgage, car loan, credit card interest, or student loan payments.  The total is really not all that much.  We have one rental property that will bring in some income.  Mr. Smith and I will do miscellaneous work here and there to bridge the gap.

And, I have a 401K that will grow until we need it in our old age.  Finally . . .  compound interest will be working for us instead of dragging us down!

The average individual allocates their earnings to make minimum-due payments and a small contribution towards retirement.  The rest is spent.  The person striving for early retirement puts as much as possible in savings, so they won’t have to bring in any income.

We’re forging our own path by creating a middle ground where we pay off debt while funding assets that will give us financial security.  I really like the phrase used by Slowly Sipping Coffee.  Their plan is “to begin a fully funded lifestyle change.”  Again, regardless of the specifics, everyone’s goal is more freedom.  When you are chained down by debt, whether it be credit cards or a mortgage, your job is essential.  If you were fired today, wouldn’t you first thought be, “how am I going to pay the bills?”

While the details may be different, many of us are on a mission rid ourselves of that uncertainty.  As opposed to those who have fully retired early, we will still have to do some part-time work, but it will be on our own terms.  There will be much more flexibility in our schedules, allowing us to experience life more fully in the near future, instead of decades from now.

Our debt is a hurdle, but it won’t stop us from escaping a mainstream, work-consumed life.  

 

What is your answer to this challenge?  How are you creating a unique path for yourself?




10 Comments

  1. I genuinely enjoyed this post, as I think many of us have resolved to reverse engineering our financial paths. It’s great having those who achieved financial independence as an example, but its more encouraging to have someone in the throes along with you sharing their journey!

  2. Dave Ramsey recommends totally paying off debt before investing. I disagree with that and apparently you do too. I think you’re approach is very wise. Why lose years on building the 401k? I also sense you feel peaceful with your choices, which is of utmost importance.

    Lately I’ve seen several articles about the savings rate being the most important part of wealth building and it makes sense. Being that you’re not into consumption, once you’re debt free you’ll be saving like crazy and you’ll have a fast-growing nest egg, even outside of your 401k. You’ll really start feeling free.
    Mrs Groovy recently posted…Don’t Be A Method Actor When It Comes To Your FinancesMy Profile

    1. As with everything else, we’re taking a middle road on the investing while paying off debt. My employer makes automatic contributions without requiring that we contribute anything. We are transferring fairly small amounts from my paycheck right now, less than what my employer contributes, but the balance is growing . . . and will continue to do so!

      I am so looking forward to feeling some groovy freedom 😉

  3. Thanks for taking the challenge, Harmony! I have known about your debt for a long time, but I don’t think I’ve ever said this: Kudos to you guys for not letting your debt steer you away from pursuing FI, even if you’re not aiming for full retirement. I love that you’ve found a way to achieve more freedom even with a big barrier in your path, even if it’s a form of freedom that’s unique to you guys. 🙂
    Our Next Life recently posted…What If the (Almost) Worst Happens?My Profile

    1. Aw thanks so much! It was a great challenge. I really enjoyed reading all of responses. We’ve recognized that there are options beyond the normal lifestyle design, and our debt is not going to prevent us from obtaining that freedom.

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