Retiring Early – Or How To Go To Taco Bell and Save Half A Million Dollars
February 1, 2010
We have been asked frequently how we were able to retire as early as we did, at age 55. Especially now that so many people have lost a considerable portion of their retirement savings in the current economic downturn, one asks the question of how in the world we can retire at all, let alone retire early. The only way most of us can do this is to increase our bottom line so that we will have enough to live on when retirement time comes. The thing to keep in mind is that there are two ways to increase your bottom line. One is to make more money, something that the present economic situation is making more and more difficult. The other, the one we so often forget, and the one that we still have some control over, is to spend less.
I never had a super high paying job. Pikun, my wife, mostly had part time teaching jobs so she could take care of our two boys. So we were basically a one income family. And unfortunately, no one died and left us with a chunk of change. But we were able to save enough to retire early by being very careful with our spending. And “time” was the secret ingredient.
For example, if you save $10 when your wife cuts your hair, that’s nice. If you do it every month for 30 years, that’s a lot of money. If you take your lunch to work you might save $5. If you take your lunch to work every day, 200 days a year, for 30 years, then you are getting closer to retiring early.
Below is a list of 10 things we did that saved us more than half a million dollars. I have given very conservative costs and savings amount as you will see. Still, the total savings number at the bottom surprised even me.
If you keep your eye on your goal and don’t spend what you save, you’ll be able to leave that 9 to 5 world sooner than you think. And if you modify your lifestyle just slightly you’ll be able to do it without ever feeling that you are forgoing all the good stuff in life.
1. College costs
My children went to good state colleges close to home. The difference between a state college and a private college was about $15,000 per year at the time. Depending on which private college you look at, the difference could be much more today. Both boys graduated with no college loan debts.
For 2 children at $15,000 apiece for 4 years
2. Living at home during college
Because the children went to local colleges they were able to live at home. We agreed that if they wanted to move out and live in off-campus housing that they would have to find jobs and pay for their own expenses, which they both willingly did by the time they were juniors. It had the added benefit of helping them to learn independence earlier than they would have.
For 2 children at $10,000 apiece for 4 years
3. Car costs
In our life together we have never bought a car that was less than 4 years old. We chose carefully when buying a used car so we had minimal extra car repairs over all the years. We always had two cars. We used to say “Our new car is 13 years old – so is our old car.”
Over our 30 years we bought 3 cars each for a total of 6 cars. The difference (between a new and a used car) was about $15,000 each.
4. Auto insurance
Because we owned older cars all we needed was minimal liability insurance instead of full coverage. You want to steal my car? Go right ahead. No one ever did. They were too busy stealing our neighbor’s new car. The difference in insurance costs were at least $100 per month for each car. We had 12 payments a year for each car for 30 years.
5. Pay the house off early
It is amazing how much you can save by paying a little extra each month on a 30 year mortgage. My mortgage was $750 per month. We paid the mortgage off 15 years early and saved $135,000 in payments. To see how much we saved we need to subtract the $80,000 extra in payments that we made.
Over the years we went on many nice vacations, Mexico, Costa Rica, Hawaii, Italy. But most years we would take car camping trips around the country. It is difficult to be closer as a family than for all of us to sleep together in a small tent. And we also saved lots of money. The difference between going on a big vacation and car camping or just staying at home was about $1,750 each. And we did this for about 20 years.
A simple way to save a bunch of money over the long run is if you have really tasty leftovers that you can take to work for lunch. We occasionally ate out with our coworkers but we usually made use of that most important piece of office equipment, the microwave. The average savings at lunch time was about $5, and my food was much better than what I could have gotten outside. There are about 200 work days a year and I took my lunch to work for 30 years
My wife worked really hard at learning to cut our hair and she became quite skilled. I learned how to trim her hair. A haircut costs $10, though you can pay lots more if you want. Pikun and I cut our own hair for 30 years (for a savings of $8,640) and cut the boys hair for 20 of those years (for a savings of $5,760).
When my first son was born I decided to give up alcohol. That was a personal decision but it also saved me quite a bit of money over the years. On a normal week (non holiday, non football, non boys night out week) I would buy at least 3 six packs of beer. At $3 a six pack (cost of cheap beer) for 52 weeks for 30 years the savings added up.
10. Miscellaneous Savings
Video rentals (instead of going to the theater)
Six movies a year viewed on video instead of going to the theater, at $15 (cost of ticket, parking, popcorn, etc) for 4 people for 20 years.
Transportation to work
For ten years I biked to work or took the bus even when I could have driven my car. Parking was about $2 (I figure that the bus fare and gas costs cancel themselves out). I did this for 200 working days a year for 10 years
I have been to many good and fancy restaurants in my life. But my favorite restaurant is Taco Bell, an American fast food, pseudo Mexican joint. My wife and I love it and it is really cheap. Let’s say that the differences between Taco Bell and a more expensive restaurant is $20. Let’s say we substituted going to a “real” restaurant with Taco Bell only 5 times a year for each of the 30 years (in reality it was lots more often than that).
Total savings over 30 years: $524,640
Non-quantifiable things we did
Here are some things we all can do but we can’t put a savings amount to. Doing them saved us probably more than all of the above.
Don’t make any big mistakes. Don’t make big investments in things you aren’t sure about. Diversify your portfolio. Cut your investment risks as you get older. We lost almost nothing in the last economic downturn since we had been out of the stock market for over a year.
Keep healthy with exercise, eat fresh foods, watch your weight, check your blood pressure often. If you aren’t sick you aren’t going to be paying doctor bills.
Any extra money you get (pay raises, gifts, tax returns, government stimulus checks, etc.), save it instead of spending it.
We refinanced the house twice. Each time we took the extra money the bank gave us and used it to remodel or upgrade the house (instead of paying for a new car or a fancy vacation, see above). It really paid off later when we went to sell the house.
We always spent less than we had and never once in 30 years did we pay a credit card interest payment because we always paid off the card in full.
I always wanted, and dreamed of having, a nice big luxurious RV, with captains chairs, satellite TV, fake lawn that we could roll out when we stopped for the night, telescoping living rooms. I never bought one. But I occasionally still leaf through some of the brochures. If I had ever given in and bought the RV of my dreams I would still be working at my office desk dreaming of retirement.
Most important of all, even though marriage and raising a family can be super stress producing, don’t even think of getting divorced if you want to have any hope of retiring early. With lots of effort, and maybe a little professional advice, you can probably work out most of your problems, because if you do get divorced, all of the savings tips above will be a waste of time. You’ll probably never have enough to retire, and retiring early will most likely be out of the question.
My hope is you will be able to retire when you want to. Be frugal and keep your eye on the prize and you’ll be able to make that dream come true.
You’ll have to excuse me now. Pikun is calling for me to get a haircut. And then we have a date for Taco Bell.
Note: If everyone took up my lifestyle then the country would be in perpetual recession. But Taco Bell, Netflix, marriage counselors, and used car lots would be doing a booming business.