One of my favorite posts on my newest favorite blog, Mr. Money Mustache (MMM), is about the Shockingly Simple Math Behind Early Retirement. MMM explains the relationship between what you spend and what you earn in incredibly simple terms, and demonstrates how quickly you can achieve freedom from your job. I like my career, but I really like the idea of not needing a job.
I had always planned on retiring before age 60, ideally by 55, but my math was much more convoluted and complicated before reading his blog post. I already track our income and expenses closely using Mint.com and my stack of spreadsheets, so it was easy to sit down and do my own simple math.
While we were aggressively paying off debt, we made rather large payments every month. Sometimes it was $500, sometimes (like in an extra paycheck month), it was over $3,000. Note that this was on less than two ‘teacher incomes‘–and I have a salary and my husband is an hourly earner. Now those huge payments are getting paid to… us. We have no car payments, and no mortgage. We pay off our credit cards every month and use up our rewards points on things we need (like Amazon.com points for textbooks and gifts or Old Navy points for clothing). This isn’t complicated financial planning, it isn’t anything ‘special,’ nor do we have a magically amazing income. We just spend significantly less than we earn, by making choices about where we live and how we live.
Between what we have been throwing at debt every month, what we put into 401ks, what automatically gets taken from my paycheck and put into a retirement account with PERA, and what we plan to put into our IRAs, we are easily at a 50% rate of savings. And that doesn’t even include what we are currently paying for my husband’s tuition, a temporary cost which will eventually lead to a higher income. All of this math was extremely exciting.
So now this blog takes a new focus: the goal of early retirement. How early? Hard to say right now, but I’ll be tracking our progress and offering more money musings on our way. Stay tuned.