Finance · Lifestyle

Road Less Traveled Challenge

Earlier this month, Our Next Life wrote a great post regarding the commonly cited “commandments” of financial independence and early retirement. While I consider myself to be following some of these rules, it got me thinking more about what I’m doing differently from other personal finance bloggers.

There are a few things that have worked well for other people, so I’ve decided to adopt them as well:

  1. The 4% rule. I’m using this as a guideline to ensure that I have enough saved before officially retiring, although I’m hoping to have enough that I’ll use a safe withdrawal rate of 3% or 3.5%, to help increase the odds that my money will last the duration of my retirement.
  2. I have my Roth IRA and Rollover IRA (money from all my 401k accounts from previous employers) with Vanguard. Vanguard seems to be the favorite among bloggers, but I had experience with them because a previous employer used them for our 401k and pension accounts. Holding these accounts with them makes sense to me, especially because of their super low fees and ease of use.
  3. I’m a believer in index funds. Low expense ratios make these a no-brainer.
  4. I’m maxing out my HSA. Wish I’d known about the benefits sooner, as this will only be my second year contributing the maximum amount. There’s more to this account than meets the eye.

Now for the things that I’m doing a little differently from other bloggers:

  1. I’m single, whereas it seems like the majority of bloggers are either married or in long-term relationships. While my status may change, I’m planning my future as if it won’t. I’ll admit that it makes the journey towards FIRE (financial independence/retire early) a little longer. But it also makes things slightly easier, since I can change directions on a dime and don’t need to worry about another person’s spending habits. Only person I need to worry about is myself.
  2. I bought my house at 24 and paid it off in less than 15 years. Many bloggers insist that the money would be better off in investments where it can compound (especially while interest rates are so low), but it was killing me to pay interest when I didn’t need to. It also makes it easier to focus on my larger goal of FIRE now that I’m debt free. While renting is tempting, as often advocated in PF blogs, my townhouse is easy enough to care for that I’m planning to stay for the foreseeable future. Not to mention that it now only costs about $3k/year for me to live there!
  3. I use a robo-advisor, rather than manage my investments myself. I’ve been using Betterment for a year now, as my taxable brokerage account. I’m really happy with the service and plan to stick with them. The less I have to think about rebalancing and tax-loss harvesting, the better. I’m all for easy.
  4. I’ll never be someone who obtains passive income through real estate or high yield dividend stocks. It’s way too time consuming to manage either of these so, to me, the term “passive” doesn’t really apply to these methods. I’ll stick to my index funds.
  5. I question the idea of maxing out a 401k. It’s important to keep in mind that you’re not avoiding taxes but deferring them. Who knows what the tax brackets and rates will look like 20-30 years down the road.
  6. I’m not frugal but I do abide by mindful spending. I’m not trying to spend as little as I can, but instead ensure that my spending aligns with my values and goals. I have no problem with hiring reputable people/companies to take care of maintenance and repairs at my house, since I know my limits. Do I go out to eat with friends often? Yes, yes I do. And I don’t regret it one bit πŸ™‚
  7. I’m not against buying new cars instead of used. Cost is the important factor, not the age of the car. I’d rather have a basic new car than a fully loaded used car, given the same price. As a side note, my most recent car purchase in December of 2008 was for a brand new 2008 Nissan Sentra that cost $16k, including all taxes and fees. I’m still driving it and plan to for some time. I had it paid off a year after I bought it and now have enough saved to buy my next reasonably priced vehicle with cash. It’s all about staying within your means.Β The Happy Philosopher wrote a great post about new vs. used so be sure to check it out.
  8. Unlike a lot of bloggers, I don’t have any set plans for my retirement. I’ll admit that this has me a little worried because I’ve read articles about how people can slide into depression in retirement if they don’t have something meaningful to fill their time. I have 10 years to think about it, so I’m sure I’ll come up with something by then. For now, I’m looking forward to being able to travel, spend more time with friends and family, and enjoy not living by an employer’s schedule.

I love that the personal finance community has a diverse range of ideologies and goals. Because of this, I try to read as many blogs as I can because each one brings something unique to the discussion. It’s incredible how much I’ve learned thanks to all the people who have been willing to let us into their lives through their blogs. Even if someone writes about something I may not agree with, it always gets me thinking and questioning my own approach and biases.

What “commandments” do you follow and how have you decided to pave your own path to FIRE?

4 thoughts on “Road Less Traveled Challenge

  1. Thanks for taking the challenge! I love this post and feel like I could write you a novel-length response. πŸ™‚ Overall, it just seems like you exercise an abundance of common sense, and you think far more about what’s practical than what’s best on paper, which I completely love and respect.

    A few random things.
    1. Hooray for paying off your house! Nothing replaces the value of being debt free, even if you can’t put a price tag on it.
    2. Robo-advisors — I know you’re still a way from FIRE, but it’s worth reconsidering using them once you get to ER because the automated trades could mess up your ACA subsidy (assuming that’s still a thing then). πŸ˜‰ We debated using Betterment but decided against it for that reason. We want to be able to control our income and not worry about what trades the computers are making for us.
    3. Good call on the rental income. It is a HUGE amount of work, and right now our rental is costing us money because we’re in a high tax bracket. That will no longer be an issue in ER, but nobody talks about that piece!
    4. Re: maxing the 401k, we don’t do it to avoid taxes, which we actually believe in paying. We do it to ensure that we can cover our health care expenses when we’re older, because we don’t believe the conventional wisdom that older people spend less. Sure, they probably do spend less, but it doesn’t mean they WANT to. They probably are forced to. We don’t want to be in that situation. And if bad things happen and we don’t make it to age 60+, then that’s our charitable bequest fund. πŸ™‚
    5. We bought both of our cars brand spanking new, too. πŸ™‚ But we have had one for 12+ years, and the other for five, and we’ll keep ’em as long as we possibly can.

    Have a fantastic weekend! Thanks again for writing this post! πŸ™‚
    Our Next Life recently posted…Don’t Wait. Do It Now.My Profile

    1. That’s a great point about the robo-advisor! I noticed while doing my 2015 taxes that there were an insane number of trades in just 6 months. I’m going to stay with them this year and see how my taxes go next spring. If I wasn’t able to import the tax form directly to the filing software, it would be far more hassle than it’s worth.

      Thanks for throwing out the challenge to fellow bloggers! It’s been fun reading all the posts πŸ™‚

  2. I’m loving reading these ‘Road Less Traveled’ series of blog posts! like ONL said, there is a lot in your post to talk about. There is just no one path that is right for everyone.

    Regarding number 8, this is such a complex topic, and one I have pondered often. Like you, I don’t really have a set plan after retirement, only having the freedom to choose what is next. For me freedom is the goal.

    My theory is that people who do fall into depression after retirement are those that have their ego so tied up in their career that a part of them is lost when the career ends. I think separating ego and identity from our work is something we should do before we quit or depression is a real risk. Cutting back to part -time or doing a sabbatical can be a great way to transition to retirement and to see how much of a change there will be.
    TheHappyPhilosopher recently posted…Summer VacationMy Profile

    1. I could see that. To me, a job is just a means to an end and not a source of fulfillment. Since I work in accounting, I’ve thought about picking up a part-time bookkeeping job or donating my time to a non-profit. We’ll see. There are so many great options of ways to fill my time that it is a little overwhelming!

      Being single also makes the “what to do in retirement” question harder to answer, since I don’t have someone to consistantly do things with. The upside is that my friends’ kids will be old enough that I will see them more often and (hopefully) resume taking trips with them, as we used to do pre-kids.

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