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:
- 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.
- 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.
- I’m a believer in index funds. Low expense ratios make these a no-brainer.
- 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:
- 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.
- 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!
- 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.
- 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.
- 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.
- 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.
- 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. The Happy Philosopher wrote a great post about new vs. used so be sure to check it out.
- 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?