Reaching FIRE (Financial Independence Retire Early)

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FIRE, or Financial Independence Retire Early, is a lifestyle that people are embracing in order to live life on their own terms. I am following this path so that I can spend more time with my kids, husband, and pursue the passion projects I have put on hold.

Before FIRE

I have been a huge fan of budgets for years. Living on a low income led me to also be frugal. After keeping a budget for years, I wanted to see how financial gurus were tackling budgeting and debt repayment. This led me to the book “The Total Money Makeover” (TMM) by Dave Ramsey. 

The budget I kept for years had very few sinking funds and it didn’t focus on getting out of debt. I also budgeted monthly. After reading TMM in 2016, I decided to revamp my budget with more sinking funds, to budget by paycheck, and to follow the debt snowball method.

There are baby steps in the book that a person will follow in order to be successful with Ramsey’s plan. Following Ramsey’s steps creates small wins which keeps you motivated.

Changing how I Thought About Money

TMM was published in 2003. Since that time we have had a financial crash and student loan debt is crippling our economy. It is a great framework for starting your financial journey. As I evolved financially, I knew it wasn’t the only way for me to be financially successful.

When I started to near the end of my commercial debt repayment journey (credit card, car loan, and personal loans), I reread Dave’s baby steps again and they didn’t make sense for my financial situation. 

Having taken 3 years to get out from under our commercial debt, I knew that I wouldn’t feel secure paying down my $116,000, and my husband’s $45,000, student loans without having a 6 month emergency fund. I decided to move to baby step 3 and then come back to baby step 2.

Ramsey frowns upon saving anything but a $1,000 emergency fund before having debt paid off. With the amount of student loan debt I had, I felt like this was an outdated approach to paying off six figure debt. 

As of February 14, 2020 we saved our six month emergency fund and are now laser focused on paying down our student loan debt! This just proves that there isn’t one way to reach your goals. Do what works for you!

How I Learned About FIRE (Financial Independence Retire Early)

It was 2017 and I was a full time working mom of a small child. The town I live in has exploded population-wise in the last ten years and my commute was so long, that I only spent 30 minutes a day with my child. I was burned out and needed to take a break. 

Taking matters into my own hands, I Googled “taking a break from the workforce” and stumbled upon Tim Ferris’ book “The Four Hour Workweek.” In his book he describes mini retirements as a series of breaks throughout your career, rather than one final retirement after a life of labor.

After reading this book I created a plan to take a mini retirement!

How Children Make you More Flexible With Your Financial Goals

At this time I got pregnant with my second child. I was unable to get pregnant easily with my first, so I was shocked to learn that I was expecting. This would derail my mini retirement plans! 

My husband was about to graduate from school. We decided that when he finished school, he would get a job as an electrical engineer, and I would take my mini retirement to focus on my health and professional development goals.

We saved enough money for me to live out this dream! During this time I was able to financially position us to live on one income. My husband’s starting salary as an engineer was $70,000.

This wasn’t the original plan, but having kids has taught be to be more flexible with my goals.

Most of the time things won’t go to plan when children are involved. When I first had children this led me to having negative emotions. I would get upset that things just didn’t go as I had wanted. Understanding that the constant pursuit of a positive experience will make me ultimately unhappy, has allowed me to be open to contingency plans, or to embrace having a loose plan for my path to FIRE as a mom.

This concept is perfectly captured in the book “The Subtle Art of not Giving a F*ck” by Mark Manson:

“The desire for a more positive experience is itself a negative experience.  And, paradoxically, the acceptance of one’s negative experience is itself a positive experience.”- Mark Manson

My Mini Retirement

I knew that during my mini retirement we could pay down our commercial debt if I had a part time job. Bookkeeping was something I could do easily. Small businesses do not always need a full time bookkeeper, so I approached people I knew who could use extra help. I was able to secure flexible positions and start to pay down our debt.

A dream of mine was to become a Certified Management Accountant. I tried to study for the exams while working full time with a small child, but I was never successful due to my long commute and general feeling of exhaustion. I used my down time after my second child was born to study for the exams. I passed each one on the first try!

How I Found FIRE (Financial Independence Retire Early)

During this time I was thinking about how I could retire early so that I could have the flexibility to live life as I wanted. I then Googled “early retirement”. My mind was BLOWN. There were so many people doing early retirement who were just like me! 

The first two books I read about early retirement were “The Simple Path to Wealth,” and “The Millionaire Next Door.” Becoming financially independent was clearly laid out in these books. It made the dream come alive for someone like myself!

My Path to FIRE (Financial Independence Retire Early)

Once you read about financial independence you start to understand a key component of retiring early: a high savings rate. You can clearly see in this chart (image credit: Mr. Money Mustache), the higher the savings rate the faster you can retire.

This chart makes me motivated to keep increasing my income and lowering my expenses. Having a budget is crucial!

Being able to already check the boxes of being frugal and budget savvy, I knew that I would need to focus on the other pillars of financial independence: having a savings rate of at least 50% (my current savings rate is 63%), being debt free, creating passive income streams, contributing the maximum amount to my 401k and Roth accounts during the year, maximizing my income during my working years, and having 25 times my annual expenses in a combination of cash and investments in order to retire early.

Knowing that we had $161,000 of student loans, and $20,000 of commercial debt at the end of 2018, I knew that I had to go back to work to make this dream happen.

Going Back to Work

In March of 2019, I went back to full time paid employment as an accountant. It was hard to be away from my new baby. I knew how hard it was for me to be away from my first child in 2017, and didn’t want to feel that way. Having a goal of early retirement made me feel better about going back to work.

I started to pay down our debt aggressively and paid off our commercial debt in mid 2019. We were spending 60% of our salaries on paying down debt. 

Then, I decided that we would focus on our retirement funds. We increased my husband’s retirement contributions since his company has an amazing match. Also, we started to contribute the maximum annual amount to his HSA and Dependent Care plan.

Life Happens

In September of 2019, my husband’s sister passed away at the age of 33 leaving behind her husband and small child. This was shattering to our family. 

Her death taught me that life is precious and it is so important to live a life of meaning. It also helped me to realign my values. I started to buy my time back in small ways, such as not cooking everything from scratch and even hiring someone to clean my house. 

Money can buy you the time you need to live your life. I wanted to pay down my student loan debt as fast as possible, but I don’t want to sacrifice the time I have with my husband and children.

We shifted focus from student loan debt repayment to saving a six month emergency fund after her passing, and started to save money to move to the low cost of living area his sister’s family lives. Being closer to family is important to us.

Staying on Track Financially

Now that we have saved our six month emergency fund we are paying down our student loans. If we stay on track we will have mine paid off at the end of 2021. Being flexible with this target date is necessary, because we may move before that time if it feels right. Also, life happens.

Once we have the student loans paid off, we will max out our retirement contributions for the year and then save the excess in a high interest savings account. I currently use Wealthfront for my six month emergency fund. 

The passive income stream I am currently working on is my Etsy side hustle. It has been such a fun way to make an extra $500 a month!

My goal is to retire before I am 50 years old. I am keeping my eye on the prize! Develop a strategy to budget, pay off debt, and then make your money work for you! Early retirement isn’t a dream reserved only for the rich. According to the book, “The Millionaire Next Door,” 80% of millionaires started with nothing.

Join me as I budget to financial independence and reach FIRE!

Are you currently on your own path to financial independence? How are you going to FIRE? Leave your comments below!