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Well, I’m about to hit the big FOUR-OH this month. Happy birthday to me! 🙂 So with that, I thought it would be a good opportunity to share my goals and plans I have for the next ten years.
If you’ve read my “about” page (Time to Make the Donuts), you know that my goal is to retire at (or hopefully before) the age of 50. To some of you that might seem like a pretty good feat, and to others, it might seem like I’ll be an old man by that time.
Regardless, I hope I can inspire you to reach financial freedom at the earliest age possible so you can quit the 9-5 job whenever you want. Although I didn’t get serious enough about early retirement until recently, I have always had the dream of not having to go to work when I don’t want to. However, it took me a while to figure out the intricacies of how to make this happen. A lot of that is because I never really had a lot of good financial mentors or friends that wanted to discuss money.
I’ve done the math though and figured out how to make early retirement work for me. And although there are a number of assumptions, here’s a couple worth pointing out:
- That I won’t be working at all. I want to ensure that I have enough money to not have to work again if I don’t want to.
- That my wife will stop working at the same time I do.
Now, in all reality, these assumptions are going to be overly cautious and aggressive. I do plan to work, but just in a different capacity and at a much more leisurely pace. In fact, one of my goals is to continue to grow this blog enough that I can continue to post and make a little bit of extra money from advertising… we’ll see how that goes. Additionally, I might do some part-time freelance work.
Also, my wife does want to keep working (at least for now). I’m guessing that once I get into a nice routine after my early retirement, she’ll see that and either quit her job or bring it down to part-time. In the meantime though, we’ll have that extra income coming in as well – at least for a while!
My goal over the next ten years though is to continue figuring out ways to either bring in additional income or reduce spending to shorten the amount of time needed to hit early retirement. For example:
- Pay off mortgage. I bought my house at the end of 2009 with a 30-year note at 5.5%. We hit at a good time and we were able to low-ball to get a good price on the house. Then the really good stuff started to float in and I’ve actually refinanced twice since then – first to a 20-year at 4.125% in 2010 and then again in 2013 for a 15-year at 2.875%.Obviously, refinancing costs you, but it made sense each time and my payment has stayed almost exactly the same throughout. So in that small amount of time, I shaved a HUGE amount of debt I would owe for just signing my name a thousand times. 😉 However, I still aim to make at least an additional mortgage payment every year to get this done and over with. According to Quicken, with the extra I currently pay, I’ll be paid off at the very beginning of 2027. But if you notice the game plan is to retire in ten years – which will be 2025.So one of my missions is to increase the amount I put toward the mortgage to get this paid off even earlier. This is going to be tough. My mortgage payment is already pretty heavy, but this would also be the biggest burden to early retirement so I’ll need to figure this out.
- Vacations need to be a little more prudent. Yes, vacations are a luxury, but we love to travel and I don’t want to change that too much. But there are unnecessary expenses on our vacations that could save us hundreds of dollars. Sometimes it’s the destination itself, or what we’re doing on the vacation, or just being a little looser on how the money flows. We just need to be a little tougher on this to ensure we don’t overspend in this category.
- Decrease entertainment costs. That is pretty self-explanatory. I look at Joe at RetireBy40.org and he seems to do a great job in this area. Another guy who knows how to keep entertainment costs low is Mr. Money Mustache. I’m definitely not as frugal as these guys are, but when I see money hemorrhaging out, it really stresses me out and I should learn a thing or two from them.My wife LOVES to have something on the calendar for every weekend. I enjoy it as well some of the time, but I can also have a weekend of staying home whereas she starts to get a little antsy.What I need to do is come up with more free or inexpensive activities that we can do to satisfy all of us. Camping used to be a great cheap weekend that we all enjoyed. We still love the camping, but now it easily runs $100+ for the weekend… to sleep in a tent!! But visiting local parks or going to the neighborhood pool are both free, so maybe we need to consider doing activities like these a little more.
- Increase savings and investments. I’ve been very good about paying myself first and I review my current state every year after I get any type of raise. We all know that if you don’t see it, it’s a lot harder to spend it, so all my withdrawals are automatic.I currently put almost exactly a third of my pay into our savings, my 401(k), my Roth IRA, and my daughter’s 529 plan. However, if I want to make this early retirement happen, I need to up the ante and put more away… maybe get closer to 40 or 45%??
- Increase rental income. This is almost an art (which I have yet to master). I’ve been extremely lucky to have the same tenants in my rental house for 6 years now. I’ve also only barely raised the rent there on just a couple of occasions. A lot of landlords are happy now with the demand to rent lately and obviously that helps push up rent prices.I have to be careful about raising the rent so much that I lose great tenants and am stuck with an empty house because of it. However, I need to also be a little more prudent about doing increases. This is a touchy subject that I’m sure many of you have an opinion on and is definitely something I want to dig into further.
I’m also in the process of looking for another rental house. This will likely not help me too much in the next ten years since I likely won’t make a lot of money off rent with it to start with. But, I’ll let the tenants help pay off the mortgage and once that’s done, that will mean another good stream of passive income coming in during my retirement years.
Another task I’ll need to make happen over the next ten years will be to start actually planning for retirement. Some things like getting health insurance will be critical. I’ll also need to start the money withdrawal plan. In a post in the near future, I’ll talk about Roth IRA conversion ladders which will almost certainly be the critical key to accessing money in my 401(k) before age 59½.
And although I’ve done some good planning to know when I can be financially free, I want a second opinion. 🙂 I’ll be testing out Empower (formerly Personal Capital)‘s new Retirement Planner shortly and I’ll let you know what I find out.
I’m sure there are plenty of things I’ve forgotten to include, but ten years is a long time span so I’m sure this list will change plenty over the next few years.
Let me know what you think and thanks for reading!