Nelson’s note: This is long, but it’s filled with actual tips you can take to supercharge your savings. You should read it.

Hi all – call me Greg (Gregory’s too long). I’m here because I like money. Pretty straight-forward, eh? And not liking money is kind of not liking chocolate. So what’s the big deal? Well you see, I spend a few extra minutes every few days going over various finance-related blogs including this one where a Financial Uproar post was mentioned.

Nelson argued that many early retirement bloggers are simply “selling a dream … and the time frame is short. Everybody who isn’t satisfied with their life is drawn to the dream and the freedom the dream provides”. The response?

  1. Buy Experience over Stuff
  2. Delay Buying Things
  3. Focus on Equal Outcomes

(you can go read the full post linked above if you really want more)

I happen to have “financial independence” as my main life goal right now, meaning that I would have enough in assets to not have to work for the rest of my life. But unlike “early retirement” junkies, I do not have any desire to stop working on cool things and picking up new skills. I agree with Nelson that things like the three listed above do a poor job of describing the benefits and details of financial independence . . . I even disagree with the above quite a bit myself: buying experience can be much more expensive than simple material things that will bring much more happiness without being groped by the TSA, delaying purchases technically just means buying the same amount of stuff (it should read “not replacing things as frequently”), and “focusing on equal outcomes” hinges on knowing every possible action and exactly how much each can make you happy (not possible). So aside from stating that I like money, I’ll briefly discuss who I am, what motivates me, how my finances have evolved over the past four years, and what I plan to do to both achieve my goal and reap the benefits.

I’m a bit over 24, have a well-paying tech-based job in the northwest of the US, have worked for 3 years after getting a B.S. in Computer Science, and got a closer look into finance during an internship at an investment bank. Then I had to compare a job offer from the bank in NYC with another offer in Long Island, and I did it with most of the emphasis on the money:

Investment bank – Manhattan:
$63,000 base salary plus unknown performance bonus
-$22,800 in taxes (roughly calculated, but includes a city tax – NYC SUCKS!!!)
-$19,500 rent ($1625/mo for small studio)
-$2,600 for food (probably under-estimated)
-$1,080 for subway cards
-$1,200 for cell phone and internet
===> remaining for the rest: $15,820

Small software firm – Long Island (full budget, I chose this option):
$67,000 base salary plus performance bonus (turned out to be around $10,000)
-$20,700 in taxes
-$15,240 housing (rent + utilities)
-$3100 food
-$2500 car expenses
-$3500 regular expenses (insurance, gym, laundry, haircuts, cell phone)
===> remaining for the rest: $21,960

When looking at these numbers, I didn’t even bother with the details in New York City. I’d have an extra $118/week (probably more) guaranteed in Long Island, not have to deal with a dirty city, get a car to avoid lugging things on the subway, and still be able to go into the city on weekends. I’ll skip the details, but assuming a 3% growth rate over inflation I would be able to retire securely around the age of 58 … but only on my expenses right out of school. But Real Life led me to realize something else: shit happens. I despised signing a lease for more than my net worth, I wondered what would happen if my car broke down . . .

For me, realizing that “shit happens” became the core motivation for increasing my net worth by making the possession of money/assets more valuable relative to my ability to live luxuriously.

So let’s step back for a bit. This is still psychological at its foundation and is different from what many people value, but to me it seems a lot less disconnected from widespread appeal than the three items from the other blog above. So the first question I would use to assess my pretty non-standard approach from your perspective is:

How much does making trouble go away, to the extent money can (IMO a lot), appeal to you?

I could argue this is a much more powerful, fundamental motivation than “focus on equal outcomes” or “delay buying things” because you immediately get something in return: security. How much would you rather just never have issues regarding money compared to buying a few things every week? IMO, that is an example of motivation for the vague mechanisms that Nelson criticized as an incomplete basis for financial independence.

With my initial job, I didn’t eat out all that much and spent most time with friends at my place by simply inviting them over a lot, and that let me save a bit over $20,000 a year with my bonus (some of which was spent on a vacation, expensive car repairs, and eliminating my small student loans). Now let’s take another step in my financial life: I got a significant salary bump and simultaneously moved to a place where living is cheaper. When I moved out West, I had a net worth around $45,000 and found I could do without my car — my only source of significant, unplanned expenses. Now if I really needed a car, I could rent one or use a Zipcar; this was my first step to saving a lot of money — roughly $2800 / yr excluding any super-expensive repairs (my car had some transmission work) and the price of the car itself.

So my new budget looked like this after I moved:
-$16,400 housing (rent + utilities)
-$580 insurance
-$1,500 cell phone and internet
-$3,840 food
-$1,440 dance lessons
-$1,700 other recurring (haircuts, gym, netflix, etc.)
===> Total expenses: 25,460 (less than I paid in taxes, FYI)

Now that I was making more, I felt OK paying the same amount for about 30% more space than in New York and also started grocery delivery with the rationale that it was still cheaper than having a car to drive to the store; I ordered pretty much everything else I needed on Amazon. This increase is what many call “lifestyle inflation” — referencing how people generally raise their spending in line with any salary gains they procure — but it was at least partially offset by deciding to get rid of my car. For me, ditching the car was a good way to save more while still balancing saving with a good lifestyle.

But then a friend pointed out that living in a luxury apartment was unnecessary and against my goals of saving and investing, alongside getting groceries delivered and paying $80/mo for a cell phone. I thought about this for a while, and what helped me realize how much all of this was costing me was thinking about it on a weekly basis: if I have wifi at home and at work, could I just use my existing smartphone on wifi and instead have $20 to spend every week? That’s a good dinner, more than 3 cheap and insanely satisfying teriyaki plates … or new running shoes every month (I actually got some pretty awesome ones on Amazon for $60 instead of $85 at REI). And with rent? If I could find a suitable place for less, that would save me much, much more.

And then my landlord tried to increase my rent by just over 10%; that pushed me over the edge. Refusing to pay so much more became a matter of principle, so I walked around my neighborhood looking for “For Rent” signs. I ended up with a studio three blocks away that is probably a bit smaller than my place in Long Island, but for $440/mo less than I had been paying ($550/mo or so less than the new rate). At the same time I replaced my cell phone with a pay-as-you-go phone at roughly $100/yr and unlimited Skype calling, decided to hike to the grocery store instead of getting groceries delivered, canceled my Netflix, and got cheaper internet service. All together, this amounted to savings of $550/mo or $6,600 every year.

Adding this to the savings from not having a car, I currently have $9,400 in savings a year compared to my lifestyle in Long Island. As I have monitored my feelings towards paring down my expenses, I have found that I am a bit happier than before, too. In fact, I would actually be fine living like I live now for the rest of my life. This means that the amount I need to be financially independent has been reduced by $235,000 (assuming the reasonably standard 4% safe-withdrawal rate) or 5 1/2 years added to the period of not having to work (based on investing $42,000 / yr). (Conversely, when adding a recurring expense to your budget, divide the yearly amount by 0.04 to see just how much extra you’ll need to amass in your investments to cover the expense in retirement without chewing into the principal).

“Aha!” you say – I have reverted to talking about not having to work! Doesn’t that mean my goal is just having a long-but-lousy retirement? No, I still plan to work. But psychologically, achieving financial independence is, for me, a matter of being able to handle one of the most drastic “shit happens” scenarios (measured by expected cost). To me, not having my livelihood held hostage by a need to work is the ultimate elimination of worrying about the shit that can happen to everybody–I would even argue that achieving financial independence (but not necessarily retiring) is one of the largest doses of freedom one can acquire after being in a country that cannot restrain the rights of its citizens too severely. And if I continue to work, I’ll have $67,000 of pure addition to my net worth. If I work for an extra 10 years and invest my entire salary, that can bring me an additional $20,419 a year in income during retirement if I beat inflation by 3%. Retiring at 48 with twice my current expenses? Sounds good to me.

In summary:

  • I strongly value just not having to be worried about stuff
  • I have twice moved a significant distance to maximize my income relative to living expenses
  • I am privileged with the absence of crushing student debt paired with a high salary
  • I have decided to fast-track my goals by taking actions available to anybody living in an urban area
  • The distance I have to my goal does not increase because I do not allow “lifestyle inflation” before achieving it

So above are some numbers and a brief summary of how I achieved them along with why I took the steps I did. I’m under no illusion that most people would view me as bat-shit-crazy in many ways, but I just thought I’d see if Nelson would accept a post with some numbers along with the motivations and how I view the tradeoffs. Please yell bloody murder in the comments at how plainly stupid my plan is if you feel the desire, but make sure to include some substantial rationale with it!

Tell everyone, yo!