HOLDING DOWN living expenses is one part of the equation in achieving financial independence. But the other part is diligently and consistently saving and investing money.
On that score, my husband Jim and I enjoyed four “lucky breaks” that accelerated our push for financial independence. Together, they helped catapult us into early retirement in just 15 years.
1. The Great Recession may have caused much short-term financial harm, but it also offered a great long-term opportunity.
When the stock market crashed, we continued to max out our 401(k) and 403(b) plans, as well as contributing to 529 plans for our two boys’ college costs. We put these various accounts 100% into stock mutual funds, taking advantage of the lower share prices. In 2017, as we prepared to retire, I moved some money out of stocks and into bonds. I was stunned by how much we had earned.
2. During the Great Recession, I mentally prepared for the possibility that one of us would get laid off—most likely me, because I worked for a bank. That never happened. Both of us kept our jobs.
Still, we strove to live as though we had just one income. When I got a raise or Jim earned extra from teaching summer school, we saved the money. We didn’t starve ourselves or skip family vacations. But we also didn’t pony up for a new car or new bathroom or new kitchen.
3. One of our sons received a full scholarship to one of the top public universities in Texas. That made college far less of a financial burden—and, as a result, both our boys were able to graduate from university with no debt. In fact, we even had some money left over in a 529 account. We owed taxes on the account’s earnings, but we were able to withdraw the original contributions with no tax cost.
4. While visiting an estate sale, we discovered a townhouse for sale next door. It was our good fortune to see the realtor putting up the sign. Our boys had just moved into university dorms, so there was no need for us to keep our current house.
We decided to take advantage of the hot Dallas real estate market by selling the house and buying the smaller townhome. That allowed us to pay off our mortgage earlier than planned.
While our four lucky breaks helped us achieve financial independence that much earlier, I suspect we would have got there soon enough. It all comes down to the same basic strategy: You need to save diligently, while minimizing unnecessary expenses, by always focusing on the difference between needs and wants. Just as money compounds in the stock market, the benefit of living beneath your means also compounds over time—and, with surprising speed, you can get your reward.
Last year, at age 53, Jiab Wasserman left her job as a financial analyst at a large bank. She’s now semi-retired. Her previous articles include Living for Less, Courting Success and Buen Camino. Jiab and her husband Jim, who also writes for HumbleDollar, currently live in Granada, Spain. They blog about downshifting, personal finance and other aspects of retirement—as well as about their experience relocating to another country—at YourThirdLife.com.