A lot of people think you should always work to eliminate debt. While this is a solid approach for high interest debt, paying off low interest student loan debt could significantly slow your portfolio’s growth. I decided not to pay off my student loans, and invested instead. While investing was a better choice for me, some of us are more risk averse, and we each need to find the right balance for ourselves. Before we make any decisions, it’s important to compare the numbers and consider the risks. Continue reading
The longer I’ve been retired, the more I’m convinced that everyone should pursue financial independence. I felt trapped while working, and that feeling kept growing as everyday started to look the same. Now, I don’t necessarily know what I’ll be doing the next day, week, or month. But every day I wake up and find myself full of purpose. The fulfillment that comes from living my life the way I want has left me happier than I’ve ever been. I want all of my friends to experience the same thing.
I’ve been trying to convince my friend Lorenzo to pursue financial independence, and I think he’s starting to see the benefits. Recently married, he’s started saving aggressively, paying down debt, and tracking their net worth which he shared with me. “Holy crap!” I exclaimed, “You guys almost have enough to retire in Costa Rica!” He didn’t share my enthusiasm. “Yeah, but most of our money is locked up in 401ks.” I remember thinking the same thing – 401k investments are like funny money, useless until retirement age. Then I learned there are strategies for making early withdrawals without any penalties.
We just bought a “new” used Prius for $3,250. It has high miles, but is in mint condition. We grabbed the car the day it popped up on Craigslist. Sometimes it’s hard to remember everything to check in the heat of a transaction, so I decided to create this used car inspection checklist and buying guide.
Last year, after working 20 years in jobs ranging from cafeteria worker to engineer, I came to a new milestone. My wife and I had been saving for years, and with our net worth exceeding a million dollars, we were financially independent. Tired of chasing money, I wanted to be able to pursue new hobbies, travel, and learn. So I quit my job. A year later, I can say this has been the most incredible experience of my life.
Growing up, my parents had extended periods of unemployment. We could have been better off financially, but we always had a home in my grandfather’s house, and never went hungry. The worst I suffered was the embarrassment of wearing my sister’s old clothes to school. Kids can be mean, especially to a smart ass wearing bad girl’s clothes – my sister didn’t exactly get to pick them either. While the 8 year-old me was pretty miserable, now I appreciate having learned the importance of money early in life.
I don’t have many boring friends. With my closest friends, there are no topics off the table – finance, politics, and sometimes this blog. When I tell them that we spend less than $40k a year and still get to do everything we want, they believe that’s how I feel. The most common response I get is, “That’s great for you, and I might be a little jealous, but living like that isn’t something I could do.”
We are all being honest, and I can understand when they say “I like being able to walk into a restaurant or bar and order anything I want.” I’ve heard this same phrase from several friends, and I used to be the same way. I remember when happy hours were my reward, and I spent money without additional consideration. Now I consider the value of any purchase I make, and I’m happier for it, even if it seems like a pain to some friends.
I tell them to chalk it up to hedonic adaption – more money doesn’t make you happier. But after studying a bit more about hedonic adaptation, I realized there is more to it than just the part about money. Continue reading