We began working toward FIRE in April 2014 and, synchronistically, he retired seven years later in April 2021 at age 37. But after 14 years, he decided it was time to bow out frugalwoods and let others take the helm. Mr. FW loved his job as a software engineer and was with the same company for 14 years.
Meet Liz
We started to feel like we were working to earn money that we weren’t spending (thanks to a combination of high incomes and frugality) and coming home exhausted and stressed. My philosophy is that managing your money wisely enables you to pursue unusual aspirations and opens up a world of options for how to live your life. The 4% rule suggests that a $1.5 million portfolio will provide for at least 30 years approximately $60,000 a year before taxes for you to live on in retirement. If, say, your Social Security checks are $2,000 monthly, you’d have a combined annual income in retirement of $40,000. Mortgage value and taxes If you’re retired, any pre-tax money taken out of your 401(k) or IRA is treated as income. Disadvantages of Paying Off Mortgage Early If you have credit card or student loan debt, funneling your extra cash toward paying off your mortgage early can actually cost you in the long run.
- A guaranteed way to retire without a mortgage is to sell your current home at a profit and use the proceeds to rent a place to live in during retirement.
- At a shorter retirement, a full 81% of the lowest income quartile and 8% in the highest income quartile will run out of money.
- I can share what plan we select if that’s of interest to folks.
Welcome to the NEW (looking) Frugalwoods!
“I think it’s very important for me to recognize that the way in which I experience frugality is not going to be the way in which everyone experiences it.” So who are these financial independence sermons for? Sometimes the stories pander to Millennials by touching on issues like climate change — “Frugality is environmentalism! What evangelists like these have embraced is a model of advice-giving that mostly involves telling self-congratulatory stories about how they achieved financial independence by being frugal.
- It was a necessary examination for us, but after a few years, we realized it wasn’t sustainable for a lifetime (at least, not for us).
- Learn about the pivotal choices we made to break free from the cycle of consumerism and materialism, leading us towards a homesteading lifestyle in a rural setting.
- Following the 2008 recession, a new kind of self-help guru — the Millennial frugality expert — emerged from the rubble.
- What evangelists like these have embraced is a model of advice-giving that mostly involves telling self-congratulatory stories about how they achieved financial independence by being frugal.
- And we had a sneaking suspicion that, if we didn’t change something, we’d wake up in 40 years still in those same cubicles.
Why Homesteading?
I feel lucky to do this work and deeply grateful to all of you for going on this winding (and often long-winded) journey with me!!! To celebrate, I’m going to write a series of reflections on my own writing over the past nine years. This is–by far–my longest tenure at a job and I’m not ready to quit or fire myself! Save my name, email, and website in this browser for the next time I comment. In the process, Elizabeth discovered the self-confidence and liberation that stems from disavowing our culture’s promise that we can buy our way to “the good life.” Elizabeth unlocked the freedom of a life no longer beholden to the clarion call to consume ever-more products at ever-higher sums. They don’t stress out about impressing people with their material possessions, buying the latest gadgets, or keeping up with any Joneses.
Benefits of Frugality That Have Nothing To Do With Money
The circumstance for failure is that you retire right before a stock market crash AND high inflation with low returns (i.e. the 1970s). In paying off our mortgage, we traded maximum possible end value for a reduction in variance. Bonds are typically safer, less volatile, lower return investments, much like a paid-off mortgage. Since I just outlined some very good reasons NOT to pay off a mortgage, why on earth did we do so? I would further argue that you should also have at least one other form of investment (in addition to your retirement). Tying up ALL of your excess cash in a paid-off house is a dangerous proposition.
What’s weird is the book’s assumption that hiring a cabinet painter is an expense that Millennials are liable to encounter — and that doing the job yourself is somehow empowering, innovative, and thrifty. Within a few years, the Frugalwoods garnered a vocal audience of aspiring frugalists, a book deal with HarperCollins, and enough guest spots on money podcasts to catch the attention of NPR and The New York Times. The Frugalwoods soon had enough money saved to escape their “frenzied” city grind. What if you were able to retire in your thirties by simply living more “intentionally” and investing in low-fee index funds?
Hi, I’m Liz!
They bought a four-bedroom house in Vermont and began a leisurely new life on 66 acres of woods, streams, and apple trees. So they squirreled away the majority of their income — in 2014, they saved an impressive 71 percent — cut back on things like eating out at restaurants and taking public transportation to work, and started a blog about their lives. Dive into the finances of real live people – not just internet people! Get hot and fresh money tips delivered to your inbox. Let me show you how to make your money create the life you want.
I’ll be there for you every step of the way, creating a customized financial plan that fits your unique goals. I don’t believe in one-size-fits-all financial advice. You can’t avoid your finances forever – we’ll create a personalized, easy-to-follow financial roadmap to ensure a robust financial future.
The book
Thus, everything we earned could go towards the future, not towards paying off the past. I’ve come to view our launch into adulthood–debt-free and mostly broke–as one of the most formative elements of our FIRE journey. I can share what plan we select if that’s of interest to folks. Astute readers will note that Mr. FW’s job provided our health insurance.
If you pay off your mortgage and debts before retiring, you could live on smaller portion of your preretirement income. “A life free from mortgage payments is psychologically liberating, but a well-funded retirement is essential for long-term financial security and peace of mind.” “Seventy to 80% of pre-retirement income is good to shoot for,” said Ben Bakkum, senior investment strategist with New York City financial firm Betterment, in an email. Thus over time as inflation increases, which generally happens, the money you’re using to pay off your mortgage becomes “cheaper.”
I’m a financial consultant who helps people figure out their money
When I started Frugalwoods on April 9, 2014, I had just turned 30, I lived in the city of Cambridge, MA, I’d been married to my husband for six years, we were both working 9-5 office jobs and we had zero kids. I’ll help you understand your entire financial situation, set goals, and provide practical solutions to manage your money. While frugality makes their lifestyle possible, it’s also what brings them peace and genuine happiness. Dubbing themselves the Frugalwoods, Elizabeth began documenting their unconventional frugality and the resulting wholesale lifestyle transformation on their eponymous blog. One of my goals in writing Frugalwoods is to build an online community of like-minded folks who value living life above spending money.
After you’ve finished the accumulation phase of life (i.e. when you retire), the importance of absolute rate of return is then, necessarily, balanced against the sequence of returns risk. 2) Paying off your mortgage at the point of early retirement dramatically decreases your sequence of returns risk. The calculation we made (in spring 2021) is that paying off our mortgage in this interest rate environment is akin to a bond allocation for our portfolio. Not a very high rate, you’re thinking, which is true if you compare this to average annual stock market returns. Remember how I mentioned that when you pay off a mortgage, you essentially lock in your mortgage interest rate as your rate of return?
I am deeply grateful for the salaries and privileges my husband and I had because that’s what made this journey possible. He doesn’t have any plans to dive back into a “real” job and is enjoying the time, space and freedom of our homestead. In general, you don’t want to invest money you’re going to need in the near future. Nor will you “lose” this money in the event of a market dip. In so doing, you are indeed missing out on potential market gains, but you’re also not going to incur capital gains taxes. In other words, we will live off of our rental income and my income.
Meet the Frugalwoods: Achieving Financial Independence Through Simple Living
This represents a willingness to trade the potential of having a higher net worth at, say, age 80 than running out of money at, say, age 70. In general, the safer the investment, the lower the rate of return you can expect. But, if you compare this to the current bond market, 4% is actually not bad. Our interest rate was 4.0% fixed for 30 years. Inflation is when money becomes less valuable. 3) A mortgage is a nice hedge against inflation.
A recent PBS NewsHour feature on the Frugalwoods clarified that Nate still works remotely for a political non-profit (hence the long and taxing search for a Vermont house with fiber optic Internet), while Liz writes and monetizes the blog. In 2014, Liz wrote that she and Nate both maxed out the $17,500 federal limit on 401K contributions, explaining that these didn’t factor into their annual percentage of saved income, which was already a whopping 71 percent. How much money do they have, and where does it come from?
We want to wake up inspired to try new things and create a life of variety. We decided to take this risk now so that we can build a meaningful life to enjoy. An additional factor spurring us on is that we don’t know how long we’ll be around–life is short and unexpected. Also, city livin’ is expensive and didn’t provide the time or the space we craved to explore our myriad interests.