Retire Early Lifestyle
Retirement; like your parents, but way cooler

In 1991 Billy and Akaisha Kaderli retired at the age of 38. Now, into their 4th decade of this financially independent lifestyle, they invite you to take advantage of their wisdom and experience.

Billy and Akaisha continuing to enjoy their Financial Independence at Lake Atitlan, Guatemala

CHAPTER 2

In our previous chapter, I told you about Billy’s outrageous plan of chucking it all – our house in California 1/2 mile from the beach (and everything in it including our art work, our beautiful imported furniture, our wine stash, kitchenware, spices, our music collection) not to mention our families, our friends and everything we called familiar – and set out to travel the world.

I was less than enthused.

Billy is an idea man and he’s good at it. In fact, he’s a genius. However, sometimes the execution of those ideas can be a bit bumpy and this was a ride I did not want to take.

Billy is also very persistent, which can be adorable or absolutely annoying – depending on the circumstances. In this case, my “annoyance” meter was stuck on high.

So I said as calmly as I could, “Where do we start? What are we supposed to do to make this work?”

Work hard, save a lot, spend little, invest wisely

Now the good part.

The first thing one must do is to work hard or work smart – preferably both.

We knew all about working hard since we owned the restaurant and it was open every meal period, every day of the year. We were now working hard on working smart. We utilized the money we were taking in and paid down our mortgage. We had already paid off our cars. Billy had the opportunity through his company to sign up for matched money from his employer for retirement funds. Any employer sponsored program that was offered to help him save money or invest money, we utilized it.

Because of our restaurant background we often ate better at home than if we would have spent the $100+ going out. We banked that money instead.

We got books, magazines and movies at the library instead of purchasing new ones. We packed our lunches. Basically, we made a game out of saving money and cutting back expenses. We were fully into saving a lot and spending little, and because of Billy’s talent at numbers, we were able to invest wisely in Index funds.

Track spending

Another secret we employed is that we tracked our spending. We knew exactly where our money was going and how much of it we had. No matter what we bought (a tank of gas? Groceries? Repairs for the house?) we tracked it.

We also logged in our income.

I know this isn’t a romantic notion and actually involves a bit of effort. But remember, the reward is financial independence and the life of your dreams. You get to choose Freedom - and for us - that was the choicest morsel.

Nuts and bolts

Sit down right now with a spreadsheet or a piece of paper and list categories. Make them broad like “Housing,” “Food,” “Transportation,” “Taxes,” “Medical,” “Entertainment,” “Sanitary/Bath,” and “Miscellaneous.” If you have outstanding loans for your education, your home, your cars or other things, then list “Loans.” Ideally, in your financially independent life you will owe nothing.

That’s right. You will be free from any debt and that includes your mortgage and car loans.

Now go back through your credit card statements or your bank statements and enter the amounts you have spent for the last year into those listed categories.

Then add those figures up. That number is what you are spending per year to live the lifestyle you currently have.

Now, just for kicks, divide that number by 365 (the number of days in a full year) and discover your cost per day figure. Does this number surprise you? Delight you? Scare you? This is the amount of money you are spending per day to live the lifestyle you currently have.

So What?

What’s important about this cost per day figure is that you can choose to manage it.

It’s the number you want to keep an eye out for – because if you can actively control that figure, then you have half the battle won.

Next

To calculate what percent of your net worth you are spending this is what you do.

Take everything you own, the equity in your home, the paid-for cars, your furniture (if you were to sell it) your jewelry – anything of value and add that up. That is what you own.

Now, add up everything you owe: your student loans, the balance on your mortgage, the car loans you have outstanding, etc. and subtract that figure from what you own. The figure that is left is called your Net Worth.

How does that look to you? Need some work? Or are you on the right path?

Ok, so now take the amount you are spending per year and divide that number by your Net worth. That figure is the percent of your Net Worth that you are spending per year. Analysts say that for retirement, a Safe Withdrawal Rate is 4% or less of your liquid Net Worth, assuming that you are invested in a balanced portfolio, 60% stocks, 40% bonds.

A 4% withdrawal rate of your liquid net worth is considered to be the amount of money you can spend per year during your financial independence, allowing for inflation and market fluctuations.

How did you do?

For most people, they find that they either need to spend less or save more.

Where did you find yourself?

How Social Security could play into this equation.

When you reach retirement age, you will have a certain amount coming to you in Social Security. This is how having that SS money could work for you in terms of raising your net worth.

As an example; let’s say your social security is estimated to be $1,000 per month or $12K per year.

And at present (in 2018) the guaranteed US Government 10 year bond is paying 2.85%. Based on the above data you would need to have approximately $420,000 dollars invested into this government bond to achieve $12,000 in annual income.  

Now add this amount to your net worth and recalculate your withdrawal rate. 

Looking better? With this net worth boost you may be closer to financial independence than you realized. Of course you have to be eligible to receive Social Security, however, knowing you’re that much closer to your goal of financial independence is a relief.

We were diligent in cutting expenses, saving a lot, managing our cost per day figure and paying off our loans. Because of our conscientious attention to these areas, we were convinced that we could live a comfortable life on less than we had done previously. We were ready to hit the road and travel.

Editor’s note: We offer an interactive spreadsheet with more detail and explanation in our book: Your Retirement Dream IS Possible.

Sell your stuff

We couldn’t bring all our furniture with us on the road, nor could we bring our extensive vinyl music collection, our art work, our kitchen equipment and spices, nor our massive work related wardrobes. We were counting down the days now, so in the newspaper we listed that we were having an estate sale. This was long before Craigslist or the internet, remember? We also made signs to post around the neighborhood saying that we were having a giant sale.

People from everywhere flocked in and took our stuff out with them. One man – newly divorced – purchased items by the room – such as our living room Italian leather couch, love seat and lounge chair and all our fireplace tools. He bought our kitchen down to the boxes and boxes of spices. And he loved our vinyls, so he bought the whole collection without looking at most of them.

After two weekends of this, we then hit the flea market. I sold artwork, tapestries and Ming vases for a steal of a price! After days of this, what was left over went to Goodwill or we put into storage. We didn’t let anything hold us back!

Tip: Whatever you think you might want to keep in storage cut that by two-thirds and save the money. Just gift it away. You won’t need these things, and it’s better to just start out that way without the added expense of buying your stuff all over again by paying storage fees. 

Our friends and family thought we were crazy

Emotionally, this was our biggest obstacle. We never let on during the 2 years it took us to track spending and save every dime we could that there was a reason to our “madness.” There was no word for what we were doing, and our family and friends thought we were nuts.

No one except those on the show The Rich and Famous were independently wealthy… what made us think we could be?

Questioning

Why leave perfectly good jobs? Why walk away from a gorgeous home minutes away from the beach? Why not have a pet, get new cars, and fill your living room with an entertainment system? Your Bar-b-que is old! Get a new one! We just bought this awesome bottle of Cabernet and it was only $75! You should too!

It was hard not having their support, but at the same time, it let us know what we were made of and that we were able to decide on a goal and stick to it.

No one size fits all

While there are many ways to live a life, and we aren’t criticizing anyone’s choice, for us, Freedom was our motivator.

During our darkest moments of wondering what we had gotten ourselves into, we made lists of things we wanted to learn (how to play the saxophone, learn to watercolor) places we wanted to visit (Asia, South America) books we wanted to read and everything possible that held our interest. That list was long and it continues today.

We are not the sort to become bored, but with our list in hand, on day one of financial freedom, we could always check our list if we doubted why we retired early.

Uncharted waters

We were now in uncharted waters. Billy had gone ahead to the Caribbean Island of Nevis, West Indies where we knew island life was slow “mon,” while I finished up with the sale of items and packing stuff away in California. There, he secured a “temporary transition job” with the Four Seasons Resort Hotel. The official resort opening was coming soon and they needed his expertise to monitor restaurant staff and taste the food this new hotel was making.

I was to meet him there in a couple of weeks.

Challenges make us grow

But something happened on the way to the island.

Remember, this was January, 1991. The Gulf War had just broken out and the news was filled with terror. No one knew how long this war would go on and the media told everyone not to fly.

We had not planned for this unexpected challenge.

Billy and I would speak on the telephone (there was no Skype or email at the time) and there he is on a laid back island in the Caribbean and I’m on the coast of California telling him I can’t fly to his location. I just can’t risk it.

Silence on the phone

Remember now, I no longer have a job. I have no furniture since I sold it all, and I don’t really have my home, since we planned to rent it out. To pay for our mortgage myself - while Billy was on St. Somewhere - didn’t fit the plan.

In slow motion I sat on the floor in front of the TV and watched the news. My family and our friends told me I should stay there in California where it was safe and let Billy manage on his own. We are not foolhardy people, but to lie in bed with my imaginary blankets (the ones I sold) pulled up to my eyes just wasn’t our style.

No matter how conflicted I felt, I had to get on that plane. I simply HAD to look danger in the eye and worry about peeing my pants later.

Billy and I hung up the phone with Billy not absolutely sure that I would arrive via flights and water taxi as planned or be talked into staying in California. The Caribbean was thousands of miles away. Visiting there was one thing. Planning to live there for six months was quite another.

What was I going to do? 

To read Part 3 click here

What's Your Number? - How much money do you need to retire?

Retire Early Lifestyle appeals to a different kind of person – the person who prizes their independence, values their time, and who doesn’t want to mindlessly follow the crowd.

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