FI Needs the RE!

The (ability to) retire early part is the primary thing that makes the Financial Independence Retire Early (FIRE) community different from all the other personal finance approaches. We CAN retire early, and we as a community should own it.

The following chart illustrates how FIRE principles compare to that of other, non-FIRE personal finance voices:

Personal Finance PrincipleFIRE CommunityCFPs, financial counselors, Dave Ramsey, Suze Orman, 50-30-20, et al.
Track SpendingXX
Separate discretionary and non-discretionary spendingXX
Make cuts from spending to enable savingsXX
Increase incomeXX
Pay off consumer debtXX
Build strong emergency fundXX
Tax planningXX
Save and investX
Savings percentage target (i.e., time to retirement choice)40, 50, 60%+ (ability to retire 20 plus years earlier and much earlier than age 62)10-20% (retire at traditional age 62-67)

As you can see, most of the principles are essentially the same. The key difference that sets the FIRE community apart is the high savings rate and the ability to retire early. 

The push for a high savings rate has driven the community to devise creative ways to reduce spending and/or increase income to achieve that savings rate, while still maintaining a quality lifestyle. It is the prospect of early retirement that drives the high savings rate and the subsequent ingenuity to achieve it.

The RE part of FIRE is what attracts media attention and gets people reading the MMM blog, listening to ChooseFI, and engaging with so many other FIRE content creators. Without the RE, we would be essentially the same as all of the other voices in the personal finance space.

The RE is what drew me into the FIRE movement. I learned about FI in 2017, and I was super excited about the prospect of early retirement. (I honestly didn’t realize I could buck the norm.) I left my government job in 2020 at age 52. While the FIRE community shares lots of interesting and valuable resources on personal finance, it only hooked me because of the RE option. 

Even though I later worked full time for one year in a new career field (personal finance education for the military), I didn’t HAVE to work. By achieving full FIRE (i.e., the ability to retire) I have the complete menu of life options to do whatever I want and to weather any financial storm (OK, except maybe not the zombie apocalypse).

Naysayers of RE

We often hear members of the FIRE community, including numerous FIRE content creators, complain about the RE part of the FIRE acronym. They say things such as the following:

  1. I don’t want to have to retire and just sit around on a beach all day–I’d be bored.

Achieving FIRE means achieving Financial Independence with the ABILITY to Retire Early. But FIWTATRE is a long and crummy acronym, and FIRE is a really cool acronym. 

Having the ability to retire never meant I must. It is my choice. 

But even if you do retire, that doesn’t mean your only option is to sit on the beach all day or sit on the couch eating Cheetos all day. Seriously, we need to stop using these ridiculous binary stereotypes when describing early retirement. 

FIRE community members think differently to include how they spend their time. I have yet to meet anyone who retired early and spent every day at the beach sipping fruity drinks. Even traditional mainstream retirees generally know to keep themselves engaged in interesting hobbies and connect with family and friends to enjoy their retirement. The list is long and fascinating of the many things financially independent, early retired people do with the time they’ve earned.

I got rid of work and other commitments that didn’t make the top of my list (such as maintaining a house and car), and I increased all of the things I wanted to do more of. I get plenty of sleep, stretch, travel full-time as a nomad, read, hike, walk, write posts for this blog, spend time with family and friends, and follow my curiosity. I easily fill my days and I am consistently happier and more content than I ever was working full time.  

We as a community need to stop letting those on the outside define our terms for us.

  1. I love my job, so I don’t need to save so much money, because the RE part of FIRE isn’t my goal. I plan to work until I’m 65 (Coast FIRE, Barista FIRE, etc.).

I am sure there are a few jobs (as well as some self employment) out there that are amazing  and enjoyable. But achieving RE is still the key to this movement because things can and often do change in our work lives. Changes that may make a person really glad they are financially independent and CAN retire early if they wish include:  

  • A new, terrible boss rolls in. 
  • Your company lays off employees due to downsizing, a merger, going out of business, etc. 
  • You’re injured and can no longer work.
  • You change your mind about how great the job is. 
  • A pandemic strikes and closes down whole industries (to include many entrepreneurs).
  • You decide to travel full time instead of working.
  • Your parent or child needs more care than your job allows you to give.
  •  I’m sure there are many more good reasons. 

The ability to retire early provides all job, sabbatical, and retirement options if (when) any of these events occur. While Coast FI and Barista FI are really cool options, they both still require some level of continued work and therefore they do not give you all the options and safety net of achieving full FIRE–the ability to retire early. 

  1. People outside of the community call me a hypocrite when I claim to have achieved FIRE but continue to make money, so I think we should drop the RE part.

Why would we let the outside world control our narrative? RE means the ability to retire early. After achieving that, we can do anything we want, to include ignoring what naysayers are saying. If that somehow seems too hard, then just state that FIRE stands for Financial Independence Retirement Eligible.

  1. Retiring means I can’t work any more.

Nope. Many traditional mainstream retirees work for money (gasp!). Why would FIRE retirees be any different? Again, the RE is not mandated retirement, but rather having all the choices to design a life that the ability to retire enables.

  1. It sounds nice to retire early, but I don’t want to be deprived or unhappy to get there. 

This is just not true. Being frugal and saving money actually has its own rewards, and it does not have to cause deprivation and unhappiness. A frugal life can actually be happier. As modern-day philosopher Naval Ravikant explains, “Money doesn’t buy happiness – it buys freedom.”


FI = 25 X expenses = passive income covers expenses = ability to not work = RE

We don’t need to rebrand FIRE to somehow get rid of the RE. We need to own and embrace the RE and control the narrative on its definition–the ability to retire early. Instead of diluting the definition of FIRE to include people who save 5-10% each year and retire at age 67 and labeling it “Career FI”, we need to embrace the higher savings rate that an early retirement goal drives. This is what sets us apart from the cacophony of all the other personal finance “experts.” 

FIRE, all four letters of our acronym, are what make our movement powerful.

Frugality Increases Happiness

And as a corollary, frugality does not mean deprivation, suffering, or unhappiness.

Spending more does not equal more happiness just as spending less does not equal less happiness. While frugality is core to how we achieve FIRE, it does not have to mean a life of deprivation. The FIRE community is too creative for that.

Setting the Stage

Recently many FIRE content creators have espoused the view that the FIRE movement has recently “evolved” from deprivation, driven by extreme frugality to, now, increased spending on stuff we “value” somehow causing increased happiness along the way. (“I like expensive cars, so I should buy a new expensive car since I VALUE expensive cars and now I am happier” — at least until the shiny newness wears off.)

Definition of Deprivation: “the fact of not having something that you need, like enough food, money, or a home; the process that causes this

  • neglected children suffering from social deprivation
  • sleep deprivation
  • the deprivation of war (= the suffering caused by not having enough of some things)” – Oxford Learners Dictionary

That deprivation-to-value narrative should not be conflated with an unhappiness to happiness narrative.

As Mr. Money Mustache’s (aka Pete Adeney), Vicki Robin (author of Your Money or Your Life), and many others have long demonstrated that frugality while pursuing FIRE does not have to mean either deprivation or unhappiness.

Pete and Vicki advocated for finding contentment in “enough.” Pete did this while living on less (~$25K a year with a paid-off house). He didn’t (and doesn’t today) live a deprived or unhappy life. Pete and many other FIRE content creators since 2013 have demonstrated replicable, creative ways to spend time with family, stay healthy, commute, eat well, etc. without spending a lot of money. 

Frugality Increases Happiness

I realize this may sound counterintuitive (especially with the marketing world trying to convince us otherwise), but I have found that spending more does not lead to increased sustained happiness, while spending less frequently does lead to increased sustained happiness. How could that be?

There are three main reasons for this surprising truth:

Main Thing #1: I can usually get or do essentially the same things for much less

Frugality is the superpower of FI. It is the core that enables us to create margin that we can use to pay off debt, save, and invest. Even a high-earner making $400K+ has to reign in spending or risk having a low net worth, as well illustrated in Thomas J Stanley’s book The Millionaire Next Door.

Cutting back on spending does not mean that we have to live a life of deprivation. My favorite cutbacks enable me to save money while still enjoying the same or close to the same goods or services. These are the “invisible” cutbacks–those that are not noticeable or barely noticeable with a little research and planning. 

Some examples:

  • Taking great trips using home exchanges (free lodging and lower food costs) and travel reward points (super low-cost airfare)
  • Going camping with our family instead of paying for high-priced hotels and eating out.
  • Arranging free pet-sitters through an online pet sit platform, such as, instead of paying for pet care.
  • Making high-quality coffee at home and putting it in a reusable travel mug instead of buying disposable cups of expensive coffee on the go (which is also better for the environment).
  • Getting free books (physical, digital, and audio) and movies (physical and digital) from the library and not buying or renting them.
  • Having my wife cut my hair instead of spending the time and money to go to a barbershop (as a full-time nomad, this is fantastic as I would hate finding a new barber everywhere I go). Note, Pete (aka MMM) has a video on how to cut your own hair.
  • Switching to a low-cost cell phone carrier
  • Hanging out with friends at one of our houses instead of paying high drink and food prices going out.
  • Repair your appliances using YouTube videos and inexpensive parts ordered online AND have a great feeling of accomplishment! 
  • And a plethora more (useless but funny link to Three Amigos “plethora” scene)

But wait! Many of these suggestions require (1) more of my time or (2) adjusting what I get or do, or (3) both, to save some money. How could I be happier by doing that?

As Dan Ariely and Jeff Kreisler illustrate in their book Dollars and Sense, we humans love getting a bargain (perceived or real). However, instead of being duped into buying over-priced merchandise that is “marked down” (dang marketers using this truism against us) we in the FIRE community find ways to buy the things we need for less and reap the enjoyment of a true bargain.

I have found that spending more either (1) leads to a feeling of disappointment if I feel like I spent to much for something OR (2) has provided only a fleeting amount of enjoyment. (See one of the many good articles on hedonic adaptation.)

It makes me happy to get good value for a lot less money. I can live the same typical middle-class life, but spend way less than most middle-class Americans by making some simple adjustments of what I buy or do.

It makes me happy to repair my refrigerator, microwave, dryer, vacuum cleaner, car side mirror, and lots of other things, saving thousands in repair costs–AND I have increased my skills and confidence along the way. 

It makes me happy to save time. If I didn’t repair something myself, I would have to spend time researching a repair company, calling to make an appointment, taking time off to be at home during the appointment, keeping an eye on the repairperson, and paying them a lot for their service (which took me time to earn). I actually save time doing it myself, and I get to do it when I want to, not when the repairperson is available.

KEY POINT: We can do essentially the same stuff AND reap the enjoyment of saving money for our future to buy more time to do what we want!

Main Thing #2: Happiness is primarily derived from family, friends, nature, health, learning, and helping others–not from spending more money.*

*This isn’t just my opinion, check out the extensive research by Dr. Arthur Brooks, Wes Moss, et al. While visiting family and some hobbies may cost some money they can often be done for a lot less (see Main Thing #1)

I have increased my long-term happiness without spending a lot of money. 

My best memories with my family involve family game nights (homemade pizzas and hours of playing games), camping and hiking together in the woods, home exchanges to great destinations with travel rewards points paying for most of the airfare, and reading great books from the library out loud together. 

My best memories with my friends are from pot-luck parties and hanging out in our backyards around a fire pit enjoying a high quality beverage, or going camping and hiking together. I don’t watch a lot of movies, but when I do, I have a lot more fun watching a video at home free through Kanopy at my public library or renting it online where we can pause and chat about the movie. In contrast I find spending $16 each to go to a movie theater that is so loud I need to wear ear plugs and I can’t chat or take any breaks a lot less fun or interactive.

My wife and I love taking free extended fitness walks along the trails around our quasi-urban house on the edge of DC. We walk along the creek and see deer and birds and lots of other people walking, jogging, and biking. We enjoy the benefits of nature and increase our happiness without spending a penny. As we travel the world, it is a rare location where we can’t find some close-by place for spending time in nature.

Happiness is rarely about the stuff we buy or the amount we spend, but about the time we spend with family, friends, learning, and helping others.

I didn’t need to spend a ton of money going to a restaurant, hotel, or buying books to increase my happiness. I have found that when I spend a lot of money on a meal out or other expensive endeavor, I am often less happy because my expectations were higher and I was underwhelmed.  

While we all have felt a jolt of pleasure from buying something new, we need to recognize and separate happiness from these fleeting moments of enjoyment. 

Main Thing #3: I am happier when I have less – both stuff and commitments

Separating our identity from our stuff enables us to pursue happiness in less-expensive ways. 

As my wife and I sold, gave away, or otherwise disposed of 98% of our personal belongings, I became a different person. Minimalism changed who I am for the better! 

By getting rid of my musical instruments, canning equipment, lawn care equipment, cars, house, tools, old files and collections, I released myself from numerous commitments and freed up enormous time and resources. 

I jettisoned my lower-priority personas of musician, canner, home owner, etc. to focus on what I truly valued and made me happier and content. Now I’m more aware of the alluring promises of new personas through purchases, and I don’t buy that stuff anymore. I travel, spend more time with family and friends, read, exercise, and learn. I am a different, more content person.

My happiness increased when I bought less. 


The FIRE community should not conflate frugality with deprivation or unhappiness. FIRE adherents can live happy and fulfilling lives while also saving a much larger percentage of their income than mainstream Americans. 

As modern-day philosopher Naval Ravikant explains, “Money doesn’t buy happiness – it buys freedom.”

The FIRE community needs to proudly claim the key tenets of what makes this movement different from other personal finance philosophies: we are frugal, and we determine and then stick to how much spending is enough. These are the FIRE tenets that Pete and Vicki have long advocated for and they are as applicable today as they were back then. 

Spending less does not mean less happiness–done the right way, it can mean more.

IMAGE Credit: “frugality” on keyboard obtained from

Has the FIRE movement lost its way?

In a recent episode of ChooseFI podcast (a favorite of mine), a visiting host (Katie, from talked about buying “a very nice car [a pre-owned Porsche Macan with 8,000 miles].” She was quick to acknowledge that this decision was “breaking the cardinal sin of FI/RE” but the main ChooseFI host, Brad, quickly said that because it was something she “valued”, it was no problem. 

Hmmm. Is this still a FI podcast? Are these hosts even interested in FI anymore? We need to talk about this.

Over on her blog, Katie justified the purchase because she could afford it (thanks to her many devoted FI-minded followers, it seems). Buying new (or nearly-new in this case) cars, let alone high-cost luxury cars, is well documented in the FI community as a financial mistake.

It should still be recognized as a financial mistake, regardless of the changes in her income. 

She justified the purchase by claiming this was the least expensive car she had ever bought as a percentage of her income.  No.  It is still the most expensive car she’s ever bought because–and I would expect a personal finance blogger to be clear on this point–it costs tons more than any previous car she bought.

She wrote, “Sometimes I think we just want to buy nice things for ourselves. They become symbols of our hard work.” She’s not alone in using that logic, of course. That logic is why many Americans are in high credit card debt, thinking, “I work hard, so I deserve this purchase.” But she may be alone among FI-minded bloggers in trying to pass off this logic as somehow connected to FI. In the FI community, our hard work does not need a luxury status symbol to show off what we have accomplished (to ourselves or to others).

In short, I have a simple response to Katie’s position on her new Porsche: 

Buy what you want, but don’t try to change the definition of FI to justify it.

Honestly, it doesn’t bother me that she bought a high-priced luxury car. She can spend her money anyway she wants. It bothers me that she used her FI platform to justify her purchase in non-FI ways. 

She wrote about how much she enjoys her car purchase and how excited she is about it. If she were approaching this from an FI-minded perspective, she might notice that her Porsche is an example of the hedonic treadmill: We get a temporary high when we buy something, but the high soon wears off and the new thing becomes the new normal. What more will she need to buy in a couple of years to be a symbol of her hard work when the luster of the Porsche (and the warranty) wears off?  

But enough about Katie and her Porsche. I am bothered even more that Brad, the main host of Choose FI, a podcast that has been a great source of FI information for many, claimed a new definition of FI: that she should  buy what she “valued,” and since she could “afford” the car and wanted it, then sure, OK. 


ChooseFI is an influential platform in the FI community and this justification of a luxury car purchase is going to be confusing to many who are striving toward FI.  

The definition of FIRE (Financial Independence/Retire Early) or FI hasn’t changed. Controlling spending is still fundamental to FI, and buying a very expensive luxury car (or any similar item) isn’t a FI-minded decision, even if we’ve always wanted one.

True value-based decisions are, of course, an important part of FI. Getting the best quality for the best price is a very good idea. For example, buying a high quality skillet that will last longer and cost less in the long run than a cheap skillet that will need to be replaced one or more times. A Porsche Macan, however, is not. Katie described the car’s unreliable quality (it has already been into the shop for a cracked axle), high insurance costs, her concerns over knicks in the doors, paying more for garage parking because of weather concerns, etc. Does it represent a good value over time in how to move herself from one place to another? Of course not. 

We should not confuse buying anything that a person desires as an inherently value-based decision or as the new definition of FI. This is a dangerous slippery slope: we could kick our self-justification machines into high gear and say, “This X (put name of your favorite high-priced consumer good here) is what I value because I deserve it as a symbol of my hard work” regardless of X’s true value and its impact on our FI progress. 

And, if I can justify buying X, then I can also justify buying Y, and Z, and XX, and YY, and ZZ, and soon I’m back to square one with a closet full of rarely worn clothes, numerous subscriptions I don’t use, eating out frequently, daily lattes, etc., and I’m left to wonder where all my money goes each month. Did this redefinition work out for me? No, thank you. 

Just Because I Can Afford It Doesn’t Mean I Should Buy It

FI is different for everyone. Some people don’t want to live an extremely lean life to get to retirement or while they’re in retirement. But also, we can’t undermine the importance of controlling expenses when pursuing FI. By limiting what we spend, we can more readily put aside enough money in investments to produce perpetual income to cover our expenses in retirement.

I first learned of this concept through Vicki Robin in her book Your Money or Your Life, and Mr. Money Mustache hammered it home for me in his popular blog. The core of their messages is that we need to learn what is enough and resist all of the shiny trinkets that the American marketing machine pushes on our society. The result is a good life that is also good for the wallet and good for the environment.

Don’t touch my daily latte!

The Porsche Macan isn’t the only indicator that there are leaders in the FI community who may be eroding the concept of controlling spending. I keep encountering FI blogs and podcasts that have “evolved” in their thinking, and they now embrace a buy-whatever-you-value mentality. 

I first noticed the change in financial debates around the daily latte. With voices like Remit Sethi saying not to worry about the daily coffee expense (who Brad has echoed on ChooseFI).  I have seen many blog commenters who ask “Why can’t I spend $5 or more a day on coffee in a disposable plastic cup? It is what I value!” Or, “$5 won’t make a difference in my retirement if I focus on earning thousands more in income instead.” 

Many FI content creators appear to be persuaded by this pushback and have seemingly stopped mentioning the lattes, and softened their guidance on controlling costs for cutting subscriptions and eating out less often.

A basic tenant of FI is to spend less than you make. A person interested in pursuing FI needs to control spending somewhere and the non-essential categories like daily lattes — or any small luxury you indulge in on a regular basis, such as bottled water, fast food, beers at a bar — are a good first step. 

The daily latte is simply a good example of how many Americans can quickly save some money to pay off debt and start an emergency fund. This advice may not be getting clicks or new listeners, but the original FI advice is still the solid, simple, effective advice that is going to help get a person to their FI number. 

We could skip the daily latte and buy a decent coffee maker, get some quality coffee grounds and a reusable, good-for-the-environment coffee mug (with a no-spill lid), and make our own. We’ll achieve the same quality (if not better) coffee while saving money and making a better environmental decision as well. There is almost always a way to get the same or similar value for less money with a little bit of effort.

FI requires some effort to get the same or similar outcome for less.

My favorite spending cuts are ones where you don’t end up losing much if any value from the cut back in spending (e.g., brew your own fresh coffee as mentioned, drink with friends at home on the patio/deck instead of at a bar, watch free movies through your town’s public library Kanopy account, negotiate discounts for the same service for less, etc.). Fundamentally, we need to control spending to make progress toward FI. Same as it’s always been.

But what if I just make more money, right?

Well, no. If we don’t control spending,  additional income can disappear just as fast. This is well explained in The Millionaire Next Door, where a person making $400K or even $800K a year can still be living paycheck-to-paycheck and not build much, if any, wealth. Authors Dr. Stanley and Dr. Danko refer to these people as Under Accumulators of Wealth. No matter how much you make, there must be some control of spending.

Even doctors married to doctors have to put a limit on the number of boats they own, and amount spent on luxury cars, eating out, high-priced luxury real estate if they want to be able to stop working at some point and enjoy a fat FIRE lifestyle. Controlling spending is a key FI tenant, and we content providers in the community should not shy away from this. 

We as a community need to continue to emphasize that controlling spending is essential to FI, even if it is not sexy or popular. Cutting daily $5 lattes is still a good example–it builds a strong habit each morning to decide to live a little differently that day–and for those still digging out of consumer debt, the small extra money does add up and make a big difference! We need to help hold each other accountable on our discretionary spending so all of us can successfully make it to our FI goal. 

FI content creators in particular need to keep the definition of FI focused on controlling spending and having enough. Let’s not dilute the definition of FI to justify buying whatever we want in the moment. People just finding FI for the first time deserve to hear from us what really works. Let’s keep it real. 

*Photo by Kelly Sikkema on Unsplash

Rent vs. Buy: the Power of Inflation (and a fairer calculation)

The FIRE community talks a lot about the rent vs. buy discussion. Which is the optimal financial decision for your personal housing and how to calculate that? While there is great information out there to help you decide, I see two important considerations often left out of these discussion:

(1) Many compare a short horizon for buying a house with a long horizon for investment of down-payment funds by renters (opportunity cost). A long-term horizon should be used for both.

(2) Many overlook the long-term impact of inflation on this financial calculation.

If you treat your personal home as an investment (for example, avoid unnecessary house upgrades and be willing to rent out your home if you need to live elsewhere for a while) and use the same long-term buy-and-hold strategy that an index-fund investor uses (a 20 to 30-year horizon that smooths over the ups and downs), then buying a home for your personal use (in other words renting to yourself) is often a good investment – especially due to the power of inflation.

The pendulum has swung on this topic. For years, the common advice was that “renting is throwing your money away” and “your house is your biggest investment.” In response, many prominent articles, blogs, videos, and podcasts have weighed in on this decision arguing the wisdom of renting. These include:

JL Collins: “Rent v. Owning Your Home, opportunity cost and running some numbers” and “Why your house is a terrible investment

Go Curry Cracker: “How I Made $102k in Real Estate and Am Poorer For It

Preconceived Podcast interview with Brad Barret: “173. To Buy or To Rent?” and ChooseFI episode “House FIRE | Ep 414

Next Level Life YouTube video: “Should You Buy A Home or Rent? | Renting Vs Buying A Home

NYT Article:

NYT calculator:

While each of these pieces have great information, they didn’t fully include the power of inflation over time for both increased rent prices and the inflation-hedge of a fixed-rate mortgage. The one exception is the NYT calculator. It did include inflation, but it did not appear to weigh inflation appropriately if you own your house over a long time (based on my testing of the calculator parameters). I believe that omission misconstrues a key part of the Rent vs. Buy financial evaluation.

This post is responding primarily to the first article by JL Collins and uses JL’s comparison formula as a starting point.

Why does Inflation Matter?

(1) Because rents generally increase over the long-term, but fixed-rate mortgage payments (P&I portion) stay fixed. And (2) while the value of a home rises slower than the stock market index, that smaller increase is for the entire value of the home — not just the down payment and other accrued principal. For example, $100,000 in the stock market getting say a 12% avg annual return is the same as a 3% return on a home valued at $500,000 with a 20% down payment of $100,000 – both gain $12,000 in value the first year (excluding taxes on those gains).

We have seen recently how the increase in inflation and increased demand for remote work have generally increased home prices across the nation. Rents have also dramatically increased. One article indicates the U.S. medium rent amount has increased by an average 8.85% per year since 1980 (although not in either of the two areas I own homes). But even in times of lower inflation, house prices and rents tend to rise over time. In recent memory, only 2010 gave the U.S. real estate market a very short period of rent deflation.

So the longer you hold your low fixed-rate mortgage property (assuming you refinanced at the historically low rates between 2012-2021 timeframe), the greater benefit you will have from inflation as the majority of your house payment will stay the same over time. The amount you would pay in rent would increase over that same period. To illustrate below are a couple of examples from my own experience below.

But first, a couple of caveats and assumptions:

  • Real estate is local. I use a Midwest example and an east coast example.
  • I’m not asserting that buying a house is the BEST possible investment. I contend that it can be a GOOD investment (part of a diversified investment portfolio) and often better financially than renting a comparable house when all numbers are considered.
  • I assume you’re familiar with investment returns and other general financial concepts, so I’m not getting into lengthy explanations here.
  • My buy-and-hold strategy for houses means that if I decide (or am forced) to move I will rent the house until I can return — I won’t sell. Selling a home too soon changes the calculations and makes buying less likely to win the financial comparison.
  • If I do need to rent my house, I do not hire a property manager (more on this below).
  • I ignore renter’s insurance. I agree with Jeremy at Go Curry Cracker that I can self-insure. If you can’t (many landlords require it) or don’t wish to self-insure, add that cost to renting.

Running The Numbers

I fully agree with JL that the key is to run the numbers for your specific situation and not assume one choice is automatically better than the other. However, JL’s example (and formula) appears to undervalue inflation benefits over time for principal and interest. For example, in his blog post comments he equates rent inflation increases to be equal with inflation increases in property taxes, insurance, and maintenance and thus offset each other. However, my data indicates otherwise because the majority of the mortgage payment is P&I which remains the same over time.

Also JL provides a very high repair, maintenance, and insurance cost of $7000 average per year (in 2012 and prior). National averages for repair and maintenance are approximately $3,000 per year and insurance certainly doesn’t cost $4,000 (I hope!). My records for the two houses I own show a much lower average for maintenance and repair costs. The breakdown for each is as follows:

For my large Ohio house, even after reroofing ($13K); completing a $3500 tree trimming; replacing the fridge, dishwasher, air conditioner, furnace, garage door opener, new bathroom floor, and decking (Trex composite); having the whole interior repainted professionally and completing numerous other small repairs and maintenance, I have averaged $3,784 per year over 13.5 years. I expect this average to go down now that I have upgraded the primary systems, and if I add insurance, it increases to $4,548 average per year — still significantly less than JL’s $7K figure.

My home in Virginia has cost me much less in maintenance and repair ($1635 per year for 10 years). In part because I enjoy doing a lot of repairs and maintenance myself, but primarily it’s because I’ve had fewer major system replacements (I did paint the interior, re-roof, replace the gas lines, install new windows, and replace the stove).

So, while I had a couple of expensive years with repairs and maintenance for both houses (especially those new roofs), the key is that these costs even out over time IF you hold onto your house. Those roof shingles usually need replacing only once every 30 years.

I did not include any costs for upgrades. I find most upgrades (such as an upgraded bathroom or basement renovation) tend to be net financial losers as they rarely return full value for the cost in increased home value, especially when you look at opportunity costs of using that money elsewhere.

Similar to JL’s buy-and-hold strategy for stocks, we need to buy-and-hold when we buy a house. Just as you should hold your stocks for 20-30 years, hold your house for 20-30 years or more to get the long-term investment returns and most benefit from inflation.

These returns get better with each year as the mortgage payment typically grows at a much slower rate than rents do and homes tend to increase in value – on average around 3.5% to 3.8% per year.

Again, real estate is local. My home in Arlington, VA has increased in value by ~48% since 2013  (avg 4.6% per year) while my home in Dayton, OH has increased ~37% since 2009 (avg 2.4% per year). But I am not selling either house any time soon as I am enjoying how inflation is my friend in both markets.

Apples to Apples

JL compared his large house he owned to a small apartment he planned to rent when he was downsizing. As he states in his comments, he did an apples to oranges comparison. But an apples to apples comparison may be more relatable for many people looking to make a buy vs. rent decision between two comparable houses.

When my wife and I went from being a couple to having a family, we shifted from an apartment to a house. We wanted the larger space, the yard for the kids, and the good schools that often come with SFH neighborhoods. We knew where we wanted to live and the size of the home we wanted–we just needed to decide if we should buy or rent that house.

So instead of comparing the rent for a small apartment to rent for a family-sized home as JL did, I believe comparing renting a 3+ bedroom/2 bath home to buying a 3+ bedroom/2 bath home is a more common situation when considering whether to rent or buy in a particular location. So in his example, renting vs. buying comparable apartments.

In Arlington, VA in 2013, rent for a comparable house to the one we bought would have been $3,400 per month while our mortgage house payment was $2783 (3.25% interest). Our first month’s principal of that payment was only $857. Since principal increases a little every month, I use the mid-year monthly numbers when calculating the annual amounts to track the opportunity costs.

Getting to the Math

To make the financial comparison, JL’s basic formula is:

Opportunity cost (equity * annual investment return %). [Note: JL used VGSLX because he would otherwise invest in real estate. This number needs to be lowered for taxes (JL’s formula did not appear to do that)].

+ Total annual cash expenses which comes from adding up these annual outlays:

  • Maintenance & repair & insurance
  • Real estate taxes
  • Mortgage interest (note: excludes principal)
  • Subtract tax deduction savings

Total annual cost of owning and operating the home = Opportunity Cost + Total expenses.

Subtract annual rent to get annual premium (or savings) to live in the house FOR a single year.

JL’s formula doesn’t appear to factor in inflation over time. I have created a spreadsheet (see images below) using the detailed numbers for my Virginia and Ohio homes over time to indicate that, early on, renting is likely better (depending on your investment return and inflation variables). But, over the long-haul, buying (depending on your variables) is likely better–due primarily to inflation.

In my spreadsheet, I factored in opportunity cost for the down payment AND the amount of principal that is tied up in the house over time using the same investment return rate compounded annually.

But even with a high average investment growth rate (12%–much higher than JL’s 3.5%) and lower than average real estate value growth (2.5%) both houses were more profitable to buy AFTER several years (9 years VA and 7 years OH), and they got better over time even after the tax benefit was reduced by the Tax Cuts and Jobs Act of 2017. Based on actual property growth rates I saw profitability at 3 and 7 years, respectively.

Here are the Virginia house results:

Screenshot of Arlington, VA house calculations

…and here are the Ohio house results:

Screenshot of Beavercreek, OH house calculations

If you would like to play around with the numbers yourself (e.g., adjust investment returns, inflation, or add your own house numbers), you can download the unprotected spreadsheet here:

Be careful not to change the cells with formulas, as that could break the spreadsheet’s functionality. If you see an error or something missing, please let me know in the comments and I’ll take another look.

A few more notes:

While some locations may not achieve 2.5% inflationary growth, they can still be the better financial choice over renting, but you will need to hold the property over a longer period for the inflation-related benefits to make it worthwhile.

In the year you sell the house, reduce the opportunity costs from renting by the amount of the taxes/capital gains on those investments. Houses that you have lived in for at least two of the last five years provide a generous capital gains exclusion ($250K for single, and $500K for married filing jointly).

You might be wondering, “what about closing costs?.” Good question. I paid ~$6K to close on my VA house in 2013. I would have locked up around the same amount on first, last, and deposit on renting a house, so that’s a wash. After 20+ years, the $6K is a deflated pittance on either score sheet. (Note that the landlord often increases the deposit amount if they raise the rent.) I did account for selling costs in my spreadsheet when calculating the capital gain for each house.

Property manager costs: I did not include hiring a property manager if you need to rent your house out. This is a whole separate article, but like self-insuring instead of paying the renter’s insurance, I do my own property management. I have found the time costs to be negligible and property managers not worth the money in my experience.

Making additional principal payments toward the mortgage isn’t supported by my data. By doing so, you would lose some of the benefit of paying off a fixed P&I amount with future inflated dollars. Many people’s wages receive inflation adjusted raises and make paying off their mortgages easier over time. Also, the more money added to the principal will negatively impact the opportunity costs comparisons as the house value will change (usually it will increase) regardless of how much principal is paid.

Bottomline: Inflation makes a big difference

My decision to buy instead of rent in Arlington, VA returned roughly $206K over the last 10 years than I would have gained with renting a comparable house and investing the down payment and principal.

Likewise, my Ohio house returned roughly $24K more in the last 13 years than a comparable rental. This is despite having lower than average capital appreciation (2.4% vs. 3.5%).

While $24K may not sound like much, don’t forget that these returns are above and beyond what I would have gained if I rented a comparable house and invested my available down payment cash at a 12% annual average return. This difference would be even higher if I had invested in real estate index funds (e.g., VGSLX which returned ~7% per year 2013-2022) or the 3.5% dividend amount that JL used for his calculation.

This only works if you keep the house for the long-haul. If you are going to sell before you breakeven, then renting is the better financial choice.

I hope this helps you to calculate the long-term financial value of renting vs. buying a comparable house, and helps you make a decision that’s best for your situation.

Addendum: After completing my analysis I stumbled onto Nerdwallet’s Rent vs Buy calculator. This has comprehensive variables you can input to make your comparison. I like the graphic that shows when the cross-over point will occur for buying vs. renting. However, I cannot access their formulas, so I’m not sure how they work behind the scenes. It uses statewide average property tax rates which do not reflect many local tax situations. Likewise, I find using a percentage of property value as a poor measure for repair and maintenance costs. For example, my less expensive OH house cost a lot more to maintain than my more expensive VA home.

I think my spreadsheet, updated each year using actual annual investment returns and inflations rates, will provide a more accurate picture if you wish to track your house’s real time performance and whether it’s better to rent or sell if you need to leave your home for an extended period of time. Note, high investment returns or capital appreciation percentages later on are less valuable than high returns early on due to sequence of returns and the power of compounding.

Home Exchanging: A Great Way to See the World

Since 2013, we have exchanged our Arlington, VA home 8* times (with several more planned exchanges foiled by the pandemic). We exchanged with families in Paris, Barcelona, Montreal, and Iceland, to name a few. With the world opening back up, this is a good time to share what is great about a home exchange experience.

* Update July 2023 — now 10 times (two in Pacific Northwest)

What is a Home Exchange?

A home exchange is an (informal) agreement between two families to exchange their homes free of charge. While there is no money exchanged, the online platforms charge an annual membership fee. These platforms facilitate exchanges between members. We joined, which is one of the larger platforms, but there are several other choices (e.g., Love Home Swap, People Like Us, Home Link, etc.).

There are four primary types of exchanges:

  • Simultaneous – exchange your home with another family during the same dates
  • Non-simultaneous – exchange your home with another family at different times (commonly used by people with second homes or other places to stay)
  • Hospitality exchange – host a family while you are still home, to be reciprocated at another time
  • Points exchange – stay in a family’s home (often their second home, or while they are elsewhere) “spending” points generated through the platform

A home exchange can also include an exchange of cars, lawn care, and pet care. When exchanging cars with the Prague family, we each agreed to pay the other’s insurance deductible if we had an accident. Neither of us had an accident and it was great having access to a free car for the two-week period.

While exchanging with an Irish family, we mowed each other’s lawns. We’ve fed fish and watered plants, too. We haven’t cared for dogs or cats, but that’s possible if you wish–you and your exchanging family are free to set the terms you’d like.

What You Can Save in Money

Here is a quick rundown of our exchanges and a rough estimate of our savings for buying similar lodging, food in restaurants, and extras. Note, getting an AirBnB with a kitchen would similarly save on vacation food costs. You can adjust your numbers based on what you expect to save.

Estimates of savings from home exchange over traditional hotels

Another way to increase value is to build up exchange points through your online home exchange platform. Under (the site we use), we earn exchange points for letting families stay in our home while we are away visiting family or taking some other vacation. We also earn points hosting families in our ground floor unit while we are home upstairs.

These points add up quickly and can fund additional travel when you are unable (or prefer not) to do a simultaneous exchange. You can see we have used our points for two exchanges, and we have enough saved up for a third trip.

The True Value of Home Exchanging

While saving approximately $26K for these 9 trips is fantastic and great for our budget (we also started using credit card travel rewards points in 2016 to offset our airline costs), we found the most valuable part of home exchanging is being better immersed in local culture and farther away from the tourist traps.

Our homes were located in neighborhoods, not hotel zones. We frequently met with the exchange families or their relatives and friends during our stays and shared many meals with them. We received local advice on the best restaurants, tips for getting around and what to do and see. One of our best experiences was touring Prague with a well-known Czech glass artist to include a visit to his glass studio in a communist era building.

At Czech glass artist Jiří Šuhájek’s studio in Prague (Jiří is wearing the hat)

In Lismore, Ireland, we enjoyed Irish music performed by a local family in a tiny pub. It was a Thursday night and wasn’t intended for tourists–just local people sharing beloved old Irish tunes together. Our kids were invited to try out the traditional instruments, and an older gentleman at the bar broke out in a moving song. He sang and danced right from the heart, and we, far from the beaten tourist path, were there to see it.

Enjoying a meal with our exchange family (we are on the right — I think my son ate the plate too :-0)

The nature of home exchanging encourages slower travel, because we want to take advantage of our free lodging. By limiting our city/country hopping, we delve deeper into the local area, getting to know neighbors and local shop employees during our stay. We don’t see as many cities that way, but what we see we see really well, and those deeper memories have lasting power.

What Exchangers are looking For

While home exchanges are available almost everywhere on the globe, there are more in some regions. Home exchanging is very popular in European countries, so we receive many offers from Europe. We also find that South American and British Commonwealth nations (such as Australia and Canada) are well represented, as well as European and Commonwealth expats living in other countries.

Exchangers are often looking for exchanges in NYC, other major U.S. cities with public transportation, beaches (e.g., CA and FL), swimming pools, or locations near other interesting U.S. touristy areas (e.g., major National Parks). That being said, there can be interest in out-of-the-way U.S. destinations, especially if the exchanging family has already been to the U.S. on a previous trip.

Being near DC, we find that many exchangers have either already visited NYC and want to see some place new, or they want to connect a trip to NYC with a long stay in DC.

Tips for Successful Home Exchanging

Getting started:

  • Shop around for the home exchange online platform(s) that best fit your needs. While we use, there are others you may prefer.
  • Create a great profile for your family and your house. You may not be in Manhattan, but many locations in the U.S. offer something cool and interesting. Be sure to explain how close you are to great sites or what amenities your home features. A well-written home profile will increase your exchange opportunities
  • Take great, well-lit photos. Lead with a cover photo of the outside of your home looking its very best. Follow that with the best features of your house, such as a great deck, pool, view, or balcony. If you lead with a picture of a bedroom, even if it’s really nice, viewers will assume there is little appealing about the outside of the home. After outside shots, follow up with sparklingly clean and tidy interior photos.
  • Listing more beds will help, as larger families are looking for more space.
  • Personalize it. If you welcome kids, point out the toys or other kid-friendly features of your home. Our huge tub of Legos was a big hit for a visiting 3-year-old!
Use photos that capture the best features of your house (view from our deck)

Tips for getting an exchange:

  • Send out lots of exchange queries. When we want to go to a particular location, we send out 40-50 requests. The platform populates your last response, so you can send out a volume of requests with relative ease.
  • Be flexible. We were trying hard to get an exchange in Montreal when we received an offer to go to Prague. So, we went to Prague. The next year we were trying to go to Budapest when we received a great offer in Montreal. So, we went to Montreal. If many places seem appealing, you’ll land in an appealing place.
  • Expect similar exchanges to your home. We are in a close suburb to DC, so we tend to get offers from families who live in similar proximity to their city centers. Our couple of downtown exchanges took a lot of queries (and rejections) before we landed them.
  • If you get an offer from a desired Asian location, take it. There are far fewer opportunities to exchange in Asia. We had just locked in our Barcelona trip when we received a great offer from Hanoi, Vietnam. “Missed it by that much!”
  • When you get an offer you are interested in, set-up a Zoom or Facetime call to “meet” the other family. You can see quickly that they are who they say they are and their home is what they posted. You can line up the details and discuss expectations. For example, we usually mutually agree to leave sheets and towels in the laundry room, and each family will wash their own when they return home. This makes the last day of both our vacations a little smoother. If there will be a car exchange or fish to feed, this is a good time to talk it over.
  • Keep lines of communications open. We share a guide to our house and our local area with lots of tips for great things to do and places to eat. We have helped our exchange families buy concert tickets, reserve hard-to-get museum and historical site tickets, and provided them DC Metro system cards. Families have left us gourmet treats from their area, maps, and small souvenirs. It’s part of the fun of home exchange to extend warm hospitality to each other.

No, They Won’t Steal (or Break) Your Stuff

When we share our stories of home exchanging we often hear, “But aren’t you worried about them taking (or breaking) your stuff?”  In short, no. We have had wonderful experiences with every exchange. No broken or missing items. Our house is always left clean and tidy. Even so, we do take a few minor precautions to make the exchange go smoothly:

  • Facetime call in advance with the other family to build a good relationship (see tip above). Be open and honest about any questions you have. Follow up with emails. The family will quickly turn from strangers into friends.
  • Put away valuables or breakables like laptops or car keys (if not exchanging cars).
  • Let your neighbors know what’s going on. We usually have a neighbor with a spare house key meet the exchange family (if we had to depart before their arrival). Our wonderful neighbors have enjoyed hosting the visiting family with an American-style BBQ.
  • Using our Kwikset locks, I easily reset the house locks to a separate set of keys just in case one is lost during the exchange. I then set the locks back when I get home. While no keys have been lost yet, it’s good to know it wouldn’t be a problem.

Even if you did arrive home and found something unimaginable, say, your sofa had a large red wine stain and your dishes were broken, it would still cost far less to replace or repair than what we saved on our vacation. Anything worse than that would be covered by our home insurance, minus the deductible. It would take a lot of theft and damage to offset the $26K (and counting) we’ve saved so far. Since we buy durable and functional things and our money is invested in stocks and not collectibles, it’s easy for us to relax, knowing our original Van Gogh won’t be ruined. And I believe that even if we did have a Van Gogh, it would be fine. We’ve found the people interested in this style of travel to be thoughtful, careful, and generous. It’s going to be a great exchange. 


Home exchanges are a great way to travel, both for saving money and getting a more in-depth experience away from touristy paths. It is based on trust and hospitality. I hope you will find the same joy exchanging your home as we have.

Please leave a comment if you are going to give it a try, or you have a great home exchange story to share. I’d love to hear about it!

A toast to your first (next) home exchange!

Calculating Functional Net Worth

Net worth is a key measure of building wealth. I have been calculating my net worth since 2011 so I can see my progress over time, and it’s a really useful tool.

Many people are familiar with calculating their net worth: you add up the value of all of your assets (e.g., stocks, bonds, real estate, and savings*), subtract your liabilities (mortgage, loans, and credit cards),  and the difference is your (hopefully positive) net worth.

Of course, you may have other assets that are harder to account for in this formula. For example, a military pension. My military pension provides valuable monthly income and I believe it should be included in my net worth, but it doesn’t lend itself easily to asset valuation.

How to Calculate the Functional Net Worth

How do we calculate the value of a pension—or other benefit that provides monthly income (or reduces expenses)—and include that in our net worth?

One way is to determine what it would cost to purchase an annuity that provides the same monthly income by pricing an Single Premium Immediate Annuity (SPIA) however, this method doesn’t answer the question of “How does my pension relate to my income from stocks, bonds, and other similar investments?” This is where my handy functional net worth calculation comes in.

To calculate the value of my pension, I use the 4% rule of thumb. This rule, first proposed by William Bengen in 1994 and validated in a 1998 Trinity University Study, is based on historical investment return research.

They found that investments in a combination of stocks (50-70%) and bonds (30-50%) historically returned 4%, annually adjusted for inflation, without running out of money over a 30-year period. If you decide to use a different percentage higher or lower than 4% just divide 100 by your number and get the new multiplier to replace the 25 I use from the 4% rate. For example for a 3.25% withdrawal rate, it would be 100/3.25=30.8.

But Why Calculate the Functional Net Worth?

Before I get into the formulas, I’ll briefly explain why I believe Functional Net Worth is useful.

Many personal finance books, articles, and podcasts in the FI arena make the assumption that most assets are invested in stocks and bonds and real estate. Advice around diversification, spending limits, and other guidance often relates to a percentage of total assets invested.

But if I include additional assets, such as my military pension, I can treat the pension asset as a very stable (i.e., low risk) part of my portfolio. I can invest the cash portion of my portfolio in higher risk investments (e.g., stocks) as a result with less need for investing a large portion in lower-risk bonds.

When I view my entire net worth to include my stable (and inflation adjusted) military pension, the remaining portion of my investment portfolio can take on more risk.

Military Pension

Here is my calculation formula for my military pension:

annual gross pension income*25 or ((monthly gross pension income)*12)*25)

On my Excel spreadsheet the formula looks like this:  =((XXXX*12)*25)

where XXXX is my monthly gross pension income

If monthly pension income is $3,500 per month, the calculation would be ((3500*12)*25) and would result in a pension value of $1,050,000 – yep, if you have a military pension paying you $3500 gross per month, you are a millionaire in my book.

This formula takes the annual gross income (before taxes) and multiplies it by 25, or multiplies the monthly gross income by 12 and then by 25.

Social security calculation would work similarly but keep in mind that it can be taxed differently based on your other income which could impact the calculation some.

Tax Exempt Benefits (e.g., VA Disability)

For tax exempt benefits like VA disability payments, the formula is a little bit more complex to account for the tax savings.

annual gross disability income*25 or ((monthly gross pension income)*12)/tax rate)*25)

On my Excel spreadsheet the formula looks like this:  =((XXXX*12)/0.YY)*25

where XXXX is my monthly gross tax-exempt payment and YY is the tax rate subtracted from 100 (e.g., for 22% tax bracket the number would be 0.78, for 12% it would be 0.88).

If your monthly disability payment is $2000 per month in a 12% tax bracket, then the calculation would be =((2000*12)/0.88)*25 and would result in a disability value of $681,818. This number would be higher if you are in a higher tax bracket.

Military Healthcare Benefits

This same formula (minus the low annual TRICARE premium, if applicable) also works for calculating the net worth value of the military retiree lifetime healthcare benefits. To estimate this value, I estimate what I would pay for commercial healthcare, either through an employer or the state exchanges (adjusting for any subsidies I may qualify for).

With my military income, rental property income, and retirement account income, I wouldn’t qualify for much (if any) subsidy. For a $1500 unsubsidized monthly healthcare premium (using a 22% tax bracket), the functional net worth value would be ~$576,900.


Calculating functional net worth, not just net worth, is a very useful exercise for military retirees and others with pensions or disability payments.

By adding the projected value of pension income and other high-valued benefits into my net worth, I am able to better identify what portion of my FIRE number needs to be investments, and how those investments should be diversified.

I can also better manage the risks of my investments over time. Seeing the equivalent investment amount, I would need to provide similar inflation-based income, as my pension and health care benefits, is a valuable marker of the progress I have made toward achieving FIRE.

* I don’t include cars, furniture, clothing, or other household items in my net worth calculation, because I view them as depreciable expenses that will sell for much less than I purchased them for and will generally need to be replaced when sold.

The Meaning of “Millionaire”

When host Regis Philbin asked his game show contestants and audience “who wants to be a millionaire?,” he tapped into a belief many of us learned as children, that a million dollars was the pinnacle of financial success. 

I grew up on the rural eastern side of Washington State, and many people I knew were (and still are) ritual lottery tickets buyers. Almost every week since the 1980s, these folks have purchased $1 to $5 of lottery tickets. They are buying the hope of becoming a millionaire.

Author Morgan Housel in his book The Psychology of Money asserted that “[w]hen most people say they want to be a millionaire, what they might actually mean is ‘I’d like to spend a million dollars.’ And that is literally the opposite of being a millionaire.” This statement helps frame a common misconception of what it really means to be a millionaire.

The common image of a millionaire is someone who owns some amazing stuff – high end sports car, mansion, designer clothes, annual golf club membership, First Class airfare, Rolex watch, nice boat, snowmobiles, etc., etc. But that image doesn’t account for living expenses. In day-to-day living, it just doesn’t work that way.

To illustrate this point, I decided to calculate how much money I have earned–and spent–in my 54 years of life (so far). I pulled up my taxable earnings from the online Social Security statement, then I added conservative estimates of military housing allowances, military pension, and other income sources. (Note that I did not include my wife’s earnings in this thought experiment–just mine.) Since I started working in high school (37 years ago – 30 years of full-time work), it turns out that I have earned over $3.6 million before taxes. Taking out an average of 15% tax (a very rough estimate of my lifetime tax rate to date) leaves me $3.1 million. Wow! I must be crazy rich!

Ah, but alas, I do not have $3.1 million in the bank. My wife and I have been good savers, but we still spent well over $2.5 million over those 37 years. We don’t own the glitzy stuff I mentioned. We have an ordinary house (with a mortgage), very used cars (19 years and 8 years old), clothes purchased with function and durability in mind, furnishing and appliances I have repaired and maintained, and my $28 watch is a trusty plastic Timex. No Rolexes here.

A lot of high-end stuff is purchased on credit. Our choice to avoid such purchases also means we’ve avoided consumer debt and its high interest rates. Excluding a lean period when I paid my way through college, I have never since carried a credit card balance or taken out any payday or other consumer loans. I paid off my student loans in my first year of full-time employment. (I recognize that college tuition has increased so much that I would need to dedicate more time and resources to pay off a comparable amount of debt today.) Other than our first car out of college (paid in full in two years), we have only paid cash for our (few) cars over the years.

So where did the $2.5 million go? Living life. Mortgage payments, food, transportation, raising kids, and other middle class life trappings. Some highlights that come to mind: we bought a $3500 used pop-up camper and enjoyed numerous fun family camping trips; we traveled abroad for two weeks each year over the 9 years before the pandemic, using home exchanges and travel rewards hacking to keep costs down. We paid our two kids’ college tuition (in-state rates). Once, with my wife’s parents, we enjoyed an amazing 5-star meal at the Inn at Little Washington for their 45th wedding anniversary. Nothing too exorbitant (except maybe the 5-star restaurant – but hey, it was a 45th anniversary!). Spending a million, or two and a half million in my case, over four decades is just not the same as the popular image of a millionaire – being rich.

So, $3.1M minus $2.5M… you might be asking, where did the remaining $600K go? I saved and invested it. Not very good investing, mind you, during the first 19 years (spoiler: we lost money), but in the last decade I got a little smarter and much luckier. Today my net worth is over 7 figures. Wow, a millionaire, right? But what about the plastic watch, old cars, and ordinary house (no master bath or garage)?

It was a tradeoff. Yes, I could have spent that $600K on unnecessary stuff. Instead, I decided to save and invest. I’m a millionaire because I have a million dollars of net worth. A major lottery win, big inheritance, or sensational entrepreneurial idea aside, it takes saving and investing, not spending, to become a millionaire and to stay a millionaire.

Since I didn’t trade that $600K for stuff, what did I trade it for? Time. I will spend most of this money saved to buy back years of my life without working. My investments will pay me enough every year to forgo having to work an additional 15 years from traditional retirement age. Since I’m retiring early, at some point in the future I may no longer be a millionaire (but I will have enough). Instead of a million dollars, I’ll have years of memories of pursuing my interests and spending time with my family.

We all have the same 24 hours a day, and the older I get, the more precious those hours feel. I’m choosing not to spend 40+ hours a week working to pay off debt as I buy more stuff for the garage and attic or spend it some other way. Instead, I will live my same simple, mostly frugal life with more hours every week to spend with family and friends, to learn, to explore, and to just be.

In a way, I feel like I won the lottery.

Taking the Leap — Living The FIgh Life

On August 28, 2020 at 5:47 pm, at age 52, I declared my financial independence (FI), packed up my personal belongings and left my GS-15 job at the Department of Defense after 9 years of civil service and 20 years of active duty. How was I feeling? As you can see from the below video, I felt great.

My financial path to this point started long ago with frugal living, focus on savings, and 28 years of investing (not always smart investing, mind you). Before we discovered FI, my wife and I travel hacked with home exchanges and credit card hacking, cut the cable cord, eliminated our home phone, switched to much cheaper cell phone plans, minimized subscriptions, drove old cars (2000 and 2003 respectively), but my FI journey can be clearly measured from just 2 years and 5 months before when I laid out a 5-year plan to quit my job for good and go to graduate school using my Post 9/11 GI Bill. 

In April 2018, my son and I were touring a college campus on the last day of a week-long trip to the Pacific Northwest. On our trip home, I made a quip about not wanting to go back to work. My son, then a senior in high school, asked me, “why don’t you quit?” I told him that I didn’t have enough money to live on, and since Social Security was unreliable, I expected to work until I was 70. But he challenged that reasoning. “Why not live in another country where it’s less expensive?” he asked. This simple question was the beginning of my rethinking the parameters I had always accepted for how much money I needed to live. 

I began searching for inexpensive countries for expats and found a long list that I could afford to live with good healthcare. One question led to another, and I was figuring out how much I needed to save to stop working. I had the Post 9/11 GI Bill benefits that would expire in 8 years, so I set 5 years as my goal to quit and go full-time to graduate school.

From that state of mind, it didn’t take long for me to find the FI community. I initially discovered The Money Habit blog and then the ChooseFI podcast that introduced me to numerous people thinking differently about money and time. I read their blogs, books, and articles, binged thousands of hours of FI-related content. I started closely tracking my spending with Mint and set-up numerous spreadsheets for monthly spending, cash flow scenarios, and how we would pay for our kids’ college after I quit. 

Seeing the numbers changed everything. The more I learned and shared with my wife who pretty quickly came on board, the more we extricated unnecessary spending from our budget, and the faster our FI date came. I didn’t need 5 years. It now became more of finding the best way to offramp from work and begin my new life. In the Fall of 2019, I applied to graduate school. 

Taking the Leap (my son is on the rock waiting to jump next)

Taking that calculated leap of faith to quit my job was exhilarating and reminded me of the time I jumped off a rock cliff on the North Shore of Hawaii. In 2017, we took a family vacation to Hawaii to visit where my daughter was born at Bellows Beach, Oahu, in the early 2000s. (She really was born at the beach, as we had a home birth on Bellows Air Force Station.) It was a great trip for so many reasons, but a highlight for me was a spur-of-the-moment decision to jump into the ocean from “The Rock” at Waimea Bay at sunset. 

Tourists and locals jumping from “The Rock” — there was also a strong current warning sign — Photo Credit

When jumping off the rock cliff, I had to trust that others had successfully and safely made the leap. I had to understand the risks and determine that I was prepared physically and mentally. Leaving my career 15 years earlier than the traditional social security age required me to trust my numbers and recognize that many others in the FI community had already made this leap–I wasn’t alone. This community was more than  great ideas to optimize investing, spending, taxes, safe withdrawal rates, and so much more. I found a community of support I could trust. 

I found virtual mentors in Brad and Jonathan at ChooseFI, Paula Pant at Afford Anything, Joe Saul-Sehy at Stacking Benjamins, Brandon (a.k.a., the Mad Fientist) at the Financial Independence Podcast as well as their inspiring guests. I also read articles on blogs too numerous to list (shout out to Carson at Early Retirement Now), and read a pile of personal finance books, such as Vicki Robin’s Your Money or Your Life, J.L. Collins’ The Simple Path to Wealth, and Kristy Shen and Bryce Leung’s Quit Like a Millionaire. Each of these helped me confirm my numbers, but more importantly they helped me break loose from cultural constraints that were deeply ingrained in me.

I found my identity was closely wrapped up in my career, and it was hard to tell others (and myself ) that I would soon be unemployed. “What will you do?” was the common response. Being a graduate student helped me make the change by providing an acceptable transitional identity. “I’m going back to school,” I told people. I did two semesters during the pandemic, then decided I was done. Now I have developed the mental freedom to just say “I am financially independent.” Am I rich? no. But am I wealthy? More than I can count. 

UPDATE: Starting January 2023, my wife and I downsized our belongs to a few boxes stored in my friend’s basement (minimalism changed who I am), rented out our Virginia house (our second rental) and we travel full-time around the world to include frequent visits with family and friends. Living a FIgh life is great!