By Alessandra Malito, MarketWatch
Jose and Tatiana are well on their way to retiring early.
The couple reached financial independence in 2017, and have 30 times the $40,000 they intend to spend each year in retirement. They work at an investment firm and save 70% of their incomes, and in recent years have cut their spending from $110,000 a year to $44,000 a year.
Millionaires next door: One couple's frugal path to early retirement
They live frugally and save 70% of their income, and now Jose and Tatiana are trying to decide what they'll do when they retire early. The first episode of the new Marketwatch series FIRE Starters.
Paring down expenses was certainly one way to reach early retirement, but it wasn’t the only one — and it isn’t a path all individuals aspiring to retire early can try anyway. The couple knew how much they wanted to save, as well as how much they want to withdraw each year for retirement (about 4% a year) and calculated how they could make it happen.
“We wanted to be happier,” Jose said. “It’s not just about cutting expenses, and that’s the thing about the FIRE journey.”
Jose, 44, and Tatiana, 33, were not always financially independent, and came from humble backgrounds. Tatiana was born in Belarus, grew up in Lithuania, and came to the U.S. at 13 years old. Her single mother raised her and her sister, and when she got older she worked part-time jobs to help her mom. Jose, who is the youngest of eight children, and his family emigrated from the Dominican Republic when he was 12 years old. They shared a lot, he said, and when he went to college he took out loans. “I feel extra accomplished because we came to this new country where we had to learn a new language and culture,” Tatiana said. Starting from humble beginnings was helpful, she said, because when they were able to afford much more, and realized these materialistic things didn’t make them happy, it wasn’t hard to change their spending habits and cut costs.
The couple is part of the FIRE movement, which stands for “Financial Independence, Retire Early.” Americans across the country are dreaming of leaving the traditional workplace in their 30s and 40s by investing enough assets in the first decade or two of their careers so they can rely on this nest egg and its investment returns the rest of their lives. Financial independence, to many of these individuals, is the ability to leave a stressful job for a less lucrative one, even if it means making a few sacrifices along the way.
The couple shared tips they used to get to early retirement:
Get on the same page
Jose pitched the idea of financial independence to Tatiana first, saying it was a way to live their lives as they want without being tethered to a 9-to-5 job. They also sat down and reviewed what made them happy, how they spent their money and the different perspectives they had about money growing up. Jose and Tatiana realized they weren’t as interested in material possessions and preferred traveling and experiences.
“We were on the same page that traveling, eating out and doing things are fun and what we want, and not so much buying a big house with two cars and a garage,” she said.
Couples working toward FIRE, and even those who aren’t, don’t always come from similar financial backgrounds, nor do they see money the same way. Some are more interested in shopping, while other spouses might think it’s best to squirrel all of their assets away. When Jose and Tatiana met, Jose was living in a big house with a pool and consumer debt, while Tatiana lived in a tiny apartment and was always eating out with friends. “We had different lifestyles and similar incomes,” Tatiana said.