13 “Simple and Stupid” Habits I Used to Save $1 Million and Retire Early at 35
I will remember December 23, 2016 for the rest of my life. It was my last day of full-time work.
My wife and I took early retirement at 33 and 35, respectively, after accumulating $870,000 working in information technology. With the help of the market, our net worth grew to $1 million soon after.
I was not born rich. We did not start our own business. None of us inherited a substantial amount of money. We didn’t even have hustles back then. We accumulated wealth the old fashioned way – by working hard and making strategic financial moves.
Here are 13 simple and stupid things I did that helped me escape the rat race after 14 years of career:
1. I ignored the “follow your passion” advice.
Our passions, which tend to be more creative, can’t always pay the bills — our strengths can.
Mine, for example, is photography. But my strength is in IT. In 2004 my starting salary as a software engineer was $55,000 and by 2016 I was making well over $100,000. I’m not sure I would have earned so much if I had chosen to follow my passion.
While it’s possible to combine your hobby with a high-paying, marketable career, it’s less common than you might think. Build a career around what you are good at.
Throughout my career I have worked with many wealthy people. Instead of being jealous of them, I took notes.
I will never forget Brian, who I worked with after college. He was a few years older than me and drove a six-year-old Honda Accord. Even though he was a millionaire, he had a cheap Casio watch and didn’t wear designer clothes.
Brian was always the first person in the office, never got involved in office politics and often volunteered for more responsibilities. It doesn’t come from the money. Instead, he earned his wealth by investing and controlling his spending.
If you only hang out with people who like to drink in bars and spend money, you will most likely follow these same money-losing habits.
I improved my life by improving my friends. I partnered with the best people in the office. I spent more time with people who were more successful than me. My mission was to build a relationship with them. Their habits rubbed off on me. We motivated each other.
I started making better financial decisions and reducing my alcohol consumption. At work, I regularly worked overtime and asked for raises and promotions, just like top performers. It worked.
I invested in my employer sponsored 401(k) and got the 4% company match, which was free money that my employer contributed on my behalf.
Some companies also offer Health Savings Accounts, or HSAs, to help employees save pre-tax money for eligible medical expenses such as deductibles and medications. The beauty of an HSA is that it acts like a 401(k) later in life. After reaching age 65, unused money can be withdrawn for any purpose.
Your full-time job may also provide education and training opportunities to help you build marketable skills such as computer programming, bookkeeping, and time management. These skills can be used to gain promotions and raises throughout your career.
Accepting a new job is often the easiest way to get a raise, as negotiating a higher salary is a natural part of the process.
I got a 15-20% raise each time I changed companies. This is well beyond the typical 3% increases in the cost of living that many employers offer their staff.
Just be careful not to change companies too often. Try to stay in each role for at least a year, as some employers won’t hire candidates who change jobs frequently. The hiring and onboarding process is expensive.
I used automatic payroll deductions for my 401(k) and Roth IRAs. I also used automated bank transfers to put money into my brokerage account. It has helped me save money on every paycheck.
I also signed up for automatic bill payment for utilities like electricity, water, and even some credit cards. I have never missed a single payment and avoided late fees, interest payments and other penalties.
An unfortunate part of doing something big is that you will get hate. Sometimes a lot.
People will criticize you for spending your money differently. You risk losing friends if you turn down those weekly happy hours at your local bar. It’s not always easy, but ignoring hate is part and parcel of building wealth.
Just because your neighbors bought a new car, boat, or house doesn’t mean you have to.
The best way to ignore the Joneses is to stay focused on your own goals. My wife and I talked about our hopes for the future every night while walking our dogs around the neighborhood. It helped keep our goals front and center in our minds.
We didn’t let other people’s spending habits affect ours.
Too often, spouses have different ideas about spending habits, goals, and dreams. If left unchecked, these differences can cause arguments and other relationship problems that prevent you from achieving your financial goals.
Healthy relationships depend on open communication with your partner, so you can align on goals and what makes you happy.
Talking about our future goals every day kept my wife and I on the same page about what we wanted our future to look like and what steps we would take now to get there.
Life is more than money. Above all, my health is my top priority. Good health makes you happier and more productive, and also reduces the risk of unexpected medical expenses.
In 2007, I was out of shape and in poor health. I decided to change my lifestyle by eating better and exercising regularly. Over the next two years, I lost 70 pounds and was back in the best shape of my life.
I am 41 today and I continue to train daily. This year my wife and I spent $10,000 to build a dedicated home gym on our seven acres of property. It was the best money we have ever spent.
Americans are struggling with more than $840 billion in credit card debt. Interest rates are extremely high, making credit card debt the worst of all types of debt.
I never paid a single dollar in interest on my credit card, and I owe a lot of that to my dad. He taught me that credit card debt is unacceptable, even for a month. For many people, credit cards make it too easy to spend money they don’t have. It’s a habit that can quickly spiral out of control.
I use credit cards for convenience. The fraud protection and implied warranties that many cards offer their customers are worth it to me, but that’s because I pay off my balance every month. This is one of the main reasons I was able to retire in my mid-30s.
12. I always said “yes”.
Even if I didn’t know how to do a job that was offered to me, I always accepted the challenge and discovered it as I went.
I remember one Friday at the office, I was called to a meeting with the CEO of the company I worked for. I was nervous at first, but it turned out to be the best career opportunity I’ve ever had.
The organization fired a whole management team above me, and they wanted me to be the CIO. As a low-level software developer, this giant leap seemed daunting. I had never worked as a manager before and felt totally unprepared for such a big promotion.
My mind told me to say “Thanks, but no thanks”, but I agreed anyway. I asked many questions, found mentors, and gained the experience I needed to improve my entire career from then on.
At the beginning of my career, I often went to the bar with colleagues. On each trip, I spent between $70 and $100 for the privilege of drinking. Over a month my bar habit drained my wallet $350-$400.
One day I decided to start skipping rides. I invested that money instead, and it helped contribute to the $1,000,000 nest egg I built at age 35.
Keep your spending on alcohol and latte under control. You may go out occasionally, but if it becomes a habit, you reduce the quality of your future self by spending more money than you should.
Steve Adcock is a financial expert who blogging on how to achieve financial independence. A former software developer, Steve took early retirement at the age of 35. Follow him on Twitter @SteveOnSpeed.