Afford Anything - How I Became a Millionaire on a Military Salary - with Doug Nordman

Episode Date: July 11, 2016

#33: After serving in the Navy for 20 years, Doug Nordman, then-age 41, retired from his military career. Most of his peers started second careers in the civilian world.    But Doug didn't. He had an ace up his sleeve: he had spent his military career saving 40 percent of his income. By the time he turned 41, he held an investment portfolio worth $1 million. Those investments, coupled with a Naval pension for $30,000 per year, propelled him into financial independence.   He's remained retired since leaving the Navy. He's now 55. He surfs three times a week. He travels to Europe on a whim. His retirement portfolio survived two recessions and is now worth $1.7 million.     In this interview, Doug shares the story of how he became a millionaire on a military salary. He also talks about the fulfillment he's found through financial independence.   Enjoy! Learn more about your ad choices. Visit podcastchoices.com/adchoices

Welcome to the Afford Anything podcast, the podcast that understands you can afford anything but not everything. So your goal is to be incredibly intentional with your time, your money, and your life. Today, we're going to hear from someone who became a millionaire on a military salary. Doug Nordman retired at the age of 41. And guess what? That was 14 years ago. He's now 55 years old. He's been retired since his early 40s and he's going to teach us, number one,

how he grew a million dollar portfolio on a military salary. Number two, what motivated him to grow that portfolio, particularly given the fact that he knew he'd be getting a small military pension, which, as he'll tell us, amounts to about $30,000 in his case. And number three, we're also going to learn what early retirement looks like. What has he done for these past 14 years since he retired? You can't retire away from the office. You can't run away from things and run into retirement.

Instead, you have to retire for something. We're going to get to all of that. But first, I have some exciting news. We have a sponsor, which is great because that means this show can definitely stay on the air. Our sponsor is FreshBooks, which is an intuitive web-based tool that makes it super easy for entrepreneurs to create and send invoices. If you use Fresh Books and you have a side hustle or run your own business, it takes you about 30 seconds to create and send an invoice and you can add your own logo. and you can add your own logo, your own color scheme, you can see whether or not the client has even opened the invoice,

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With that being said, Let's find out how Doug became a millionaire on a military salary. Hey Doug. Aloha, Paula. Thanks for having me on a show. Thanks for coming on. I'm happy to be here. I've looked forward to being a guest here for quite a while.

I can, oh, this is awesome. I can hear birds in the background. Nice. You're financially independent. You live in Hawaii. You surf every day. You seem to be outdoors most of the time. I just want to have a conversation about

how you got to this point and what happens next. So how did you reach financial independence and what happened after that? Let's start at the beginning. Tell us about your bio, starting from 18-year-old Doug. Oh, good Lord. I went to the U.S. Naval Academy because it looked like a really cool place to go to college and because I didn't visit many other college campuses before I went to that school. I spent my 20 years in the U.S. Navy's submarine force and I retired in 2002. My wife, I also met her at the Naval Academy. We joke that that's the one good thing that we both got out of a service academy. And we've been married now for almost 30 years. She was on active duty for many years with me.

And then she went into the reserves and finished out her career in her reserves. And she retired fully from the reserves in 2008. You said that your epiphany about financial independence happened before you retired from the military, just briefly for a bit of background. So I know in the military there's a career path that leads to a, retirement that is determined by spending a given number of years in active duties. Is that correct? That's right. And what happens in the Navy is it has a sort of a cliff vesting pension. You get zero pension unless you stay in a military for at least 20 years. And that's where the pension vesting begins at the 20 year point. Oh, wow. So if you quit at 19 and a half years,

it's nothing? That's right. It's absolutely nothing. It's just whatever savings you've managed to make along the way, but there's no pension. But I did 20 years of active duty and that 20 years gave me an active duty pension as soon as I retired from the Navy at the age of 41. That was 14 years ago. I think the first big advance toward financial independence was in 1992 with Joe Dominguez's and Vicki Robbins book, Your Money or Your Life. That made a really big impact on me when it came out. And just a few years later after that, the millionaire next door came out. And that made another big impact. Let me just contextualize all these time periods. So 1992, your money or your life, that book comes out,

makes a huge impact on you. How old approximately were you at this time? Were you still on active duty? Were you still working? Right. I just hit the midpoint of my career. I was 32 years old. We were just about to start a family. My wife was pregnant at the time, and we had no idea what we were getting into with being parents, but we thought we were ready, as all new parents do. And when that book came out, we began to realize that we had other priorities other than the Navy. Up until that point, my Navy career had been a lot of fun, had been challenging and fulfilling, and I enjoyed what I did in a submarine force. But when we started our family and our daughter came along, our priorities changed completely. And we wanted to spend more time being around. her and being with each other. So the next 10 years after that, it was a tough time to finish out active duty and get to that 20-year point. And in fact, I tell people today that when you're in the military to take it one obligation at a time, only one out of six people stays in the Navy to reach that 20-year point. And it's like that across almost all of the military services. One out of six people stay for a 20-year retirement. So for the sake of the listeners who are wondering, how did you reach financial independence? Did you achieve financial independence by

putting in your 20 years and then getting a pension, or is there more financial juiciness to this story? That's right. There's no fancy gossip here. There's no hidden secrets. It's all hard work, and it's simple, but it's not easy. We could have done that with the military pension. Instead, what we managed to do is save for financial independence strictly on a high

savings rate. My wife and I, oh, yeah, and the math works for everybody, whether you're in a military or not, if you manage to save at least 40% of your income, your gross income, for about 20 years, and if you invest it in equities and a good asset allocation like everybody does, then at that 20-year point, you'll reach financial independence. And for us, we had a little extra boost from the stock market of the 1990s. We reached financial independence around 1999, and I retired in 2002. So what made you decide to save 40% of your gross income?

I mean, especially given the fact that you knew that you were going to get this pension, what motivated you to also take the additional step of having such a high savings rate? Part of it was that we've been naturally frugal. We enjoyed being frugal even back before it became cool like it is today. And frugality was something that was easy to do when you're in a military because you're out sea duty, you're busy, you're working a long week. And when you're at sea, you're working almost 16, 18 hours a day. And so you don't have a lot of chances to spend your money frivolously or to waste it.

So we stay frugal and we kept saving, mostly because we were never really sure whether we were going to stay on active duty or get out of the Navy. You know, as you get to the end of every service obligation, every three or four years, you begin to wonder, do I want to stay on active duty and keep going? Do I want to get out? We just really weren't sure. So we saved as much as we could for as long as we could. And in the late 1990s, we realized, around 1999, we realized that we had reached financial independence. Huh. So that's interesting. So you wanted to give yourself the option to quit before the 20 year mark. You wanted to give yourself the option to not need that pension if you. Exactly. Exactly. And today, if I was going back and talking to my younger self, I would. I've told myself that when I started a family, I really should have left active duty and gone into the Navy Reserve, where I would have done that one weekend a month and two weeks a year for another 10 years or so. And eventually, I would have reached financial independence on our own savings rate.

And from there, we would have continued to maybe do some part-time work, maybe do a little bit of a job. But at the end of it, we would have had about the same quality of life at about the same time in our lives. And it would have been a lot less work than staying on an extra 10 years of active duty for the pension. Don't get me wrong, the pension's really nice, but we managed to reach it on our high savings rate. How much is the pension? I don't know anything about military pensions. What amount is that? It works out to about a third to 30% of what you used to have on active duty. When I retired, I was making a little over $100,000 a year, and then my pension, and when I retired was down around a low $30,000 a year. The big difference, though, in the military pension is that it is indexed to

inflation. So every year, if the consumer price index rises, you get that percentage addition in your pension, it fights inflation. And you also have cheap health care. My health care, my health insurance with TRICARE costs less than $70 per month. Wow. Yeah. Okay, so you're 41 years old. You had been making $100,000 a year. You retire from the military. Now you're collecting approximately $30,000 a year plus affordable health insurance. You theoretically, could have lived on that, but you also had this additional savings that you'd been compiling for the last 20 years. How, if I may ask, how much was that details? Oh, yeah, absolutely. And I want to tell more people about this story because a lot of people in the military find it very hard to believe that

they could actually have a high savings rate and that they could reach financial independence while they're on active duty and doing less than 20 years. When we retired, we had just over a million In fact, right after 9-11, when a stock market's reopened after the attack in the World Trade Center, I watched the stock market meltdown. I don't know if you remember that personally, but I watched it go down 1,700 points in one day. And at the end of the day, I actually re-ran our numbers, our portfolio, and our savings, and we had just under a million dollars. And I ran it against our budget, what I was going to spend and what I plan to spend and how much I plan to get in a pension. And it all worked out still. We had barely enough.

So I knew if that was probably going to be as bad as the stock market got, was that that has enough money for us to enjoy our financial independence and retire. Plan B was we could always go back to work and work part-time and supplement our income for another 10 or 15 years if we needed to. And I was a little concerned about that during the first few years of the retirement from 2002 to about 2006. But after we went through the second recession in 2008 and 2009, I didn't have to worry about that anymore. Your portfolio was a million in addition to this 30,000 annual pension? We had managed to save that 40% for 20 years, both of us, of our income. And by investing that in a high stock portfolio, just index funds, but we also used mutual funds that were actively managed. We even paid sales charges.

We made all the classic mistakes of the 1980s and 1990s, chasing managers and chasing hot funds. We still managed to rack up that million dollars. And it turns out that in the numbers, when 9-11 happened, we had just less than a million dollars, where you're still right where we needed to be for our spending. And since then, the math of the 4% safe withdrawal rate says that when you retire with greater than an 80% chance of success, that that means that eight times out of 10, you end up with more money than you need. And that's been the case with us after 14 years. So far, two recessions still have more money than we need, still doing a great job with our spending. So for the listeners who aren't familiar with the 4% withdrawal rate, it's the theory that has been tested out that if you, for example, if you have a million dollars, portfolio as you did, you can withdraw 4% of that amount each year and still have an 8 out of 10 chance of that money lasting. So if you have a million dollar portfolio, you can withdraw $40,000 the first year and 40,000 adjusted for inflation every subsequent year after that. And that sounds too easy

to be true, and it doesn't seem like it would work, but the reality is that most of the time it works, and there are times when it has not worked, for example, if you retire when the markets are extremely high, and then you go through a long bear market that happened in the 1960s and 70s, then the portfolio might have failed. But not everybody is like that. Nobody retires and blindly spends 4% and raises it for inflation every year. You retire and a recession comes along. You probably cut back on your spending or you look for bargains or you figure out other ways to conserve and give your portfolio a break. And that's been exactly our experience. We managed to spend 4% in a good years. And in the years when the market was down, we might cut our spending back

a little bit, and we might not do something that year until the market had recovered. So we were able to adjust our spending, a variable spending. It's funny that you say that, because that was exactly going to be my follow-up question, was, did you start withdrawing from your portfolio at that 4% rate? We did. And initially, it looked a little scary because I retired in 2002 and in June of 2002, and the stock market bottomed in October. So just three months into it, this 4% safe withdrawal rate idea looked like it was just going to be a miserable failure. And, of course, plan B was, I could always go get a job. I had just gotten out of the active duty and I had the ability to go put in a resume and go find a job. But we decided to give it a few more months, spent some more time with family

and watch our spending. And after a couple of years after that, things eased up and the portfolio recovered and life was good. And it's been that way for 14 years. I will admit, 2008 and 2009 during the Great Recession, that was another gut check. But we came out of that with our portfolio rolling back. And we managed to stay on our asset allocation. And we cut back on our spending a little bit during that time. But everything has come back and today life is good. Did you and your wife both retire around the same time? Did you both retire in 2002? I retired in 2002 and she at that point was on one weekend a month and two weeks a year of her reserve career. And then she retired for good in 2008. Walk me backwards a little bit because I'm still trying to make sense of the time frame here.

When you were 32, you read your money or your life. You found that to be a fairly transformational book. But you had by that point already been saving 40% of your income for 10 years approximately. That's right. Yeah. Why? It seemed like the thing to do. It gives you a great feeling of security to be able to save as much as you can. We are also very busy with our careers.

And I at the time in the 1980s had gone to sea on submarines for up to 90 days at a time. I would go to sea and be at sea underwater 90 days. And then I would come back in port for two or three months off. And so you don't spend a lot of money under those situations. And when you come back to shore duty, at least for me, when you come back to short duty, I didn't feel like I deserved a great big pickup truck or a huge house or an airplane or a luxury boat or anything else because I could always look back to the life I'd had on that submarine and understand how I could live frugally and keep saving and investing my money.

And having that savings rate was a big source of comfort in the early years and you could watch your savings grow. And you knew that if you needed to get out of the Navy and leave active duty, that you had enough money in savings, that you had enough time for the transition, for the job search for whatever time it took you to find a job or to deal with unemployment if your career didn't work out. Can you give me some specific examples of how you saved money? On short duty, I would do that with riding my bicycle whenever I could to work. At many of the short duties I was at, we would live either on base or close enough to the

base to ride a bicycle back and forth and commute and save the gas in a car. I brown bagged a lot. I would bring in my lunch, and some days I'd bring in dinner to, and I'd be on the submarine for whatever the workday was, and so I'd save money that way. When you send off a check to your investment account every two weeks, you figure out what you're going to save for the next two weeks after your next payday. And you kind of turn that into a goal. If you find out that you can save 40%, then you want to try to make 45% or 50%. Every time you get a pay raise in the military, every time you get a little more of a raise for promotion, you try to save most of that pay raise or that promotion.

It's the equivalent of living like a poor college student as long as you can after you graduate. when we would transfer to a new duty station, we'd try to pick a house that was well within our budget. I know that the housing allowance that military people get makes them feel like they can go out and rent a luxury condo somewhere in the center of downtown. But we would rent something closer to the base, easier to get in and out of work from, and it wasn't so expensive, and we would save whatever we weren't spending of our housing allowance. So some of the untaxed allowances we would save, which would be sort of a double boost to our savings rate because we didn't have to pay the taxes on it in the first place. It sounds like a lot of the classic examples that you often hear. Choose housing that is much cheaper than what you could afford. Right.

Bring lunch to work with you instead of buying lunch out every day. Reduce the amount of time that you spend driving a car. And when you do drive a car, don't drive a super fancy one. I've never owned a late model Mustang, but I've been tempted many times. And today, I can't see myself driving a fancy, luxurious, expensive car because I just don't feel like I'm mature enough or responsible enough to want that job of taking care of that car. The thing I tell my readers to do is something I did obsessively in 80s and 90s, and that was just to track our expenses. And after we tracked every penny we spent for a couple months, by the end of that period, you'd look back at how your spending was over the last few months, and you'd figure out what brought value to your life, what was worth it to you and what was worth it so much.

So you find yourself spending more time, cooking dinner at home, for example, if you don't enjoy going out to eat as much as you thought you would. If you're going out to the bars every weekend and spending $20, $40, $40 a night on a weekend and find yourself, spending $300 a month on a bar bill, and then you go look at that after a couple of months of tracking your spending, you may find that that's not as valuable to you as you thought. When you start out raising a family and your new parents, it's tempting to go out and buy every piece of baby gear you see out there, but we'd shopped from Goodwill and garage sales and bought used baby gear. Our daughter never knew that. And more importantly, she didn't care. And by being a new parents, your entertainment budget drops very, very low. You're sitting around

a house, working with your baby, you're watching your baby grow, or you're going out to the park, bicycling around, walking around with a stroller. You're not going jetting away to luxury weekends at a resort anymore because you're too tired. You're a new parent. You're working on your family. So what happened after you turned 41? What happened after you retired? Because that's, I think, the piece of the story that often doesn't get told. People talk about financial independence as though that is the end goal. But what next? The question that we all joke about in the early retiree forums is what do you do all day? Because clearly you can't just golf or surf all day, but you can try. And in my case, when I retired, one of the things we did as a joke is we took

family surfing lessons. And it was the first time I'd ever surfed. It was the very first day I had retired. And my daughter, my wife and I went down to a local beach here on Oahu and took surfing lessons. I was hooked. I couldn't believe that I had waited until I was in my 40s to learn how to surf. I wish I'd learned earlier, but it's probably a good thing that I didn't because I would have had a tough time showing up for work. And so you can't surf every day. In fact, I find that if I surf more than two or three times a week, I get kind of sore and over-stressed with my muscles having to need more recovery time. But I do enjoy surfing for 14 years.

I've been doing as much of it as I can handle, and it gets better every year. The other thing you do all day is you find something that brings fulfillment to your life. And it took me a year or two to figure it out, but I came around to writing. And today I still enjoy writing. I get up every morning and write for 30 to 60 minutes on whatever topic strikes my fancy. For example, like you talk about putting together your course on real estate and all the things you're working on. I feel the same way with writing the next book. I'm working on the next book, but every once in a while a shiny object comes along and I want to write about something else.

And so I'll be distracted for a few weeks. And then when I go out with my spouse, Marge and I enjoyed travel, we spent a lot of time traveling. We spent five months on a road last year. Most of that in Europe. Our daughter was stationed in Spain last year, and so we visited her and hung out at her place in Spain and went and traveled the country and enjoyed ourselves. You mentioned that it took you a couple of years to figure out what brought fulfillment to your life. How did you figure that out? Because that doesn't sound like a simple question. You can't retire away from the office. You can't run away from things and run into retirement. Instead, you have to retire for something. And I had a list. I wanted to spend more time with family. I wanted to learn more about investing. and make sure I was doing the right thing with our investments. I wanted to do more just relaxing and reading and enjoying books and enjoying life.

We also wanted to catch up on some home improvement projects. Now, the myth of early retirement is that you retire with a to-do list or a honey-do list, and six months later, you're all caught up and you run out of things to do and you're bored and you want to go back to work. That hasn't been the situation for us. We've had a rolling list of things we wanted to work on, things we wanted to fix up, and we've always been working on some kind of a home improvement project. Okay, so let's recap what I think you just said or what I hear from what you just said.

From what I'm hearing, it sounds like you experiment. Exactly. It's the first time in your life, perhaps, that you've had the chance to do that since you were in elementary school with going out to recess and never having to go back to school. You can do anything you want, and you can pursue your interests and spend as much time as you want in there. And since then, admittedly, I started out with trial and error. And today there's another book that helps a lot with that called The Joy of Not Working. and it's by an author named Ernie Zelensky. One of the tools he has in there is a worksheet called a Get a Life tree.

A Get a Life Tree is just a mind map, a brainstorming concept where you write down to things interest you and use that as inspiration to write other things that would also maybe interest you that are related to that activity and then come up with other ideas. And you work out through there and figure out what you want to do all day. Almost everybody who does that, once you retire or once you get some time off to think about it and sit down and be inspired and start figuring out what you really do want to do. do with the rest of your life, you'll come up with a number of ideas and things that you want to pursue. My joke is that I've had one of those worksheets for the Get a Life Tree on your desk for almost

14 years now and I've never found the time to do anything with it. Hey, I hope you're enjoying this interview. We're going to keep hearing more from Doug in just a moment. But first, I want to give a huge thanks to Fresh Books for supporting the show and keeping us on the air to any of you who are entrepreneurs if you run your own business, if you have a side hustle and you need a streamlined, easy, time-effective way to send invoices, grab your 30-day free trial of FreshBooks by going to FreshBooks.com slash Paula. Again, that's freshbooks.com slash Paula.

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Was there ever a time that you regretted retiring or wanted to go back into the workforce or thought about starting a second full-time career? When I started writing the book, that suddenly became a project that I realized, oh my gosh, I could actually make some money on this and become a professional writer and actually make a career at it. And, you know, I've discovered since then, that's absolutely right. But you know that too. And since I've looked at that, I've decided that I really don't care to go back to a full-time job. For example, I could sit down and make a career out of freelancing. or something else that involves working at home. But I enjoy the autonomy.

I jealously guard my free time. And I try not to take any commitments on that would make me have to sit down and work for 20, 30, 40 hours a week. The other thing that is very flattering when you retire from the military and when you get out of the service is that you'll start doing whatever your next thing is. If you are financially independent, then you'll start enjoying life. If you have to work a bridge career, maybe you're working in a civilian career for a while, or maybe you start your own business. And the job offers start to come your way.

And it's tremendously flattering to realize that people will pay you money for doing what you thought you were doing for fun. In general, I've looked at those opportunities and realized that they just involve taking on commitments that I'm not willing to take on. For example, commuting to work, wearing a different kind of uniform than I used to do in military but still haven't wear a work uniform. Department had meetings, commuting in rush hour traffic. Those are things that I'm not willing to do. Let's go back to that earlier concept. You can't retire away from something. you have to retire to something.

I'm assuming that when you were 20 and you started saving 40% of your income, at that point you didn't necessarily have an idea of what you were going to be retiring into. In fact, I'm going to make the wild assumption that for most of the time that you were, you know, saving and investing and building this million dollar portfolio, you didn't know what would come next. How, under those circumstances, do you retire to something? That's, that's, it's a thought process. And in my case, I knew that someday I was going to be out of the Navy. You know, I didn't know if that was going to happen in five years or 10 years or 20 years. And of course, now that you know the ending of the movie, a 20 years seems like a smart move. But as you're going through those years, you don't know whether your next job in the Navy, your next assignment is going to be just as miserable as your last one or whether it's going to be better and make you want to stay to 20. So I was always saving for just in case I had to get out of active duty and go find myself a civilian job. And that's when I really went back and started digging into our spending and looking at our savings and our investments and learning more about the 4% safe withdrawal rate and figuring out

whether this financial independent stuff really would work out. So approximately how old were you at this time? 39 years old, just about to turn 40. So just a couple of years away from retirement. So you had built most of the portfolio already even without committing to the idea of retiring. Oh yeah. And you know, when you start saving 40 or 50% of your income early on right after college, if you can do that, which is a challenge. But if you can keep saving the money that you get from every promotion and every pay raise and keep putting away most of that. After a while, what seemed to be just going along is a very slow growth in your savings. About the 16, 17, 18 year point starts to turn up elliptical and starts to go exponential. And you start seeing that curve going way up there.

And that was the big express trained to financial independence those last few years was watching the compounding finally work its magic and generate portfolio that would produce as much money as we needed to live. You know, that's the funny thing is when you're on an exponential curve, the beginning of it looks linear. For a long, long time. And sometimes the lines go on the wrong way. And finally, having to go exponential up in the right direction is a big relief. And that's when you finally begin to breathe easier and realize that, yes, you could always go out there and work part-time or even start another career.

But you have the time to explore that. And you have the time to spend with your family or to travel or pursue your interests. You mentioned earlier that the book, Your Money or Your Life really had a huge impact on you. And you read that right in the middle of your career. 10 years, about 10 years down, 10 years to go. Tell me a little bit more about that. How to change you? Well, the first thing I wouldn't recommend to most of your readers that they take my approach on reading that book, but I was a new parent and I was severely sleep deprived. And so reading this book about being able to not have to go to work anymore and being able to spend time with your family, that hit me particularly hard between the demographic eyeballs at that point in my life. The other part that Joe Dominguez talked a lot about is how much your life energy is worth? How much time do you want to spend in a workplace?

and how much of your life energy is it going to cost? And he managed to make the connection in my brain between anything I wanted to buy and how much time of my life I'd have to give up to earn the money to pay for it. So when you look at something and you realize it costs $100, that might just seem like a little bit of money out of your next paycheck.

Your savings account will never miss it. It's easy to come up with $100, no problem. But when you turn that into, you're going to have to spend three or four or five more hours at work to earn that $100 after taxes to pay for that thing, suddenly your life energy becomes the currency that you're a little more jealously guarding and not necessarily spending on that $100 object. In our case, the things that we had looked at in our budget that are spending that we felt were not bringing value were things that we were gradually cutting out anyway.

And as new parents, we really didn't have enough time to run around and spend a lot of money. We also had by this time gotten the point in our lives where we built enough furniture in a house. We had enough furniture in a house. We had bought all the baby gear we needed at garage sales and Goodwill. and we continue to keep shopping at garage sales and goodwill for whatever we felt we needed. Also, back in the early 90s, you had to work with newspaper ads and the classifieds, but by 2002-2004, Craigslist had come around, and it was a lot easier to find things you wanted to buy for half of the retail price. So once you're financially independent and you're not going to work 40 hours a week,

you have plenty of time to look at your budget and shop for bargains, and that really pays off at the end. But do you enjoy shopping for bargains, or is that just another job, or, you know, a type of of a job? I hear you on that, and I've lived in a submarine that has very little creature comforts, and so I still could live in a dorm room like a poor-collar student. As long as I have bandwidth, I'd be happy. But I also find it's the thrill of the chase when you can find a bargain out there and it fills a gap in something in your house. One example of that is when our daughter left the house, we packed out her stuff, her bedroom, and now we had an empty room in a house, and now we could have gone and bought a whole bunch of expensive electronic media and turned that

into a man cave or a multimedia room or some other major investment. Instead, we just looked around at furniture and spent about six months finding the perfect combination of a piece of used furniture that fits in there as a sofa and expands out into a sofa bed so that we have a nice guest bedroom that's not as cluttered as our daughter's room was perpetually when she was living in it. And so the thrill of the hunt, it's being patient and being able to take your time and find something you really want. So at this point, you've been retired for, wait, how many years now? You retired at 41 and you're currently... 55. I've been retired just over 14 years.

Is there anything over that 14-year time span that has surprised you? One of the things that shouldn't have surprised me and did is that our portfolio has done better than we ever expected. When we retired in 2002 and we were financially independent in the late 90s and starting to spend the 4% rule, I was kind of tight-fisted, white knuckles on a wheel, afraid to spend too much past the 4% rule and keeping an eye on it just to see make sure we didn't become one of the miserable failure. years that could occur from the 4% safe withdrawal rate. And yet, 14 years have gone by,

and we've gone from enough to more than enough. And that exponential curve is still growing in our favor. And I'm sure in the next five or 10 years, it's going to get to the point where it's way more than enough. And we're going to have to start thinking about our legacy, about estate planning and about what we want to do with the money if we don't spend it fast enough. Right now, it doesn't look like we're spending it fast enough. It's an excellent problem to have. Yes, a very good first world problem. I'm glad to have it. And it took me 14 years to get there. but it's a good problem to have. Can I ask what it is right now?

It's about $1.7 million. Wow. So you retired at age 41 with $1 million. Now you're 55 and it's grown to $1.7. Part of that is because I do have most of my spending covered by my military pension. As we've stayed in retirement for 14 years, another surprise, has been that our spending has not gone up every year with inflation. Everybody worries to death about inflation and rightfully so

because some parts of your life can become very expensive. But our experience has been that our spending, has stayed fairly flat with a few lumps in the middle of it over the last 14 years. And by lumps, I mean, we had to replace a car or we had to do some renovations in the house or we wanted to do something voluntarily to the house that we saved for and deliberately spent the money on. However, in general, our spending has had that flatness to it. One thing that really reduced our spending was having our daughter graduate from high school and go off to college and start her own life. That was the biggest impact on our budget, both on our electric bill and on our

spending on groceries that I'd ever expected. Another thing that surprised me in retirement, and this is 14-year perspective now, was that in my 50s, I've noticed that I need more recovery time on my body than I thought. I've noticed that in my 30s. Okay, thank you. I'm glad I'm not the, I'm sorry that you noticed this, but I'm glad I'm not the only one. And that is that I can't rush around like I used to do in my 20s and 30s. I can't go out and serve every morning for three or four hours and expect to do it again the next day. My wife and I joke about travel while you can, and that's why we enjoy slow travel so much now at this point in our lives is that we can see that in 20 or 30 years traveling the way we are today in our mid-50s might be a little more complicated and maybe a little more limited than it is now. So we're going to enjoy it now. But we'll figure out what we're going to do when we're in our 70s and 80s later.

Final question. What are the major lessons that you want to impart onto your daughter about money, work, and life? we've told her time and time again that it isn't that she should become rich and it isn't that she should do the Navy for the rest of her life. It's that when you save your money and when you have enough money and savings to go a few months without having to earn a paycheck, that that money gives you choices. And having that money gives you the flexibility and a freedom to figure out what you want to do with your life. And she's got choices. She's got time to figure out what she wants to do. And who knows, maybe she'll decide to travel the world and spend a couple of years seeing everything that she didn't have a chance to explore when she was on sea duty and then go back to work.

It'll be up to her because she saved her money. She's earned it and she has choices. Well, thank you. Doug. That was excellent. How can people find you? I'm on the internet at our site, the military guide.com and it's the, with a hyphen, military, hyphen guide. Or just search for the military guide online. We've been doing it for almost six years now, so we rank pretty high in the search engines. Also on Mr. Money Mustaches forums. You can find me there. I post as Nords. Cool. Well, thanks for chatting with us. I'm delighted to be here, Paula. Thanks for having me on the show.

So now that we've heard Doug's story, I've got to ask the question. So what? What have we learned? Well, here are some of the aspects of his interview that stood out to me, some key takeaway lessons. Number one, he knew that he was going to get a pension. Number two, he didn't dislike his job. You can tell based on the interview that he was passionate about the work that he did. And number three, he didn't really even know what he was going to do after retirement. So it seems like the perfect recipe for somebody to not save, you know, like, I like my job, I don't know what else I'd do, and I'm going to get a pension anyway. Those are all really good excuses to not save money. And yet, he decided to save 40% of his income.

I thought that was fascinating. And I also really liked the answer that he gave when he explained why. You know, well, I wanted to have the option. I wanted the choice of not sticking around long enough to get the pension. And also, I like the comfort and peace of mind that comes from having savings. And also, frugality is not the same thing as deprivation. And happiness doesn't depend on a fancy vehicle or a big house. I thought that was an excellent answer.

And that really stood out to me from this talk that we just had. I also enjoyed the part of the story where he talks about, you know, what if I retire in the market crashes? That's one of those what ifs that I hear from a lot of people, from a lot of my audience. And it happened to him. He retired. and immediately the market crashed. And you know what? It was fine. Because as he points out, humans are not robots, like methodically spending exactly 4% every year. You adjust based on what's happening in the outside world. That's what's great about being human. You're flexible. You have choices. You have options. That's the whole idea behind financial independence is that you are independent and you can make those types of decisions. And that came out later in the interview too when he was talking about finding. the what next, finding what brings fulfillment to your life and how that number one happens

through a lot of trial and error. And number two is not always the same answer. Maybe for a while you want to write and then after that you don't anymore. Maybe for a while you want to surf or travel and then after that you don't. That's fine. That again goes back to independence, freedom, choice, options, flexibility. From all of the interviews that I've done around the concept of financial independence, I feel like choice, flexibility, fulfillment. learning growth. Those are some of the major themes that seem to come out of this. And the specifics of that are different for everyone. You know, he's the only person who I've interviewed who is really enthusiastic about surfing, but surfing isn't the point. Choice and options and opportunity. That's

the point. And so when I hear from internet trolls who say like, well, what? Is this just all about drinking margaritas on the beach all day. Actually, no, it's not. It's about having the option to drink margaritas on the beach all day if that's what you want to do. It's about having the ability to spend your time doing whatever it is that fulfills you. And I enjoyed all of the parts of the interview where that message really came out. I also like talking to somebody who's been retired for 14 years. You know, he retired at 41. He's now 55 and he's had the benefit of a decade and a half of, doing lots of trial and error and seeing what life is like post work. And from the way he described it, working a specific job is not critical to finding meaning and fulfillment in your life. In other words, you can find meaning and fulfillment regardless of whether or not you're working, a traditional job. And so when you talk to people who say, well, if I weren't working, I don't know what I would do, yeah, you know, you might not know what you're going to do at first, but you're smart, you'll figure it out.

Thank you for joining me in today's show. If you enjoyed this episode, please do me a favor. Head to iTunes and leave us an honest review. Good, bad, indifferent. I'd love to hear your thoughts. Also, you can subscribe to show updates by visiting podcast. Dot afford anything.com. Thank you so much, and I'll see you next week.

What food reminds you of your birthday? Cake? Is that a trick question? That's pretty stupid question What was I going to say? Like spinach? That was really stupid.