Afford Anything - How I Retired at Age 32 - with Liz Thames from Frugalwoods

Episode Date: March 19, 2018

#121: After Liz Thames graduated from college, she couldn't find a job. "Nowhere would hire me," Thames says. "I had what I thought was this nice resume, and I sent out over 50 applications. Nowhere called me back." She took a temporary job at a document-scanning agency, then joined Americorps to serve as a full-time volunteer in a low-income neighborhood in Brooklyn. She lived on a stipend of $10,000 annually, plus food stamps and a transit pass. She saved $2,000 from her $10,000 stipend, while paying rent in New York. To say that Thames is a natural saver is an understatement. Her frugality stayed intact throughout her twenties. She got married, earned a free masters degree and advanced into higher-paying roles. But she and her husband, who was equally frugal, continued saving as much as possible -- at times pushing their savings rate to as high as 70 percent of their income. When they were 30, they decided to shoot for financial independence. They shared a dream of moving to a rural farm, where they could raise children and spend everyday outdoors. By age 32, they achieved financial independence. Their investment portfolio is robust enough that they could draw down, in perpetuity, for the rest of their lives. They rented out their home in Cambridge, quit their office jobs, and moved to a 66-acre farm in Vermont. These days, they live on a combination of their rental income and 'side hustle' income from their blog, Frugalwoods. They have two children. Today, Liz joins me on the Afford Anything podcast to share the story of how she and her husband achieved financial independence by age 32. Resources Mentioned: Book: Meet the Frugalwoods Website: Frugalwoods.com   For more information, visit the show notes at http://affordanything.com/episode121 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every decision that you make is a trade-off against something else, and that is true, not just for your money, but also your time, your focus, your energy, your attention, anything in your life that is a scarce or limited resource. And so the questions become twofold. Number one, what's most important to you? And number two, how do you align those values with your day-to-day behaviors? Answering these two questions is a lifetime practice,

And that is what this podcast is here to explore. My name is Paula Pan. I'm the host of the Afford Anything podcast. And today we have Liz from Frugal Woods joining us. Liz writes a popular blog that many of you are familiar with. She and her husband reached financial independence when they were in their early 30s. I believe they were 32 when they reached the point at which the investments in their portfolio were sufficient enough such that they could draw down from those investments and live on those for the rest of their. their life. Now, they don't have to do this because they have income from a rental property. They have

side hustle income from their blog. They've got other sources of income, but they know that they can live on their investment portfolio and they'll be okay. So once they had that realization, they both quit their jobs. They were living in Cambridge. They moved out to Vermont. They live on 66 acres. They've just welcomed their second child into the world. So congratulations. Today's episode is less of an interview and more of a conversation. Liz and I chat. We have a have fun. And she walks us through her story starting from college and all the way through where they are now. So without any further delay, here's Liz from Frugal Woods on how she and her family achieved financial independence by their early 30s. Hey, Liz. Hey, Paula. So you are in Vermont right now on

66 acres of land. I am. Well, I'm in my office. I'm not sitting on the land at present. Yes. I've read your book. There are a lot of personal finance books. that are prescriptive, you know, that are like, do this, follow steps one, two, three, four, five. Your book, what I enjoyed about it is that you tell your story. So we understand you and your husband and now your daughter and like the case study of how you became a financially independent couple. Yes, I think people often relate best to a story. I certainly enjoy reading things that are narrative and interesting and funny. And I do think finance has that, reputation of being very dry because I think a lot of times we're afraid to insert ourselves

into the story of, for example, why you shouldn't have debt, but why not make it a personal story? I think that ultimately money really is about how we want to use our time and what we want to do with our lives. And so I love being able to tell a story. And it's very much the way that I naturally relate to the world through stories. So it just made sense for me to do a more a memoiristic narrative style. So let's talk about your story. Let's go over it. And we'll start with, you went to the University of Kansas. I did. Were you from Kansas? No. So I was born in San Diego and then my family moved to the Midwest and we lived in Decatur, Illinois, and then a suburb of St. Louis, Missouri, and then I went to school at the University of Kansas, then moved out to the

East Coast to New York City after that. So I sort of popped around and lived. in quite a few places. All right. So I've heard two things in that statement. Number one was that you went out of state to college and number two is that you then moved to a very expensive place. We'll talk about the expensive place later, but tell me about how you got through college debt-free. Sure. So at the time that I went to KU, it was a very inexpensive school. And the out-of-state tuition price was about commensurate with in-state tuition prices in Missouri. So I said, aha, I wanted to go just a little bit farther away. And I wanted to go to a school where I didn't know everyone, which, you know, when you go to high school in one state and then go to a

nearby college, that can happen. So it was pretty inexpensive at the time. I also had scholarships. And then I worked throughout college. I actually worked as a writing tutor, which is my favorite job that I've ever had to this day. I wish I could still do it. I helped people with their papers, then my parents were also able to help me pay for tuition. And that was transformational for me to come out of school without debt. And so that's kind of one of the elements that is so important for me to talk about is privilege, because I think there's a lot of privilege in my story in being able to come out of school without debt. And sure, part of it was that, you know, I chose a really inexpensive school and I worked, but part of it is that I had a family who was able to pay. And

the several thousand dollars every year for me to get through school without debt. So coming out of school without debt was really sort of the origin point for me of starting from zero. And that's a great place to start from, honestly. And that's how my husband was as well. And from there, we were able to build on our savings. But I think there's a great deal of challenge when you do come out of undergrad with so much debt. And I hope that we can, in a lot of ways, change the conversation for high schoolers around. It's not a question of go to the best school you get into. I think it's really go to the best school that you can honestly afford. What was the approximate split? Because in college, there's not just tuition. You've also got to pay for rent and food, all of the cost of living

expenses as well. Were you responsible for that? Or just trying to get a sense of what was the split there between what work and scholarships covered, what your parents covered. What was that structure like? So you're testing me a little bit because I am almost third. So this was a number of years ago. I will just put it that way. But I do remember senior year my rent was $400 a month, and I paid that myself. And the utilities were included in that. And I paid for my own groceries.

And so I actually met the person who is now my husband. We met a freshman year of college, and we were dating very seriously senior year. And so we did our grocery shopping together. And we went to the dirt chief grocery store, like with the sawdust on the floor. And we would get tuna fish, cans of tuna, beans, rice, some bananas. I mean, we bought just the cheapest food we could find and we'd cobble together these little meals. And so it was being with someone who was similarly frugal was very helpful because we were

always on the lookout for free and cheap things. And he worked, my husband worked as a photographer at the art museum. And so that was partially how he funded his undergraduate career. And I honestly could not tell you the dollar amount breakdown. I would have to go back into some ancient records to find out exactly how that broke down. But the sense of frugality was interwoven throughout my life. And it's kind of, I've always been a frugal person. I actually bought my own car at 16 that I saved up the money to buy.

My parents said, okay, if you can save up the money to buy a car, you can. And so I came to them at 16 and said, okay, I have my $3,857. I'm ready to buy my used car. And they're like, oh, oh, you actually did save that up. So I think that sense of delayed gratification and savings was woven through my early years and then through college. And then dating someone who was similarly frugal was helpful to me. And I think it really reinforced a lot of the goals that I already had.

Right. And what I think is interesting about saving up for your own car at the 8. of 16 is I, because I remember experiencing this. I remember being 15 years old and applying to all of these jobs. And a lot of the employers wouldn't hire you until you were 16. Yes. So I babysat and I worked at my church because they didn't care. So yes. Yeah. And so in order to make money at the age of 14 or 15, you have to be a little bit more entrepreneurial. You have to be a little more creative because there's so many jobs that you just can't get until you turn 16. So I remember that very clearly, like having to think creatively before I could actually

get the job that I wanted at the time, which was to work in fast food. Yes. I know. I upgraded to the Burlington Coat factory when I turned 16. So I'm not sure that was better than babysitting and working at church, but it felt, you know, like a very real job to me at the time. I was a carny at an amusement park when I was. I turned 16. Oh my gosh. What amusement park did you work? Kings Island in Cincinnati, Ohio. And so my job was to yell into the

microphones. I was like, step right up. There's a winner every time. Step right up. It's just $3 to play. I did that all day, every day for like eight hours. Oh my gosh. So I worked at Six Flags, which is also an amusement park. But I worked in the cash office, like counting all the sweaty, greasy, dirty money that came in. I don't know which is worse. It was pretty gross. Oh, but you got to sit in air conditioning. Yes. Now, that is true. We were in the air. Yes, we had a big leg up there. All right. So you graduated from college and then you, I love this part of your story. You couldn't find a job so you joined AmeriCorps. That's exactly what happened. You know, I also had this vague sense like, oh, I would like to give back. And AmeriCorps is a program where you work in a low-income community. And I thought, okay,

this is a good thing, but also just nowhere would hire me. You know, I had what I thought was this nice resume, and I sent out, I don't know, over 50 applications and nowhere called me back. So I thought, okay, this is not good. I've got to find something. So I first, after graduation, I worked, this is another great job that I had at a document scanning agency, which I detail in the book, which means I straightened out folders of paper in order to feed them through a scanner. So I did that for eight hours a day, five days a week, because I thought I need to at least earn money while I'm not progressing here in my career at all. So did that, then got a job with AmeriCorps in New York City.

So I went from Kansas to New York City. I'd never been to New York City before, so I don't know what I was thinking exactly, but I was 22 and headed off. And so for AmeriCorps, you receive a stipend of $10,000 for the year, or you did at the time. And then you also receive food stamps and a transit pass. And of those $10,000, I saved $2,000. So that was another year of pretty good frugality for me. Yeah, and that is incredible. Living on $8,000 in New York City over the course of a year,

8,000 plus food stamps and a transit pass. Yes. You see, the food and the transit is covered, and that's big. That's really big. But the food stamps are 1.20 a month? Yep. Eating on $120 a month. Totally possible. Not fabulous, but very doable. Tell me a little bit about how you did that. What did you eat?

And the $8,000 that you lived on during that year, where did most of that go? What were your biggest non-food bills? So I think at the time, part of the reason why I saved so much is that I did not understand money. I had essentially no concept of personal finance other than that you should not go in debt. So I knew that debt was bad. I knew that I didn't have very much money and I knew that you should try and save money. This was sort of all that I knew. So in a lot of ways, I was saving from a place of fear as opposed to a place of trying to reach a goal or have some sort of actionable savings plan. I just was really terrified that I would overdraw my account. So that, you know, this is not a

great way to go about things in my opinion. But it worked. In terms of eating, you know, the tuna fish comes up again. There was a lot of tuna fish. There's a lot of beans out of a can. If I knew how to cook, this would have been better, but I don't cook. I don't know how to cook. And so I would also get the frozen lean cuisine dinners because they were, I could afford to get one for, I don't remember what. I had It worked out like every other night or something. I could have a lean cuisine. So that was like my big fancy meal that I would have in between the beans and pasta and tuna fish and peanut butter. You know, it wasn't a fantastic diet, but it was tenable and I was able to stay within that budget.

And so the things that I did spend money on were largely not that exciting. So going to the laundromat, things like that, going out with my friends. So that was important to me at the time being 22. And so going out to dinner and things like that were part of what I did spend money on. And so it's interesting for me now reflecting back because I think it was kind of a misguided frugality in a lot of ways. Even though I made it work, I was largely miserable throughout that year. And I think it was really a question of not understanding how I should have used my money and what would have been a better way. of going about it.

Your story reminds me a lot of my own, everything that you've just said, and particularly in your early 20s being extremely frugal from a place of fear. I can completely relate. It's not a bad thing. I mean, if you're going to err, right, in your financial approach, you can err that way. But it's almost just as bad as, you know, overspending because it's a fundamental misunderstanding of what you should be doing with your money. Exactly. And it's living in fear and it's entrenching yourself in the scarcity mindset. Yes. Yeah, absolutely. Tell me a bit about how you overcame that. Was it just, did it just happen sort of through the years as you were able to find higher paying employment, that you were able to kind of slowly leave that place of fear? I think so. And it was a gradual process for me. And so after that year in AmeriCorps, I then moved to Cambridge outside of Boston.

and my husband and I got engaged at that time and I had a better paying job. I've actually always worked for nonprofits. And so, you know, I've never made an investment maker salary, but I was certainly making more. And my husband has also always worked for mission-based or nonprofit organizations. And while we recognized in that first year of living together in the city is that up to a certain point, money really does make your life better. You know, it's very easy to say money does not buy happiness, but here's the thing, when you have not had a washer dryer in your apartment and then you can afford an apartment that does have a washer dryer, this is transformational. And so, you know, that first year for us was very much like, ah, small applications of money, being able to have a washer dryer, buying better food at the grocery store. Also, my husband knows how to cook, so that greatly improved the food thing. Really, knowing how to cook is a really useful skill and one that I should. have, but still don't. And, you know, being able to rent a zip car to go to the grocery store as opposed to walking to the grocery store, these types of applications of money really do make

your life better. And so I think it's easy for us to say, oh, lifestyle inflation is terrible and anything you buy is not really going to make you happy. And I don't think that's true because I think there's a tipping point. So there's a threshold up to which you are spending in ways that really does demonstrably make your life better. You know, being able to afford nice, produce and things that are better for you to eat. So we enjoyed that sort of like little increase in our quality of life. And at the same time, though, we had a goal of buying a house. And so that's really what kept us on track financially and kept us from spending too much more in those jobs that, you know, suddenly paid more than $10,000 a year. So we thought, okay, we really want to buy a house

in Cambridge, Massachusetts, which is one of the most expensive real estate markets in the country, if not in the world. But we were 23 undeterred. Like, we can do this. Okay, a one bedroom is $500,000. Okay, we're going to do this, you know, with the like $5,000 that we were starting with. But we were really motivated by that idea of a big goal. And so that's really what kept us on track and kept us living in this little basement apartment that had a washer dryer. And so I think making sure that you have some kind of actionable plan, even if it seems like a really large goal, for us was really important because we then, and I talk about this in the book, we got to a point then where we no longer had a goal. And that was when our spending really ratcheted up. It's funny to hear you talk so much about the washer dryer because I clearly remember that.

I remember I was living in Boulder, Colorado, and I didn't have a car, so I had this backpack. I'd fill the backpack with dirty laundry, walk to the laundromat, and then you'd have to sit there the whole time. And you said this in the book, too, because if you don't sit there at the laundromat the whole time, somebody's going to steal your clothes. Somebody will steal your clothes. People don't believe me. I'm like, no, no, no, they really would. Yeah, that's the other thing. That's one thing that I also loved about your story, because I relate to this as well.

you and I have both lived in neighborhoods where there are certain concerns that I think other people, and small rant, this is one of my like kind of qualms with the FI community whenever I read these posts about like, you don't need to worry about security. That's all make believe. And I'm like, you know what? No, it's not. My triplex in Atlanta in the five years that I live there, the following things were stolen. Our car was stolen. Our shoes were stolen off the front porch. Our plant literally a gym. Jade plant was ripped out of the ground in front of the house. Our mail kept getting stolen. That was back when we were getting Netflix DVDs and they kept stealing the DVDs. So eventually we put a lock on the mailbox. I mean, we actually, we still never got like a proper security system because we were cheap at the time. But I mean, things including a car, which was valued at $1,500, kept getting stolen. And one of my neighbor slash tenants who lived in the same building got kidnapped at gunpoint right in front of the house.

Oh, my gosh. You know, there are actually neighborhoods that are not these like Starbucks and Panera bread neighborhoods. I think the FI community does lose sight of the fact that some of us live there. We did so by choice because that was the way that we were able to save money was by buying and living in a place. like that. Right. And that was very much the neighborhood that I lived in in Crown Heights, Brooklyn. And it was so enlightening for me. I was scared at the time. I mean, I was honestly scared at the time because it just was not a safe neighborhood, but it gave me so much perspective. You know, I had never understood what my privilege really is and how deep my privilege goes.

you know, being with people who live in generational poverty who do not have access to banking. There were no banks in that neighborhood, by the way. There were no real services to speak of, no doctor's offices, no grocery stores, nothing that you would think of that would traditionally be in an urban neighborhood. There was a subway stop that, you know, that was sort of the best resource that we had that you could get on the train and go somewhere else. But understanding how fortunate I am to come from the background that I am and that I was, able to leave that neighborhood really has given me a mindset of gratitude and of abundance. So, you know, I started out with that scarcity. Oh, poor me. I have no money to work with. And then I

understood, oh, my goodness, I have everything. You know, I am such an incredibly fortunate person. I have health care. I have a tremendous family support system to fall back on. So that for me has really framed the way that I've thought about financial independence in a lot of ways. And the way that I view frugality is more a mindset of abundance as opposed to one of deprivation because I know what it is for people who truly do not have anything, you know, and you talk about not having access to banking, you know, that's a compounding problem then. And you have predatory lenders and you have all sorts of ways in which people are repeatedly disenfranchised. So, you know, I think just talking about financial independence is a very fortunate thing to be able to do. We'll come back to

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And enter the code Paula at checkout. Again, that's Simplecontacts.com slash Paula. A-U-L-A and intercode Paula at checkout. One thing that I really enjoyed about when I read your experience of living in Crown Heights, Brooklyn, was, again, I feel like this experience is so missing from so many people in the F-I community. And so it was nice to read that you've also lived in a place like that. And I'm like, finally, somebody gets it.

Somebody understands. Yeah, and we lived in cities, you know, I mean, even after leaving, and I have to say, too, for anyone listening right now who lives in Crown Heights, I've been back to Crown and it is a gentrified Starbucks, Panera bread, doggy daycare. I just almost passed out walking down the street. So I have to tell you what I really read is not buying the building that I rented because it was for sale. I couldn't have afforded it, but it was for sale for something like 800K.

And I'm like, oh, if only, you know, I had been able to buy it. At any rate. So you have to understand that this was a very different crown heights in 2007 than what it is today with the doggie daycares. But, you know, my husband and I then lived in cities. So we lived in Central Square, Cambridge, which is just a pretty standard urban neighborhood with, you know, a decent amount of crime, but certainly just a pretty typical urban area. And then also lived in Washington, D.C., lived on Capitol Hill, which is, again, just, you know, I just consider them standard urban neighborhoods you need to be careful about where you're going and what time of day it is.

So that for us was very much our experience. And we love living in urban areas. And, you know, our rental property is in Cambridge, Mass now. So coming from the suburbs of the Midwest, which is where we both grew up, it was a vast departure at the beginning, but then it became very much home. And so we've always said now we always would want to live either in the middle of the city or in the middle of the country. So now we live in the middle of the country.

But I could see us back in the middle of the city someday, too, because it's such a vibrant, an exciting, wonderful place to live. Yeah, absolutely. All right. So then you decided that you wanted to save up for this expensive place in Cambridge. Can I ask how much it cost? Because you mentioned it's $550,000 for a one bedroom over there. Yes.

So the route to buying our Cambridge house was very long and circuitous. So we started saving when we were 23, which is when we got engaged, then we got married at 24. I looked back at some of our financial records in writing the book because it was fun to just kind of see where we'd started from. And I think it was that we had about $5,000 when we got married. And then in those first jobs that we have, you know, we started saving 20, 30, 40, 50 percent of our salaries. And these were not very high salaries, but we were saving pretty significant amounts. And so we were very motivated by this concept of homeownership. We started going to open houses every weekend, which I highly recommend because it's a lot of fun.

And it's such a great way to just get a feel for a real estate market. And I'm sure you've talked about. And also just to get decorating ideas and then kind of be nosy about what your neighbor's houses look like. Oh, actually it's free. I mean, it's free. And they often have snacks. Yes. Yeah.

People think I'm crazy. I'm like, no, no, no. This is like the best form of free entertainment because you go on a stroll. and then you like pop in the house. I highly recommend it. So we try to tell you. Oh, it's great. Free food. Oh, yeah.

We think we've been to over like 270 open houses in Cambridge in the couple neighborhoods that we were interested in. And so we really had a pretty good sense of the market and of what we wanted, which I think is really important, especially for us because we did have an eye on potentially one day renting this place out, which is what we now do. And so we were trying to find something that would be. flexible and that would work for us and would work to eventually rent out. So we started this journey

in 2007. We didn't buy our place until 2012, which is a pretty long amount of time, but we needed that much time to save up our down payment and also to find a home that would work for us. We also moved to Washington, D.C. in the middle there for a couple of years. So it's not a totally linear path, which is also okay. And then when we bought our house, I think it was 460 when we bought it. And one of the main reasons we bought it is that it was essentially the lowest price per square foot that we had ever seen. And sure enough, on historical, when we look back on all of the selling data for that time period, it was the lowest price per square foot that sold in Cambridge. It's a single family. And so in looking at rentals, that was fantastic because most of the places in Cambridge are condo associations.

And so you have HOA fees, but you also in Cambridge have restrictions on owner occupancy. So units cannot be non-owner occupied for a certain number of years, et cetera. So it doesn't necessarily work as a long-term rental. So having a single family, you know, you have a lot more expense, but you also have total jurisdiction over what you do with it. And it was a combination of luck and doing a lot of research and sort of knowing the market because this house showed very poorly and had been sitting on the market for 50 days, which is unheard of in Cambridge. You know, things sell, I mean, the minute they hit the market. So for something to be on the market for almost two months is just there must be something wrong with it. Well, we thought we must see it.

And it was in a neighborhood that was gentrifying. and the neighbors at the time, the buildings did not look good. What we realized, though, is that the building adjacent had just been bought by a developer and was being flipped into high-end condos. So we said, aha, this is great. And we knew the neighborhood quite well. So we were able to buy that home, and we lived in it for a couple years, and now we rented out.

So I think one of the sort of takeaways from that is know why you're buying a place. You know, are you buying it as an investment or are you buying it more as an emotional decision because you really want to live there or is it a combination of both? I would say don't ever do a combination of both. Buy a place for yourself or buy a place that's an investment. Well, and this was kind of strange for us because we did live there for a couple of years. And I would say it was fine living there. We could have gotten a much nicer, smaller condo.

But, you know, in looking ahead towards it being a rental, we thought, oh, we can. can live here. Yeah. I mean, I think it's great to buy a personal residence that has multiple exit strategies, which is what you've done. Right? Like, you had a personal residence that you enjoyed for yourself and you knew that whenever you moved out, you would have an array of different options. Yes. I love having options. I love exit strategies. Yeah, that was very important. It continues to be always important for us to have different options. All right. So then, was there a point at which you decided that you wanted to become financially independent, or did that happen organically as the result of the saving habits that you would nail down? It was a deliberate decision. So we've been living in cities,

working these jobs, advancing in our careers. And at age 30, this was 2014, we sat down and said, you know, we are not happy. We are not fulfilled. We're frustrated by this daily grind and by really working for the weekends and feeling as though we don't have very much agency over. our time because so much of our time was spent in cubicles under artificial lights in office buildings and we realized, you know, we're 30. If we don't change something, we'll be doing this for the next 30, 40, 50 years. That was a little bit terrifying. So it was very much a quarter life, midlife crisis there where we said, you know, we need to change something and we need to change it radically and we need to change it now. Having that understanding really propelled.

us towards our financial independence goal. And we had been saving at pretty high rates, which was very helpful to us. So, you know, it's disingenuous to say, oh, and then we reached financial independence two years later because we had been saving, didn't have debt. We had, you know, a healthy set of assets already, but we needed to save more. And my husband asked, when are you happiest? And my response was when we're hiking in the woods together. But we can't hike together all day, every day in the woods. And he said, well, I think we should move to the woods. Initially, that idea was, okay, maybe we have a weekend cabin that we go to or maybe we retire at 65 to a place in the woods. And that evolved into, no, I think we should do this now because what's the point of

wanting to do this all of our lives, not doing it, and then being too old to really enjoy it by the time we actually get there. Let's just actually do it and reach financial independence, quit our jobs, moved to the country. So that was the decision-making part that did not relate to money. And then the part that did relate to money was the recognition that we needed to save more. And so at that point, March 2014, we said, all right, we're going to see how much we can save every month if we really buckle down. And we were able to get ourselves up to a 70%, sometimes 80%, savings rate. and I actually detail how we do that on frugal woods in my free Uber-Frugel month challenge, which is a month-long challenge that just outlines all the steps that we took in order to scale back on our spending in every single area.

Of course, for financial independence, I think it's really important to understand that it's not just about frugality. It's very easy to say, oh, you can save your way there. You can't. You have to have an income that's going to allow you to save. and then you need to have investments. You know, you need your money to be growing for you. So you can't just save money and stick it in a checking account. That's not going to work. So you have to think about all of these different elements of financial independence. But for us at the time, you know, we had pretty good jobs already and we had investments already. And so the key was just to save more.

You know, one thing that I have noticed about, again, about people in the FI community is oftentimes when we talk about our journey to FI, what we emphasize is the piece of it that at the time that we decided that we wanted to make a change, the piece of it that in our own personal stories, we ourselves had to change. So like when I read your story, I was like, wow, we're actually very, very similar. Like there's huge, huge parts of your story just reminded me of my own. Some of the details are different, like names and locations and types of, you know, know, careers. Like, sure, those details are different, but the broader outline is very much the same. Like, when I read your story, I was like, wow, there's kind of two ways to frame this.

You know, you could frame this as Liz made $10,000 a year working as an AmeriCorps volunteer and then increased her income and having, like, such a big jump in income was the thing that allowed her to save and invest. Or you could frame the story as Liz made this really good money. And so then by being frugal, that was the thing that allowed her to save and invest. And both of those are true. It's just kind of the perspective, the frame from which you see the same set of facts. Absolutely.

Yeah. And I think it is really important that people don't lose sight of the fact that you have to have something in order to save it. Yeah. You do have to have an income that's going to allow you. to save. And I think there are benefits to be had all along the spectrum of frugality. And I think even going from a 0% to a 5% savings rate, that can bring tremendous dividends to your life. But when we're talking about financial independence, again, I think that privilege element is so important because I did have a good career. I had gotten a master's degree and I had increasingly advancing

responsibilities. And my husband also had a good career. So we had a dual income. We had no children at the time. We drove a 20-year-old minivan with 200,000 miles on it. So sure, you know, we were being very frugal, but we had the means to see some actionable difference with our frugality. And it's also a question of time. So we were able to do this pretty quickly. But if you have less to work from, so if you're saving less, earning less, just expand your time horizon. So, you know, you're looking at your income, your expenses, and then the amount of time that it's going to take. So I think adjusting between those three variables is really how you get at financial independence. When you decided that you wanted to become financially independent, did you have a particular

benchmark in mind for how much you wanted in your portfolios? Were you making assumptions based on the 4% withdrawal rate? What were those projections like? So initially we did work from a 4% withdrawal rate. And I would say that we have actually become more conservative in that and we actually don't currently draw down. At present, our passive income covers our expenses and then some. So the passive income that comes in from the work that I do online and then really from our rental property. So, you know, we are not in a position right now of drawing down on our assets, but we would be able to in perpetuity. So I think it's, you know, It really depends on kind of what your portfolio shakes out as and what your family constitution is.

You know, we have one daughter. We have a second daughter who will be born very soon. So I think as we've had children, we've actually become sort of more conservative in our projections. And I think you just have to sort of balance your comfort level with risk as well because there's risk in everything. There's risk in every investment. So for us, it's kind of an ongoing flexibility, I would say, and an ongoing recognition that things can always change, but that we feel very comfortable with the projections that we've made. And, you know, something that I always like to point out to people is that they say, oh, why'd you a phrase you're going to write out of money? I say, well, I'm not.

But it's also true that you can always go back to work. You could always, I mean, you know, you can always find ways to earn money if that's something that. that you feel like you need to do at a certain point. And, you know, I really don't advocate for quitting your job with no plan or without a very comfortable safety net. And I, you know, I really encourage people to do their own calculations. But it's also true that you can earn more money if you need to. Worst case scenario, you could get a job.

Worst case scenario, you know, you can, you can do some freelancing. So I just think, you know, it's important for people to recognize, like, there is inherent flexibility in life and there are inherently unforeseen and unpredictable circumstances. And so my husband and I, we are both like worst case scenarioists. So we've gamed out like kind of, okay, so the apocalypse comes, we can grow our own food, we have an issue with coffee, the stock market crashes, you know, both of our homes burned out. I mean, we're ridiculous. But the point is, you know, I think you can think of ways in which you can make a lot of different lifestyles tenable. And what a lot of it comes back to is the less you spend, the less you need.

We'll return to the show in just a moment. Would you like to spend less money at restaurants, less money on takeout, and make more fresh, home-cooked meals? Blue Apron can help. Blue Apron is the leading meal kit delivery service in the U.S. And while many people have heard of them, a lot of people might not know about the types of meals that you can eat. Items like Bucatini with broccoli and pecorino cheese or Italian-style shrimp and sweet pepper. Those are some of the shrews. chef-designed recipes that Blue Apron serves.

They offer 12 new recipes each week, and customers can pick two, three, or four recipes based on whatever's good for your schedule, and they send only non-GMO ingredients and meet with no added hormones. They send fresh ingredients in exactly the right portions, plus step-by-step recipes, and you can cook these meals from scratch in under 45 minutes. One of the things I really enjoy about it is that they always have at least three vegetarian in recipes. So I get that freshness and variety in a way that fits with how we eat at home. Blue Apron is treating Afford- Anything listeners to $30 off your first order if you visit

Blue Apron.com slash afford. So check out this week's menu and get your $30 off at blueapron.com slash afford, a-f-f-o-R-D. That's blue apron.com slash afford. for $30 off your first order. Blue Apron. It's a better way to cook. So what are some of the other common questions, objections, et cetera, that you hear from other people? And how do you respond to those? So part of my answer to this is who cares?

I'm serious. I do very much approach life from the philosophy that no one is going to care how you lived your life except for you. The reason I now feel that way is because I spent the entire. of my 20s living for other people. I was really caught up in what I thought I should be doing, what society expected me to do, to look like, to act like, the job I should have, the types of certifications I should have. And so chasing all of those external validators never made me happy. I was frustrated. I was anxious. I was really pretty miserable. And just chasing these next steps in a career that I didn't really care about and failing to see the overarching point

that, you know, time is going to elapse, your life is going to pass you by. Do you really just want to be doing what you think your parents think you should be doing or what this ephemeral, you know, society thinks you should be doing? So moving past that was a very big part of this journey for me and embracing ever higher levels of frugality and really, simplicity and minimalism for me all relates back to that theme of honestly doing what I want to do. My husband has kind of always been that way. He's just always been sort of, well, I really don't care what other people think. And for me, that was hard at the beginning of our relationship because I'd say, like, I just don't understand why you won't just wear like khakis and buttoned down

shirts like everybody else. He's like, because I don't care. And I refuse to do that. And so, you know, it's hard for me to understand his philosophy on really pursuing the things that you're passionate about. But now that I've internalized that and understood that, it has become a lot easier for me to say, you know, this is what works for me in my life. You need to figure out what works for you in your life because I think everyone can be living an ideal version of what they want to be doing, but it's going to look different for everybody. So part of it for me is that much as I am a total evangelist on the blog, in my book, when I get to come on podcasts like this. You know, in real life, this is not the kind of stuff that I talk about. I really let people come to me if they have

questions about frugality or about personal finance or any element of managing their money. So I think it's sometimes as important to remember that, you know, we are deeply passionate about this, but for other people talking about money, it's just not what they want to do. And so I try not to shove it down people's throats unless they come to frugal woods and then you know i'll talk about it all day long so remembering that you know this is what works for me but it might not work for you you know some of the objections that we hear are that we are depriving our children which to me is a really interesting one because our kids have two stay-at-home parents who are you know very actively involved in our daughter's upbringing and in the things that she's learning and doing every day and we're able to

hike with her and teach her how to cook. I mean, cooking is like a loose term. She's two years old. But having that time with your kids is transformational. And they need that, in my opinion, so much more than they need, you know, brand new toys and iPads. So I think for us, it's really focusing on what matters to us and focusing on our highest and best priorities. And just understanding that, you know, that doesn't work for everybody. And I'm okay with that. Nice. Well, we're coming to the top of the hour. Is there anything that I haven't asked about that you'd like to emphasize? You know, one of the overarching themes for me is that, as I was just alluding to, the right thing for me was to leave the city, quit my job and move to this homestead in the woods of Vermont. But that's probably not what your goal is. What I really encourage people to do and what the book prompts you to do is think about what you would do if you didn't need your paycheck.

So where would you go in life? What are the things that you would pursue? And the answer might be that you would continue working the job you have. And I think that's a wonderful thing. But it's a question of are you using your time and your money in the ways that are most meaningful to you. And if you're not, how can you start to bring that into alignment with what your real long-term goals are? Because I don't think that for any of us, our real goal is to buy a new car every year or to buy new shoes every month. You know, is that really really? how you want to say you've used your time and your money. Nice. Well, thank you so much. Thank you so much. Thanks, Liz. What an awesome conversation. What are some of the key takeaways that we got from this? Well, I have four. Number one, neither demonize nor glorify the concept of lifestyle inflation. Because as Liz says, there is a tipping point. Some lifestyle inflation is okay. So depending on where you're starting from, don't beat yourself up, don't feel bad if you want to live at a higher standard than you currently do, because up to a certain extent, that makes an appreciable difference in your life. However, after that, you reach a tipping point at which it then becomes excessive.

While we recognized in that first year of living together in the city is that up to a certain point, money really does make your life better. You know, it's very easy to say money does not buy happiness, but here's the thing. When you have not had a washer dryer in your apartment, and then you can afford an apartment that does have a washer dryer. This is transformational. So that is core takeaway number one. Don't be afraid of lifestyle inflation, but don't be in love with it either. After all, the healthiest way to spend money is to do so in a way that's in line with your values and to do so in a way that will allow you to create the best quality of life. And that means finding that balance, finding the optimal point

for you. So that's takeaway number one. Takeaway number two is to have a big goal. Remember how Liz mentioned when she was in her 20s, before she was ever acquainted with the concept of financial independence, the reason that she and her husband saved so diligently and so much up to 70% of their income is because they were highly motivated by a very big goal, which was to buy a house. We were really motivated by that idea of a big goal. And so that's really what kept us on track and kept us living in this little basement apartment that had a washer dryer. Saving for the sake of saving alone is probably not something you're going to be able to do for a very long time. Like if you're saving but you don't

have a why behind it, you don't have motivation behind it, then what are you doing it for? If you can't answer that question, chances are you're going to end up blowing your money on things that aren't important because there's no deeper meaning behind why you wouldn't. So if your goal is to save money, start by figuring out why. Start by finding that big Y. And once you do, then from that point forward, savings isn't going to feel like deprivation. It's simply going to feel like the tradeoff between X and Y. You'll think, oh, yeah, I could upgrade my car into something newer and nicer, or I could take that exact same amount of money and use it to max out my Roth IRA, which means that I'll be this much closer to financial independence. You know, once you've got that Y inside of your head, then it doesn't feel like deprivation, and then you're more likely to stick with it for the long term. Because remember, these financial goals that we're talking about, this is not the crash dieting of personal finance. This is something that needs to be sustainable. This is a lifestyle. And so all of the hacks and the tactics and the tricks and the whatever's in the world

are not actually going to make an appreciable difference, but having a strong value or priority that serves as your motivation and for which you are willing to, make tradeoffs. That is how you develop a sustainable lifestyle and a healthy relationship with money. So that is takeaway number two. Key takeaway number three, in the worst case scenario, you can always get a job again. That's a little bit of a tongue-in-cheek statement, but I think it says so much, right? We are so oftentimes guided by fear and we make decisions based on a place of fear. Liz does. She said so in the interview. I do. I think it's incredibly common for many people. to make decisions from a place of fear rather than a place of love.

But remember that the solution to fear is understanding that you are more powerful than you realize, you are more resourceful than you realize, and flexibility is your true, true security. So for us, it's kind of an ongoing flexibility, I would say, and an ongoing recognition that things can always change, but that we feel very comfortable with the projection. that we've made. And, you know, something that I always like to point out to people is that they say, oh, why don't you a phrase you're going to run out of money? I say, well, I'm not. But it's also true that you can always go back to work. And that's the thing, all the retirement projections in the world, all of the spreadsheets with 4% assumptions and this and that and the

other, none of these can adequately address the volatility of a human life. There will be ups and downs, there will be illnesses and accidents, births and deaths, periods of elation and periods of depression. It's so easy in the financial world to talk about market risk. What's going to happen with the economy? What's going to happen with the markets? What if my tenants don't pay? What if my tenants dump a bag of concrete down the toilet and completely F up my plumbing? Yeah, sure, those are all risks. But don't forget the other quote unquote risk is the fact that you're a human and you're going to have a lot of changes that happen over the course of your life, both in terms of external changes to your life as well as changes in priorities, changes in what you want,

and what's important to you and where you find meaning. And so in order to set up your finances in such a way that you won't be financially stressed throughout all of this, you have to, A, just act with common sense, and B, understand that flexibility is the best tool in your arsenal. I think I just mix metaphors there, didn't I? It's a weapon in your arsenal tool in your toolbox. Well, whatever, you get what I'm saying. Let's say that you quit your job, you reach financial independence, and things get really rough. Make a list of what you can do if that happens and get super creative.

Maybe you go move to Medellin in Colombia and you spend a year there where the cost of living is significantly lower than it is in the United States. Or maybe you go live in Thailand or in Bali. or maybe you rent out your guest room to Airbnb guests. And most of the time you would prefer not to, but because you're temporarily going through a little bit of a cash crunch, you're willing to do it for six months. These are all options, and this is just a small, small sliver of the many options that are available to you.

In fact, as I'm talking through this out loud, it occurs to me that flexibility is the antidote to fear. Because I suppose when you truly embrace your ability to be flexible, what you're really embracing is your resourcefulness and your inner warrior and you're developing that confidence to know that no matter what happens, you'll be okay because you still have you. So that's core takeaway number three. And then finally, takeaway number four from today's interview is that nobody cares more about how you live your life than you do. I do very much approach life from the philosophy that no one is going to care how you lived your life. life except for you. The reason I now feel that way is because I spent the entirety of my 20s

living for other people. It's so easy to spend your life following the scripts that were provided to you by your family, by your society, by social pressures and expectations. Unfortunately, a lot of parents, in a misguided attempt to help their children lead happy, successful lives will prescribe precisely what they want that child to do. Oh, you have to go to college. You have to go to grad school. You have to work a nine to five job. One of those fancy white collar jobs with a suit and tie that requires a commute and an office. And so that child grows up into us, it grows up into an adult who thinks I have to live life this certain way because that's what my parents wanted for me. That's what society wants for me. But you know what ultimately?

What everybody really wants is for you to be happy and for you to be a contributing member of society and for you to spread that happiness and that joy to others. Basically, the people who love you just want you to live your life and not be a jerk. So do those two things and don't worry about what other people think. And I know that's easier said than done. And I know that that itself is a daily practice. because often we are unconscious of the things that we do because of pressure versus the things that we do because we actually want to do them. So developing the consciousness around it and then aligning our actions with that consciousness, it's a lifetime practice.

Nobody ever is done doing that. But pay attention to that and make that part of your lifetime practice. Make that a value. All right. So those are our four takeaways. Before we sign off, I want to say thank you to everybody who filled out the survey. 456 of you filled out a survey to explain who you are, your gender, age, marital status, race, education, income. So I want to share those results with you if you're interested.

If you are, keep listening. And if not, you can stop now. Here is a snapshot of this community. Gender. We are 57% female, 42% male and 0.2% other. Age. this community is 55% between the ages of 25 to 34. And another 5.7% of you are between the ages of 21 to 24.

So there's a solid 60% of you who are adults under the age of 35. This is awesome. The fact that so many people in their 20s and early 30s are listening to a podcast about personal finance and financial independence gives me tremendous hope, but like makes me super happy. I don't even know how to put that into words. It just makes me smile. That's so awesome.

Now, another quarter of you, almost 27% of those of you who are listening, are between the ages of 35 to 44, and another 12% of you are 45 and above. I love the wide age range that listens to this show. No matter how old you are, it is never too late to start paying attention to your financial life. And you know, the expression, the best time to plant a tree was 30 years ago, the second best time is today.

That. All right, marital status. 57% of you are married. 38% of you are single. 4% of you are divorced and half of a percent of you are widowed. In terms of education, half of you, exactly 50% have a four-year college degree, another one-third of you have a master's degree, and then another 8.3% of you have a PhD. So this is a very highly educated audience. And when you pair that information alongside the fact that the bulk of listeners are under the age of 35, this is a young, well-educated crowd.

And now for the financial gossip. About 2% of you make less than $25,000 per year. High five, because that's what I made when I was in the 9 to 5 workforce. Well, that was my starting salary. My ending salary was $31,000 a year. Hashtag don't be jealous. another 10% of you make between $25,000 to $50,000 per year. So a solid 12% of this audience makes less than $50 grand per year.

I hear you. I'm with you. And I truly hope that a lot of what I create speaks directly to you because I was in that position myself for many, many years and I understand. Now, another 20% of you make between $50,000 to $75,000 per year. hey, that is, statistically speaking, $75,000 is the tipping point after which additional income may not make you happy, according to some recent studies. Let's look at that segment of the population. People who are earning more than enough.

And asterisk, I understand that varies depending on where you live and the size of your family and the size of your educational debt. But with that disclaimer out of the way, here are the stats on the income levels of this audience in the higher income echelons. almost 14% of you make between 75,000 to 100,000 a year. A whopping 43% of the people who listen to this show, almost half, make between $100,000 to $200,000 per year. And another 12% make more than $200,000. Now, to clarify, those stats are based on household income. And given that 57% of you are married,

I suspect that at the upper income levels, many of you are reflecting the higher incomes that come from a two-income earner household. And my message to you, if you are among those people who has a household income that is $75,000 per year or greater, you have incredible opportunity at your fingertips. You are in one of the, statistically speaking in terms of the United States population, you are doing better than the average American in terms of income. So please, I want you to understand you have incredible opportunity. And some days it might not feel that way.

Those days when you are staring down the barrel of your debt payments or frustrated with your commute or for whatever reason, things just don't feel that great, remember, you're doing really well and you have the opportunity to put yourself in a position where you could be doing very, very well in perpetuity. So good for you for listening to this podcast and paying attention to your finances. And I am so excited to be part of that journey. My name is Paula Pan. I am the host of the Afford Anything podcast. If you enjoy today's episode, please share it with a friend. Thanks for tuning in. I'll catch you next week.