BiggerPockets Money Podcast - How to Retire Early in Your 40s by Supercharging Your Savings

Starting point is 00:00:00 Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen, and today I have a very special episode for you, my dear listeners. Today we're going to share another episode from the YouTube series on the Bigger Pockets Money YouTube channel that I host that features stories of people that are either on their way to or have already achieved fire. Today, we're featuring my friend Eric Peterson's financial journey. Eric was able to reach financial independence and retire early in just a decade. After reading Mr. Money Mustache's famous fire blog, Eric quadrupled his savings overnight and started investing all the money he had into those boring investments most Americans

Starting point is 00:00:42 don't pay attention to. Don't miss this episode to find out how. Before we get in the show, we want to thank our sponsor. This episode is brought to you by Connect Invest, Real Estate Investing simplified and within your reach. Now back to the show. Eric, I am so excited to talk to you today. I am super happy to be here.

Starting point is 00:01:01 So, Eric, how did you discover the concept of financial independence? That's probably like a decade old journey. I was in the investment management side of things. So I made mutual funds in my corporate job. And one day I was just scrolling through doing some research on something. And I came across an article. And I want to say I was embarrassed that there's this guy that retired when he was 29. And his name is Mr. Money Mustache.

Starting point is 00:01:25 and read the article. I'm like, wow, this guy's got to figure it out. And he's a similar age to me. So I went to his blog and just started consuming it as much as I could. Like, I read it. I think I read his whole blog in like a month or two. He just opened up my eyes. He said, you don't have to do the nine to five. Well, you don't, nobody does nine to five. You don't have to do that until you're 65. Luckily, I was in a position where I was making decent money and I could start super saving. And before that, I always knew I should save. But he just kind of is like, well, you can live a little. more frugally and save a lot more. And then your age of retirement drops dramatically. Given all that, I was just like, hey, my wife's name is Shelly. I said, Shelly, let's go after this and see if we can't do it. And she's like, yeah, that's something good idea. And so here we are. What was your life like before you discovered financial independence and before you started pursuing it? I think the key thing is I was stressed out. The corporate job was working with C-suite people and there's just a lot of pressure behind delivering and getting things done and playing all the politics and all those things I go along with corporate America and a lot of stress. To me, I mean, my wife would say it impacted my

Starting point is 00:02:40 home life too because if you're constantly thinking about your job, you're not thinking about the things that are really important like your family and taking care of yourself and all that stuff. I think it's kind of that typical story of you're living for your job and then you try to squeeze in fun things to do on the weekend or maybe a show or two at night and just kind of trot along. You know, I don't think we ever really dive into the stress levels that a job takes on you on the Bigger Pockets Money podcast. But when you said that, I was like, yeah, of course. Your life is usually really stressful. Well, yeah, there's the unicorn person who works in a job they love and you'll never work a day in your life when you do what you love. And it's still stressful. I mean, there's always something happening at work that you carry home with you.

Starting point is 00:03:29 And, you know, it does take a toll. And you remember, oh, I've got to work on that project or, oh, I hope I, you know, make it into the office on time tomorrow. So I get that project done. So it's on my boss's desk or, you know, whatever it is. And your mind isn't fully or at all in the conversation that you're having with your family. Yeah, that's not all the time, but that can happen a lot. And that starts to erode your relationship with your kids. And, you know, it can get really, really, really difficult, especially if you're in a job that you hate. Or you're in a job where you're making mutual funds and everybody's money is riding on whatever you decide to put inside your fund and, you know, one bad stock and everybody hates you, I'm assuming. Is that what happens that when you make, I've never made mutual funds clearly? Yeah. You know, it's kind of funny because I wasn't running money. I I was kind of the research and development guy, and I made this big spreadsheet that evaluated our own internal stuff. I was known as the Grim Reaper when I came to meeting sometimes because I had the evaluation on, hey, this fun is not doing what's supposed to be doing, and we need to talk about killing it. That was a me, a big stressor. It's funny, like you're talking about how you don't

Starting point is 00:04:37 forget about it, but I remember I was so proud the day that I earned a Blackberry at work. I was like, oh, this is so cool. And little did I realize. I'm like, oh, now I'm tethered to my job 24-7. Yeah, now they can get in touch with you anytime. When you said BlackBerry, I'm like, is that like an award? Like a little berry. Oh, you mean the old school. Yeah, that shows how old I am. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going. And more importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward. It's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax

Starting point is 00:05:33 season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves in You'll achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code pockets at monarch.com for half off your first year. That's 50% off at monarch.com code pockets. I love Matt, said no one ever.

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Starting point is 00:07:06 At this point, I've logged over 229 audio book completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Leaner Stronger for Fitness, the Anxious Generation for Parenting Perspective, and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more,

Starting point is 00:07:34 all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over 10 years. kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP money. So what was the most significant change that you had to make once you discovered this concept of I don't have to work until I'm 65? The most significant was thinking about savings more. Like I said, I was saving at a good rate. And I went back and calculated and I was like before I figured out the fire movement and stuff, it was like 17% a year.

Starting point is 00:08:10 which is pretty good for your average American. But once I discovered, hey, there's another way, we basically ratcheted it up. We're making decent money and we were saving about 70% of our income. Living on a very frugal, you know, lifestyle, I think we dialed it into like 44th grand a year for a family of four. And, you know, this is in Midwest, so it was pretty cheap living. But it just allowed us to save so much more, so much faster. We didn't cut back significantly. I mean, we still felt like we're living our lives.

Starting point is 00:08:40 we didn't feel super deprived. Now that we're on the flip side, live in Colorado now, which is awesome. That's part of the whole fire thing, too. There's more to that. It's just a, it's a beautiful thing. When you have money, you have options. I love that quote. When you have money, you have option. What was something you thought was going to be hard to give up, but ultimately wasn't? In terms of the biggest thing to give up in that situation, didn't a lot of people say this, but it's the relationships at work. I mean, you make some good friends. You make neat connections. And when you're no longer there, you don't talk to them as much. And they're still, they're still great people. That is one of the downsides of FI is losing the the work connections. Although you then make different friends, at least I have,

Starting point is 00:09:23 we live near each other. And, you know, I live at Longmont. It's kind of this mecca for Fai. And I have a lot of these retired friends in my circle. So it's a different, the transition has been different for me. But yeah, that can be tough. Have you been able to keep? keep anything in your life that you thought you would have to give up? Well, I just bought a really expensive mountain, but we're kind of the same. I mean, honestly, we're still frugal. We're not like penny pinchers. And full disclosure, my wife still works part-time.

Starting point is 00:09:55 So there's income coming in that way. And you just dial it in more. And that's one thing, I think that's what a big takeaway from fire is, when you kind of do this subculture or you start thinking about it differently, you have to really examine your own values. And it sounds cool. It's like, oh, yeah, what do I really care about? But there's a big responsibility there, too. Am I being true to myself? Am I being true to my values that I've reflected on? And sometimes when you're just working all the time, you don't have time to think about that. It's a bigger responsibility than I thought it would be. Yes, it's so easy to get swept up in

Starting point is 00:10:26 other things when you can't focus on yourself. Like, when you go for a walk and you have your phone with you, you don't have to be alone with your thoughts. You can, you know, check out, oh, what's on Twitter and who's texting me and maybe I'll take a phone call. When you go for a walk by yourself and you're alone with your thoughts, depending on how long that walk is, you can get into some really deep conversations with yourself. And the same is true when you don't have work distracting you all the time. You're thinking about yourself, what do I truly value? Having that conversation with no distractions can be eye-opening. It can be eye-opening that you don't know what you truly value. You know, it's not necessarily a bad thing that you don't know.

Starting point is 00:11:06 That just means you have a homework assignment. Let's go figure out what I want to be when I don't have to work anymore. Yeah, yeah. But what do I want to be when I grew up? Because you've had all these inputs from your parents and from culture and from school. It's really truly a point where you're like, okay, I can actually think for myself. And I can actually figure out what I truly value. Did you track your spending prior to retirement?

Starting point is 00:11:31 Like, did you have a good handle on what you were spending or like an amount or where it was going? Oh, yeah. So I was kind of like thinking back on stuff preparing for this. I was obsessive. I was to the point where I would check sometimes daily on what my net worth was. And it's so funny because once we hit fire, that all went away. And I remember saying one time, I'm like, I obsess about money so I don't have to obsess about money. And that's what that was during my working years.

Starting point is 00:11:59 And it's funny because I just looked at my net worth this morning. And the last time I updated it was in March of 2022. And then prior to that was another year. So I'm like, I don't care. I know generally where we're at, but it's a beautiful thing. I should redo that intro of recovering money obsessor. Yeah, big time. That's awesome.

Starting point is 00:12:20 Can you teach my husband how to not obsess? So do you still track your spending? No, we've done a lot of the different things. We've done a spreadsheet budget. We've done a cast budget in the past. We've just kind of like generally tracked it. And right now we don't. You're kind of like in this area of where you know where you're at.

Starting point is 00:12:40 If you go over on a month, you just take some from savings and take care of a credit card or whatever. And, you know, if we're going to do like a big trip, we'll be like, oh, we're going to take the money from XYC and do it that way. So we've really cut back on the tracking and all that stuff. And in full disclosure, we're not super wealthy by any means. Like, we're probably right on the cost of fire between the FU money and fire. So we don't have unlimited resources, but we still have a, I would say, fulfilling life. So let's look at your money where it's parked. What are you investing in? VTSAX gets the J.L. College stamp of approval, but where are you putting your money? I was in the business.

Starting point is 00:13:21 I know how the sausage is made. And it's kind of insane where everybody gets paid. So I'm a big, huge believer in index funds. I'm a huge believer in asset allocation. And I think, that sometimes gets overlooked in terms of 92% of your returns come from your asset allocation. So that means that little 8% really matters on what fun you picked. I do like individual stocks because I do like the possibility of hitting a home run. I'm fine with the fluctuation and the risk and all that stuff. One little tidbit is I always say put your risk in your Roth. And the reason why that is is if you do hit a home run in your Roth, the government can't tax it.

Starting point is 00:14:01 So if you turn your whatever your Roth is, your $100,000 into $1.2 million, that's a beautiful place to have it. Or your PayPal stock into $5 billion. Yeah, well, yeah. I mean, you can always dream, right? You could always, that's the best story ever. Yeah, but it's out there. And so why not take advantage of it? Put your risk in your Roth. I love that. I don't think I've ever heard anybody say that. But that's such a great idea because, yeah, if you're going to put that kind of risk in there with all the rewards, I mean, your Roth is it grows tax-free. You withdraw it paying no taxes because you paid the tax up front. What a really, why is nobody saying that?

Starting point is 00:14:46 Coin today. And, you know, like, beneficiary things, like, it's so well protected. And that's the other thing, too. Like, I grew up through the whole financial services and I read Ed Slott's book on taxes. And like, that's only half the game is accumulating your wealth. The other half, and it made me even more important, is figuring out your tax strategy. That's probably something, and maybe that's another discussion, is figuring out how should you spend your money once you are retired and how do you keep the government's fingers out of it as much as possible? All on the up and up, obviously, but there's a lot of loophole. There's a lot of things. They're not loopholes, they're tax strategies.

Starting point is 00:15:24 And yes, you should absolutely pay every dollar of tax that you owe, and you should. should absolutely try to pay as few dollars of tax as possible by taking advantage of these tax strategy. 100%. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going. And more importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward. It's to actually make progress. Simplify

Starting point is 00:15:56 your finances with Monarch. Monarch is the all-in-one person. personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple.

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Starting point is 00:19:03 Many promotions are available both in-store and online, though some may vary. Eric, you said that you're on the cusp of financial independence. I'm assuming that you used the 4% rule to determine your number. I don't know about the 4% rule. I get it. I understand it. I think it's more of the... like, let me back up. I want to have diversification in terms of how my income comes in. So as I check

Starting point is 00:19:28 these off, then that just makes me feel better. So it's not, we don't live off of our investments at all. We live off of my little income doing handyman stuff and my other projects. And then we live off my wife's income. And those are just sources of income. So in the future, because I'm listening to bigger pockets and whatnot, we'll have a rental. And in the future, my side, businesses, my little side hustles, those will produce income. So it's less about the 4% rule. It's more about what does our lifestyle require in terms of income, kind of answering the question. Okay, so you have a nice nest egg and then you are looking for sources of more passive income. Yeah, and fun income, fun income, I think. Fun income. It's not passive, but I'm fine with that. Yes, for all of you out there

Starting point is 00:20:19 listening or watching who think that real estate is passive, you're wrong. I'm sorry. All those people who tell you real estate is passive, they are incorrect. There's an element of passivicity. Passivist. That's not even, I don't know, that maybe, there's a new word. There's an element of passivicity with real estate because technically you're doing nothing. They give you a check at the beginning of every month, but then things break. Eric, walk me through your FI timeline. How old were you when you discovered Mr. Money Mustache? How long did it take you to become comfortable with the amount of money that you had so you could quit your job? And how old were you when you finally quit? Yeah, that's a good one. It's probably around 34 when I found that article on Mr. Money Mustache.

Starting point is 00:21:06 And then it took about a decade. So at age 44, I had a beautiful moment at work. And it was called getting laid off. I was smiling in the whole meeting. And luckily, I had prepared prior to that. So that kind of sparked me getting into the true fire thing. And maybe I would have drug it out longer. or maybe I wouldn't have. I don't know. But it was a good, perfect, perfect timing. So my first year, I literally just decompressed. Like, I went fishing. I went biking practically every day and just took in the beauty of not having that job. And it was a lot of, yeah, this is how I thought it would be. But then at some point, I was like, hmm, I should probably start doing something. And year two is when I started to kind of take off and like start helping friends with, because I'm relatively handy,

Starting point is 00:21:56 so helping friends with like home approval projects, that kind of stuff. And the word kind of got out. I was like, oh, well, kind of accidentally started a handyman business. At some point, I was like, well, I should probably charge these people something for it. It has some type of value, you know, exchange. And the other thing I did too was something I'm really proud of. And I think this is like my little, my little legacy thing is I started a comic about being a dad. I've had so much fun with that. And that's one of those things that's a labor of love. I've had a lot of connections because of it. And you can probably see. So my wife put this for me for Father's Day a couple years ago or she prints it out some of my comics. And I've actually started to, I've done those, like I have like 80 of

Starting point is 00:22:35 them out there now. And I've started to ramp it up because these people are coming back and like, hey, you need to make a book and you need to do this. And I was like, oh, geez, didn't really think I'd go that far with it. But another beauty of being fired, right? Like pursuing something. something just for the fun of it. And then this might be one of my, you know, semi-passive income streams. And then the other thing that I really got to do a lot was just, this is funny because I just got back from a Moab trip, mountain biking Moab trip. And we were talking about the crazy big lottery of a billion dollars or whatever. And people were like, oh, what would you do? You know, that kind of stuff. I'm like, well, I would just build cool stuff. I didn't say stuff. I said something else.

Starting point is 00:23:14 And that's kind of what I do too. Like we were talking about bikes, like I built an electric bike. And next week, I'm going to do a three-day fast. But to keep my mind busy, I'm going to build a bike out of wood. You just don't get those options when you're working 95. It's just a beautiful thing to have that time. Eric, you've mentioned your comic strip, Dad's R. Where can we find this comic? I love hearing comments of my comics, because a lot of them are really good and some of them really funny.

Starting point is 00:23:42 It's on Instagram at Dads underscore R, A-R, A-R-E, not R. And then on Facebook, it's just dads are. And hopefully someday you see a book published. I've been talking to some people and there's definitely some interest there. So again, you just don't know where you can go when you don't have to do that nine to five and you're stressed out. So one of those cool, cool options. Eric, I love your dad's R comic. They don't all relate to me, but many of them do to me, my husband, my dad, and I can see those on T-shirts. I've already harassed you about this. I can't wait for the book to come out. And since I have your phone number, I'm going to keep asking until it does. Sounds good. I like it. It's good to have an accountability, buddy. Eric, I really appreciate your time today. This was so much fun. Is there any place else that people can find you online besides your dad's R comics? I have a live long, live often website. And it's basically just it's merchandise, but it's like do what you do and do it often. Like, here, here's, so live long, fish often, live long, ride often, live long,

Starting point is 00:24:54 quilt often. Do what you want to do and do it often because that just makes you happy. So that's another little tangent that I've been able to start up to since I don't have to work all the time. Live long, draw often. Yeah, yeah. Oh, it's a beautiful one. Yeah. Eric, thank you again for your time. It's always lovely to talk to you. Thank you. I appreciate it. And this was great. Awesome time. If you'd like this video, please click the thumbs. And don't forget to subscribe to this channel for more videos with inspiring fire stories just like Eric. This is Mindy Jensen, signing off.

BiggerPockets Money Podcast - How to Retire Early in Your 40s by Supercharging Your Savings

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