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According to the Federal Reserve, Millennials in their twenties carried an average debt of $22,135 last summer. And for the millions of Millennial freelancers toiling away in the “gig economy” — which is growing larger each year — benefits like 401K plans and employer-paid insurance slide further out of reach. That’s before their paychecks are flattened by rent, utilities, and exorbitant health insurance premiums and deductibles. There’s still time to join us in revolutionizing our finances this month—link in bio! For that reason, she told PBS, she prefers to describe herself as “financially independent.”

How I (try to) Align My Time and Money With My Highest Priorities

Thus, everything we earned could go towards the future, not towards paying off the past. I’ve come to view our launch into adulthood–debt-free and mostly broke–as one of the most formative elements of our FIRE journey. I can share what plan we select if that’s of interest to folks. Astute readers will note that Mr. FW’s job provided our health insurance.

They bought a four-bedroom house in Vermont and began a leisurely new life on 66 acres of woods, streams, and apple trees. So they squirreled away the majority of their income — in 2014, they saved an impressive 71 percent — cut back on things like eating out at restaurants and taking public transportation to work, and started a blog about their lives. Dive into the finances of real live people – not just internet people! Get hot and fresh money tips delivered to your inbox. Let me show you how to make your money create the life you want.

Today, they are financially independent and living out their dream on a sixty-six-acre homestead in the woods of rural Vermont with their young daughter. My writing is a narration of our successes, foibles, and lessons learned along this path to a wholly unconventional, whimsical, and purpose-filled life. We’re striving for a life where we work hard, but on projects that are rewarding.

Reader Case Study: Plasterer and Social Worker in Manitoba Plan for a Baby

This represents a willingness to trade the potential of having a higher net worth at, say, age 80 than running out of money at, say, age 70. In general, the safer the investment, the lower the rate of return you can expect. But, if you compare this to the current bond market, 4% is actually not bad. Our interest rate was 4.0% fixed for 30 years. Inflation is when money becomes less valuable. 3) A mortgage is a nice hedge against inflation.

Is Your Need For Control Killing Your Frugality?

If you simulate retirement over the course of known financial history, there is a very specific set of circumstances whereby a person fails (runs out of money) in retirement. When you pay off a mortgage, you’re not going to end up with the highest dollar return at the end, but you’re also way less likely to run out of money. You can’t use a paid-off house to buy groceries or fix your car or pay for health insurance if you’ve lost your a job. A paid-off house essentially returns the rate of your mortgage interest rate. This makes it easier to put a down payment on a house, build a portfolio, and — if you’re lucky — retire early, Frugalwoods-style. The 2008 recession may have cratered the wages and employment prospects for people just entering the job market, but according to the myth of the American Millennial, the real problem young people have today is themselves.

You should aim to have everything paid off, from student loans to credit card debt, by age 45, O'Leary says. But, the data is only slightly better if you are living in retirement for 20 years. The above data refers to people who will be retired for 35 years. The average Social Security retirement benefit check is $1,907 as of January 2024. If your bank interest rate is more than your mortgage rate, keep the mortgage for now. When we got married in 2008, we didn’t have much money, but we didn’t have any debt.

I felt like I was bumping through life as a balloon just ricocheting off of other people’s expectations.
No, we didn’t inherit money (nor will we) and no, our parents didn’t buy us houses or cars, but crucially, they did pay for our undergraduate education.
If, say, your Social Security checks are $2,000 monthly, you'd have a combined annual income in retirement of $40,000.
We took a look at our finances and realized that if we embraced extreme frugality–and maintained our decent salaries–we’d be able to make this dream a reality much sooner.

What’s weird is the book’s assumption that hiring a cabinet painter is an expense that Millennials are liable to encounter — and that doing the job yourself is somehow empowering, innovative, and thrifty. Within a few years, the Frugalwoods garnered a vocal audience of aspiring frugalists, a book deal with HarperCollins, and enough guest spots on money podcasts to catch the attention of NPR and The New York Times. The Frugalwoods soon had enough money saved to escape their “frenzied” city grind. What if you were able to retire in your thirties by simply living more “intentionally” and investing in low-fee index funds?

Confront & overcome your feelings of financial fear and insecurity

Before the Frugalwoods, there was Broke Millennial, a self-described “financially independent” New frugalwoods Yorker whose parents covered half of her college tuition and began teaching her about building capital when she was seven years old. Following the 2008 recession, a new kind of self-help guru — the Millennial frugality expert — emerged from the rubble. Many of the modern rich are prolifically frugal, and for Americans who dream of a more gilded life, the art of bean counting can become its own form of religion. This is one of the most integral metrics of the Millennial experience because of its implications for how much money a young person can save.

How much do you get for retirement if your house is paid off? ›

There’s a lot that we love about dense, urban environs, but it was time for a change. Our desire to live in ways that we find personally meaningful was powerful. At first we thought, ok, we’ll move to the woods when we retire at 65.

Let’s resolve your stress and confusion around managing your money

The better question, however, may be whether that's enough for a 70-year-old to live on in retirement so that you can align your budget accordingly. If your bank interest rate is less than your mortgage rate, pay it off. As a result, an oft-stated rule of thumb suggests workers can base their retirement on a percentage of their current income. That could reduce your retirement income too much. Based on this rule, if your annual preretirement income was $100,000, you need $80,000 a year in retirement to cover your expenses. I get bored writing about myself (I mean, kinda…. ) and I want to dig into stuff that’s relevant to your life and your financial journey.

We’ve settled into a more temperate version of our old selves, which extends its tendrils into every aspect of our lives. In the spring of 2021, we made the decision for Mr. FW to retire from his job as a software engineer after being with the same company for 14 years. We continued to save at a pretty high rate–typically saving all of my husband’s salary and living off of my income combined with the rental income. We moved to Vermont full-time in May 2016 and began renting out our Cambridge house in June 2016.

This was accomplished, yes, through extreme frugality, but also through having good, white-collar salaries. During 2014–our first lean Frugalwoods year–we vacillated between saving 65%-82% each month making our average savings rate 71.4%. →Eliminating everything is an easy way to figure out what you value and what you want to add back into your life. The way my husband, Nate, and I decided to achieve that was through financial independence. I wanted to change how I lived. A job I was fortunate to have.

Here we’d achieved everything we’d set out to and yet, we weren’t fulfilled.
Mr. Frugalwoods and I both went to college at the University of Kansas (where we met our freshman year), did relatively well, graduated in 2006 without any debt, and got good jobs.
By comparison, historical stock market trends demonstrate that–over many decades of investing–the market delivers somewhere in the range of 7% annually.
This was accomplished, yes, through extreme frugality, but also through having good, white-collar salaries.

We began working toward FIRE in April 2014 and, synchronistically, he retired seven years later in April 2021 at age 37. But after 14 years, he decided it was time to bow out and let others take the helm. Mr. FW loved his job as a software engineer and was with the same company for 14 years.

The circumstance for failure is that you retire right before a stock market crash AND high inflation with low returns (i.e. the 1970s). In paying off our mortgage, we traded maximum possible end value for a reduction in variance. Bonds are typically safer, less volatile, lower return investments, much like a paid-off mortgage. Since I just outlined some very good reasons NOT to pay off a mortgage, why on earth did we do so? I would further argue that you should also have at least one other form of investment (in addition to your retirement). Tying up ALL of your excess cash in a paid-off house is a dangerous proposition.

“I think it’s very important for me to recognize that the way in which I experience frugality is not going to be the way in which everyone experiences it.” So who are these financial independence sermons for? Sometimes the stories pander to Millennials by touching on issues like climate change — “Frugality is environmentalism! What evangelists like these have embraced is a model of advice-giving that mostly involves telling self-congratulatory stories about how they achieved financial independence by being frugal.

I am deeply grateful for the salaries and privileges my husband and I had because that’s what made this journey possible. He doesn’t have any plans to dive back into a “real” job and is enjoying the time, space and freedom of our homestead. In general, you don’t want to invest money you’re going to need in the near future. Nor will you “lose” this money in the event of a market dip. In so doing, you are indeed missing out on potential market gains, but you’re also not going to incur capital gains taxes. In other words, we will live off of our rental income and my income.