There was one day after I saved my first $100,000 and before I retired where I stopped worrying about money. I don’t remember when it was exactly, but overnight, my perception shifted and not having enough money to do what I want stopped nagging me.
The biggest protection against devastation is building in a lot of cushions when you think about your money. The cushion also helps as a motivator. If life throws you a great roll, you reach your goals faster.
Here were cushions I built in that kept me warm and safe and comfortable.
Cushion #1: Overestimate your expenses
Whenever I make a budget, (which is, admittedly, rarely) I deliberately overestimate my expenses. Before I started working and after finishing law school, I calculated that it would take me three years to pay off my student loans. I budgeted for my own apartment, expensive utilities, clothes, whatever else I could think of.
And then when it was time to start working, I could look for ways to cut my expenses. It’s a game.
Cushion #2: Underestimate your income
When I calculated my income, I estimated with an eye toward caution. I assumed the government would take out a healthy amount for taxes and that my health insurance premiums would be really high. I assumed I wouldn’t get a bonus and would never get a raise.
When you do actually get a bonus and raises, you’re that much closer. You never expected it, so it’s a happy surprise.
Cushion #3: Your confidence in yourself
This is my favorite cushion.
Okay, let’s say my net worth gets cut in half tomorrow. I’m still way ahead of the game. Even if my portfolio, somehow, decreased to zero tomorrow, I’m still ahead of the game.
It’s not hard to be ahead of the game.
You probably are, too. Most people live paycheck to paycheck. If you’re not in debt, you’re ahead. If you’re saving for the sweet, sweet days of early retirement, you’re way ahead. If you’re already retired, well, why aren’t we hanging out?
Let’s be way ahead together. I promise it will be fun.
But let’s say, somehow, I lost it all. Well, I’m a reasonably intelligent person who has had no trouble finding a job in the past. Plus, I can live on a small amount of money happily.
People ask me if I was afraid of quitting my job when I did.
What if the market takes a sustained and terrible downtown? What if a few years have passed and you want to work again? What if you have kids and decide to be a snowplow parent who must leave your offspring millions?
It’s a bit silly living life for the what ifs.
Of course I’m afraid occasionally. But the longer I do this retirement thing and the more data I gather about the world and myself, the fear diminishes.
And if civilization were to collapse, my survival plan is to die in the first wave of destruction.
So, here are my current cushions in retirement
- Bank account
- Investment account
- My degree as a lawyer
- My ability to find a job and make money
- The fact that I can be super happy with a relatively small amount of money.
- My pillows (lame joke). Sorry, you deserve better.
Great post, short and sweet. I guess I would struggle with how much to overestimate, but that’s probably where #3 comes in handy.
Let’s say you are apartment hunting and you figure you’ll spend $1100-$1300 on rent. Go with the $1300 number when you budget. Look at your past expenses and round up. When I moved to Denver last year, I estimated I’d spend $2000 on furniture for my new place. I ended up spending about $400. I estimated I’d spend $18,000 on rent. I ended up spending about $13,000. Cushions!
Good stuff, and you need to start a separate website for the towel animals. I sense the beginning of something big 🙂
I only have one towel animal left to show you guys and I have no idea what it is.
What a great piece! Boy is #1 (Overstimate your expenses) so true. Here’s one of MY cushions–since opting for early retirement in 2015, I elected to keep a 2 year cash bucket (in a Vanguard Prime Money Market Fund). I know that at 2.45% its not earning like VTSAX, but it sure helps me sleep at night 🙂
Oh, wow, is the interest rate up to 2.45%? That’s great! Last time I checked, I thought it was like 1.5%. I’ll believe your number. I had a years worth of expenses in my money market fund. Well, a “year”. I overestimate my expenses, so I still have plenty left at the end of the year. Cushions! 🙂
I’m glad you liked this piece. I didn’t publish it ages ago because I thought it was a bit repetitive.
My spouse and I disagree on #1 (I’m for it, he’s against it). He likes to calculate a highly accurate budget and build the cushion by saving more so we’re generally on the same page with the idea of cushions. This is a great post!
As for the value of your law degree, do you keep your license active or would you have to retake the bar exam if you ever wanted to return to practice?
I like having an accurate budget when I’m in the midst of it, but when I’m guessing for the future, I like overestimating my expenses. It puts my mind at ease.
I’m on retired status. If I wanted to practice again, I think I’d just have to catch up on some continuing legal education and pay some money to reactivate. I think it’s not too hard.
I’m a presently practicing attorney and how to handle my license in early retirement has been on my mind. My state only allows inactive status for 3 years, but we don’t have CLE requirements. In light of that, I’ll probably maintain active status until I’m either closer to traditional retirement age or we’ve passed the worst of sequence risk. Retired status in my state requires an age or number of years of practice that are incompatible with doing it early.
Thanks for sharing!
It makes sense that different states are different. I should probably look into inactive status more than I have. Thanks for the input!
Love your posts they seem to always come at the right time and remind me that life is BEAUTIFUL! Thanks!
Was it the comment about dying in the first wave of destruction should the apocalypse occur that reminded you? 🙂
That’s the comment that got to me, TG. Yikes+Lol=what?
I don’t understand people who want to survive the apocalypse. The post-apocalyptic world will be awful!
Don’t forget about side income. Husband has been retired for almost three years now, and my ‘little’ side jobs (writing quilt restoration, dog and catsitting, piano lessons, etc.) have filled in the money gaps again and again.
My mom always said to work at being good at least three different skills — that way, wherever you moved, the odds were good that you could use one of those skills to find work. That helps a lot, as well as Husband’s ability to fix practically anything, from appliances to cars. He keeps things going; I keep us fed, fairly tidy (sort of) and in clean clothes.
All those “jobs” you mentioned sound awesome! I want to learn how to quilt.
I like your mom’s saying too. Moms are wise. 🙂
Lovely post, I always find it encouraging to hear from people who have successfully retired early on their thoughts afterwards! Did I miss where those towel animals were created? Such a cute idea.
I went on a cruise in March and the stewards delighted us with a different towel animal every day. 🙂
This is great advice, and, you might be on to something about not planning to make it beyond the first wave of destruction! That could be a great money-saving tip for all those preppers out there: the most frugal plan for the apocalypse is figure out where it is starting and to run towards it.
LMAO. Rarely do I actually laugh out loud, but this time I did. Love it!
Great post, as always! I find people in the FI community underestimate the value of “ability to find a job and make money”. I am not convinced of slaying away in awful jobs for years in order to never have to work again. I much prefer building up enough safety net, then go find jobs that I enjoy. Life is too short to be miserable 50+ a week.
100% agree. I occasionally apply for part-time jobs that sound interesting or different.
You’re a better woman than I am. (!) When I think of applying for a part-time job, I think “Better dust off the resume and gussy it up,” which thought is so depressing I need to take time off to do retired sorts of things until the impulse outgasses.
I’ve never seriously pursued any of them beyond filling out the initial application. If they ask for references or any sort of real work, I quickly leave and do retired sorts of things. 🙂
Can you please give me the name of the book on investment that got you started and fired up on this journey you’ve been on? Thanks
Your Money or Your Life. A Random Walk Down Wall Street. The Bogleheads Guide to Investing. The Simple Path to Wealth.
Hope that helps!
The idea of turning someone down because of an (unnecessarily) long job application does sound appealing… hmm does that make me a bad person?
That makes you wise, my friend.
Fun piece!
I still think it’s amazing you quit such a lucrative and competitive field cold turkey with no plan to every practice again. This I struggle with, so impressive.
I’m a person before I’m a writer before I’m a lawyer. That life wasn’t for me and I knew it from the beginning. I wanted to live on my own terms as much as possible.
And I don’t think it was cold turkey! I think it was years of planning. 🙂
How much is your life worth? Being told what to do? Not having control? Doing something you find boring and not stimulating?
Life is better now. So much better now.
I dig your retirement posts. I’m saving for retirement. So far, the sum doesn’t spark as much joy for me as yours did for you. Maybe because my mortgage remains larger than the sum. Will I feel more joyous once they’re closer in size? That would be nice. Joy sounds nice.
Joy is nice! But I think the key is to find joy along the way as well as waiting for some destination in the future where joy is abundant. You’re ahead of the game! Go you!!
Once again, you have shown how to live a real life instead of a statistical life. What life is is defined by its purpose. Our purpose in life is two-fold, to be kind to ourselves, while being the conscience of the universe, the infinite, beholding and knowing itself.
Oh goodness, I love the idea of being the conscience of the universe! I always remind myself that we are the universe observing itself. It speaks to me. 🙂