Sarajevo at Dusk. Taken from the Yellow Fort on the last night of Ramadan.
Outwardly, I probably appear to be like most 35 year old professionals. I get up, I go to work, I come home, and if I’m lucky, I get to watch some TV, play with my dogs, or read something before hitting the sack and waking up to do the same thing over again. I struggle to fit my workouts in and stay healthy. I stress out about work and as a result, act grumpy to the people I love. At times, it seems like the grind will never end.
But what if it didn’t always have to be that way?
While my daily routine looks a lot like the average person’s, I’m leading a secret life. For a few years now, I’ve been working towards a dream the soon-to-be-Mrs.-Vagabond and I don’t discuss with too many people. The goal: To eliminate all debt, live frugally, save every penny we can, and quit working by the age of 40 to live a vagabond life, traveling the world and connecting with new cultures, places, and people. It hasn’t been easy so far– I bought a home in the pricey San Francisco Bay Area days before the market crash in 2008. I carried huge amounts of credit card, student loan, and mortgage debt. My company went out of business and I spent almost a year unemployed. I worked hard, built a consulting business, and managed to pay off all the credit card debt, all the high-interest student loan debt, and despite all the challenges, have managed to save more in my retirement accounts in the past two years than I did in all the previous years combined. I’ve purchased three rental properties, and aim to buy about 12 more before we retire. The cash flow from these properties and the retirement accounts will allow us to live comfortably almost anywhere in the world.
When STB-Mrs.-Vagabond and I discuss our retirement dreams, they go a little like this:
We’ll settle in a small town in Spain, or Southern France, or Argentina, or maybe Mexico. We’ll work hard to make friends and really become a part of the community. We’ll join in festivals, perform some community service like opening an animal rescue, and raise our kids as citizens of the world. When we crave the big city, we’ll hop on a train to Paris, or Barcelona, or London. We’ll immerse ourselves in really, truly understanding the language and people we live among. Maybe we’ll start a tour business or a service catering to expats. When the time comes and we want to try someplace new, we’ll pack up and go, knowing that we can afford it and that we have the skills to cope with a new and unfamiliar environment. If we miss the United States, we can always move back until the wanderlust overwhelms us again.
It may not be everyone’s cup of tea, but to me, this is a reason to get up every morning and go to work.
So what will this blog be about? I’m hoping I can offer a few interesting insights, such as:
Monthly Progress Reports
Learn from my success and mistakes. There have been plenty of both so far! To stay focused and keep it interesting, I’ll post actual numbers for my finances, and how close or far we are from achieving our goal. We’ll look at net worth compared to the previous month, income from rental properties, places I could do better, and most importantly, remain accountable by opening up my spending for all to see.
Rental Property Analysis and Landlording
I’m acquiring property at the rate of 2-3 units per year right now. Once we hit the magic 15 unit threshold, we’re technically able to retire. I’ll share my experience as I find, analyze, and purchase (or reject!) properties. I’ll share my experiences as an out-of-state landlord, for better or for worse.
Annual Progress Reports
The other day, I suggested a thought experiment to STB-Mrs.-Vagabond: Every year, we’ll look at what our monthly income would be in retirement if we stopped working at that exact moment. We’ll explore some exciting places in the world where we could afford to live and thrive. At first, the options available to us may not be what most would consider garden spots. Over time, our options will expand and we’ll find ourselves with options that we could easily call home.
Travel and Travel Hacking
As you might expect from our retirement dreams, we love to travel. This is the one place where we splurge relative to the rest of our lifestyle, but we still try to use clever techniques to travel on the cheap, or even free. So far this year, we have traveled to Egypt ($374 per person), Mexico ($95 per person), and six countries in Europe ($1500 per person). The last trip was full retail price, but we went to Mexico and Egypt on credit card reward points, mistake fares, and other clever travel “hacks.” Though my insight and experience pales in comparison to some of the travel hacking specific blogs, I will share a few of the tips and tricks that have allowed us to travel the world for pennies on the dollar.
Wedding
Someday soon (hopefully in 2016), the soon-to-be Mrs. Vagabond will become the actual Mrs. Vagabond. We have a wedding to plan, but we don’t want to rob Peter to pay Paul. We need to come up with the wedding funds independent of our retirement savings, and we’ll try to find frugal ways to make a royal wedding happen on a peasant’s budget! Luckily we have a ton of wonderful, eager-to-help friends who may be able to help us plan the perfect day. I have faith that we can get this done without spending anywhere near the national average, even in the pricey San Francisco area.
The Journey Begins…
In the next day or two, I’ll post my first monthly progress report, as well as a detailed article on how to evaluate rental property. I hope you’ll join me on our journey to Financial Independence, Early Retirement, and the journey that follows after that– this is just the beginning.
Pingback: Where Can I Retire: A Little Goes a Long Way | The Frugal Vagabond
Hello FV from SoCal. Just came across your site and love your story. I’m a real estate investor as well and an avid traveler…. well, at least before the kids came. 🙂 I think it would be so cool to live in or near Barcelona or Paris – best food ever!
Where do you do your RE investing? I’m guessing you go elsewhere for cashflow since you live in the Bay area. I’m primarily invested in the Las Vegas suburbs.
Hey Michael, thanks so much for the comment and the kind words! Barcelona is probably tops on our list right now for a first place to live in early retirement. We got engaged in Paris! We’ll probably have a little one by then, but are hoping to time it right to allow for slow travel/education abroad to be a part of their life from the very beginning.
You’re absolutely right– We invest out of the area, mostly in the midwest and south. I have property in Tennessee and in Ohio. I’m happy with both, so will probably continue to buy in those markets!
Hi Vagabond –
As you might’ve gathered from my other posts, I just stumbled on your blog tonight. (It was the Investment Policy Statement that lured me in, believe it or not. I’m in the middle of crafting mine right now.) Anyway, it seems like we’re in similar places in our journey so I’m looking forward to following along and getting to know you.
One of things that I’m trying to understand: your progress bars show Rental Income and 401k Income. But if you’re 35ish and aim to retire at 40, then you can’t access (much) of your 401k for many years still. I do see in your net worth update that you’re also investing in stocks in a taxable account; is this what your Investment Policy is referring to for stock investment?
Also, look forward to learning more about your 5 year plan, long distance RE investment, and how you see the slow travel lifestyle working in practice.
All aboard!
-Cody
Hey Cody,
Thanks for the comments this evening, and thanks for sticking around and reading more! It really means a lot to me because the blog is tiny, and it’s often hard to have a sense of whether you’re just talking to yourself! 🙂
We plan to use a Roth IRA conversion ladder to get access to our 401(k) funds in early retirement. It’s a process by which you convert your 401(k) to an IRA, then each year, convert a small portion of that amount into a Roth IRA. You pay income taxes on the smaller conversion amount at that time (but since our income will be lower in early retirement, we hope to keep the effective tax near 0). Once those funds have “seasoned” for five years in the Roth IRA, they can be withdrawn without penalty! So basically it goes like this:
Year 1 Early Retirement: Convert one year of expenses from IRA to Roth IRA, pay taxes on that amount. Fund expenses from taxable account.
Year 2 Early Retirement: Convert one year of expenses from IRA to Roth IRA, pay taxes on that amount. Fund expenses from taxable account. (Y1 rollover has seasoned for 1 year)
Year 3 Early Retirement: Convert one year of expenses from IRA to Roth IRA, pay taxes on that amount. Fund expenses from taxable account. (Y1 rollover has seasoned for 2 years)
Year 4 Early Retirement: Convert one year of expenses from IRA to Roth IRA, pay taxes on that amount. Fund expenses from taxable account. (Y1 rollover has seasoned for 3 years)
Year 5 Early Retirement: Convert one year of expenses from IRA to Roth IRA, pay taxes on that amount. Fund expenses from taxable account. (Y1 rollover has seasoned for 4 years)
Year 6 Early Retirement: Convert one year of expenses from IRA to Roth IRA, pay taxes on that amount. Fund expenses from rollover from year one, because that amount has now seasoned for five years!
SeattleCyclone has a much more detailed post on the strategies for accessing 401k funds on his site. I’ve resisted the urge to reinvent the wheel here since I know there are a lot of good articles on this topic:
https://seattlecyclone.com/accessing-your-retirement-accounts-early-yes-you-can/
In this way, you basically create a waterfall of funds that sustain you until you can just withdraw them directly from the 401(k) further down the road. You just have to come up with enough accessible assets to fund the first five years, and that’s why I put a smaller amount into taxable accounts (or backdoor Roth IRA) each month. I’m looking to hit ~$120K in freely accessible funds to cover 24K a year for the first five years.
If all that makes sense, when I refer to stocks/bonds in my investing policy, I’m actually lumping together the three funds I hold across all accounts, whether they be 401(k), Roth, or taxable.
Let me know if that doesn’t make sense and I can either respond further or write a post about it.
Take care and thanks again!
Ah, wonderful, that makes sense. Thanks for the thorough explanation (and the link to more info). I haven’t figured out exactly how stocks will play into my FIRE plans. Knowing myself and my (newlywed) wife, I don’t think the idea of tapping into our retirement funds (and the principle, at that) in this way suits us. Probably more a mix of real estate and private businesses. But I’m always eager to hear other approaches. 🙂
-Cody
Absolutely love your blog.
My SO and I are in a VERY similar spot right now. Though we are not investing in RE at this time.
Literally, you could be our twins.
Thank you, and best of luck to you both! Since I wrote this post, much has changed, but the basics remain the same. The big difference is that thanks to saving, being moderately frugal, and staying focused on what mattered to us, we’re on the verge of being able to make some serious life changes for the better. I hope you’ll check back every now and again, as early 2018 will be a super exciting time… hope it will be something you’ll enjoy 🙂
Kudos to you guys and thanks for the blog. My wife and I live in the Bay Area as well and amidst the insane housing prices (we’re early thirties), have no idea how we’re going to make it long term out here. That said, we love it and have no plans on leaving, just trying to strategize on the long term and how we can eventually “settle down.” I make good money as a VP in the tech scene in SF and my wife is a teacher (unfortunately not so lucrative), and we’re looking to researching the idea of investment properties. Where in Ohio do you own, out of curiosity (we’re both from there).