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When I was in the Army back in the late 1960's and someone asked us how long we had to go before we were out, we would always say "x number of days and a wake up", the wake up being that last day, when you got up, turned in the weapon and all that other crap, got paid, signed the papers and said "AMF" to all the other guys. Don't even ask what "AMF" meant… had to be there.

I mention all this because my wife, who retired early seven years ago, asked me the other day when I was going to join her and I said "503 and a wake up!"

Five Oh Three…..hey, that's less time than I spent in the infantry beginning back in 1969. I can do Five Oh Three standing on my head!

I turn 55 in Five Oh Three and I am out of here! The way I see it, my income after taxes should be just what I am making now and my expenses are going to be at least $700 a month less. I am going to make it!

There are different ways to do this, but for those of you who cannot see the light at the end of the tunnel, permit this old fool to share some of his observations on the art of the early retirement.

1. Live Below Your Means. My car is 10 years old. It looks fine, it runs fine. Can I afford a flashy car? Sure, but I would rather retire early. Remember the story about the guy who wanted a big Cadillac? He worked and worked and finally got the car. The guy worked himself to death but he didn't care, and he loved the car so much he asked to be buried in it. So the funeral procession is heading for the cemetery and someone sees the Cadillac and says "Man, that's really living!" Not for me, it's not. The time to unburden oneself of all those silly expensive habits that don't mean much in the scheme of things, is right now, this moment, today, not when we are retiring. I mean, for example, does smoking really give one $150 a month worth of "fun"? Cut down on silly expenses now and it is easier to…..
2. Save Regularly. Savings is like exercise. It's a lot more beneficial if you do it regularly, in moderation, beginning when you are young, than it is if you do it sporadically, to excess, when you are getting older. Pay yourself first, every payday. A little here, a little there over a period of time and pretty soon, you are talking real money, especially if you……..
3. Invest for the Long Term. Seven or eight years ago, my father, who was getting on in years asked me if I would look after his investments for him. I said sure. So I am looking through things, trying to decide what to keep and what to sell and I come across this mutual fund, which was not exactly a swinger. I think there was maybe $90,000 or something. I asked my dad "what did you pay for this?" He said, "$5000". I said, "When did you buy it?" He said "1969". Turns out he reinvested the dividends every year and paid the taxes. Now, 1969 to 1982 was, after the Great Depression, the second nastiest stock market in U.S. history, yet a below average mutual fund turned into an "18 bagger" between 1969 and 1992. I shouldn't have been surprised. It worked for me too.
4. Don't be House Poor. There are folks out there who have made serious money buying and selling houses. There are others out there who don't ever consider housing to be an extravagance because "you have to live somewhere". Different strokes for different folks. All I know is, my house is paid for in 503, because I resisted the urge to keep moving up into something bigger and bigger. It was a little bit cramped when the kids were still at home, but I waited them out! Always watched the interest rates and refinanced when it made sense (the mortgage is currently 6 5/8%) As a result, my housing expenses as a percentage of my income have declined every year of my adult life! Keep trading up and you may never get off the treadmill! An added advantage? If I need some money can tap into the $245,000 gain. But the time to do that is if you have to, not to fool around.
5. Don't Let Tax Considerations Drive Your Spending Decisions. Some folks must be madder at their government than I am, because they will do foolish things, just to avoid taxes. I say, forget that lame argument that you should keep a big mortgage going to shelter your income from taxes. You pay interest and get to deduct it, but what do you care whether you pay the bank or pay Uncle Sam? The goal is to pay yourself! If the house is appreciating fast, that's fine, just own the fact that, to the extent you have more house than you need, you are speculating in real estate on margin. Might be more restful to just....
6. Take Advantage of Tax Free Compounding. If you can have an IRA, have one. If you can have a 401k, get one. If you can have both, go for it!
7. Pay Off the Balance on the Credit Cards every Month. If someone offered you a sure thing investment paying 18% a year would you take it? You should. 18% is almost twice what the stock market pays over the long term. Invest $10,000 at 18% and it becomes about $37,600 in eight years and almost $2 million in 32 years! The easiest way for most people to make 18% is to pay off their credit cards, yet how many people out there have maxed out credit cards and money in stocks. Hello??????? How are you going to make money at something that is really hard (investing in stocks) when you haven't even figured out how to pick the low hanging fruit? I haven't carried a credit card balance since 1978. If I want something, I plan and save for it.
8. Have a Plan. Wanting to retire early is one thing. Having good habits with money helps. But without a plan, how do you know if you are on target, whether you are saving enough, whether your investments are returning enough, whether you are likely to out live the money you are likely to have on the day you retire? This stuff doesn't just happen, but, being a finite problem, it is a heck of a lot easier to figure out than a lot of other things, like………..
9. Have Fun Every Day. Some fools have the attitude that if you just grit your teeth and work really, really hard at something, and don't have a life in the here and now, then some day in the future, you will have a wonderful life. Me, I think back to 1969. I say, "make sure every day above ground is a good one because you just don't know how many you are going to have!"

Fool on!
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