Investing

Retire at 38? Pay Off $200K of Debt? Extreme Savers Share Their Secrets

Building wealth is usually a slow and steady process, more of a marathon than a sprint. But as these extreme savers prove, it’s not impossible to cross the finish line early.

Their techniques may require more discipline than you can muster, but many of their habits—like living below your means, steering clear of debt and investing regularly—are easy to emulate.

Jeremy, Winnie & Julian“I retired in my 30s—without a windfall of cash.”

Jeremy Jacobson, 42, location-independent retiree, currently traveling in Asia

“Most 30-somethings are still building up their retirement funds, not getting ready to cash them in. But that’s exactly what I was doing four years ago.

I got fired up about early retirement after spending six years paying off $40,000 of student debt. The experience left me exhausted and disenchanted with the traditional vision of the American dream—graduate, work till 65, retire.

Instead, I ruthlessly cut costs—selling my house and motorcycle, swapping my car for a bicycle and moving to a cheaper place with roommates in Seattle. My expenses went way down, and my savings shot up to more than $5,000 per month. In 2004, I met my wife, Winnie, who was on board with my frugal ways. Together, we began funneling our savings into index funds.

By 2010, we were well on our way to saving a million dollars. We were putting away roughly 90 percent of our $135,000 income, and living off the interest and dividend income from our investments. That gave Winnie the freedom to leave her program manager job. With seven figures in the bank—and plans to spend less than 4 percent per year—I retired from my job as a hardware architect three years later.

I earn some income from my blog and Winnie just published a book, but neither of us works a traditional job anymore. We’re now full-time parents to our almost 2-year-old son Julian and embrace a minimalist lifestyle—and we’re traveling the world in the process. We’ll see where the journey takes us.”

Matt DeMargel and family“We saved more than 70 percent of our income last year.”

Matt, 43, and Misti DeMargel 40, a marketing specialist and nurse in Houston, Texas

“My wife Misti and I saved well over half of our net income last year, which landed in the low $100,000s, by living below our means, investing in index funds and staying out of debt (aside from our mortgage). We also have a six-month emergency fund and routinely top off both our Roth IRAs and my 401(k).

Our family opts for Netflix over cable and a free library card over new books and movies. We also have cheap Wi-Fi calling plans instead of expensive family bundles. And we’re proud couponers, always on the hunt for a good deal on food.

Another huge money-saver for us is sharing one family car, a 12-year-old Dodge Neon. (I ride my bike almost everywhere.) Our family vacations are usually road trips, Misti cuts our hair to save on salon bills and we rarely buy new clothes.

We’re big-time budget nerds, and I wouldn’t have it any other way. Once our home is paid off, we plan on maxing out Misti’s 403(b) and saving in a 529 plan for our 9-year-old’s college education. Funding a health savings account is also on our list.”

Lisa Perry“I paid off close to $200,000 of debt in six years.”

Lisa Perry, 55, an attorney in Phoenix, Ariz.

“A decade after I graduated with my PhD, I was still up to my ears in debt—about $160,000 in student loans. Credit card debt and a car loan tacked on another $40,000. I was unwilling to spend the next 30 years making minimum payments, so I got serious about eliminating every cent.

As an hourly worker—I’m a temporary document-review attorney—I picked up every project that came my way and got a second job teaching. I even participated in research trials at a nearby college.

In addition to bumping up my income, I majorly slashed my expenses. I moved into an apartment with roommates, biked to save on gas, cut cable and stuck to a strict budget that limited my food and entertainment spending. At one point, over half of my income was going toward debt.

I kept this up for six years before becoming debt-free. My income fluctuated a good bit, but it was mostly between $80,000 and $120,000. However, a lot of my accelerated payments toward the end—sometimes upward of $2,200—were made on a $50,000 salary. I’m living proof that it’s not how much you make, but what you’re willing to do with what you have.

I’ve since loosened the purse strings a bit, but I have zero regrets!”

Carl and Mindy“We increased our wealth by more than $764,000 in four years.”

Carl, 43, and Mindy, 44, a software developer and writer in Colorado

“Four years ago, my wife Mindy and I set a huge goal: to boost our portfolio from $586,000 to $1 million by 2017. That’d give us the freedom to work on things we truly care about, like writing, web development and other passion projects.

Great investment returns have accounted for a lot of our increased wealth. (If you haven’t noticed, the market’s been on a tear.) But one of our most powerful savings tools has been tax-advantaged retirement accounts. In addition to maxing out IRAs, we’ve invested a lot in 401(ks). In 2013 and 2014, I maxed out my traditional 401(k) and got a 25-percent employer match. In 2015, I started doing contract work, and opened a self-directed Solo 401(k), which benefited both Mindy and me. Since 2015, we’ve invested more than $130,000, thanks to the 25-percent corporate match.

The other piece of the puzzle is frugality. I drive a 2003 Honda Element with 160,000 miles on it. We cook most our meals and live in a modest, 1,800 square foot home in a neighborhood we love. For us, these aren’t sacrifices—living below our means allowed us to save over 70 percent of our six-figure take-home pay last year, which we’ve invested in a regular brokerage account.

Smart investing is the other game changer: We’re usually passive investors, which has paid off, but we also got lucky with some stocks we purchased a while ago and held onto, including Google in 2004 and Facebook in 2012. The latter is my biggest success. I bought 2,000 shares for about $30 apiece. Facebook now sits at almost $140 per share. This alone counts for a gain of over $200,000. (I attribute much of my success here to luck! These days, I’m mostly an index investor.)

Our portfolio now sits at $1.35 million and early retirement is on the horizon.”

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