My husband and I plan to retire from the corporate world of 9-to-5’s and be financially independent by 40. Why 40? Well a couple big things will happen before we’re 40. My husband’s daughter will be 18, so child support payments will end. Our son will also be out of daycare, so that’s another huge expense we won’t have to worry about. My husband will also retire from the Marine Corps, which will give us a small pension and affordable health care for the rest of our lives. (Honestly, the health care alone is enough of a reason for him to stay in until retirement).
How do we plan to do it? First and foremost, we know our numbers. We know exactly how much we’ll need on a monthly basis to not only survive, but thrive. (We know those survive numbers too, but plan on thriving after 40).
Because we know our numbers, we know our goals or our end game. We know exactly how much we need to make a month to live the lifestyle we’re comfortable with. Because we’re both frugal, and aim for self-sufficiency, the lifestyle we’re comfortable with doesn’t cost very much.
Passive Income
Someone once said the key to financial independence was to spend less than you earn and invest the rest. The more frugal and self-sufficient you are, the less you spend, and the more you can invest. Our primary investment plan is Lending Club. Lending Club is an online peer-to-peer lending platform. It might sound odd, but it’s legit. Lending Club creates a platform so that you can act as the bank.
As a bank, I can pick and choose different loans to back. Lending Club gathers all the information a brick-and-mortar bank would: income, FICO score, rent or own, any late payments, etc. and assigns a rating to each individually borrower with an appropriate interest rate attached. If the borrower is risky, they have to borrow at a higher interest rate, but you – as the bank – also make more on your money if you choose to invest in this person.
The best part about it is that you’re only ever invested in a single loan for $25. Banks spread around their risk by lending to lots of different borrowers. You do the same with Lending Club. So if someone defaults on their loan (which is bound to happen), you only ever lose $25 – not the $4,000 they borrowed.
The bester (ok – not really a word) part about Lending Club is that you can set up automatic investments. Say I only want to back borrowers who own their own homes, haven’t missed a payment in 5 years, have FICO scores of above 650, and are asking for 60 month loans. I can set up Lending Club so that whenever I have $25 in my account (from invest I’ve accrued from other loans) it will go out and purchase the note for a loan that fits my criteria.
This may sound like an ad but it’s not. I rave about Lending Club to everyone I meet. I can rely on a 6-7% return from Lending Club that the stock market certainly won’t give me. Assuming a 6% return, we know exactly how much money we’ll need to have in Lending Club to use the interest we earn to pay the bills. And that’s just our passive income.
Retirement Doesn’t Mean Not Working
Just because we’ll be “retired”, doesn’t mean we won’t be working. Starting this Spring we’ll be starting a hop yard. The microbrewery industry around us has simply skyrocketed, and starting a hopyard now means we’ll be well established by the time we retire. A lot of people are skeptical about hops being profitable in Virginia, but starting now mean we’ll be able to make a decision on that later.
I will also have my blog and books for a little side income. Writing and photography have always been great passions of mine, and blogging is a fun way to combine the two and get paid for it!
Chicken and the Egg
So the question occurred me: is homesteading the chicken or the egg? Is self-sufficiency the means by which we’re going to be able to retire early (the chicken), or is it the ultimate end goal (the egg)? I think, in our case, it’s both. Being self-sufficient now will not only allow us to save more money for our retirement goal, but will teach us the skills we need to live a simple, frugal lifestyle. Being self-sufficient in retirement means we’ll need less money than most to be able to fully retire. It’s an interesting concept.
I didn’t write this to show you how to retire by 40, but hopefully inspire someone to shoot for (what seems like) crazy goals. Life doesn’t happen behind a cubicle.
If you’re interested in checking out Lending Club, I could get a small referral fee if you use this link: Lending Club. If you do sign up, let me know and I’ll throw a couple Steem Dollars your way.
If you want to follow our journey and read more about how we're becoming self-sufficient, check out my blog:
Good luck. I started quitting LC 2 years ago like a smoker quits cigarettes.
hahaha why did you quit?
Invest in cryptocurrencies as well. Bitcoin may go down in value for a while but always comes back stronger than ever. I'm fairly new to crypto and wish I had started years before.
Yep! We have some gold/silver, and obviously steem and a little in the stock market. Lol heck, we even have Iraqi dinar! Lol not sure when that'll go up in value - if ever. I haven't done enough research on bitcoin, but it's definitely on my list
I've been investing with Lending Club for a long time, probably five or six years now. It was fun at first when every loan came with a story, now they are almost anonymous. The returns are also not very good for the level of risk, in my opinion. After several defaults my returns are similar to a junk bond index fund, ticker JNK, for example. My LC account is still active, but I'm not putting any more money into it.
Now I just invest in a Vanguard Stock ETF, ticker VTI, and some other Index ETFs. It is brainless investing, but I keep myself occupied by playing with a small stake in several cryptos.
I admire your ambition to retire at 40.
I have noticed an increase in defaults the last few months, but I've never had a month where I lost any money - the interest on other loans covered the loss - but I can't say the same for the stock market. Maybe I'm just no good at investing in stocks.
I just checked my LC account; it earned 4.00% averaged over six years. JNK earned about 5% or a little more in the same period with lower risk.
Hope you have better luck.
Month to month loses in the market don't bother me at all. I'm looking at 5 to 30 years.
So I guess that's another topic - what do you want from your investments? We want to be able to withdrawal funds on a monthly basis to live off of ideally without having to touch our principle. I think LC is better for that. Unless you have high dividend paying stocks?
It depends on your time frame if you have already built your nest egg and are trying to live off of it without draining the account, then generating income would be a key decision. I'm still many years from retirement, so I'm more interested in growth than income.
Generally speaking: more bonds = more income and more stocks = more growth.
That is why I compared LC to high yield bonds (JNK is a bond fund), both provide income with little growth. Unfortunately, LC provides less income than JNK with a higher risk.
Young people who are not on the cusp of retiring are usually advised to keep a portfolio that is tilted heavily toward growth and light on the bonds.