1500 Days – Pulling the Early Retirement Trigger

Mad Fientist: Hey! Welcome everyone to the Financial Independence Podcast, the podcast where I interview personal finance experts to find out how they got to early financial independence.

Today’s interview is unlike any interview I’ve ever done. I’m very nervous, but also excited. I’m nervous because for the first time ever, I can actually my guests. They’re sitting right next to me and it’s pretty scary.

Not only that, this is taking place on a big Trade King stage in the center of the Financial Blogger Conference in Charlotte, North Carolina. So there are actually other people looking at us. The Frugalwoods are dancing right now.

I’m excited though because these are two good friends of mine. So this interview is going to be a lot of fun. And since they’re just staring at me as I say all this, I’ll hurry up and introduce Mr. and Mrs. 1500 from 1500 Days.

Mrs. 1500: Yay!

Mr. 1500: Hey, Brandon. It’s awesome to be here. We’ve been trying to put this together for, it seems like, 10 years now. I’ve only been blogging for two years, so I know that there’s no way that can be correct.

Mad Fientist: I know, yeah.

Mr. 1500: It’s awesome to finally get around to it.

Mad Fientist: Thank you guys for doing it. Yeah, the benefit of having financial blogger friends is you get to trade a lot of really interesting e-mails between each other. So we’ve had some really good e-mails going back and forth. I’ve been hesitant to talk about any of it because I’m like, “Let’s just do a podcast.” So we finally made it happen.

So in case anybody doesn’t know about your site or hasn’t been to 1500Days.com, can you guys just tell a little bit about yourself and how you started on the path to financial independence?

Mr. 1500: Yeah, that’s a great question. But before we begin, I want to state for any of the hotel officials that may be in the crowd, this is Pliny, the throat lubricant. It has nothing to do with alcohol in any way.

Mad Fientist: Yeah. The 1500s were kind enough to bring probably one of the best beers ever made.

Mr. 1500: Throat medicine.

Mad Fientist: Pliny the Elder. And we are using that to make this less awkward for ourselves.

Mrs. 1500: Except Pliny the Elder is a delightful choice if you are a Pale Ale fan. I am not, sorry, Pliny. So I am paying homage to Brandon’s home state of Vermont…

Mad Fientist: Yes.

Mrs. 1500: … by drinking Woodchuck Hard throat lubricant.

Mr. 1500: What could possibly go wrong?

Mrs. 1500: Nothing.

Mad Fientist: The interview is going to keep better and better. There’s no doubt. So that’s it. Tell us a little bit about your site and how you got started.

Mr. 1500: Yeah. So way back, I had no plans to be a blogger or writer of any type. Back in about October of 2013, I had a miserable day at work. I’m a computer programmer.

Mrs. 1500: October, 2012.

Mr. 1500: October, 2012. I’m sorry, Mrs. 1500 with the first correction. So I had a terrible day at work. The first thing I thought – it was miserable, I thought I was going to get fired. It turned out not to be as bad as I thought it would be, but at the moment, I’m like, “There’s no way I can do this for the next 24 years of my life until I’m 62.” It would just be misery. It’s way too stressful.

So I googled something like “How do I retire earlier? How do I quit my job?” The first thing that popped up was Mr. Money Moustache.

It was one of the epiphanies of my life. Here was a guy telling you that you didn’t have to work until 62 or 65. If you tweak your life right, you could work until you’re 30 like he did (and if you had planned earlier – I was already 38, so that was impossible).

So I ran the numbers. Actually, the first thing I did is I ran the numbers and figured out how long it would take. And then I thought, “Mr. Money Moustache is awesome. And since there are only two personal finance blogs, Mr. Money Moustache and Get Rich Slowly, we should totally write about this. It’s going to be a niche.”

I’m glad Mrs. 1500 is here because she comes into the next part of the story. I ran down the stairs from my home office and I said, “Hey, I want to…”

Mrs. 1500: The home office in the bathroom…

Mr. 1500: Yeah, that’s a whole other story. So I ran. I said, “Hey! I want to retire. If we do everything right, we could do it in four years.” And she was completely onboard with it. She’s like, “Oh, okay. That sounds great.”

Mrs. 1500: Yay!

Mr. 1500: So then I’m like, “And the other thing I want to do is write about it. We should hold ourselves publicly accountable through a blog.” And I was talking Mr. Money Moustache and she’s like, “Mr. Money what? What the hell are you talking about?” I said, “Yeah, it’s this guy who said you could retire at 30 and we should do the same thing just like him.” And she’s like, “That’s the worst idea I’ve ever heard.”

Isn’t that what happened?

Mrs. 1500: I believe what really happened was that he came downstairs and said all of that and I said, “I think you’ll run out of topics. I think you’ll run out of things to talk about because as…”

Mrs. 1500: Actually, I had tried to start a blog a couple of years ago beforehand. I did exactly one post and it’s the end.

Mad Fientist: So you ran out of content after one post.

Mrs. 1500: I ran out of content after one post.

Mad Fientist: You write quite a lot on the blog as well. So how do you keep coming up with content?

Mrs. 1500: You just walk down the street and you’re like, “There is a blog post. There is a blog post.” You have a conversation and you’re like, “Oh my God, that’s a blog post. We should write about that. We should write about that.”

We’re at this FinCon conference and I’ve sat in on several presentations and I’m thinking to myself, “Oh, my God! I’m going to write about that and I’m going to write about that and I’m going to quote her here.” I’m frantically taking notes on my phone. You never not have something to say.

Mad Fientist: Yeah.

Mr. 1500: Yeah. The crazy thing in my real life, if you know me, is I don’t like to talk a lot. I’m a quiet, introverted person. And unlike most people on it, I’m miserable. You can sled me if you want now, Brandon.

Mrs. 1500: Mrs. 1500 shakes her head.

Mr. 1500: But I’ve got almost 200 drafts in my draft folder now. So apparently when it comes to the written word, I can’t keep my mouth shut.

Mad Fientist: That’s great stuff. I absolutely love it. I can’t believe the 1500 dinosaurs are actually here with us, enjoying some Pliny and the others as well.

Mr. 1500: Yeah, if you’ve seen the blog, we do dinosaurs. I’m a goofy guy.

But one of the things I want to say about the blog is our goal was to have a million dollars and no debts. That was the number we are reaching to. We do reveal our net worth on the blog. People think we’re insane for doing that. But it’s beneficial. I’ve only been hit up for money once.

And none of you in the audience can have money. You can have some cough medicine if you’d like. No money.

Mad Fientist: Yeah. So 1500 days from the day you’ve started the blog, was it? Was it January 1st 2013? Is that it? Was that it?

Mr. 1500: Yeah, that’s correct and the end date is supposed to be February of 2017 I think. It’s the middle of February. I should know this. I should know that day.

Mrs. 1500: I think it was March, whatever. It doesn’t matter.

Mad Fientist: My notes say February. So actually, I’m sorry to side with Mr. 1500 on this one.

Mrs. 1500: Oh, well. I’m so sorry.

Mad Fientist: Usually you are right, but…

Mrs. 1500: Brandon does excellent research. Meticulously researched is this podcast.

Mad Fientist: Absolutely. There’s no stone left unturned. So a million with no debt, obviously you want to pay off your mortgage and then have a million in investments so that you can live off of that.

Mr. 1500: That was the original plan, but then I think it’s silly to pay off my mortgage. Our interest rate is so low. My solution to that is to come up with enough money to pay off the mortgage if we chose to, but I’m not actually going to do that because we’re at the lowest rates in history. I think could be forced to not leverage a little bit of debt. That’s a scary phrase, but I’m willing to leverage that.

Mad Fientist: No, I agree. I completely agree. Yeah. So you guys are way far ahead of your goal. What is this? This is only September of 2015. You’ve hit the double comic club quite a few times, up and down recently. But obviously not with the mortgage paid off or anything. So there’s a little bit to go, but you’re looking quite ahead of schedule.

Mr. 1500: Yeah. It’s not that I check my portfolio every day…

Mrs. 1500: Every single day.

Mr. 1500: Sometimes, multiple sometimes per day and that’s a very bad habit. Do as I say. Don’t do as I do. Now, it’s $1,030,000 and something.

Mad Fientist: See, that was the research I wasn’t able to do. I need to access my guests’ Personal Capital accounts so that I can get the up-to-date number. So you’re over a million. You’re starting to gear up to quit the job. How is that going?

Mr. 1500: Yeah, it’s interesting. This might sound strange, but the hardest thing for me isn’t the money part. The money is easy. It’s all numbers and math. I know the 4%. For the most part, I believe that it’s the emotional part. I’ve worked since I was 14 years old. I’ve never had more than a week off of work.

I’ve got a million things that I planned to keep myself busy, but the emotional part is difficult and the blog has been therapeutic in that way. It has helped me think through our thoughts or my thoughts. My wife is much better adjusted than I.

Mrs. 1500: You ask me if I think he should quit.

Mad Fientist: Do you think he should quit?

Mrs. 1500: I think he should quit.

Mad Fientist: I think you should quit.

Mrs. 1500: He should quit today.

Mad Fientist: Yes!

Mrs. 1500: I think we should quit.

Mad Fientist: Quit today, yes.

Mrs. 1500: Yeah!

Mad Fientist: Hear that from the crowd.

Mr. 1500: How awesome is that, a wife who doesn’t want her husband to work? I’m thankful every single moment of my life.

Mrs. 1500: Let’s pick up the phone and call your boss right now.

Mad Fientist: Let’s do it. Now, that would be the best podcast I’ve ever created in my life.

Mr. 1500: We’ll do it seriously, Mad Fientist 2 Podcast. I’m not kidding either.

Mad Fientist: Yeah. You’re quite stressed out at work and you’re very busy when you are working.

Mr. 1500: Yeah. It’s very stressful. I’m a programmer and I program point of sales systems, life insurance. This is a medical device where if you mess up, you can kill someone. So you don’t want to mess up the code, no null pointer exceptions.

Mad Fientist: Yeah. So when do you think you’ll work up the courage to do it? I completely agree with all your reasons. I don’t know how I’m ever going to pull the plug finally really. It’s something I can’t visualize personally.

Mrs. 1500: Not soon enough.

Mad Fientist: Do you have any tentative plans?

Mr. 1500: It’s either going to be this November or a year from this November. I’ve already told my job that I can only work part time for the next year if they want me back. I’m a contractor. So if they want me back, it’s going to be a part time situation. We’re still talking about that. But if that happens, one year of part time. And then that will probably be it.

The only thing that scares me a little bit about the whole numbers thing – we don’t want to talk too much about numbers, but market valuations are pretty high too. I think we’re in a high point generally. So, long-term, as Mr. Frugalwood showed me a while ago, Kitces or whatever that site is, I think by portfolio, it’s probably a little bit inflated. It scares me slightly, not that much though.

Mad Fientist: Yeah. There’s actually a post that I’m almost done finishing and it relies heavily on Michael’s research in safe withdrawal rates and how you can have a pretty good prediction of your next 10 years with chillers.

Mr. 1500: Yeah, absolutely.

Mad Fientist: P/E 10 and things like that. And there’s actually a very strong correlation between the P/E 10 and safe withdrawal rates because the first 10 years of your retirement are the most important.

So you’re right, the 4% rule is very robust because it’s built on the last. It’s built on worst case scenarios. It’s not like just built on average case scenarios. It’s built on the worst case. But as you’ve said, things are high.

Mrs. 1500: One of the things that maybe people don’t really understand (or maybe he doesn’t understand, maybe I should explain to him as well). Well, I guess about his job. One of the things people don’t really understand about his job is he works from home. He has a 15-step commute to get to his job. He doesn’t have to brush his teeth and he doesn’t have to change his pajamas. So it isn’t like he’s got a real job where he’s got this horrible commute and if it snows, it’s now doubled. He works from home and he is a computer programmer, he’s a consultant. So people already know about our numbers because they’re on the site. I mean, he’s paid very well for what he does and it’s difficult to walk away from that.

And when you grow up, I don’t like the term poor, but financially insecure. He didn’t always have money just coming in all the time, his parents. So when you grow up without all this money, it’s difficult to just walk away from this giant pile of cash that they’re throwing at you and they’re like, “Oh, you want to take another week off? Okay.” It’s difficult to walk away from that.

You have a similar situation.

Mad Fientist: Absolutely! I feel like I have a winning lottery ticket and I’m just going to throw that away. Yeah, exactly. And maybe early retirement doesn’t have to be the goal all the time. Maybe you work yourself into such a position that you actually enjoy what you do and use your financial independence to demand better terms, better situation.

But yeah, I completely relate and I always just think of it as throwing away a winning lottery ticket.

Mrs. 1500: It’s tough! And we have two young children. They’re in school, fulltime, what? Nine months a year or eight and a half months a year. So we have all this empty time. We can’t go away on a trip because we got the children to pick up after school, but we’ve got to do something. You can’t just sit around and watch the TV. I guess you could, but that’s not us.

Mad Fientist: Yeah, right, exactly.

Mrs. 1500: He’s got to find something to do. I would love if he could work four or five or six hours a day. That would be great for him.

Mad Fientist: You mentioned part time. So what’s that going to look like for you?

Mr. 1500: Right now, under the terms of my contract, I have to work about 1880 hours a year and I’m trying to get it down to 1500. So we’ll see how that works out. I’m going to try to have Fridays off and limit myself to maybe 25 to 30 hours a week. So just having one day a week opened up would be huge. We’re very busy, so that would just open things up for us. I hope they bite on that because I’m not sure what I’d do if they told me it’s fulltime or nothing.

Mad Fientist: Yeah. Do they have a choice?

Mr. 1500: Yeah. I don’t know yet. I’ve told them my devious plan and they haven’t agreed to it yet. So yeah, we’ll see what happens.

Mad Fientist: What about maybe finding some less stressful programming? For me, nobody’s lives rely on my code, which I am very thankful for. So I don’t have any of that stress, but I do still enjoy coding like I’m sure you do and like I’m sure most of developers do. Is there any part time gigs that you could get that aren’t your current job?

Mr. 1500: Yeah. That’s a really great thing to mention too because I love coding. I would do it without getting paid. One of my goals once I do quit is to code, but to code stuff in a language that I really want to code in for a product I really want to work in that my heart is into, maybe mobile apps or something like that. I haven’t yet decided. But yeah, that’s a great point.

Maybe some of it will bring money down the road. Maybe it won’t. It’s okay. It makes things a lot easier if the main purpose isn’t money. It moves everything. It changes everything because you could really concentrate on what you want to do and not worry if you’ve taken the biggest part of the equation. I think it sets you free.

Mad Fientist: Absolutely. We have already talked about Mr. Money Moustache. I recently saw him earlier this spring and I was asking him a question, I was like, “I really don’t think I’m going to be able to quit because like I said, it just feels like throwing away a winning lottery ticket.” I have convinced myself that I’m happy now because I worked my way into this, but maybe I would be even happier when I can actually spend time doing other things and I just can’t see that.” I was like, “When do I finally pull the plug?”

You recommended removing money completely out of the equation and treat any work as if it paid nothing and treat any spending as if it costs nothing. But I’m not quite there yet because it does pay a lot and it’s not nothing. So it is a very tough situation, but it’s a great position to be in obviously.

Mr. 1500: Yeah. And that’s a wonderful point too. That makes me wish I was as well adjusted as Mr. Money Moustache because I’m not at his level of – what’s the word I’m looking for?

Mad Fientist: Yeah.

Mr. 1500: Enlightenment. Enlightenment. Mr. Money Moustache is far more enlightened than I.

Mad Fientist: I agree. So you’ve actually just started picking up some part time work these days as well.

Mrs. 1500: Oh, no. Now, I’m fulltime.

Mad Fientist: Are you?

Mrs. 1500: I am! I am fulltime.

Mad Fientist: Geez, you guys are going the opposite direction.

Mrs. 1500: We are. I took off eight and a half years to raise our girls and now that they’re both in school full time, I need something to consume my days. Like you said, we’re very busy. We got a lot of little projects and I could finish that up, but then, what?

And a job opportunity came up and I thought, “Oh, this timing is terrible.” It was in May. I said, “Oh, this timing is terrible. I’m not going to apply for this job.” And I almost didn’t tell him about it. And then I just mentioned it in passing. It was like, “My favorite website is hiring.” I’m like, “Oh, okay. I would love to work there.”

I just kept putting it off and I didn’t apply. And then somebody asked a question, “How long are you going to keep this job open?” They said, “We are going to keep it open until we fill it.” And then I said, “Okay, I’ll apply.”

I applied and they called me. They said, “Oh, let’s have a Skype conversation. Come in for an interview.” I’m like, “This timing is terrible. It doesn’t work out.” And they’re like, “Oh, we’ll work with you. You can do part time over the summer. And then when the girls go back to school, you can be full time.”

It’s my dream job. I get to talk about what I love and do what I love and they pay me for it.

Mr. 1500: At this point, I’d like to point out the irony of this situation. A couple of minutes ago, I mentioned that my lovely wife thought blogging was a horrible idea. And now…

Mrs. 1500: I thought you would run out of things to talk about. I didn’t ever say it was a horrible idea.

Mr. 1500: So my blog makes about $0.3 a day, maybe $0.4 in a good day. And my lovely wife, who didn’t think highly of my idea to be a blogger, is now, “Hey, become a full time blogger, full time contact creator.”

Mrs. 1500: Yes. And I never ran out of things to talk about. I can just talk about it forever. So I guess you hear this all the time, “Find your voice. Find your subject!”

What do you love to talk about? Personal finance, do you ever stop talking about it? Do you ever stop thinking about it? No. And once you start blogging for a little bit, you’re like, “Yeah, I have 200 drafts in my draft folder and I’m never going to have to stop talking about it.”

Right now, I’ve got 10 blog posts in my head. I can’t wait to get home and get in the car tomorrow and start typing during our 24-hour marathon drive home.

Mad Fientist: That’s great. Alright! So now, Mrs. 1500 works, Mr. 1500. There’s even…

Mrs. 1500: He’s free to quit this job.

Mad Fientist: He’s free, that’s right.

Mrs. 1500: Quit. Quit. Quit.

Mad Fientist: Even freer to quit.

Mr. 1500: I have no excuse.

Mad Fientist: So there are some concerns that you have there because I know we’ve traded some e-mails. That was one of the discussions we’re going to have privately. I was like, “No, we should have this publicly.”

We’ve already touched on the 4% rule a bit, but you’re also just concerned about future growth and maybe the future is not going to be as good as the past was. Talk a little bit about that.

Mr. 1500: Yeah. I am not an economist in any way, shape or form. I think I’m going to play one on the Mad Fientist Podcast for a moment.

I’ll tell a story first of all. I think around 1992, my great grandmother died and I was sitting there and all sad and crying. My mom is like, “You should be happy. Look at what happened in her life.” She was born in 1900. When she was born, she was riding on a horse. Most houses, 2% of houses had electricity in 1900 and she got to see the space war take off. If you think of what happened in the 20th century, it was huge leaps for mankind.

What are some other statistics? I’m going to cheat here and look at my notes.

Mad Fientist: Yeah, I have to say that Mr. 1500 came with more notes than me, so I was very scared because I was like, “He doesn’t even know what I’m asking and yet he has a page full of notes in a computer with him.” I’m glad I get to find out what’s on that paper.

Mr. 1500: Yeah. Don’t look. One in four children died before age five in 1900. If you live to be 21, there was a 50% chance that one of your parents would be dead. In 1918, a flu pandemic wiped out 100 million people. So you think at how far mankind has come, humankind has come in the 20th century.

I believe for the most part in the 4% rule. But the 4% rule is also based on historical data and all these incredible things that happened in the 20th century. In 1927, there were two billion people. Now there are seven billion and we’re going to hit 12 billion by the year 2100. I think that the five billion growth from 1927 to now is a lot easier than the next five billion. It’s going to happen in this century.

So I think humankind has these challenges. I don’t think the economies will grow as strong as they did in the past. I’ve read Charlie Munger, Warren Buffett and Jack Bardwell. They seem to say the same thing.

Mad Fientist: Yeah.

Mr. 1500: I think the best times are still ahead of us. I’m not saying things are going to be worse. I just don’t think economic expansion will be the same perhaps.

Mad Fientist: I agree. I don’t think it’s going to be good for the middle class. They’re currently being squeezed out. All the technology advancements are doing away with most of their jobs and the consumer that just spends everything he or she earns, it’s not looking rosy. But if you think about the businesses we invest in, the financial crisis gave them free reign to just be assholes and just start firing people left, right and center. It’s bad for the worker obviously, but for profit margins, it may be better. And as more things get automated, what would you say to something like that?

Mr. 1500: I think you see the results of it now. I absolutely have no interest in getting into a political discussion, but if you look at Bernie Sanders’ rise of popularity, I think it’s a reaction to what you just said, to some of the greed that’s going on. The CEO is making crazy money whereas the little guys are getting squeezed out.

Mad Fientist: So the investor class would maybe benefit from something like that. So for those of us who do save quite a bit of money and do invest quite a bit of money, maybe that reduction in cost will drive future profits at least for a little while.

Mr. 1500: Yeah. You think of what drives economies, it’s population growth, it is technological innovation and it’s things like that. I don’t see that going away. So like you said, if you’re an investor investing in these things, maybe you will be okay or better off.

Mad Fientist: Is there anything you think we, as investors, can do to potentially mitigate some of the risks that maybe the future won’t be as rosy as the past was?

Mr. 1500: That’s an interesting state. Before I say anything, I want to say that life is so great like I said before. A hundred million people died with the flu in 1918. People had cholera, polio, smallpox, all kinds of crazy stuff. Now, people whine because their cellphone won’t last the whole day.

So I think times are great and you should strive to maybe not focus on the income part, but just try the good frugal existence and try to live on less money and be more sensible.

I lived in my grandparents’ house for a while after they passed. And their house, they thought it was huge. It was 1200 square feet and it was a mansion to them. And now, what the average house is? I’m sure it might be twice that. So I don’t know.

Mad Fientist: Yeah. This was a long time since I did this research. The house of the 1950s that held 2.3 million people, I think now, one person fills that same amount of space or something along those lines. So yeah, it’s insane amounts of unnecessary growth in lots of different ways and nobody’s happier because happiness has just remained flat.

And staying flexible as well. Obviously, if you can reach financial independence at the age that you both are, you’re flexible, you’re resourceful. If things aren’t as rosy as you hoped, you’ll, no doubt, be able to find something to do. Mrs. 1500 has a job that she loves that she just got even though you don’t need a job.

Mrs. 1500: That’s a really good point. I think Mr. 1500 said this at one point. If you work until you’re 65 and you have saved whatever and then you quit working and all of a sudden, your nest egg doesn’t cover it, you’re greeting people at stores that shall be unnamed, Walmart. When we run out of money – I’m sorry. If, if, if. If we run out of money…

Mad Fientist: Mrs. 1500 has gone on a shopping spree.

Mrs. 1500: I did just go on a shopping spree. I spent 200 whole dollars.

Mad Fientist: Whoa!

Mr. 1500: What?! Hold on a second. We have to have a conversation. We’ll be right back.

Mrs. 1500: If our money were to run out in 10 years – well, let’s say 10 years older than we are now – you will still be young enough to go out and get jobs. We won’t have to greet people and it will be okay for this early retirement thing.

Early retirement is such a stupid word. Financial independence is a lot better because we’re not going to retire. I’m just starting to work again after eight and a half years and I love my job. I don’t have any plans to quit. I want to continue to grow.

I willingly went on maternity leave and never came back eight and a half years ago. That’s what I wanted to do. I wanted to have children and raise them. She’s five, she’s not raised, but she’s in school fulltime. I want to contribute and I want him to quit. Quit your job.

Mr. 1500: What I tell people is that we’re going to do what we love and some of those things might bring an income. They might not, but we don’t have to worry about it though.

The 4% rule, if people aren’t familiar with it, say, you need $40,000 to live, that means you need a million dollars or 4% of one million. You hear a lot of hate about that. For every good article about the 4% rule, there’s a thousand that will tell you that you’re going to die if you dare follow the 4% rule.

But one thing that I never hear that hater articles say is the 4% rule assumes no future income. There are similar hateful articles about Social Security, but I don’t think any American politician is going to let that die. So we already have lots of income that’s going to come in at some point in our lives.

Mad Fientist: Do you factor Social Security into your calculations or is that just going to be a bonus?

Mr. 1500: I do not factor it in.

Mad Fientist: I don’t think I have met any early retirees or future early retirees that factor that in. So that’s yet another buffer that most of us have. It’s like, “I imagine we are still going to get something.”

Mr. 1500: We have a million backup plans. I don’t factor that our house is going to be paid off in 12 years either. So I’ve just assumed that our spending is going to be exactly what it is now, but it won’t. In 12 years, it will be $1150 more a month because the mortgage payment is going to be on.

Mad Fientist: Nice. So can we dive into a little bit of your investments? What do you invest in?

Mr. 1500: I’m scared now.

Mrs. 1500: Will you recommend index funds?

Mad Fientist: You recommend it, but what do you? I mean Carl has a technology streak there.

Mr. 1500: Yeah.

Mrs. 1500: We do not practice what we preach.

Mr. 1500: Yeah, I’ve had some bad habits. This is embarrassing to admit, but when I started blogging, I didn’t even know what an index fund is. I’m thankful I discovered Jim Collins’s wonderful Stock Series, so now all my investing is that. It’s index funds. But in the past, I would buy stock.

Mad Fientist: And you’ve done quite well.

Mr. 1500: Yeah. I’m luckier than anything. This is crazy, but some people remember the day when Elvis died. People remember when JFK was shot. I remembered the day I discovered Google. I was at work and this guy said, “Check out Google. It has all your answers.” And I was like, “Whoa! Google is awesome.” So I bought into that IPO. And the smart thing was I held on to it. I never sold it.

Mad Fientist: Wow!

Mr. 1500: I also thought the iPhone was brilliant when it came out. So we bought that. It was January of 2007 when Steve Jobs announced it and we held on to that. But I’m not going to call myself brilliant. If I could do that over four decades, you can call me brilliant, but just call me lucky for now.

I’m a total index investor now. If it wasn’t for the taxes, I’d probably sell almost all of my individual stock.

Mad Fientist: So what percentage do you say is index versus individual?

Mr. 1500: I think it’s about 400,000. And I don’t factor in our house into our net worth. It’s about 400,000 individual stocks, which scares me. Apple is almost $150,000 and so is Facebook. Again, these are not recommendations in any way, shape or form. So we have $400,000 in individual stocks and about $600,000 in index funds.

Mad Fientist: Nice! I have a post about all the mistakes I made coming up. It’s in draft state, but it’s good that your mistakes have been so lucrative, whereas mine weren’t so lucrative.

Mr. 1500: It’s interesting. I’ve surely bought losers before. CMGI Internet, look that one up. See what happened to them. Most of my mistakes are just selling things. If I would have held on to half the stuff I sold, I would have been much better off than I am now.

Mad Fientist: So do you expect to transition into bonds a bit more after you quit? What’s your stance on that?

Mr. 1500: Again, do not take this as advice. As of now, I was looking at my Personal Capital account (not that I check it every day), but I have about…

Mrs. 1500: Every single day.

Mr. 1500: Out of my million dollar portfolio that I mentioned, about $27 of it is in bonds, 27 without 00.

Mrs. 1500: Wait! How much is for the bonds?

Mr. 1500: Twenty-seven dollars. It’s like $27.38.

Mrs. 1500: So we don’t really particularly believe in bonds all that much. Are they 0% interest or something like that?

I want to side track for a second. He said some people remember where they were when JFK died. We’re not alive when JFK died. I’m not that old.

Mad Fientist: This is the sexiest power couple in early retirement blogging world. If only you could see them.

Mr. 1500: So yeah, the bonds question is a very interesting one. Recently, I asked Mr. Collins about it and I know you both have opinions on it. So yeah, I don’t know.

One of my favorite quotes, Charlie Munger once said, “You shouldn’t be on the stock market unless you can tolerate a 50% drop.” It has happened before recently and it will happen again in our lives. If I retired now and there’s a 50% drop tomorrow, I’d be down half because I have zero in bonds. So this is still something I’m trying to figure out. I want to take a pass on this question.

Mrs. 1500: We have figured out the 4% that we need based on the 4% rule and we will continue to have income because that 4% rule, we’re at that level and we got that amount saved up. But I’m working now. I’m making enough to cover our expenses for the year. So we don’t have to tap into that at all. It’s just going to continue to grow.

Mad Fientist: Exactly!

Mrs. 1500: And then next year, same thing, it’s just going to continue to grow. He loves programming computers. He loves talking about computers and cars and motorcycles and he wants to make…

Mr. 1500: Beer.

Mrs. 1500: What?

Mad Fientist: Beer.

Mr. 1500: Beer.

Mrs. 1500: And beer, high quality beer.

Mad Fientist: High quality. Speaking of, you are out. So we’re going to take a quick pause as you continue.

Mrs. 1500: I will continue to talk and you guys can open that bottle of…

Mr. 1500: Throat medicine.

Mrs. 1500: …throat medicine from Russian River. It’s called Pliny the Elder. I don’t like it, but they think it’s awesome.

Mad Fientist: And we have an opener here.

Mrs. 1500: We have an opener.

Mad Fientist: This is the best podcast ever by the way.

Mrs. 1500: It’s a SoFi opener. Thanks, SoFi.

Mad Fientist: Oh, no, no.

Mrs. 1500: It’s an unofficial sponsor.

Mad Fientist: I know. I was trying to get the sound, but we missed it.

Mrs. 1500: Oh, no. Should we stop and re-record?

Mad Fientist: No. It’s good. We had some audio effects on there.

Okay! So obviously, you guys are in the similar position that I’m in. I can never imagine not working or not earning money. Actually, I was talking to my wife, Jill about maybe getting a part time job on weekends just meet people in the new town that we live in. I thought, “I’m going to be the worst early retirement blogger in the world by getting another job on top of my fulltime job that I meant to quit a year ago.”

Mrs. 1500: And doesn’t Jill work too?

Mad Fientist: Jill works too. Yeah. So we’re the worst. I can feel where you’re coming from. Has it at least made a huge impact in your life, in your psyche as far as building up this money or you’re just working towards a goal and it hasn’t really reaped any benefits yet?

Mrs. 1500: Not big enough because he’s still working.

Mr. 1500: I must say that I’m infinitely happier. It’s such a cool thing to be working because you choose to and not because you have to. I’m a far, far happier person than I was two years ago. It’s funny. I think the key to the whole thing is frugality and living the right life, you kind of figure out what’s important.

The simple frugal life also happens to be the happiest life. We’re so happy. It’s strange because some of our neighbors think we’re poor because I do things like change my own oil and cut my hair. But man! I wouldn’t change anything about my life. If I had $10 million tomorrow, nothing would change. I wouldn’t do anything different except maybe I’ll have more Pliny the Elder throat medicine.

Mad Fientist: So Internet, we’re going to help Carl make the transition this year and help Mrs. 1500 out here.

Mrs. 1500: Yeah. I wanted to expand on his…

Mad Fientist: Oh yeah, please.

Mrs. 1500: The neighbors think that we’re poor. When we first moved into our house, we bought it out of foreclosure and it was extremely dumpy-looking. There had been a rental before we were there. The neighbor across the street asked, “Are you renting it or did you buy it?” I said, “Oh, we bought it.” She said, “Oh, good for you” like it was our first purchase or something.

Mad Fientist: Starter home.

Mrs. 1500: It was like our starter home. And I’m like, “Yeah, we sold twice the size house to buy this one.”

Mr. 1500: It was a more expensive house. We always haven’t been on the right path, but we had a house that was 4200 square feet or something like that. It’s just ridiculous. And we’re way happier in our neighborhood with nice neighbors instead of that big house. We miss nothing about it.

Mrs. 1500: No, we don’t miss that house at all. In fact, we moved there. We were on the bigger, better track. We used to flip houses to get. We buy this house for a small amount of money, repair it, rehab it and sell it for more money and move into the next one and on and on and on. And we got up to where we want to be.

We thought we wanted to live on the lake in Madison, Wisconsin and we thought it was awesome. And we had this amazing house. And then we decided we are going to move to Colorado because Madison, Wisconsin is colder. Let’s say cold. I don’t want to say colder than a well digger’s ass.

So we left Wisconsin. We moved to Colorado. We did a really quick house search when we were in Colorado and we found the house we wanted. It was the big 4000 square foot house. Everybody had their own bedroom and everybody had their own bathroom and it was awesome and amazing and wonderful.

And Mr. 1500 worked in the bathroom of our bedroom because it was, I don’t know, 8000 square feet. He actually had a separate office in addition to all these bedrooms and bathrooms. The flooring right outside of that was – anyway, it doesn’t matter. He worked in the bathroom because it was easier for him.
We were there for two weeks, the perfect house and we were there for two weeks and we’re like, “Let’s move back to Wisconsin because we hate this neighborhood so much.”

Mad Fientist: Really?

Mrs. 1500: There was some unwritten rule that everybody was having a contest who could show that they’re spending the most money and who could just throw money out of their windows and paint their house every year and buy a brand new car every year and get all new clothes and have the latest phone every single time it was updated and, and, and, and, and.

Once we got out of that neighborhood, we lost money on the house and we were so happy to throw that money away on the realtor fees and all sorts of things. We were happy to let it go just to be happy in this tiny little house that we have now.

Mr. 1500: It was a slightly painful lesson financially, but the best life lesson ever.

Mad Fientist: That’s exactly what happened with us. We just sold our house in Vermont over the winter. I honestly would have given it away. Somebody came up to me and said, “I’ll give you $5 for it,” the stress that I was going through was not worth any amount of money, I was like, “I don’t care what happens. You can take it.”

Mrs. 1500: Wait! You sold the house in Vermont in the winter?

Mad Fientist: Yes. They closed on the house on December 23rd. And then January, it was =20 in the entire – and we were living in Scotland at the time. So every morning, I would wake up and just see my money flowing out of these house windows in the cold Vermont wilderness. I was 3000 miles away and I couldn’t even enjoy the heat that was pumping out my windows. It was the worst. That’s a good call, happiness over money every single time.

Mrs. 1500: That is such a true statement, happiness over money every single time. Like I said, we lost $13,000 when we sold that house and I wrote a blog post about that, Happily Losing $13000. It was the best $13000 I ever wasted in my life.

Mad Fientist: That was good. I’m glad you brought up real estate. So how did your real estate investing play a part in your path to FI? Did it really super charge your savings or was it mainly just a side hobby?

Mr. 1500: Yeah, we stumbled upon that. It was an old house. It was a starter home. We did some work to it, just some real simple work. And as a result of part of the work and part of just the economy doing well at the time, we made about $100,000 on the sale of that home.

The other thing is we discovered the IRS rule where if you live in a home for two for the past five years and owned it for two for the past five years, you don’t have to pay capital gains. So we started doing live-and-flips where we would move into an old house, fix it up over the course of a year or two and then sell it and then reap all that sales.

Yeah, it set us ahead decades. It was the start of everything. We invested the money. We bought bigger houses and kept on doing it. We did it probably five times?

Mrs. 1500: I think we did five or six.

Mad Fientist: Wow!

Mr. 1500: Yeah. It’s good for single young people, young people or young couples. But we don’t do this anymore.

Mrs. 1500: It’s really difficult when you’re living in a house that’s covered in drywall dust and there are open wires and nails everywhere and then you’ve got a baby.

Mr. 1500: A $100,000 tramps drywall dusts and electrical shocks every once in a while.

Mrs. 1500: Unless you have a baby.

Mad Fientist: It builds character.

Mrs. 1500: Unless you have a baby.

Mad Fientist: For the baby, yeah.

Mr. 1500: They just cry for a minute. I’m going to keep quiet.

Mrs. 1500: No children were harmed in the flipping of any of our homes.

Mad Fientist: So that’s an amazing strategy though. That must be the most tax efficient strategy for building wealth with real estate. Is there any other? What’s the swap?

Mrs. 1500: There’s the 1031 exchange.

Mad Fientist: Yeah, the exchange.

Mrs. 1500: What I don’t know about the 1031 exchange, you can just about squeeze into the Grand Canyon. I don’t know a squat about that. Brandon Turner does, but he’s over there chatting with somebody else.

Mad Fientist: I know. We have so many experts in the room.

Mrs. 1500: This is such an amazing place.

Mad Fientist: I know.

Mrs. 1500: We’re still at FinCon. I guess we started. We’re not going to stop halfway through.

Mad Fientist: I know. There are real estate professional investors everywhere and it’s crazy.

Mrs. 1500: Yeah. And that’s an investment tool. If you own an apartment building and then you want to sell it, you can take those proceeds and put it into another apartment building and avoid taxes. But there are certain timeframes and there are certain rules. There are certain rules, pages and thousands of hundreds and billions of rules.

Mad Fientist: And then you’ll eventually get taxed. It’s not…

Mrs. 1500: You will usually get taxed.

Mad Fientist: Whereas what you’re saying…

Mrs. 1500: Tax deferment.

Mad Fientist: Right, exactly.

Mrs. 1500: Yes. Ours is tax-free.

Mad Fientist: Which is amazing.

Mrs. 1500: We just get to grow our money. So what we would do is we would do the flip and then take the money out. Sometimes we would have another house to buy and sometimes we wouldn’t. And when we didn’t have a house to buy immediately, we would just put that into the stock market and let it grow there and then pull it out again and put it back into the real estate.

Didn’t we do that between Illinois and Wisconsin?

Mr. 1500: Yes.

Mrs. 1500: And there you are. Can you please elaborate?

Mad Fientist: So yeah, that is an amazing strategy. Even though the most stressful times in my life were selling houses (honestly 100 times more stressful than anything else I have ever gone through), every time I sell one, I’m like, “I’m never buying a house again,” I still get drawn to it so much. And that strategy is perfect because I like tax avoidance.

Mrs. 1500: Yeah, I’ve heard you like tax avoidance.

Mad Fientist: Yeah.

Mrs. 1500: For those of you not familiar with Mad Fientist – what did you read, the whole tax code and like converted to English or something for one post.

Mad Fientist: Exactly, yeah. So that’s an excellent strategy and I’m glad we touched on it. I ask all my guests if they had one piece of advice for somebody who’s hoping to achieve financial independence one day, what would it be?

Mr. 1500: Yeah, that’s very easy for me. It’s just to know the long term cost of buying something. I always hear people say, “Oh, this car only cost me $10,000… this only costs this much.” That’s a very dangerous thing to say, especially if you’re young.

I’ll use my own example. We’ve made mistakes and one of them was buying new cars. That old Honda we bought in 2003 for $19,600, I look at what that money would have been worth now if I just put it in the index fund, the whole market index fund and it’s over $50,000. I think it was the last time I checked. I know the economy has been shaky, but that’s a lot of money and we’re young. That’s going to be hundreds of thousands of dollars over the course of our life.

So just think about every dollar that goes on and make sure you’re using it in the most efficient way possible.

I would say just figure out what makes you happy. I think it’s the people around us. Going back to this neighborhood that Mrs. 1500 had mentioned a couple of minutes ago, I knew we had to move when our five year old child is out playing and another five year old child came up to our child and said, “How many American girl dolls do you have?” Our child was like, “What’s an American girl doll?” And the other kid is like, “Argh!” and walked out.

Right then, in my head, I said, “We have to move. I cannot raise my children around people with these values systems.” It could be hard to find, but it’s worthwhile.

Mrs. 1500: For those of you who don’t know the American girl doll costs $100 and every outfit is $75 and her shoes are $20. We don’t have American girl dolls because we’re cheap.

Mad Fientist: That is insane. I had no idea what an American girl doll was. How about you, Mrs. 1500?

Mrs. 1500: Start early. I recently did some research into compound interest. I think Mr. 1500 wrote The Magic Doubling Penny. Mr. 1500…

Mr. 1500: Don’t read that post. It’s very poor.

Mrs. 1500: Do you do show notes?

Mad Fientist: Yes, all of this will be in the show notes.

Mrs. 1500: Okay. So we’ll put a link in the show notes for The Magic Doubling Penny. What it is his teacher asked him once, “Would you rather have a million dollars today or a penny doubled every day for a month?” And of course, if you don’t know how to do math as I don’t, you take the million dollars. But if you take that doubling penny and you extrapolate it out – Mr. 1500 actually did this day by day by day – you end up with what? In a 31-day month, it’s $5 million or $10 million or something like that. Even a 28-day month is $2 million.

So you start early and save. You don’t need to keep up with fashion trends. Don’t start saving until you paid off your debt. But once you’re debt-free, start saving like crazy.

Mr. 1500: That Honda Civic that you drove around in college still drives the exact same way and gets you to point A and B after you graduate from college. Every college person in my family, as soon as they graduated, the first thing they do is get a new car. I’m like, “Oh, why did you do that?” My heart hurts.

Mrs. 1500: We’ve only bought two new cars ever. They were pretty old. That was a 2003, so 12 years or 13 years ago?

Mr. 1500: Twelve.

Mrs. 1500: Twelve years ago. I was right the first time. Twelve years ago was the first time we bought a brand new car. Those of you who can see us, we were…

Mr. Frugalwoods: Eighteen.

Mrs. 1500: Eighteen. Thank you, Mr. Frugalwoods.

Mad Fientist: You just got your license.

Mrs. 1500: He’s my favorite person. We have just gotten our licenses.

Mad Fientist: You just passed your test.

Mrs. 1500: No. What were we, 30? How old are we now? Twelve years ago, yeah, we were like 30.

So do not buy a brand new car until you’re 30. We had paid off all of our debt and we were investing and then this car came out. It’s a Honda Element and that’s the coolest car in the planet according to me. I wanted one and we bought one. Yeah, it’s $19,000 and yeah, it’s worth $100,000 in retirement. But it’s only $19,000. I didn’t go out to buy a $50,000 a car.

Mad Fientist: Yeah.

Mrs. 1500: So start early and then rationalize your spending.

Mad Fientist: Absolutely, yeah. We just bought our favorite car that we’ve ever owned and it’s a 2006 Honda Jazz, which is a European version of a Honda…

Mr. 1500: Fit.

Mad Fientist: Honda Fit, yeah, I think. It’s 60 miles a gallon, 50 to 60 mile a gallon. It costs $3400. Both Jill and I just love it. It’s just like the best little car ever. But yeah, buying a new car and keeping it forever is not a bad way to go, especially a Honda Element.

Mrs. 1500: It’s better than leasing.

Mad Fientist: Absolutely! So what would you say your savings rate was throughout the last maybe five years? Do you guys just save a ton?

Mrs. 1500: It’s difficult to really pinpoint that because we were flipping houses and we would get a mortgage on a property when we purchased it, but then we would pretty much pay cash for the repairs. We weren’t paying cash. We were turning credit cards to get points so we can go for free places.

Mr. 1500: Right now, I think in our most efficient life, now that we’re not doing that, we save at least 75% significant. And our life isn’t compromised. We’re very happy.

Mad Fientist: So you feel like you can spend on anything you want?

Mr. 1500: Yeah. We go on vacations. We go out to eat occasionally. We’re not crazy people who have holes in our clothes.

Mad Fientist: You’re going to come and visit us Scotland? You’re going to come to visit?

Mrs. 1500: Yes, we do. So Mr. 1500 and maybe I wrote about this. He’s got eleventeen billion T-shirts. And here at this FinCon Convention, everybody was giving out a T-shirt and he made it his goal in life to get every single one. Mission accomplished, we’re taking home 15 more T-shirts.

Mad Fientist: That is my entire wardrobe, just conference T-shirts.

Mrs. 1500: Jill and I had a conversation about how you guys both collectively have too many T-shirts and some of them just may walk away. Some of Mr. 1500’s clothes, he can’t find anymore. Gosh, I don’t know what happened to those.

Mad Fientist: Yeah, that would be a disaster. Just tie them.

Mrs. 1500: It’s nothing that means anything.

Mad Fientist: Yeah. So where can everybody find you guys? If they want to get in touch and learn all about the 1500 lifestyle, which is amazing to read about, there are so many incredible posts that you rant about, your family members, your neighbors. It’s the most entertaining blog I read.

Mr. 1500: And that is why we’re anonymous.

Mrs. 1500: Yeah, that is why we’re anonymous so we can talk crap about our neighbors.

Mad Fientist: And your family.

Mrs. 1500: And our family. We still anonymize them as well. Ruby’s name isn’t really Ruby.

Mad Fientist: Oh, no.

Mrs. 1500: So our blog is 1500Days.com. I am on Twitter, @Mrs1500. He is on Twitter, @retirein1500. And then what are we on Facebook? I forgot.

Mr. 1500: I think it’s Facebook.com/1500days.

Mrs. 1500: And I don’t think we do Pinterest or Periscope or any of that. I just learned about all the stuff this week. So we got to figure that out.

Mad Fientist: Yeah, I will have all those links in the show notes so you guys can just come and click and go see the wild world they live in.

I just want to thank you both so much. This has been a terrifying interview for me. I’m used to being in my room, quiet and nobody’s looking at me and then I spend 20 hours editing all my nonsense questions and rerecording them. The fact that you guys got on the stage with me in front of all these people that are smarter than me and intimidating…

Mrs. 1500: No, I’m going to jump in here and say that I don’t think there are very many people here that are smarter than you. I mean, Mr. 1500 of course, I have to say that.

Mad Fientist: That is very kind.

Mrs. 1500: You’re pretty brilliant. Do you tell people that you write Ruby on Rails? Do you tell people that?

Mad Fientist: I don’t know if I did.

Mrs. 1500: For those of you non-computer guys, that’s a really cool language that all websites are written in. And everybody on the earth who needs a Ruby programmer can’t find one because they’re in such hot demand.

Mr. 1500: And we’re all retiring early.

Mrs. 1500: And they’re all retiring early because they make ridiculous wads – oh, are you? Are you? Oh, Mr. Frugalwoods is also a Ruby. I’m going to start a Ruby on Rails consulting company and I am going to make bank.

Mad Fientist: Yes. Speaking of Frugalwoods, I just nailed them for an upcoming podcast. So you will be hearing from Mr. and Mrs. Frugalwoods. We’ve drank too much beer together this weekend to not have a really good conversation.

Mrs. 1500: Throat medicine.

Mad Fientist: Medicine. So yeah, thank you very much, the 1500s and for bringing Pliny the Elder, which for all the beer geeks out there, they’ll know how actually amazing that is that we’re having that right now.

Mrs. 1500: It’s a “Thank you for bringing the Heady Topper last year.”

Mad Fientist: Mm-hmmm… I know, my Heady Topper supply is now gone because I live in Scotland. But the Frugalwoods will be moving to Vermont soon and we will now have new hookups.

So yeah, thank you guys so much. It’s been very scary, but very amazing.

Mr. 1500: Yes. Thank you too. We’re completely thrilled that we finally got to put this together. It’s been a long time in the making.

Mrs. 1500: Yeah. Thank you for having us. This is a lot of fun. And you don’t seem nervous. You don’t sound nervous.

Mad Fientist: This is another side story, but I just got interviewed for Radical Personal Finance Podcast. So you’ll have to check that out because my voice is so destroyed from talking so much this weekend that my voice broke about seven times during it and it sounded like I was going through puberty. It happened right at the beginning of this episode, but it wasn’t as bad as it was. I took a throat lozenge. So now, we can just drink and not worry about our voices.

Mrs. 1500: There you go!

Mad Fientist: Alright! Thank you very much, guys. See you.

Mr. 1500: Thank you.

Mrs. 1500: Thank you.