How to Retire Early in Your 40s by Supercharging Your Savings

Mindy:
Hello, hello, hello and welcome to the BiggerPockets Money podcast. My name is Mindy Jensen, and today I have a very special episode for you, my dear listeners. Today we’re going to share another episode from the YouTube series on the BiggerPockets Money YouTube channel that I host, the features stories of people that are either on their way to or have already achieved fire. Today we’re featuring my friend Arik Peterson’s financial journey. Eric was able to reach financial independence and retire early in just a decade. After reading Mr. Money Mustaches famous Fire blog, Eric quadrupled his savings overnight and started investing all the money he had into those boring investments most Americans don’t pay attention to. Don’t miss this episode to find out how. Before we get into the show, we want to thank our sponsor. This episode is brought to you by Connect Invest Real Estate Investing simplified and within your reach. Now back to the show. Eric, I’m so excited to talk to you today.

Arik:
I’m super happy to be here.

Mindy:
So Eric, how did you discover the concept of financial independence?

Arik:
That’s probably like a decade old journey. I was in the investment management side of things, so I made mutual funds in my corporate job, and one day I was just scrolling through doing some research on something and I came across an article and I want to say it was in Barron’s, that there’s this guy that retired when he was 29 and his name is Mr. Money Mustache, and read the article. I’m like, wow, this guy’s got it figured out, and he’s a similar age to me. So I went to his blog and just started consuming it as much as I could. I think I read his whole blog in a month or two. He just opened up my eyes. He said, you don’t have to do the nine to five. Well, nobody does nine to five. You don’t have to do that until you’re 65. Luckily, I was in a position where I was making decent money and I could start super saving, and before that I always knew I should save, but he just kind of is like, well, you can live a little more frugally and save a lot more, and then your age of retirement drops dramatically. Given all that, I was just like, Hey, my wife’s name is Shelly. I said, Shelly, let’s go after this and see if we can do it. And she’s like, yeah, that sounds like a good idea. And so here we are.

Mindy:
What was your life like before you discovered financial independence and before you started pursuing it?

Arik:
I think the key thing is I was stressed out. The corporate job was working with C-suite people, and there was just a lot of pressure behind delivering and getting things done and playing all the politics and all those things that go along with corporate America and a lot of stress to me. I mean, my wife would say it impacted my home life too. If you’re constantly thinking about your job, you’re not thinking about the things that are really important, like your family and taking care of yourself and all that stuff. I think it’s kind of that typical story of you’re living for your job and then you try to squeeze in fun things to do on the weekend or maybe a show or two at night and just kind of trot along.

Mindy:
I don’t think we ever really dive into the stress levels that a job takes on you on the BiggerPockets Money podcast, but when you said that, I was like, yeah, of course your life is usually really stressful. There’s the unicorn person who works in a job they love and you’ll never work a day in your life when you do what you love and it’s still stressful. I mean, there’s always something happening at work that you carry home with you and it does take a toll and you remember, oh, I’ve got to work on that project. Or, oh, I hope I make it into the office on time tomorrow, so I get that project done so it’s on my boss’s desk or whatever it is. And your mind isn’t fully or at all in the conversation that you’re having with your family. Yeah, that’s not all the time, but that can happen a lot, and that starts to erode your relationship with your kids and it can get really, really, really difficult, especially if you’re in a job that you hate or you’re in a job where you’re making mutual funds and everybody’s money is riding on whatever you decide to put inside your fund and one bad stock and everybody hates you, I’m assuming.

Mindy:
Is that what happens, that when you make I’ve never made mutual funds clearly.

Arik:
Yeah. It’s kind of funny. I wasn’t running money. I was kind of the research and development guy, and I made this big spreadsheet that evaluated our own internal stuff. I was known as the Grim Reaper when I came to meetings sometimes because I had the evaluation on, Hey, this fund is not doing what it’s supposed to be doing and we need to talk about killing it. That was me a big stressor. It’s funny you’re talking about how you don’t forget about it, but I remember I was so proud the day that I earned a Blackberry at work. I was like, oh, this is so cool. And little did I realize, I’m like, oh, now I’m tethered to my job. 24 7.

Mindy:
Yeah, now they can get in touch with you anytime. When you said Blackberry, I’m like, is that an award? Like a little berry? Oh, you beat the old school.

Arik:
Yeah, that shows how old I am.

Mindy:
So what was the most significant change that you had to make once you discovered this concept of I don’t have to work until I’m 65?

Arik:
The most significant was thinking about savings more. Like I said, I was saving at a good rate and I went back and calculated, and it was like before I figured out the fire movement and stuff, it was like 17% a year, which is pretty good for your average American. But once I discovered, hey, there’s another way, we basically ratcheted up, we’re making decent money and we were saving about 70% of our income living on a very frugal lifestyle. I think we dialed it into like 44th grand a year for a family of four, and this is in Midwest, so it was pretty cheap living, but it just allowed us to save so much more, so much faster. We didn’t cut back significantly. I mean, we still felt like we’re living our lives, but we didn’t feel super deprived now that we’re on the flip side live in Colorado now, which is awesome. That’s part of the whole fire thing too. There’s more to, it’s a beautiful thing when you have money, you have options.

Mindy:
I love that quote. When you have money, you have options. What was something you thought was going to be hard to give up but ultimately wasn’t?

Arik:
In terms of the biggest thing to give up in that situation, and a lot of people say this, but it’s the relationships at work. I mean, you make some good friends, you make neat connections, and when you’re no longer there, you don’t talk to ’em as much and they’re still great people.

Mindy:
That is one of the downsides of PHI is losing the work connections, although you then make different friends, at least I have. We live near each other and I live in Longmont. It’s kind of this mecca for phi, and I have a lot of these retired friends in my circle, so different. The transition has been different for me, but yeah, that can be tough. Have you been able to keep anything in your life that you thought you would have to give up?

Arik:
Well, I just bought a really expensive mountain bike. We’re kind of the same. I mean, honestly, we’re still frugal. We’re not like penny pinchers and full disclosure, my wife still works. So there’s income coming in that way and you just dial it in more. And that’s one thing, I think that’s a big takeaway from fire is when you kind of do this subculture or you start thinking about it differently, you have to really examine your own values and it sounds cool. It’s like, oh, yeah, what do I really care about? But there’s a big responsibility there too. Am I being true to myself? Am I being true to my values that I’ve reflected on? And sometimes when you’re just working all the time, you don’t have time to think about that. It’s a bigger responsibility than I thought it would be.

Mindy:
Yes. It’s so easy to get swept up in other things when you can’t focus on yourself, when you go for a walk and you have your phone with you, you don’t have to be alone with your thoughts. You can check out, oh, what’s on Twitter? And who’s texting me? And maybe I’ll take a phone call. When you go for a walk by yourself and you’re alone with your thoughts, depending on how long that walk is, you can get into some really deep conversations with yourself. And the same is true when you don’t have work distracting you all the time. You’re thinking about yourself, what do I truly value? Having that conversation with no distractions can be eye-opening. It can be eyeopening that you don’t know what you truly value. It’s not necessarily a bad thing that you don’t know. That just means you have a homework assignment. Let’s go figure out what I want to be when I don’t have to work anymore.

Arik:
Yeah, but what do I want to be when I grow up? Because you’ve had all these inputs from your parents and from culture and from school. It’s really truly a point where you’re like, okay, I can actually think for myself and I can actually figure out what I truly value.

Mindy:
Did you track your spending prior to retirement? Did you have a good handle on what you were spending or an amount or where it was going?

Arik:
Oh, yeah. So I was thinking back on stuff preparing for this. I was obsessive. I was to the point where I would check sometimes daily on what my net worth was. And it’s so funny because once we hit fire, that all went away. And I remember saying one time, I’m like, I obsess about money so I don’t have to obsess about money. And that was during my working years. And it’s funny, I just looked at my net worth this morning, and the last time I updated it was in March of 2022, and then prior to that was another year. So I’m like, I don’t care. I know generally where we’re at, but it’s a beautiful thing.

Mindy:
I should redo that intro of recovering money.

Arik:
Yeah, big time.

Mindy:
That’s awesome. Can you teach my husband how to not obsess? So do you still track your spending?

Arik:
No, we’ve done a lot of the different things. We’ve done a spreadsheet budget, we’ve done a cash budget in the past. We’ve just kind of generally tracked it, and right now we don’t. You’re kind of in this area of where you’d know where you’re at. If you go over on a month, you just take some from savings and take care of a credit card or whatever. And if we’re going to do a big trip, we’ll be like, oh, we’re going to take the money from X, Y, Z and do it that way. So we’ve really cut back on the tracking and all that stuff. And in full disclosure, we’re not super wealthy by any means. We’re probably right on the cusp of fire between the FU money and fire. So we don’t have unlimited resources, but we still have, I would say, a fulfilling life.

Mindy:
So let’s look at your money where it’s parked. What are you investing in? V-T-S-A-X gets the jail college stamp of approval, but where are you putting your money?

Arik:
I was in the business. I know how the sausage is made. Ew, and it’s kind of insane where everybody gets paid. So I’m a big huge believer in index funds. I’m a huge believer in asset allocation, and I think that sometimes gets overlooked in terms of 92% of your returns come from your asset allocation. So that means that little 8% really matters on what funds you picked. I do like individual stocks. I do like the possibility of hitting a home run. I’m fine with the fluctuation and the risk and all that stuff. One little tidbit is I always say, put your risk in your Roth. And the reason why that is is if you do hit a home run in your Roth, the government can’t tax it. So if you turn whatever your Roth is, your a hundred grand into 1.2 million, that’s a beautiful place to have it.

Mindy:
Or your PayPal stock into 5 billion your deal.

Arik:
Yeah, yeah. I mean, you can always dream right?

Mindy:
You can always, that’s the best story ever,

Arik:
But it’s out there and so why not take advantage of it?

Mindy:
Put your risk in your Roth. I love that. I don’t think I’ve ever heard anybody say that, but that’s such a great idea because yeah, if you’re going to put that kind of risk in there with all the rewards, I mean your Roth, it grows tax free, you withdraw it paying no taxes because you paid the tax upfront. What a brilliant, why is nobody saying that

Arik:
Coin today and beneficiary things? It’s so well protected. And that’s the other thing too. I grew up through the whole financial services and I read Ed slot’s book on taxes, and that’s only half the game is accumulating your wealth. The other half, and it made me even more important is figuring out your tax strategy. That’s probably something, and maybe that’s another discussion, is figuring out how should you spend your money once you are retired and how do you keep the government’s fingers out of it as much as possible, all on the up and up, obviously, but there’s a lot of loophole, there’s a lot of things you can do.

Mindy:
They’re not loopholes. They’re tax strategies. And yes, you should absolutely pay every dollar of tax that you owe, and you should absolutely try to pay as few dollars of tax as possible by taking advantage of these tax strategy.

Arik:
A hundred percent.

Mindy:
Eric, you said that you’re on the cusp of financial independence. I’m assuming that you used the 4% rule to determine your number.

Arik:
I don’t know about the 4% rule. I get it. I understand it. I think it’s more of the, let me back up. I want to have diversification in terms of how my income comes in. So as I check these off, then that just makes me feel better. So we don’t live off of our investments at all. We live off of my little income doing handyman stuff and my other projects, and then we live off my wife’s income, and those are just sources of income. So in the future, because I’m listening to BiggerPockets and whatnot, we’ll have a rental and in the future, my side businesses, my little side hustles, those will produce income. So it’s less about the 4% rule, it’s more about what does our lifestyle require in terms of income. It’s kind of answering the question.

Mindy:
Okay, so you have a nice nest egg and then you are looking for sources of more passive income.

Arik:
Yeah, and fun income. Fun income. I think

Mindy:
Fun income.

Arik:
It’s not passive, but I’m fine with that.

Mindy:
Yes. For all of you out there listening or watching who think that real estate is passive, you’re wrong. I’m sorry. All those people who tell you real estate is passive, they are incorrect. There’s an element of, I dunno, that maybe there’s a new word. There’s an element of ity with real estate because technically you’re doing nothing. They give you a check at the beginning of every month, but then things break. Eric, walk me through your PHI timeline. How old were you when you discovered Mr. Money mustache? How long did it take you to become comfortable with the amount of money that you had so you could quit your job? And how old were you when you finally quit?

Arik:
Yeah, that’s a good one. Probably around 34 when I found that article on Mr. Money mustache, and then it took about a decade. So at age 44, I had a beautiful moment at work and it was called getting laid off. I was smiling in the whole meeting, and luckily I had prepared prior to that. So that kind of sparked me getting into the true fire thing, and maybe I would’ve drug it out longer. Maybe I wouldn’t have, I don’t know. But it was a good, perfect, perfect timing. So my first year I literally just decompressed. I went fishing, I went biking practically every day and just took in the beauty of not having that job. And it was a lot of, yeah, this is how I thought it would be, but then at some point I was like, Hmm, I should probably start doing something.

Arik:
And year or two is when I started to take off and start helping friends with, because I’m relatively handy helping friends with home improvement projects, that kind of stuff. And the word kind got out. I was like, oh, well, kind of accidentally started handyman business at some point. I was like, well, I should probably charge these people something for it to have some type of value exchange. And the other thing I did too was something I’m really proud of, and I think this is my little legacy thing, is I started a comic about being a dad. I’ve had so much fun with that, and that’s one of those things that’s a labor of love. I’ve had a lot of connections because of it. And you can probably see, so my wife did this for me for Father’s Day a couple of years ago where she prints it out, some of my comics, and I’ve actually started to, I’ve done those.

Arik:
I have 80 of them out there now, and I’ve started to ramp it up because these people are coming back and they’re like, Hey, you need to make a book and you need to do this. And I was like, oh, geez. Didn’t really think I’d go that far with it. But another beauty of being fired, pursuing something just for the fun of it, and then this might be one of my semi passive income streams. And then the other thing that I really got to do a lot was just, this is funny. I just got back from a Moab trip, mountain biking web trip, and we were talking about the crazy big lottery of a billion dollars or whatever, and people are like, oh, what would you do? That kind of stuff. I’m like, well, I would just build cool stuff. I didn’t say stuff. I said something else. And that’s kind of what I do too. We’re talking about bikes. I built electric bike and next week I’m going to do a three day fast, but to keep my mind busy, I’m going to build a bike out of wood. You just don’t get those options when you’re working 95. It’s just a beautiful thing to have that time.

Mindy:
Eric, you’ve mentioned your comic strip dads are, where can we find this comic?

Arik:
I love hearing comments of my comics. A lot of ’em are really good and some of ’em are really funny. It’s on Instagram at dads RARE, not R. And then on Facebook, it’s just dads R. And hopefully someday you see a book published. I’ve been talking to some people and there’s definitely some interest there. So again, you just don’t know where you can go when you don’t have to do that nine to five and you’re stressed out. So one of those cool options.

Mindy:
Eric, I love your dad’s art comic. They don’t all relate to me, but many of them do to me, my husband, my dad, and I can see those on t-shirts, hats. I’ve already harassed you about this. I can’t wait for the book to come out. And since I have your phone number, I’m going to keep asking until it does.

Arik:
Sounds good. I like it. It’s good to have an accountability buddy.

Mindy:
Eric, I really appreciate your time today. This was so much fun. Is there any place else that people can find you online besides your dad’s r comics?

Arik:
I have a live long, live often website, and it’s basically just, it’s merchandise, but it’s like do what you do and do it often. So live long fish often. Live long ride often. Live long quilt, often. Do what you want to do and do it often because that just makes you happy. So that’s another little tangent that I’ve been able to start up too, since I don’t have to work all the time.

Mindy:
Live long draw often.

Arik:
Yeah. Yeah. Well, it’s a beautiful one. Yeah.

Mindy:
Eric, thank you again for your time. It’s always lovely to talk to you.

Arik:
Thank you. I appreciate it. And this was great, awesome time.

Mindy:
If you liked this video, please click the thumbs up and don’t forget to subscribe to this channel for more videos with inspiring fire stories. Just like Eric. This is Mindy Jensen signing.